As filed with the Securities and Exchange Commission on December 31, 1998
================================================================================
File No. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE
[X] SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[ ] Post-Effective Amendment No. 6
and/or
REGISTRATION STATEMENT UNDER THE
[X] INVESTMENT COMPANY ACT OF 1940
[ ] Amendment No.
(Check appropriate box or boxes)
AUL AMERICAN INDIVIDUAL VARIABLE ANNUITY UNIT TRUST
(Exact Name of Registrant)
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Name of Depositor)
One American Square, Indianapolis, Indiana 46282
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number: (317) 285-1877
Richard A. Wacker, One American Square, Indianapolis, Indiana 46282
(Name and Address of Agent for Service)
Title of Securities Being Registered: Interests in individual variable annuity
contracts
It is proposed that this filing will become effective (Check appropriate Space)
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
on ____________ pursuant to paragraph (b) of Rule 485
_____
_____ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on (date) pursuant to paragraph (a) (ii) of Rule 485
_____ this post-effective amendment designates a new effective date for a
previously filed amendment.
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CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus) and Part B (Statement of Additional Information)
of Registration Statement of Information Required by Form N-4
PART A - PROSPECTUS
Item of Form N-4 Prospectus Caption
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1. Cover Page ........................... Cover Page
2. Definitions .......................... Definitions
3. Synopsis ............................. Summary; Expense Table
4. Condensed Financial Information ...... Not Applicable
5. General Description of Registrant,
Depositor, and Portfolio Companies.... Information About AUL, The Variable
Account, and the Funds; Voting of
Shares of the Funds
6. Deductions and Expenses .............. Charges and Deductions
7. General Description of Variable
Annuity Contracts .................... The Contracts; Premiums and Contract
Values During the Accumulation
Period; Cash Withdrawals and
Death Proceeds; Summary; Annuity
Period
8. Annuity Period ....................... Annuity Period
9. Death Benefit ........................ Cash Withdrawals and The Death
Proceeds
10. Purchases and Contract Values ........ Premiums and Contract Values During
the Accumulation Period
11. Redemptions .......................... Cash Withdrawals and The Death
Proceeds
12. Taxes ................................ Federal Tax Matters
13. Legal Proceedings .................... Other Information
14. Table of Contents for the Statement
of Additional Information ............ Statement of Additional Information
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PART B - STATEMENT OF ADDITIONAL INFORMATION
Statement of Additional Information Statement of Additional Information
Item of Form N-4 Caption
- ----------------------------------- ------------------------------------
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15. Cover Page ........................... Cover Page
16. Table of Contents .................... Table of Contents
17. General Information and History ...... General Information and History
18. Services ............................. Custody of Assets; Independent
Accountants
19. Purchase of Securities Being Offered . Distribution of Contracts;
(Prospectus) Charges and Deductions
20. Underwriters ......................... Distribution of Contracts
21. Calculation of Performance Data ...... Performance Information
22. Annuity Payments ..................... (Prospectus) Annuity Period
23. Financial Statements ................. Financial Statements
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PART C - OTHER INFORMATION
Item of Form N-4 Part C Caption
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24. Financial Statements and Exhibits .... (Statement of Additional
Information) Financial Statements
and Exhibits
25. Directors and Officers of the
Depositor............................. Directors and Officers of AUL
26. Persons Controlled By or Under
Common Control with the Depositor or
Registrant............................ Persons Controlled By or Under
Common Control of Depositor or
Registrant
27. Number of Contractowners ............. Number of Contractholders
28. Indemnification ...................... Indemnification
29. Principal Underwriters ............... Principal Underwriters
30. Location of Accounts and Records ..... Location of Accounts and Records
31. Management Services .................. Management Services
32. Undertakings.......................... Undertakings
Signatures ......................... Signatures
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<PAGE>
PROSPECTUS
for
Individual Flexible Premium Deferred Variable Annuity
Dated December 31, 1998
Sponsored by:
American United Life Insurance Company(R)
P.O. Box 7127
Indianapolis, Indiana 46209-7127
AUL
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Prospectus
Individual Flexible Premium Variable Deferred Annuity
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
Offered By
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46282
(317) 263-1877
Variable Products Service Office:
P.O. Box 7127, Indianapolis, Indiana 46209-7127
(800) 863-9354
This Prospectus describes individual variable annuity contracts (the
"Contracts") offered by American United Life Insurance Company(R) ("AUL" or the
"Company"). AUL designed the Contracts for use in connection with retirement
plans and deferred compensation plans for individuals. Contract Owners may use
the Contracts in connection with retirement plans that meet the requirements of
Sections 401(a), 403(b), 408, 408A or 457 of the Internal Revenue Code.
This Prospectus describes two types of Contracts: Contracts for which
premiums may vary in amount and frequency, subject to certain limitations
("Flexible Premium Contracts"), and Contracts for which premiums may vary in
amount and frequency, only in the first Contract Year ("One Year Flexible
Premium Contracts"). Both Contracts provide for the accumulation of values on
either a variable basis, a fixed basis, or both. The Contracts also provide
several options for fixed and variable annuity payments to begin on a future
date.
A Contract Owner may allocate premiums designated to accumulate on a
variable basis to one or more of the Investment Accounts of a separate account
of AUL. The separate account is named the AUL American Individual Variable
Annuity Unit Trust (the "Variable Account"). Each Investment Account of the
Variable Account invests in shares of one of the following mutual funds:
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Portfolio Mutual Fund Investment Adviser
AUL American Equity AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Bond AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Managed AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Money Market AUL American Series Fund, Inc. American United Life Insurance Company(R)
Alger American Growth Alger American Fund Fred Alger & Company
American Century VP International American Century Variable Portfolios, Inc. American Century Investment Management, Inc.
American Century Ultra American Century Mutual Funds, Inc. American Century Investment Management, Inc.
Fidelity Asset Manager Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
Fidelity Contrafund Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
Fidelity Equity-Income Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
Fidelity Growth Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
Fidelity High Income Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
Fidelity Index 500 Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
Fidelity Overseas Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
PBHG Emerging Growth PBHG Insurance Series Fund, Inc. Pilgrim Baxter & Associates, Ltd.
T. Rowe Price Equity Income T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc.
</TABLE>
Premiums allocated to an Investment Account of the Variable Account will
increase or decrease in dollar value depending on the investment performance of
the corresponding mutual fund portfolios in which the Investment Account
invests. These amounts are not guaranteed. In the alternative, a Contract Owner
may allocate premiums to AUL's Fixed Account. Such allocations will earn
interest at rates that are paid by AUL as described in "The Fixed Account."
This Prospectus concisely sets forth information about the Contracts and
the Variable Account that a prospective investor should know before investing.
Certain additional information is contained in a "Statement of Additional
Information," dated December 31, 1998, which has been filed with the Securities
and Exchange Commission (the "SEC"). The Statement of Additional Information is
incorporated by reference into this Prospectus. A prospective investor may
obtain a copy of the Statement of Additional Information without charge by
calling or writing to AUL at the telephone number or address indicated above.
The table of contents of the Statement of Additional Information is located at
the end of this Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any represention to the contrary is a
criminal offense.
This prospectus should be accompanied by the current prospectuses for the
fund or funds being considered. Each of these prospectuses should be read
carefully and retained for future reference.
The date of this Prospectus is December 31, 1998.
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TABLE OF CONTENTS
Description Page
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DEFINITIONS............................................. 3-4
SUMMARY................................................. 5-6
Purpose of the Contracts.............................. 5
Types of Contracts.................................... 5
The Variable Account and the Funds.................... 5
Summary of the Fixed Account.......................... 5
Market Value Adjusted Fixed Acount...................
Non-Market Value Adjusted Fixed Account..............
Enhanced Averaging Fixed Account.....................
Premiums.............................................. 5
Right to Examine......................................
Transfers............................................. 5
Charges...............................................
Distributions.........................................
Withdrawals.......................................... 6
Loan Privileges......................................
The Death Benefit.................................... 6
Initial Dollar Cost Averaging Program.................
Ongoing Dollar Cost Averaging Program.................
Portfolio Rebalancing.................................
Contacting AUL........................................ 6
EXPENSE TABLE........................................... 6-9
PERFORMANCE OF THE INVESTMENT
ACCOUNTS................................................ 11-12
INFORMATION ABOUT AUL, THE VARIABLE
ACCOUNT, AND THE FUNDS.................................. 12-15
American United Life Insurance Company(R)............. 12
Variable Account...................................... 12
The Funds............................................. 13
AUL American Series Fund, Inc......................... 13
AUL American Equity Portfolio........................ 13
AUL American Bond Portfolio.......................... 13
AUL American Money Market Portfolio.................. 13
AUL American Managed Portfolio....................... 13
Alger American Fund................................... 14
Alger American Growth Portfolio...................... 14
American Century Variable Portfolios, Inc............. 14
VP Capital Appreciation Portfolio.................... 14
VP International Portfolio........................... 14
Calvert Variable Series............................... 14
Calvert Social Mid Cap Growth Fund .................. 14
Fidelity Variable Insurance Products Fund............. 14
Equity-Income Portfolio.............................. 14
Growth Portfolio..................................... 14
High Income Portfolio................................ 14
Overseas Portfolio................................... 14
Fidelity Variable Insurance Products Fund II.......... 14
Asset Manager Portfolio.............................. 14
Contrafund Portfolio................................. 14
Index 500 Portfolio.................................. 14
PBHG Insurance Series Fund, Inc....................... 15
Growth II Portfolio.................................. 15
Technology & Communications Portfolio................ 15
T. Rowe Price Equity Series, Inc...................... 15
T. Rowe Price Equity Income.......................... 15
THE CONTRACTS........................................... 15
General............................................... 15
PREMIUMS AND CONTRACT VALUES
DURING THE ACCUMULATION PERIOD.......................... 15-17
Application for a Contract............................ 15
Premiums under the Contracts.......................... 15
Right to Examine...................................... 16
Allocation of Premiums................................ 16
Transfers of Account Value............................ 16
Dollar Cost Averaging Program......................... 16
Initial Dollar Cost Averaging Program................
Ongoing Dollar Cost Averaging Program................
Portfolio Rebalancing.................................
Contract Owner's Variable Account Value............... 17
Accumulation Units................................... 17
Accumulation Unit Value.............................. 17
Net Investment Factor................................ 17
CHARGES AND DEDUCTIONS.................................. 18-19
Premium Tax Charge....................................
Withdrawal Charge.....................................
Mortality and Expense Risk Charge.....................
Administrative Fee....................................
Rider Charges.........................................
Other Charges.........................................
Variations in Charges.................................
Guarantee of Certain Charges..........................
Expenses of the Funds.................................
DISTRIBUTIONS...........................................
Cash Withdrawals...................................... 18
Loan Privileges.......................................
Death Proceeds Payment Provisions..................... 18
Death of the Owner...................................
Death of the Annuitant...............................
Payments from the Variable Account.................... 19
Annuity Period........................................
General..............................................
Fixed Payment Annuity................................
Variable Payment Annuity.............................
Payment Options......................................
Selection of an Option...............................
THE FIXED ACCOUNT....................................... 21-22
Summary of the Fixed Account..........................
Non-Market Value Adjusted Fixed Account..............
Market Value Adjusted Fixed Account..................
Enhanced Averaging Fixed Account.....................
Withdrawals........................................... 22
Transfers............................................. 22
Contract Charges...................................... 22
Payments from the Fixed Account(s).................... 22
MORE ABOUT THE CONTRACTS................................ 22-23
Designation and Change of Beneficiary................. 22
Assignability......................................... 23
Proof of Age and Survival............................. 23
Misstatements......................................... 23
Acceptance of New Premiums............................ 23
Optional Benefits.....................................
FEDERAL TAX MATTERS..................................... 23-26
Introduction.......................................... 23
Diversification Standards............................. 23
Taxation of Annuities in General-
Non-Qualified Plans.................................. 23
Additional Considerations............................. 24
Qualified Plans....................................... 25
403(b) Programs-Constraints on Withdrawals............ 26
403(b) Programs-Loan Privileges.......................
Qualified Plan Federal Taxation Summary...............
OTHER INFORMATION....................................... 26-27
Voting of Shares of the Funds......................... 26
Substitution of Investments........................... 27
Changes to Comply with Law and Amendments............. 27
Reservation of Rights................................. 27
Periodic Reports...................................... 27
Legal Proceedings..................................... 27
Legal Matters......................................... 27
Financial Statements.................................. 27
YEAR 2000 ISSUES AND READINESS.......................... 28
PERFORMANCE INFORMATION ................................ 28
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF CONTENTS........................... 29
2
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DEFINITIONS
Various terms commonly used in this Prospectus are defined as follows:
403(b) PLAN - An arrangement by a public school organization or an organization
that is described in Section 501(c)(3) of the Internal Revenue Code, including
certain charitable, educational and scientific organizations, under which
employees are permitted to take advantage of the Federal income tax deferral
benefits provided for in Section 403(b) of the Internal Revenue Code.
408 or 408A PLAN - A plan of individual retirement accounts or annuities,
including a simplified employee pension plan, SIMPLE IRA or Roth IRA plan
established by an employer, that meets the requirements of Section 408 or 408Aof
the Internal Revenue Code.
457 PLAN - A plan established by a unit of a state or local government or a
tax-exempt organization under Section 457 of the Internal Revenue Code.
ACCOUNT VALUE - The total sum of a Contract Owner's interest in the Variable
Account, the Fixed Account(s) and the Loan Account. Initially, it is equal to
the initial premium less any applicable premium tax and thereafter reflects the
net result of premiums, investment experience, charges deducted, and any partial
withdrawals taken.
ACCUMULATION PERIOD - The period starting on the Contract Date and ending when
the Contract is terminated, either through surrender, withdrawal(s),
annuitization, payment of charges, payment of the death benefit, or a
combination thereof.
ACCUMULATION UNIT - A unit of measure used to record amounts of increases to,
decreases from, and accumulations in the Investment Accounts of the Variable
Account during the Accumulation Period.
ANNUITANT - The person or persons on whose life annuity payments depend.
ANNUITY - A series of payments made by AUL to an Annuitant or Beneficiary during
the period specified in the Annuity Option.
ANNUITY DATE - The first day of any month in which an annuity begins under a
Contract, which shall not be later than the required beginning date under
applicable federal requirements.
ANNUITY OPTIONS - Options under a Contract that prescribe the provisions under
which a series of annuity payments are made to an Annuitant, contingent
Annuitant, or Beneficiary.
ANNUITY PERIOD - The period during which annuity payments are made.
ASSUMED INTEREST RATE (AIR) - The investment rate built into the Variable
Payment Annuity table used to determine the first annuity payment.
AUL - American United Life Insurance Company(R).
BENEFICIARY - The person having the right to receive the death proceeds, if any,
payable upon the death of the Contract Owner during the Accumulation Period, and
the person having the right to benefits, if any, payable upon the death of an
Annuitant during the Annuity Period under any Annuity Option other than a
survivorship option (i.e., Option 3-under which the contingent Annuitant has the
right to benefits payable upon the death of an Annuitant).
BUSINESS DAY - A day on which AUL's Home Office is customarily open for
business. Traditionally, in addition to federal holidays, AUL is not open for
business on the day after Thanksgiving and either the day before or after
Christmas or Independence Day.
CASH VALUE - An Owner's Account Value minus the applicable withdrawal charge.
CONTRACT ANNIVERSARY - The yearly anniversary of the Contract Date.
CONTRACT DATE - The date shown as the Contract Date in a Contract. It will not
be later than the date the initial premium is accepted under a Contract, and it
is the date used to determine Contract Months, Contract Years, and Contract
Anniversaries.
CONTRACT OWNER OR OWNER - The person entitled to the ownership rights under the
Contract and in whose name the Contract is issued. A trustee or custodian may be
designated to exercise an Owner's rights and responsibilities under a Contract
in connection with a retirement plan that meets the requirements of Section 401
or 408 of the Internal Revenue Code. An administrator, custodian, or other
person performing similar functions may be designated to exercise an Owner's
responsibilities under a Contract in connection with a 403(b) or 457 Program.
The term "Owner," as used in this Prospectus, shall include, where appropriate,
such a trustee, custodian, or administrator.
CONTRACT YEAR - A period beginning with one Contract Anniversary, or, in the
case of the first Contract Year, beginning on the Contract Date, and ending the
day before the next Contract Anniversary.
DEATH PROCEEDS - The amount payable to the Beneficiary by reason of the death of
the Annuitant or Owner during the Accumulation Period in accordance with the
terms of the Contract.
EMPLOYEE BENEFIT PLAN - A pension or profit sharing plan established by an
Employer for the benefit of its employees and which is qualified under Section
401 of the Internal Revenue Code.
FIXED ACCOUNT - An account that is part of our General Account, and is not part
of or dependent on the investment performance of the Variable Account.
FIXED ACCOUNT VALUE - The total value under a Contract allocated to any of the
Fixed Account(s).
FREE WITHDRAWAL AMOUNT - The amount that may be withdrawn without incurring
withdrawal charges, which is 12% of the Contract Value at the time the first
withdrawal in a given Contract Year is requested.
3
<PAGE>
FUNDS - AUL American Series Fund, Inc., which offers the Equity, Bond, Money
Market, Managed, and Tactical Asset Allocation Portfolios; Calvert Variable
Series, which offers the Calvert Social Mid Cap Growth Fund; Alger American
Fund, which offers the Alger American Growth Portfolio; American Century
Variable Portfolios, Inc. which offers the VP Capital Appreciation and VP
International Portfolios; Fidelity Variable Insurance Products Fund ("VIP"),
which offers the Equity-Income, Growth, High Income and Overseas Portfolios;
Fidelity Variable Insurance Products Fund II ("VIP II"), which offers the Asset
Manager, Contrafund, and Index 500 Portfolios; PBHG Insurance Series Fund, Inc.,
which offers the Growth II and the Technology & Communications Portfolios; and
T. Rowe Price Equity Series, Inc., which offers the T. Rowe Price Equity Income
Portfolio. Each of the Funds is a diversified, open-end management investment
company commonly referred to as a mutual fund, or a portfolio thereof.
GENERAL ACCOUNT - All assets of AUL other than those allocated to the Variable
Account or to any other separate account of AUL.
GUARANTEE PERIOD - The period of time in years that the interest rate on an MVA
Fixed Account is guaranteed. Guarantee Periods may be 1, 3, 5, 7, or 10 years in
length or other duration offered from time to time by AUL.
HOME OFFICE - The Variable Products Service Office at AUL's principal business
office, One American Square, Indianapolis, Indiana 46282.
HR-10 PLAN - An Employee Benefit Plan established by a self-employed person in
accordance with Section 401 of the Internal Revenue Code. Investment Account - A
sub-account of the Variable Account that invests in shares of one of the Funds.
INVESTMENT ACCOUNTS - One or more of the subdivisions of the Separate Account.
Each Investment Account is invested in a corresponding Portfolio of a particular
mutual fund.
LOAN ACCOUNT - A portion of the Account Value which is collateral for loan
amounts.
MARKET VALUE ADJUSTMENT - An upward or downward adjustment in the value of an
MVA Fixed Account if withdrawals or transfers are made prior to the expiration
of the Guarantee Period.
MVA FIXED ACCOUNT - A subaccount of the Fixed Account, having a particular
Guarantee Period, and subject to a Market Value Adjustment.
NET CASH VALUE - Cash Value less outstanding loan and loan interest.
NET PURCHASE PAYMENTS - The premiums paid less any applicable premium tax.
PREMIUMS - The amounts paid to AUL as consideration for the Contract. In those
states that require the payment of premium tax upon receipt of a premium by AUL,
the term "premium" shall refer to the amount received by AUL net of the amount
deducted for premium tax.
PROPER NOTICE - Notice that is received at our Home Office in a form that is
acceptable to Us.
SEPARATE ACCOUNT - AUL American Individual Variable Annuity Unit Trust. The
Separate Account is segregated into several Investment Accounts each of which
invests in a corresponding mutual fund portfolio.
VALUATION DATE - Valuation Dates are the dates on which the Investment Accounts
are valued. A Valuation Date is any date on which the New York Stock Exchange is
open for trading and we are open for business. Traditionally, in addition to
federal holidays, AUL is not open for business on the day after Thanksgiving and
either the day before or after Christmas or Independence Day.
VALUATION PERIOD - The Valuation Period begins at the close of one Valuation
Date and ends at the close of the next succeeding Valuation Date.
VARIABLE ACCOUNT - The Account Value of this Contract which is invested in one
or more Investment Accounts.
4
<PAGE>
SUMMARY
This summary is intended to provide a brief overview of the more
significant aspects of the Contracts. Later sections of this Prospectus, the
Statement of Additional Information, and the Contracts provide further detail.
Unless the context indicates otherwise, the discussion in this summary and the
remainder of the Prospectus relates to the portion of the Contracts involving
the Variable Account. The pertinent Contract and "The Fixed Account" section of
this Prospectus briefly describe the Fixed Account.
PURPOSE OF THE CONTRACTS
AUL offers the individual variable annuity contracts ("Contracts")
described in this Prospectus for use in connection with taxable contribution
retirement plans and deferred compensation plans for individuals (collectively
"non-Qualified Plans"). AUL also offers the Contracts for use by individuals in
connection with retirement plans that meet the requirements of Sections 401,
403(b), 457, 408 or 408A of the Internal Revenue Code, allowing for pre-tax
contributions (collectively "Qualified Plans"). A Contract presents a dynamic
concept in retirement planning designed to give Contract Owners flexibility in
attaining investment goals. A Contract provides for the accumulation of values
on a variable basis, a fixed basis, or both, and provides several options for
fixed and variable annuity payments. During the Accumulation Period, a Contract
Owner can allocate premiums to the various Investment Accounts of the Variable
Account or to the Fixed Account. See "The Contracts."
Investors should carefully consider the tax benefits and disadvantages of a
Contract, and should consult a tax advisor. The tax benefits can be important
for investors seeking retirement income. The Contract may be disadvantageous for
those who do not plan to use the Contract as a source of retirement income. The
tax treatment may not be important for investors using the Contract in
connection with certain Qualified Plans. Investors should also consider the
investment and annuity benefits offered by the Contracts.
TYPES OF CONTRACTS
AUL offers two variations of contracts that are described in this
Prospectus. With Flexible Premium Contracts, premium payments may vary in amount
and frequency, subject to the limitations described below. With One Year
Flexible Premium Contracts, premium payments may vary in amount and frequency
only during the first Contract Year. Premiums payments may not be made after the
first Contract Year.
THE VARIABLE ACCOUNT AND THE FUNDS
AUL will allocate premiums designated to accumulate on a variable basis to
the Variable Account. See "Variable Account." The Variable Account is currently
divided into subaccounts referred to as Investment Accounts. Each Investment
Account invests exclusively in shares of one of the portfolios of the following
mutual funds:
<TABLE>
<S> <C> <C>
Investment Account and Mutual Fund Investment Adviser
Corresponding Mutual Fund Portfolio
AUL American Equity AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Bond AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Managed AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Money Market AUL American Series Fund, Inc. American United Life Insurance Company(R)
Alger American Growth Alger American Fund Fred Alger & Company
American Century VP International American Century Variable Portfolios, Inc. American Century Investment Management, Inc.
American Century Ultra American Century Mutual Funds, Inc. American Century Investment Management, Inc.
Fidelity Asset Manager Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
Fidelity Contrafund Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
Fidelity Equity-Income Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
Fidelity Growth Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
Fidelity High Income Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
Fidelity Index 500 Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
Fidelity Overseas Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
PBHG Emerging Growth PBHG Insurance Series Fund, Inc. Pilgrim Baxter & Associates, Ltd.
T. Rowe Price Equity Income T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc.
</TABLE>
Each of the Funds has a different investment objective. A Contract Owner
may allocate premiums to one or more of the Investment Accounts available under
a Contract. Premiums allocated to a particular Investment Account will increase
or decrease in dollar value depending upon the investment performance of the
corresponding mutual fund portfolio in which the Investment Account invests.
These amounts are not guaranteed. The Contract Owner bears the investment risk
for amounts allocated to an Investment Account of the Variable Account.
SUMMARY OF FIXED ACCOUNT
A Contract Owner may allocate premiums to one of several fixed accounts
which are part of AUL's General Account. The Contracts will offer either Market
Value Adjusted (MVA) Fixed Accounts or a non-MVA Fixed Account. The MVA Fixed
Account(s) may not be available in all states. The Contracts will also offer an
Enhanced Averaging Fixed Account in all states as a part of the dollar cost
averaging program.
Market Value Adjusted Fixed Account
Market Value Adjusted Fixed Accounts provide a guaranteed rate of interest
over five different maturity durations: one (1), three (3), five (5), seven (7)
or ten (10) years. AUL will credit the Fixed Account the declared interest rate
for the duration selected unless a distribution from the Market Value Adjusted
Fixed Account occurs for any reason. If such a distribution occurs, AUL will
subject the proceeds to a market value adjustment, resulting in either an
increase or decrease in the value of the distributed proceeds, depending on
interest rate fluctuations. No market value adjustment will be applied to a
Market Value Adjusted Fixed Account if the allocations are held until maturity.
In that case, the Market Value Adjusted Fixed Account will be credited the
declared rate for the duration selected. A Contract Owner must allocate a
minimum amount of $1,000 to a Market Value Adjusted Fixed Account. MARKET VALUE
ADJUSTED FIXED ACCOUNTS ARE NOT AVAILABLE IN ALL STATES.
Non-Market Value Adjusted Fixed Accounts
A Contract Owner may allocate premiums to the non-Market Value Adjusted
(non-MVA) Fixed Account only where MVA Fixed Accounts are not available. The
non-MVA Fixed Account is part of AUL's General Account. Amounts allocated to the
non-MVA Fixed Account earn interest at rates periodically determined by AUL.
Generally, any current rate that exceeds the guaranteed rate will be effective
for the Contract for a period of at least one year. These rates are guaranteed
to be at least an effective annual rate of 3%.
Enhanced Averaging Fixed Account
A Contract Owner may allocate premiums in the first Contract Year to the
Enhanced Averaging Fixed Account. Within one year after deposit, a Contract
Owner must transfer these allocations to other Investment Accounts. AUL will
recalculate, each month, the amounts it will transfer out of the Enhanced
Averaging Fixed Account. This procedure ensures that the entire balance of the
Enhanced Averaging Fixed Account will be transferred within the one year period.
Amounts allocated to the Enhanced Averaging Fixed Account earn interest at rates
periodically determined by AUL. AUL guarantees these rates to be at least an
effective annual rate of 3%. The Enhanced Averaging Fixed Account is only
available in the first Contract Year and requires an initial deposit of $10,000
therein.
PREMIUMS
For Flexible Premium Contracts, the Contract Owner may vary premiums in
amount and frequency. The minimum premium payment is $50. For One Year Flexible
Premium Contracts, the Contract Owner may pay premiums only during the first
Contract Year. The minimum premium is $500 with a minimum total first year
premium of $5,000. See "Premiums under the Contracts."
Right to Examine
The Contract Owner has the right to return the Contract for any reason
within ten days of receipt (or a longer period if required by state law). If the
Contract Owner exercises this right, AUL will treat the Contract as void from
its inception. AUL will refund to the Contract Owner the Account Value plus any
amounts deducted for premium taxes. The Contract Owner bears all of the
investment risk prior to the Company's receipt of request for cancellation. AUL
will refund the premium paid in those states where required by law and for all
individual retirement annuities, if returned within seven days of receipt.
TRANSFERS
A Contract Owner may transfer his or her Variable Account Value among the
available Investment Accounts or to any of the available Fixed Accounts at any
time during the Accumulation Period. The Contract Owner may transfer part of his
or her Fixed Account Value to one or more of the available Investment Accounts
during the Accumulation Period, subject to certain restrictions. The minimum
transfer amount from any one Investment Account or from the Fixed Account is
$500. If the Account
5
<PAGE>
Value in an Investment Account or the Fixed Account prior to a transfer is less
than $500, then the minimum transfer amount is the Contract Owner's remaining
Account Value in that account. If, after any transfer, the remaining Account
Value in an Investment Account or in the Fixed Account would be less than $500,
then AUL will treat that request as a request for a transfer of the entire
Account Value.
Amounts transferred from the Non-MVA Fixed Account to an Investment Account
cannot exceed 20% of the Owner's Non-MVA Fixed Account Value as of the beginning
of that Contract Year. See "Transfers of Account Value."
CHARGES
AUL will deduct certain charges in connection with the operation of the
Contracts and the Variable Account. These charges include a withdrawal charge
assessed upon partial withdrawal or surrender, a mortality and expense risk
charge, a premium tax charge, and an annual contract fee. In addition, the Funds
pay investment advisory fees and other expenses. For further information on
these charges and expenses, see "Charges and Deductions."
Distributions
Withdrawals
The Contract Owner may surrender or take a partial withdrawal from the
Account Value at any time before the Annuity Date. Withdrawals and surrender are
subject to the limitations under any applicable Qualified Plan and applicable
law. The minimum withdrawal amount is $200 for Flexible Premium Contracts and
$500 for One Year Flexible Premium Contracts.
Certain retirement programs, such as 403(b) Programs, are subject to
constraints on withdrawals and full surrenders. See "403(b) Programs-Constraints
on Withdrawals." See "Cash Withdrawals" for more information, including the
possible charges and tax consequences of full and partial withdrawals.
Loan Privileges
Prior to the annuity date, the owner of a contract qualified under Section
403(b) may take a loan from the Account Value subject to the terms of the
Contract. The Plan and the Internal Revenue Code may impose restrictions on
loans.
THE DEATH BENEFIT
If a Contract Owner dies during the Accumulation Period, AUL will pay a
death benefit to the Beneficiary. The amount of the death benefit is equal to
the Death Proceeds. A death benefit will not be payable if the Contract Owner
dies on or after the Annuity Date, except as may be provided under the Annuity
Option elected. See "The Death Proceeds" and "Annuity Options."
Initial Dollar Cost Averaging Program
Beginning within the first contract year, owners who wish to purchase units
of an Investment Account over a one year period may do so through the Initial
Dollar Cost Averaging ("Initial DCA") Program. Under the Initial DCA Program,
the Contract Owner authorizes AUL to transfer an amount from the Enhanced
Averaging Fixed Account into one or more other Investment Accounts. AUL
recalculates the transfer amount each month to ensure that the entire balance of
the Enhanced Averaging Fixed Account is transferred within the one year
timeframe. The unit values are determined on the dates of the transfers. These
transfers will continue automatically over a 12 month period. To participate in
the Program, AUL requires a minimum deposit of $10,000 into the Enhanced
Averaging Fixed Account. For further information, see the explanation under
"Dollar Cost Averaging Program."
Ongoing Dollar Cost Averaging Program
At any time, the Contract Owner may purchase units of an Investment Account
over a period of time through the Ongoing Dollar Cost Averaging (Ongoing DCA)
Program. Under the Ongoing DCA Program, the Contract Owner authorizes AUL to
transfer a specific dollar amount from the AUL American Money Market Investment
Account into one or more other Investment Accounts at the unit values determined
on the dates of the transfers. These transfers will continue automatically until
AUL receives notice to discontinue the Program, or until there is not enough
money in the AUL Money Market Investment Account to continue the Program. To
participate in the Program, AUL requires a minimum deposit of $10,000 into the
AUL Money Market Investment Account. For further information, see the
explanation under "Dollar Cost Averaging Program."
Portfolio Rebalancing Program
The Contract Owner may elect to automatically adjust his or her investment
account balances consistent with the allocation most recently requested. AUL can
do this on a monthly, quarterly, or annual basis from the date on which the
Portfolio Rebalancing Program commences.
CONTACTING AUL
Individuals should direct all written requests, notices, and forms required
under these Contracts, and any questions or inquiries to AUL's Variable Products
Office at the address and phone number shown on the front of this Prospectus.
EXPENSE TABLE
The purpose of the following table is to assist investors in understanding
the various costs and expenses that Contract Owners bear directly and
indirectly. The table reflects expenses of the Variable Account as well as the
Funds. Expenses of the Variable Account shown under "Contract Owner Transaction
Expenses" (including the withdrawal charge and annual contract fee) and
"Variable Account Annual Expenses" are fixed and specified under the terms of
the Contract. Expenses of the Funds as shown under "Fund Annual Expenses" are
not fixed or specified under the terms of the Contract, and may vary from year
to year. The fees in this expense table have been provided by the Funds and have
not been independently verified by AUL. The table does not reflect AUL's charges
for premium taxes that may be imposed by various jurisdictions. See "Premium Tax
Charge." The information contained in the table is not generally applicable to
amounts allocated to the Fixed Account or to annuity payments under an Annuity
Option.
6
<PAGE>
EXPENSE TABLE (continued)
For a complete description of a Contract's costs and expenses, see "Charges
and Deductions." For a more complete description of the Funds' costs and
expenses, see the Funds' Prospectuses.
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES
SALES CHARGE (ALSO REFERRED TO AS A "WITHDRAWAL CHARGE")(1)
Charge on Withdrawal Exceeding 12% Free Withdrawal Amount(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contract Year 1 2 3 4 5 6 7 8 9 10 11 or more
- ------------- - - - - - - - - - -- ----------
Flexible Premium 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
Contracts
One Year Flexible 7% 6% 5% 4% 3% 2% 1% 0% 0% 0%
Premium Contracts
Annual Contract Fee
Maximum administrative fee (per year)(2) .....................................................................$30
Variable Account Expenses (as an equivalent annual percentage of the average account value)(3)
Standard Individual Deferred Variable Annuity
Mortality and expense risk fee..........................................................1.00% yrs 1 - 10
..........................................................90% yrs 11+
Enhanced Individual Deferred Variable Annuity
Mortality and expense risk fee..........................................................1.15% yrs 1 - 10
........................................................1.05% yrs 11+
Optional Rider Expenses (as an equivalent annual percentage of average account value)(4)
Enhanced Death Benefit Rider Option....................................................................0.15%
Enhanced Death Benefit and Guaranteed Minimum Income Benefit Rider Option..............................0.45%
Enhanced Death Benefit, Guaranteed Minimum Income Benefit, and
Guaranteed Minimum Account Value Rider Option ...................................................1.50%
FUND ANNUAL EXPENSES (as a percentage of net assets of each Fund)
<S> <C> <C> <C>
Management/ Other Total Fund
Portfolio Advisory Fee Expenses Annual Expenses
- --------- ------------ -------- ---------------
AUL American Series Fund, Inc.
Equity Portfolio 0.50%(5) 0.16% 0.66%
Bond Portfolio 0.50%(5) 0.17% 0.67%
Managed Portfolio 0.50%(5) 0.17% 0.67%
Money Market Portfolio 0.50%(5) 0.16% 0.66%
Tactical Asset Allocation Portfolio 0.68%(5) 0.32% 1.00%
Alger American Fund
Alger American Growth Portfolio 0.75% 0.04% 0.79%
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation 1.00% 0.00% 1.00%
American Century VP International 1.50% 0.00% 1.50%
Calvert Variable Series:
Calvert Social Mid Cap Growth Portfolio 0.90%(6) 0.15% 1.05%
Fidelity Variable Insurance Products Fund
Equity-Income Portfolio 0.50% 0.08% 0.58%(7)
Growth Portfolio 0.60% 0.09% 0.69%(7)
High Income Portfolio 0.59% 0.12% 0.71%
Overseas Portfolio 0.75% 0.17% 0.92%(7)
Fidelity Variable Insurance Products Fund II
Asset Manager Portfolio 0.55% 0.10% 0.65%(7)
Contrafund Portfolio 0.60% 0.11% 0.71%(7)
Index 500 Portfolio 0.24% 0.04% 0.28%(8)
PBHG Insurance Series Fund, Inc.
Growth II Portfolio 0.00% 1.20% 1.20%
Technology & Communications Portfolio 0.00% 1.20% 1.20%
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income 0.85% 0.00% 0.85%
<FN>
(1) An amount withdrawn during a Contract Year referred to as the Free
Withdrawal Amount will not be subject to a withdrawal charge. The Free
Withdrawal Amount is 12% of the beginning of the year Account Value at the time
of the first withdrawal in any Contract Year in which the withdrawal is made.
See "Withdrawal Charge."
(2)The annual contract fee may be less than $30.00 per year, based on the
Owner's Account Value. The maximum charge imposed will be the lesser of 2% of
the Owner's Account Value or $30.00 per year. The administrative charge is
waived if the Account Value equals or exceeds $50,000 on a Contract Anniversary.
(3)The Variable Account expenses set forth apply exclusively to allocations
made to the Investment Account(s) of the Variable Account. Such charges do not
apply to, and will not be assessed against, allocations made to the Fixed
Account(s). The total Variable Account expenses shown include the Standard
Contractual Death Benefit (See Death Proceeds Payment Provisions). The Variable
Account expenses are deducted from the Account Value on a monthly basis.
(4)At the time of application, the applicant may choose any of the optional
benefit riders which may be attached to the Enhanced Individual Deferred
Variable Annuity. Should the applicant choose an Optional Rider, the Company
will deduct the appropriate rider charge from the Account Value on a monthly
basis.
(5)AUL has currently agreed to waive its advisory fee if the ordinary
expenses of a Portfolio exceed 1% and, to the extent necessary, assume any
expenses in excess of its advisory fee so that the expenses of each Portfolio,
including the advisory fee but excluding extraordinary expenses, will not exceed
1% of the Portfolio's average daily net asset value per year. The Adviser may
terminate the policy of reducing its fee and/or assuming Fund expenses upon 30
days written notice to the Fund and such policy will be terminated automatically
by the termination of the Investment Advisory Agreement.
(6)The figures above are based on expenses for fiscal year 1997, and have
been restated to reflect an increase in transfer agency expenses of 0.01% for
the Portfolio expected to be incurred in 1998. Management and Advisory Expenses
includes a performance adjustment, which depending on performance, could cause
the fee to be as high as 0.95% or as low as 0.85%. The performance adjustment is
proposed to be eliminated if approved by a vote of shareholders, expected in
late February 1999. "Other Expenses" reflect an indirect fee. Net fund operating
expenses after reductions for fees paid indirectly (again, restated) would be
0.97%. Management and Advisory expenses for the Portfolio include an
administrative service fee of 0.10%, paid to Advisor's affiliate.
(7) A portion of the brokerage commissions that certain funds pay was used
to reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including these
reductions, the total operating expenses presented in the table would have been
0.57% for the VIP Equity-Income Portfolio, 0.67% for the VIP Growth Portfolio,
0.90% for the VIP Overseas portfolio, 0.64% for the VIP II Asset Manager
Portfolio, and 0.68% for the VIP II Contrafund Portfolio.
(8) Fidelity Management & Research Company agreed to reimburse a portion of
VIP II Index 500 Portfolio's expenses during the period. Without this
reimbursement, the fund's management fee, other expenses and total expenses
would have been 0.27%, 0.13%, and 0.40% respectively for VIP II Index 500
Portfolio.
</FN>
</TABLE>
7
<PAGE>
EXAMPLES (for any Investment Account)
The following examples show expenses that a Contract Owner would pay at the
end of one, three, five, or ten years if at the end of those time periods, the
Contract is (1) surrendered, (2) annuitized, or (3) not surrendered or
annuitized. The information below represents expenses on a $1,000 premium and
assumes a 5% return per year. For a Contract that is surrendered, and for a
Contract that is annuitized, the example shows expenses for Flexible Premium
Contracts and One Year Flexible Premium Contracts. Expenses will be the same for
both Contracts if not surrendered or annuitized. Column (2) reflects an
assumption that a life annuity or survivorship annuity is elected. Under certain
circumstances, a withdrawal charge may apply upon annuitization. See "Withdrawal
Charge." These examples should not be considered a representation of past or
future expenses. Because Fund expenses may vary, actual expenses may be greater
or less than those shown. The assumed 5% return is hypothetical and should not
be considered a representation of past or future returns, which may be greater
or less than the assumed amount.
<TABLE>
<CAPTION>
(1) If Your Contract (2) If your Contract (3) If your Contract
is Surrendered is Annuitized is not Surrendered or
Annuitized
<S> <C> <C> <C> <C> <C>
Flexible Premium One Year Flexible Flexible One Year Flexible
Contracts Premium Contracts Premium Contracts Premium Contracts All Contracts
----------------- ----------------- ----------------- ----------------- -------------
Investment Account
- ------------------
AUL American Equity
1 year $106.38 $ 84.72 $106.38 $ 21.38 $ 21.38
3 years 142.26 113.56 142.26 65.72 65.72
5 years 172.97 142.62 112.26 112.26 112.26
10 years 250.84 239.18 239.18 239.18 239.18
AUL American Bond
1 year 106.49 84.82 106.49 21.49 21.49
3 years 142.56 113.87 142.56 66.05 66.05
5 years 173.50 143.16 112.82 112.82 112.82
10 years 251.97 240.33 240.33 240.33 240.33
AUL American Managed
1 year 106.49 84.82 106.49 21.49 21.49
3 years 142.56 113.87 142.56 66.05 66.05
5 years 173.50 143.16 112.82 112.82 112.82
10 years 251.97 240.33 240.33 240.33 240.33
AUL American Money Market
1 year 106.38 84.72 106.38 21.38 21.38
3 years 142.26 113.56 142.26 65.72 65.72
5 years 172.97 142.62 112.26 112.26 112.26
10 years 250.84 239.18 239.18 239.18 239.18
Alger American Growth
1 year 107.71 85.96 107.71 22.71 22.71
3 years 145.95 117.36 145.95 69.72 69.72
5 years 179.28 149.13 118.97 118.97 118.97
10 years 264.32 252.82 252.82 252.82 252.82
American Century VP Capital Appreciation
1 year 109.79 87.91 109.79 24.79 24.79
3 years 151.76 123.36 151.76 76.01 76.01
5 years 189.18 159.34 129.50 129.50 129.50
10 years 285.27 274.01 274.01 274.01 274.01
American Century VP International
1 year 114.80 92.60 114.80 29.80 29.80
3 years 165.59 137.61 165.59 90.97 90.97
5 years 212.53 183.43 154.34 154.34 154.34
10 years 333.70 323.00 323.00 323.00 323.00
Calvert Social Mid Cap Growth
1 year 110.31 88.39 110.31 25.31 25.31
3 years 153.19 124.82 153.19 77.55 77.55
5 years 191.59 161.83 132.06 132.06 132.06
10 years 290.34 279.14 279.14 279.14 279.14
8
<PAGE>
Examples (for any Investment Account) (continued)
<CAPTION>
(1) If Your Contract (2) If your Contract (3) If your Contract
is Surrendered is Annuitized is not Surrendered or
Annuitized
<S> <C> <C> <C> <C> <C>
Flexible Premium One Year Flexible Flexible One Year Flexible
Contracts Premium Contracts Premium Contracts Premium Contracts All Contracts
----------------- ----------------- ----------------- ----------------- -------------
Investment Account
- ------------------
Fidelity VIP Equity-Income
1 year $105.58 $ 83.96 $105.58 $ 20.58 $ 20.58
3 years 139.99 111.22 139.99 63.27 63.27
5 years 169.10 138.62 108.14 108.14 108.14
10 years 242.51 230.76 230.76 230.76 230.76
Fidelity VIP Growth
1 year 106.68 84.99 106.68 21.68 21.68
3 years 143.08 114.40 143.08 66.61 66.61
5 years 174.38 144.07 113.76 113.76 113.76
10 years 253.85 242.23 242.23 242.23 242.23
Fidelity VIP High Income
1 year 106.90 85.20 106.90 21.90 21.90
3 years 143.69 115.04 143.69 67.28 67.28
5 years 175.43 145.15 114.88 114.88 114.88
10 years 256.11 244.51 244.51 244.51 244.51
Fidelity VIP Overseas
1 year 108.99 87.16 108.99 23.99 23.99
3 years 149.52 121.05 149.52 73.59 73.59
5 years 185.37 155.41 125.45 125.45 125.45
10 years 277.24 265.89 265.89 265.89 265.89
Fidelity VIP II Asset Manager
1 year 106.27 84.62 106.27 21.27 21.27
3 years 141.95 113.24 141.95 65.39 65.39
5 years 172.45 142.07 111.70 111.70 111.70
10 years 249.71 238.04 238.04 238.04 238.04
Fidelity VIP II Contrafund
1 year 106.97 85.27 106.97 21.97 21.97
3 years 143.90 115.25 143.90 67.50 67.50
5 years 175.78 145.52 115.25 115.25 115.25
10 years 256.86 245.27 245.27 245.27 245.27
Fidelity VIP II Index 500
1 year 102.56 81.13 102.56 17.56 17.56
3 years 131.51 102.47 131.51 54.09 54.09
5 years 154.51 123.56 92.62 92.62 92.62
10 years 210.79 198.68 198.68 198.68 198.68
PBHG Growth II
1 year 111.80 89.80 111.80 26.80 26.80
3 years 157.34 129.10 157.34 82.04 82.04
5 years 198.63 169.09 139.55 139.55 139.55
10 years 305.03 294.00 294.00 294.00 294.00
PBHG Technology & Communications
1 year 111.80 89.80 111.80 26.80 26.80
3 years 157.34 129.10 157.34 82.04 82.04
5 years 198.63 169.09 139.55 139.55 139.55
10 years 305.03 294.00 294.00 294.00 294.00
T. Rowe Price Equity Income
1 year 108.29 86.51 108.29 23.29 23.29
3 years 147.59 119.05 147.59 71.49 71.49
5 years 182.07 152.00 121.94 121.94 121.94
10 years 270.25 258.81 258.81 258.81 258.81
</TABLE>
9
<PAGE>
PERFORMANCE OF THE INVESTMENT ACCOUNTS
The following tables present the return on investment for each of the
Investment Accounts. Though the Contracts were not offered prior to the date of
this prospectus, the tables present hypothetical information of the results,
based on the performance of the Funds, that would have been achieved if the
Contracts had been held for the periods presented. The return on investment
represents a change in a hypothetical Accumulation Unit allocated to an
Investment Account and takes into account Variable Account charges such as the
mortality and expense risk charges. The return on investment figures in the
first table (excluding charges) do not reflect either the deduction of the
withdrawal charge or a pro rata portion of the administrative charge. The return
on investment figures in the second and third tables (including charges) reflect
the deduction of the withdrawal charge and a pro rata portion of the
administrative charge.
<TABLE>
<CAPTION>
Performance (excluding charges) for All Contracts
Average Average Average Average
Annual Annual Annual Annual Cumulative
Return on Return on Return on Return on Return on
Inception Inception Investment Investment Investment Investment Investment for
Date of Date of for Year for 3 Years for 5 Years for lesser of lesser of 10
Mutual Investment ending ending ending 10 Years or Years or Since
Investment Account Fund Account 12/31/97 12/31/97 12/31/97 Since Inception Inception
- ------------------ ---- ------- -------- -------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
AUL American Equity 4/10/90 04/30/99 28.11% 21.24% 15.47% 13.84% 172.49%
AUL American Bond 4/10/90 04/30/99 6.61% 7.85% 5.53% 7.40% 73.63%
AUL American Managed 4/10/90 04/30/99 19.56% 15.89% 11.22% 10.85% 121.77%
AUL American Money Market 4/10/90 04/30/99 3.73% 3.78% 2.97% 3.30% 28.56%
Alger American Growth 1/09/89 04/30/99 24.30% 23.37% 17.93% 17.82% 336.04%
American Century VP Capital
Appreciation 11/20/87 04/30/99 (4.36%) 5.45% 4.54% 7.45% 105.22%
American Century VP
International 5/01/94 04/30/99 17.28% 13.73% n.a. 9.33% 38.74%
Calvert Social Mid Cap Growth 7/16/91 04/30/99 22.20% 21.40% 11.12% 11.80% 105.71%
Fidelity VIP Equity-Income 10/09/86 04/30/99 26.65% 24.08% 18.79% 15.40% 319.17%
Fidelity VIP Growth 10/09/86 04/30/99 22.07% 22.81% 16.66% 15.86% 336.22%
Fidelity VIP High Income 9/19/85 04/30/99 16.32% 16.06% 12.61% 11.52% 197.83%
Fidelity VIP Overseas 1/28/87 04/30/99 10.28% 10.20% 12.81% 8.37% 123.52%
Fidelity VIP II Asset Manager 9/06/89 04/30/99 19.27% 16.04% 11.69% 11.58% 148.96%
Fidelity VIP II Contrafund 1/03/95 04/30/99 22.72% n.a. n.a. 28.12% 110.01%
Fidelity VIP II Index 500 8/27/92 04/30/99 31.18% 29.27% 18.54% 18.52% 148.09%
PBHG Growth II 5/01/97 04/30/99 n.a. n.a. n.a. 10.16% 6.68%
PBHG Technology
& Communications 5/01/97 04/30/99 n.a. n.a. n.a. 4.98% 3.30%
T. Rowe Price Equity Income 3/31/94 04/30/99 27.38% 26.11% n.a. 22.35% 113.35%
11
<PAGE>
<CAPTION>
PERFORMANCE OF THE INVESTMENT ACCOUNTS (continued)
Performance (including charges) for Flexible Premium Contracts
Average Average Average Average
Annual Annual Annual Annual Cumulative
Return on Return on Return on Return on Return on
Inception Inception Investment Investment Investment Investment Investment for
Date of Date of for Year for 3 Years for 5 Years for lesser of lesser of 10
Mutual Investment ending ending ending 10 Years or Years or Since
Investment Account Fund Account 12/31/97 12/31/97 12/31/97 Since Inception Inception
- ------------------ ---- ------- -------- -------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
AUL American Equity 4/10/90 04/30/99 14.95% 17.57% 13.70% 12.74% 152.77%
AUL American Bond 4/10/90 04/30/99 (4.33%) 4.58% 3.91% 6.36% 61.03%
AUL American Managed 4/10/90 04/30/99 7.29% 12.36% 9.53% 9.77% 105.58%
AUL American Money Market 4/10/90 04/30/99 (6.93%) 0.63% 1.40% 2.29% 19.15%
Alger American Growth 1/09/89 04/30/99 11.54% 19.63% 16.13% 17.20% 315.84%
American Century VP Capital
Appreciation 11/20/87 04/30/99 (14.18%) 2.24% 2.95% 7.03% 97.32%
American Century VP
International 5/01/94 04/30/99 5.24% 11.08% n.a. 6.84% 27.48%
Calvert Social Mid Cap Growth 7/16/91 04/30/99 9.65% 17.73% 9.43% 10.73% 93.30%
Fidelity VIP Equity-Income 10/09/86 04/30/99 13.63% 20.32% 16.98% 14.93% 302.73%
Fidelity VIP Growth 10/09/86 04/30/99 9.53% 19.09% 14.87% 15.39% 318.81%
Fidelity VIP High Income 9/19/85 04/30/99 4.37% 12.54% 10.89% 11.08% 186.27%
Fidelity VIP Overseas 1/28/87 04/30/99 (1.05%) 6.86% 11.09% 7.83% 112.61%
Fidelity VIP II Asset Manager 9/06/89 04/30/99 7.02% 12.51% 9.98% 10.81% 135.00%
Fidelity VIP II Contrafund 1/03/95 04/30/99 10.12% n.a. n.a. 24.12% 91.01%
Fidelity VIP II Index 500 8/27/92 04/30/99 17.71% 25.35% 16.48% 16.99% 131.42%
PBHG Growth II 5/01/97 04/30/99 n.a. n.a. n.a. (6.33%) (4.28%)
PBHG Technology
& Communications 5/01/97 04/30/99 n.a. n.a. n.a. (10.73%) (7.31%)
T. Rowe Price Equity Income 3/31/94 04/30/99 14.29% 21.84% n.a. 19.62% 95.99%
<CAPTION>
Performance (including charges) for One Year Flexible Premium Contracts
Average Average Average Average
Annual Annual Annual Annual Cumulative
Return on Return on Return on Return on Return on
Inception Inception Investment Investment Investment Investment Investment for
Date of Date of for Year for 3 Years for 5 Years for lesser of lesser of 10
Mutual Investment ending ending ending 10 Years or Years or Since
Investment Account Fund Account 12/31/97 12/31/97 12/31/97 Since Inception Inception
- ------------------ ---- ------- -------- -------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
AUL American Equity 4/10/90 04/30/99 18.79% 18.83% 14.41% 13.19% 160.68%
AUL American Bond 4/10/90 04/30/99 (1.15%) 5.71% 4.57% 6.78% 66.02%
AUL American Managed 4/10/90 04/30/99 10.86% 13.57% 10.22% 10.21% 112.05%
AUL American Money Market 4/10/90 04/30/99 (3.82%) 1.71% 2.03% 2.71% 22.99%
Alger American Growth 1/09/89 04/30/99 15.26% 20.92% 16.86% 17.47% 324.54%
American Century VP Capital
Appreciation 11/20/87 04/30/99 (11.33%) 3.34% 3.59% 7.13% 99.18%
American Century VP
International 5/01/94 04/30/99 8.74% 12.25% n.a. 7.77% 31.61%
Calvert Social Mid Cap Growth 7/16/91 04/30/99 13.30% 18.99% 10.12% 11.26% 99.36%
Fidelity VIP Equity-Income 10/09/86 04/30/99 17.43% 21.61% 17.72% 15.05% 306.96%
Fidelity VIP Growth 10/09/86 04/30/99 13.18% 20.37% 15.60% 15.51% 323.19%
Fidelity VIP High Income 9/19/85 04/30/99 7.85% 13.75% 11.59% 11.19% 189.12%
Fidelity VIP Overseas 1/28/87 04/30/99 2.25% 8.01% 11.79% 8.16% 119.21%
Fidelity VIP II Asset Manager 9/06/89 04/30/99 10.59% 13.72% 10.68% 11.21% 142.16%
Fidelity VIP II Contrafund 1/03/95 04/30/99 13.78% n.a. n.a. 25.50% 97.40%
Fidelity VIP II Index 500 8/27/92 04/30/99 21.63% 26.70% 17.22% 17.68% 138.82%
PBHG Growth II 5/01/97 04/30/99 n.a. n.a. n.a. (1.62%) (1.08%)
PBHG Technology
& Communications 5/01/97 04/30/99 n.a. n.a. n.a. (6.24%) (4.22%)
T. Rowe Price Equity Income 3/31/94 04/30/99 18.11% 23.16% n.a. 20.64% 102.35%
</TABLE>
INFORMATION ABOUT AUL, THE VARIABLE ACCOUNT, AND THE FUNDS
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
AUL is a legal reserve mutual life insurance company existing under the
laws of the State of Indiana. It was originally incorporated as a fraternal
society on November 7, 1877, under the laws of the Federal government, and
reincorporated under the laws of the State of Indiana in 1933. It is qualified
to do business in 48 states and the District of Columbia. AUL has its principal
business office located at One American Square, Indianapolis, Indiana 46282.
AUL conducts a conventional life insurance, reinsurance, and annuity
business. At December 31, 1997, AUL had total assets of $8,597,755,587 and a
policy owners' surplus of $664,638,385.
The principal underwriter for the Contracts is AUL, which is registered
with the SEC as a broker-dealer.
VARIABLE ACCOUNT
AUL American Individual Variable Annuity Unit Trust was established by AUL
on November 11, 1998, under procedures established under Indiana law. The
income, gains, or losses of the Variable Account are credited to or charged
against the assets of the Variable Account without regard to other income,
gains, or losses of
12
<PAGE>
AUL. Assets in the Variable Account attributable to the reserves and other
liabilities under the Contracts are not chargeable with liabilities arising from
any other business that AUL conducts. AUL owns the assets in the Variable
Account and is required to maintain sufficient assets in the Variable Account to
meet all Variable Account obligations under the Contracts. AUL may transfer to
its General Account assets that exceed anticipated obligations of the Variable
Account. All obligations arising under the Contracts are general corporate
obligations of AUL. AUL may invest its own assets in the Variable Account, and
may accumulate in the Variable Account proceeds from Contract charges and
investment results applicable to those assets.
The Variable Account is currently divided into sub-accounts referred to as
Investment Accounts. Each Investment Account invests exclusively in shares of
one of the Funds. Premiums may be allocated to one or more Investment Accounts
available under a Contract. AUL may in the future establish additional
Investment Accounts of the Variable Account, which may invest in other
securities, mutual funds, or investment vehicles.
The Variable Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"). Registration with the
SEC does not involve supervision by the SEC of the administration or investment
practices of the Variable Account or of AUL.
THE FUNDS
Each of the Funds is a diversified, open-end management investment company
commonly referred to as a mutual fund, or a portfolio thereof. Each of the Funds
is registered with the SEC under the 1940 Act. Such registration does not
involve supervision by the SEC of the investments or investment policies or
practices of the Fund. Each Fund has its own investment objective or objectives
and policies. The shares of a Fund are purchased by AUL for the corresponding
Investment Account at the Fund's net asset value per share, i.e., without any
sales load. All dividends and capital gain distributions received from a Fund
are automatically reinvested in such Fund at net asset value, unless otherwise
instructed by AUL. AUL has entered into agreements with the
Distributors/Advisers of American Century Variable Portfolios, Inc., Calvert
Variable Series, Fidelity Investments, Pilgrim Baxter & Associates, and T. Rowe
Price Equity Series, Inc. under which AUL has agreed to render certain services
and to provide information about these funds to its Contract Owners and/or
Participants who invest in these funds. Under these agreements and for providing
these services, AUL receives compensation from the Distributor/Advisor of these
funds, ranging from zero basis points until a certain level of Fund assets have
been purchased to 25 basis points on the net average aggregate deposits made.
The investment advisers of the Funds are identified on page 5. All of the
investment advisers are registered with the SEC as investment advisers. The
Funds offer their shares as investment vehicles to support variable annuity
contracts. The advisers or distributors to certain of the Funds may advise and
distribute other investment companies that offer their shares directly to the
public, some of which have names similar to the names of the Funds in which the
Investment Accounts invest. These investment companies offered to the public
should not be confused with the Funds in which the Investment Accounts invest.
the Funds are described in their prospectuses, which accompany this prospectus.
A summary of the investment objective or objectives of each Fund is
provided below. There can be no assurance that any Fund will achieve its
objective or objectives. More detailed information is contained in the
Prospectus for the Funds, including information on the risks associated with the
investments and investment techniques of each Fund.
AUL AMERICAN SERIES FUND, INC.
AUL AMERICAN EQUITY PORTFOLIO
The primary investment objective of the AUL American Equity Portfolio is
long-term capital appreciation. The Fund seeks current investment income as a
secondary objective. The Fund attempts to achieve these objectives by investing
primarily in equity securities selected on the basis of fundamental investment
research for their long-term growth prospects.
AUL AMERICAN BOND PORTFOLIO
The primary investment objective of the AUL American Bond Portfolio is to
provide a high level of income consistent with prudent investment risk. As a
secondary objective, the Fund seeks to provide capital appreciation to the
extent consistent with the primary objective. The Fund attempts to achieve these
objectives by investing primarily in corporate bonds and other debt securities.
AUL AMERICAN MANAGED PORTFOLIO
The investment objective of the AUL American Managed Portfolio is to
provide a high total return consistent with prudent investment risk. The Fund
attempts to achieve this objective through a fully managed investment policy
utilizing publicly traded common stock, debt securities (including convertible
debentures), and money market securities.
AUL AMERICAN MONEY MARKET PORTFOLIO
The investment objective of the AUL American Money Market Portfolio is to
provide a high level of current income while preserving assets and maintaining
liquidity and investment quality. The Fund attempts to achieve this objective by
investing in short-term money market instruments that are of the highest
quality.
AUL AMERICAN TACTICAL ASSET ALLOCATION PORTFOLIO
The investment objective of the Tactical Asset Allocation Portfolio is
preservation of capital and competitive investment returns. The Portfolio seeks
to achieve its objective by investing primarily in stocks, United States
Treasury bonds, notes and bills, and money market funds.
FOR ADDITIONAL INFORMATION CONCERNING AUL AMERICAN SERIES FUND, INC. AND ITS
PORTFOLIOS, PLEASE SEE THE AUL AMERICAN SERIES FUND, INC. PROSPECTUS, WHICH
SHOULD BE READ CAREFULLY BEFORE INVESTING.
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<PAGE>
ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio is a growth portfolio that seeks to
obtain long-term capital appreciation by investing in a diversified, actively
managed portfolio of equity securities. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase, have a total market
capitalization of one billion dollars or greater.
FOR ADDITIONAL INFORMATION CONCERNING THE ALGER AMERICAN FUND AND ITS PORTFOLIO,
PLEASE SEE THE ALGER AMERICAN FUND PROSPECTUS, WHICH SHOULD BE READ CAREFULLY
BEFORE INVESTING.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP CAPITAL APPRECIATION
The VP Capital Appreciation Portfolio seeks capital growth by investing
primarily in common stocks (including securities convertible into common stocks
and other equity equivalents) and other securities that meet certain fundamental
and technical standards of selection and have, in the opinion of the Fund's
investment manager, better than average potential for appreciation. The Fund
tries to stay fully invested in such securities, regardless of the movement of
prices generally.
VP INTERNATIONAL
The VP International Portfolio seeks to achieve its investment objective
of capital growth by investing primarily in securities of foreign companies that
meet certain fundamental and technical standards of selection and have, in the
opinion of the investment manager, potential for appreciation. The Fund will
invest primarily in common stocks (defined to include depository receipts for
common stocks and other equity equivalents) of such companies. Investment in
securities of foreign issuers typically involves a greater degree of risk than
investment in domestic securities.
FOR ADDITIONAL INFORMATION CONCERNING AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
AND ITS PORTFOLIOS, PLEASE SEE THE AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
CALVERT VARIABLE SERIES
CALVERT SOCIAL MID CAP GROWTH
The Calvert Social Mid Cap Growth Portfolio is a socially responsible
growth Portfolio that seeks long-term capital appreciation by investing
primarily in the stock of medium sized companies. To the extent possible,
investments are made in enterprises that make a significant contribution to
society through their products and services and through the way they do
business.
FOR ADDITIONAL INFORMATION CONCERNING CALVERT VARIABLE SERIES AND THE CALVERT
SOCIAL MID CAP GROWTH PORTFOLIO, PLEASE SEE THE CALVERT VARIABLE SERIES
PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP EQUITY-INCOME PORTFOLIO
The VIP Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing equity securities; the fund will also consider the
potential for capital appreciation.
VIP GROWTH PORTFOLIO
The VIP Growth Portfolio seeks to achieve capital appreciation. The
Portfolio invests primarily in normally purchases common stocks, although the
Portfolio's investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including bonds and
preferred stocks.
VIP HIGH INCOME PORTFOLIO
The VIP High Income Portfolio seeks to obtain a high level of current
income by investing primarily in all types of income-producing debt securities,
preferred stocks, and convertible securities, while also considering growth of
capital. These include securities commonly referred to as junk bonds, the risks
of which are described in the prospectus for the Fund.
VIP OVERSEAS PORTFOLIO
The VIP Overseas Portfolio seeks long-term growth of capital primarily
through investments in foreign securities. The VIP Overseas Portfolio provides a
means for investors to diversify their own portfolios by participating in
companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II ASSET MANAGER PORTFOLIO
The VIP II Asset Manager Portfolio seeks high total return with reduced
risk over the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term money market instruments.
VIP II CONTRAFUND PORTFOLIO
The VIP II Contrafund Portfolio seeks capital appreciation by investing
primarily in equity securities of companies whose value the investment adviser
believes is not fully recognized by the public.
VIP II INDEX 500 PORTFOLIO
The VIP II Index 500 Portfolio seeks to provide investment results that
correspond to the total return (i.e., the combination of capital changes and
income) of a broad range of common stocks publicly traded in the United States.
In seeking this objective, the Portfolio attempts to duplicate the composition
and total return of the Standard & Poor's 500 Composite Stock Price Index.
14
<PAGE>
FOR ADDITIONAL INFORMATION CONCERNING FIDELITY'S VARIABLE INSURANCE PRODUCTS
FUND ("VIP") AND VARIABLE INSURANCE PRODUCTS FUND II ("VIP II") AND THEIR
PORTFOLIOS, PLEASE SEE THE VIP AND VIP II PROSPECTUS, WHICH SHOULD BE READ
CAREFULLY BEFORE INVESTING.
PBHG INSURANCE SERIES FUNDS, INC.
PBHG GROWTH II PORTFOLIO
The investment objective of the PBHG Growth II Portfolio is capital
appreciation. The Portfolio normally will be invested in common stocks and
convertible securities of small and medium-sized companies (market
capitalization or annual revenues up to $4 billion) which, in the Adviser's
opinion, have an outlook for strong earnings growth and the potential for
significant capital appreciation. The PBHG Growth II Portfolio is managed by
Jeffrey A. Wrona, CFA, who is responsible for managing other mid-cap
institutional accounts.
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
The primary objective of the PBHG Technology & Communications Portfolio is
long-term growth of capital. Current income is incidental to the Portfolio's
objective. The Portfolio invests in common stocks of companies which (1) rely
extensively on technology or communications in their product development or
operations; (2) are experiencing exceptional growth in sales and earnings driven
by technology or communications-related products and services; and, (3) are
expected to benefit from technological advances and improvement. The Portfolio
is co-managed by Jeffrey Wrona, CFA and Michael Hahn, CFA.
FOR ADDITIONAL INFORMATION CONCERNING THE PBHG INSURANCE SERIES FUND, INC. AND
ITS PORTFOLIOS, PLEASE SEE THE PBHG INSURANCE SERIES FUND, INC. PROSPECTUS,
WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
T. ROWE PRICE EQUITY SERIES, INC.
T. ROWE PRICE EQUITY INCOME PORTFOLIO
The T. Rowe Price Equity Income Portfolio seeks to provide substantial
dividend income as well as long-term capital appreciation through investments in
common stocks of established companies.
FOR ADDITIONAL INFORMATION CONCERNING T. ROWE PRICE EQUITY SERIES, INC. AND ITS
PORTFOLIO, PLEASE SEE THE T. ROWE PRICE EQUITY SERIES, INC. PROSPECTUS, WHICH
SHOULD BE READ CAREFULLY BEFORE INVESTING.
THE CONTRACTS
GENERAL
The Contracts are offered for use in connection with non-tax qualified
retirement plans by an individual. The Contracts are also eligible for use in
connection with certain tax qualified retirement plans that meet the
requirements of Sections 401, 403(b), 408 or 408A of the Internal Revenue Code.
Certain Federal tax advantages are currently available to retirement plans that
qualify as (1) self-employed individuals' retirement plans under Section 401,
such as HR-10 Plans, (2) pension or profit-sharing plans established by an
employer for the benefit of its employees under Section 401, (3) Section 403(b)
annuity purchase plans for employees of public schools or a charitable,
educational, or scientific organization described under Section 501(c)(3), and
(4) individual retirement accounts or annuities, including those established by
an employer as a simplified employee pension plan or SIMPLE IRA plan under
Section 408, Roth IRA plan under Section 408A or (5) deferred compensation plans
for employees established by a unit of a state or local government or by a
tax-exempt organization under Section 457
PREMIUMS AND ACCOUNT VALUES DURING THE ACCUMULATION PERIOD
APPLICATION FOR A CONTRACT
Any person or, in the case of Qualified Plans, any qualified organization,
wishing to purchase a Contract must submit an application and an initial premium
to AUL, and provide any other form or information that AUL may require. AUL
reserves the right to reject an application or premium for any reason, subject
to AUL's underwriting standards and guidelines.
PREMIUMS UNDER THE CONTRACTS
Premiums under Flexible Premium Contracts may be made at any time during
the Contract Owner's life and before the Contract's Annuity Date. Premiums for
Flexible Premium Contracts may vary in amount and frequency but each premium
payment must be at least $50. Premiums may not total more than $1 million in
each of the first two contract years. In subsequent Contract Years, premiums may
not exceed $15,000 for non-Qualified contracts or $30,000 for Qualfied
contracts, unless otherwise agreed to by AUL.
For One Year Flexible Premium Contracts, premiums may vary in amount and
frequency except that additional premiums will only be accepted during the first
Contract Year. Each such premium payment must be at least $500; premiums must
total at least $5,000 in the first Contract Year for non-qualified plans and
$2,000 in the first Contract Year for qualified plans, and all premiums combined
may not exceed $1,000,000 unless otherwise agreed to by AUL.
If the minimum premium amounts under Flexible Premium or One Year Flexible
Premium Contracts are not met, AUL may, after 60 days notice, terminate the
Contract and pay an amount equal to the Account Value as of the close of
business on the effective date of termination. AUL may change the
15
<PAGE>
minimum premiums permitted under a Contract, and may waive any minimum required
premium at its discretion.
Annual premiums under any Contract purchased in connection with a Qualified
Plan will be subject to maximum limits imposed by the Internal Revenue Code and
possibly by the terms of the Qualified Plan. See the Statement of Additional
Information for a discussion of these limits or consult the pertinent Qualified
Plan document. Such limits may change without notice.
Initial premiums must be credited to a Contract no later than the end of
the second Business Day after it is received by AUL at its Home Office if it is
preceded or accompanied by a completed application that contains all the
information necessary for issuing the Contract and properly crediting the
premium. If AUL does not receive a complete application, AUL will notify the
applicant that AUL does not have the necessary information to issue a Contract.
If the necessary information is not provided to AUL within five Business Days
after the Business Day on which AUL first receives an initial premium or if AUL
determines it cannot otherwise issue a Contract, AUL will return the initial
premium to the applicant, unless consent is received to retain the initial
premium until the application is made complete.
Subsequent premiums (other than initial premiums) are credited as of the
end of the Valuation Period in which they are received by AUL at its Home
Office.
RIGHT TO EXAMINE PERIOD
The Owner has the right to return the Contract for any reason within the
Right to Examine Period which is a ten day period beginning when the Owner
receives the Contract. If a particular state requires a longer Right to Examine
Period, then eligible Owners in that state will be allowed the longer statutory
period in which to return the Contract. The returned Contract will be deemed
void and AUL will refund the Account Value as of the end of the Valuation Period
in which AUL receives the Contract plus any amounts deducted for premium taxes.
The Contract Owner bears the investment risk during the period prior to the
Company's receipt of request for cancellation. AUL will refund the premium paid
in those states where required by law and for individual retirement annuities
if returned within seven days of receipt.
ALLOCATION OF PREMIUMS
In the Policy application, you specify the percentage of a Premium to be
allocated to the investment accounts and to the Fixed Account(s). The sum of
your allocations must equal 100%, with at least 1% of each Premium payment
allocated to each account selected by you. All Premium allocations must be in
whole percentages. AUL reserves the right to limit the number of Investment
Accounts to which premiums may be allocated. You can change the allocation
percentages at any time, subject to these rules, by sending Proper Notice to the
Home Office, or by telephone if written authorization is on file with us. The
change will apply to the premium payments received with or after receipt of your
notice.
The initial Premium generally is allocated to the available Fixed
Account(s) and the Investment Accounts in accordance with your allocation
instructions on the date we receive the premium at our Home Office. Subsequent
premiums are allocated as of the end of the Valuation Period during which we
receive the premium at our Home Office.
In those states that require the refund of the greater of premiums paid or
Account Value, we generally allocate all premiums received to our General
Account prior to the end of the "right to examine" period. We will credit
interest daily on Premiums so allocated. However, we reserve the right to
allocate premiums to the available Fixed Account(s) and the Investment Accounts
of the Separate Account in accordance with your allocation instructions prior to
the expiration of the "right to examine" period. At the end of the Right to
Examine period, we transfer the Net Premium and interest to the Fixed Account(s)
and the Investment Accounts based on the percentages you have selected in the
application. For purposes of determining the end of the right to examine period,
solely as it applies to this transfer, we assume that receipt of this Policy
occurs 5 days after the Contract Date.
TRANSFERS OF ACCOUNT VALUE
All or part of an Owner's Account Value may be transferred among the
Investment Accounts of the Variable Account or to the Fixed Account at any time
during the Accumulation Period upon receipt of Proper Notice by AUL at its Home
Office. Transfers may be made by telephone if a Telephone Authorization Form has
been properly completed and received by AUL at its Home Office. The minimum
amount that may be transferred from any one Investment Account is $500 or, if
less than $500, the Owner's remaining Account Value in the Investment Account,
provided however, that amounts transferred from the Fixed Account to an
Investment Account during any given Contract Year cannot exceed 20% of the
Owner's Fixed Account Value as of the beginning of that Contract Year. If, after
any transfer, the Owner's remaining Account Value in an Investment Account or in
the Fixed Account would be less than $500, then such request will be treated as
a request for a transfer of the entire Account Value. Currently, there are no
limitations on the number of transfers between Investment Accounts available
under a Contract or the Fixed Account. In addition, no charges are currently
imposed upon transfers. AUL reserves the right, however, at a future date, to
change the limitation on the minimum transfer, to assess transfer charges, to
change the limit on remaining balances, to limit the number and frequency of
transfers, and to suspend the transfer privilege or the telephone transfer
authorization. Any transfer from an Investment Account of the Variable Account
shall be effected as of the end of the Valuation Date in which AUL receives the
request in proper form. AUL has established procedures to confirm that
instructions communicated by telephone are genuine, which include the use of
personal identification numbers and recorded telephone calls. Neither AUL nor
its agents, will be liable for acting upon instructions believed by AUL or its
agents to be genuine, provided AUL has complied with its procedures.
Part of a Contract Owner's Fixed Account Value may be transferred to one or
more Investment Accounts of the Variable Account during the Accumulation Period
subject to certain limitations as described in "The Fixed Account."
DOLLAR COST AVERAGING PROGRAM
Owners who wish to purchase units of an Investment Account over a period of
time may do so through the Dollar Cost Averaging ("DCA") Program. The theory of
dollar cost averaging is that greater numbers of Accumulation Units are
purchased at times when the unit prices are relatively low than are purchased
when the prices are higher. This has the effect, when purchases are made at
different prices, of reducing the aggregate average cost per Accumulation Unit
to less than the average of the Accumulation Unit prices on the same purchase
dates. However, participation in the Dollar Cost Averaging Program does not
assure a Contract Owner of greater profits from the purchases under the Program,
nor will it prevent or necessarily alleviate losses in a declining market.
For example, assume that a Contract Owner requests that $1,000 per month be
transferred from the Money Market Investment Account to the AUL American Equity
Investment
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Account. The following table illustrates the effect of dollar cost averaging
over a six month period.
<TABLE>
<CAPTION>
Transfer Unit Units
Month Amount Value Purchased
----- ------ ----- ---------
<S> <C> <C> <C>
1 $1,000 $20 50
2 $1,000 $25 40
3 $1,000 $30 33.333
4 $1,000 $40 25
5 $1,000 $35 28.571
6 $1,000 $30 33.333
</TABLE>
The average price per unit for these purchases is the sum of the prices ($180)
divided by the number of monthly transfers (6) or $30. The average cost per
Accumulation Unit for these purchases is the total amount transferred ($6,000)
divided by the total number of Accumulation Units purchased (210.237) or $28.54.
THIS TABLE IS FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT REPRESENTATIVE OF FUTURE
RESULTS.
Initial Dollar Cost Averaging Program
Under the Initial DCA Program, the owner deposits premiums into the
Enhanced Averaging Fixed Account and authorizes AUL to transfer an amount that
is recalculated on a monthly basis from the Enhanced Averaging Fixed Account
into one or more Investment Accounts. These transfers will continue
automatically over a 12 month period. To participate in the Program, a minimum
deposit of $10,000 into the Enhanced Averaging Fixed Account is required.
Transfers to any of the Fixed Account(s) are not permitted under the
Initial Dollar Cost Averaging Program. AUL offers the Initial Dollar Cost
Averaging Program to Contract Owners at no charge, and the Company reserves the
right to temporarily discontinue, terminate, or change the Program at any time.
Contract Owners may discontinue participation in the Program at any time by
providing Proper Notice to AUL. AUL must receive Proper Notice of such a change
at least five days before a previously scheduled transfer is to occur.
Contract Owners may only elect to participate in the Initial DCA Program
within the first contract year. The Program will take effect on the first
monthly transfer date following the premium receipt by AUL at its Home Office.
The Contract Owner may select the particular day of the month that the transfers
are to be made. Transfers will be performed on such day, provided that such day
is a Valuation Date. If the date selected is not a Valuation Date, then the
transfer will be made on the next Valuation Date.
Ongoing Dollar Cost Averaging (DCA) Program
Under the Ongoing DCA Program, the owner deposits premiums into the AUL
American Money Market Investment Account and then authorizes AUL to transfer a
specific dollar amount from the Money Market Investment Account into one or more
other Investment Accounts at the unit values determined on the dates of the
transfers. This may be done monthly, quarterly, semi-annually, or annually.
These transfers will continue automatically until AUL receives notice to
discontinue the Program, or until there is not enough money in the Money Market
Investment Account to continue the Program, whichever occurs first.
Currently, the minimum required amount of each transfer is $500, although
AUL reserves the right to change this minimum transfer amount in the future.
Transfers to any of the Fixed Accounts are not permitted under the Ongoing DCA
Program. At least ten days advance written notice to AUL is required before the
date of the first proposed transfer under the Ongoing DCA Program. AUL offers
the Ongoing Dollar Cost Averaging Program to Contract Owners at no charge and
the Company reserves the right to temporarily discontinue, terminate, or change
the Program at any time. Contract Owners may change the frequency of scheduled
transfers, or may increase or decrease the amount of scheduled transfers, or may
discontinue participation in the Program at any time by providing written notice
to AUL, provided that AUL must receive written notice of such a change at least
five days before a previously scheduled transfer is to occur.
Contract Owners may initially elect to participate in the Ongoing DCA
Program, and if this election is made at the time the Contract is applied for,
the Program will take effect on the first monthly, quarterly, semi-annual, or
annual transfer date following the premium receipt by AUL at its Home Office.
The Contract Owner may select the particular date of the month, quarter, or year
that the transfers are to be made and such transfers will automatically be
performed on such date, provided that such date selected is a day that AUL is
open for business and provided further that such date is a Valuation Date. If
the date selected is not a Business Day or is not a Valuation Date, then the
transfer will be made on the next succeeding Valuation Date.
Portfolio Rebalancing Program
You may elect to automatically adjust your Investment Account balances to
be consistent with the allocation most recently requested. This will be done on
a monthly, quarterly or annual basis from the date on which the Portfolio
Rebalancing Program commences. The redistribution will not count toward the 12
free transfers permitted each Policy Year. If the Dollar Cost Averaging program
has been elected, the Portfolio Rebalancing Program will not commence until the
date following the termination of the Dollar Cost Averaging Program.
You may elect this plan at any time. Portfolio rebalancing will terminate
when you request any transfer or the day we receive Proper Notice instructing us
to cancel the Portfolio Rebalancing Program. We do not currently charge for this
program. We reserve the right to alter the terms or suspend or eliminate the
availability of portfolio rebalancing at any time.
CONTRACT OWNER'S VARIABLE ACCOUNT VALUE
ACCUMULATION UNITS
Premiums allocated to the Investment Accounts available under a Contract
are credited to the Contract in the form of Accumulation Units. The number of
Accumulation Units to be credited is determined by dividing the dollar amount
allocated to the particular Investment Account by the Accumulation Unit value
for the particular Investment Account as of the end of the Valuation Period in
which the premium is credited. The number of Accumulation Units so credited to
the Contract shall not be changed by a subsequent change in the value of an
Accumulation Unit, but the dollar value of an Accumulation Unit may vary from
Valuation Date to Valuation Date depending upon the investment experience of the
Investment Account and charges against the Investment Account.
Accumulation Unit Value
AUL determines the Accumulation Unit value for each Investment Account of
the Variable Account on each Valuation Date. The Accumulation Unit value for
each Investment Account was initially set at one dollar $1 for the Money Market
Investment Account and $5 for all other Investment Accounts. Subsequently, on
each Valuation Date, the Accumulation Unit value for each Investment Account is
determined by multiplying the Net Investment Factor determined as of the end of
the Valuation Date for the particular Investment Account by the Accumulation
Unit value for the Investment Account as of the immediately preceding Valuation
Period. The Accumulation Unit value for each Investment Account may increase,
decrease, or remain the same from Valuation Period to Valuation Period in
accordance with the Net Investment Factor.
Net Investment Factor
The Net Investment Factor is used to measure the investment performance of
an Investment Account from one
Valuation Period to the next. For any Investment Account for a Valuation Period,
the Net Investment Factor is determined by dividing (a) by (b) where:
(a) is equal to:
(1) the net asset value per share of the Fund in which the Investment
Account invests, determined as of the end of the Valuation Period, plus
(2) the per share amount of any dividend or other distribution, if any,
paid by the Fund during the Valuation Period, plus or minus
(3) a credit or charge with respect to taxes if any, paid or reserved for
AUL during the Valuation Period that are determined by AUL to be attributable to
the operation of the Investment Account (although no Federal income taxes are
applicable under present law and no such charge is currently assessed);
(b) is the net asset value per share of the Fund determined as of the end
of the preceding Valuation Period.
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CHARGES AND DEDUCTIONS
Premium Tax Charge
Various states and municipalities impose a tax on premiums received by
insurance companies. Whether or not a premium tax is imposed will depend upon,
among other things, the Owner's state of residence, the Annuitant's state of
residence, the insurance tax laws, and AUL's status in a particular state. AUL
assesses a premium tax charge to reimburse itself for premium taxes that it
incurs. This charge will be deducted as premium taxes are incurred by AUL, which
is usually when an annuity is effected. Premium tax rates currently range from
0% to 3.5%, but are subject to change.
Withdrawal Charge
No deduction for sales charges is made from premiums for a Contract.
However, if a cash withdrawal is made or the Contract is surrendered by the
Owner, then depending on the type of Contract, a withdrawal charge (which may
also be referred to as a contingent deferred sales charge), may be assessed by
AUL on the amount withdrawn if the Contract is within the withdrawal charge
period. The withdrawal charge period varies by contract. An amount withdrawn
during a Contract Year referred to as the Free Withdrawal Amount will not be
subject to an otherwise applicable withdrawal charge. The Free Withdrawal Amount
is 12% of Account Value at the beginning of the Contract Year in which the
withdrawal is being made. Any transfer of Account Value from the non-MVA Fixed
Account to the Variable Account will reduce the Free Withdrawal Amount by the
amount transferred.
The chart below illustrates the amount of the withdrawal charge that
applies to the Contracts based on the number of years that the Contract has been
in existence.
<TABLE>
<CAPTION>
Charge on Withdrawal Exceeding 12% Free Withdrawal Amount
Charge on Withdrawal Exceeding 12% Free Withdrawal Amount(1)
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Contract Year 1 2 3 4 5 6 7 8 9
10 11 or more
Flexible Premium
Contracts 10% 9% 8% 7% 6% 5% 4% 3% 2%
1% 0%
One Year Flexible
Premium Contracts 7% 6% 5% 4% 3% 2% 1% 0% 0%
0% 0%
</TABLE>
<PAGE>
20
In no event will the amount of any withdrawal charge, when added to any
withdrawal charges previously assessed against any amount withdrawn from a
Contract, exceed 8.5% of the total premiums paid on a Flexible Premium Contract
or 8% of the total premiums paid on a One Year Flexible Premium Contract. In
addition, no withdrawal charge will be imposed upon payment of Death Proceeds
under the Contract.
A withdrawal charge may be assessed upon annuitization of a Contract. No
withdrawal charge will apply if a life annuity or survivorship annuity option is
selected or if the Contract is in its fifth Contract Year or later and a fixed
income option for a period of 10 or more years is chosen. Otherwise the
withdrawal charge will apply. A withdrawal may result in taxable income to the j
Contract Owner.
The withdrawal charge will be used to recover certain expenses relating to
sales of the Contracts, including commissions paid to sales personnel and other
promotional costs. AUL reserves the right to increase or decrease the withdrawal
charge for any Contracts established on or after the effective date of the
change, but the withdrawal charge will not exceed 8.5% of the total premiums
paid on a Flexible Premium Contract or 8% of the total premiums paid on a One
Year Flexible Premium Contract.
Mortality and Expense Risk Charge
AUL deducts a monthly charge from the Investment Accounts pro rata based on
your amounts in each account. Refer to the Expense Table for current charges.
This amount is intended to compensate AUL for certain mortality and expense
risks AUL assumes in offering and administering the Contracts and in operating
the Variable Account.
The expense risk is the risk that AUL's actual expenses in issuing and
administering the Contracts and operating the Variable Account will be more than
the charges assessed for such expenses. The mortality risk borne by AUL is the
risk that the Annuitants, as a group, will live longer than the AUL's actuarial
tables predict. AUL may ultimately realize a profit from this charge to the
extent it is not needed to address mortality and administrative expenses, but
AUL may realize a loss to the extent the charge is not sufficient. AUL may use
any profit derived from this charge for any lawful purpose, including any
distribution expenses not covered by the withdrawal charge.
Annual Contract Fee
AUL deducts an annual contract fee from each Owner's Account Value equal to
the lesser of 2.0% of the Account Value or $30 a year. The fee is assessed every
year on a Contract if the Contract is in effect on the Contract Anniversary, and
is assessed only during the Accumulation Period. The administrative fee is
waived on each Contract Anniversary when the Account Value, at the time the
charge would otherwise have been imposed, exceeds $50,000. When a Contract Owner
annuitizes or surrenders on any day other than a Contract Anniversary, a pro
rata portion of the charge for that portion of the year will not be assessed.
The charge is deducted proportionately from the Account Value allocated among
the Investment Accounts and the Fixed Account(s). The purpose of this fee is to
reimburse AUL for the expenses associated with administration of the Contracts
and operation of the Variable Account. AUL does not expect to profit from this
fee.
Rider Charges
The addition of any riders will result in additional charges which will be
deducted proportionately from the Account Value allocated among the Investment
Accounts and the Fixed Account(s).
Other Charges
AUL may charge the Investment Accounts of the Variable Account for the
federal, state, or local income taxes incurred by AUL that are attributable to
the Variable Account and its Investment Accounts. No such charge is currently
assessed.
Variations in Charges
AUL may reduce or waive the amount of the withdrawal charge and annual
contract fee for a Contract where the expenses associated with the sale of the
Contract or the administrative costs associated with the Contract are reduced.
For example, the withdrawal and/or annual contract fee may be reduced in
connection with acquisition of the Contract in exchange for another annuity
contract issued by AUL. AUL may also reduce or waive the withdrawal charge and
annual contract fee on Contracts sold to the directors or employees of AUL or
any of its affiliates or to directors or any employees of any of the Funds.
Guarantee of Certain Charges
AUL guarantees that the mortality and expense risk charge shall not
increase. AUL may increase the annual contract fee, but only to the extent
necessary to recover the expenses associated with administration of the
Contracts and operations of the Variable Account.
Expenses of the Funds
Each Investment Account of the Variable Account purchases shares at the net
asset value of the corresponding Fund. The net asset value reflects the
investment advisory fee and other expenses that are deducted from the assets of
the Fund. The advisory fees and other expenses are not fixed or specified under
the terms of the Contract and are described in the Funds' Prospectuses.
DISTRIBUTIONS
Cash Withdrawals
During the lifetime of the Annuitant, at any time before the Annuity Date
and subject to the limitations under any applicable Qualified Plan and
applicable law, a Contract may be surrendered or a partial withdrawal may be
taken from a Contract. A surrender or withdrawal request will be effective as of
the end of the Valuation Date that a Proper Notice is received by AUL at its
Home Office.
If we receive a full surrender request, we will pay the Owner' Account
Value as of the end of the Valuation Period, plus any positive or negative
market value adjustment on the amounts allocated to the MVA Fixed Accounts minus
any applicable withdrawal charge.
A partial withdrawal may be requested for a specified percentage or dollar
amount of an Owner's Account Value. Upon payment, the Owner's Account Value will
be reduced by an amount equal to the payment, plus any positive or negative
market value adjustment on the amounts withdrawn from the MVA Fixed Accounts,
and any applicable withdrawal charge. We reserve the right to treat requests for
a partial withdrawal that would leave an Account Value of less than $5,000 as a
request for a full surrender. AUL may change or waive this provision at its
discretion. The minimum amount that may be withdrawn from a Contract Owner's
Account Value is $200 for Flexible Premium Contracts and $500 for One Year
Flexible Premium Contracts. In addition, Contracts issued in connection with
certain retirement programs may be subject to constraints on withdrawals and
full surrenders.
The amount of a partial withdrawal will be taken from the Investment
Accounts and the Fixed Account(s) as instructed. If the Owner does not specify,
withdrawals will be made in proportion to the Owner's Account Value in the
various Investment Accounts and the Fixed Account(s). A partial withdrawal will
not be effected until Proper Notice is received by AUL at its Home Office.
In addition to any withdrawal charges or applicable market value
adjustments, a surrender or a partial withdrawal may be subject to a premium tax
charge for any tax on premiums that may be imposed by various states and
municipalities. See "Premium Tax Charge." A surrender or withdrawal may result
in taxable income and in some cases a tax penalty. See "Tax Penalty." Owners of
Contracts used in connection with a Qualified Plan should refer to the terms of
the applicable Qualified Plan for any limitations or restrictions on cash
withdrawals. The tax consequences of a surrender or withdrawal under the
Contracts should be carefully considered. See "Federal Tax Matters."
Loan Privileges
Loan privileges are only available on Contracts qualified under 403(b).
Prior to the Annuitization Date, the Owner of a Contract qualified under 403(b)
may receive a loan from the Account Value subject to the terms of the Contract,
the specific 403(b) plan, and the Internal Revenue Code, which may impose
restrictions on loans.
Loans from a 403(b) qualified Contract are available beginning 30 days
after the Issue Date. The Contract Owner may borrow a minimum of $1,000. Loans
may only be secured by the Account Value. In non-ERISA plans, for Account Values
up to $20,000, the maximum loan balance which may be outstanding at any time is
80% of the Account Value, but not more than $10,000. If the Account Value is
$20,000 or more, the maximum loan balance which may be outstanding at any time
is 40% of the Account Value, but not more than $50,000. For ERISA plans, the
maximum loan balance which may be outstanding at any time is 50% of the Account
Value, but not more than $50,000. The $50,000 limit will be reduced by the
highest loan balances owed during the prior one-year period. Additional loans
are subject to the contract minimum amount. The aggregate of all loans may not
exceed the Account Value limitations stated above.
All loans are made from the Loan Account. An amount equal to the principal
amount of the loan will be transferred to the Loan Account. The Owner can
specify the Investment Accounts from which collateral will be transferred. If no
allocation is specified, collateral will be transferred from each Investment
Account and from the Fixed Account(s) (subject to any applicable market value
adjustment) in the same proportion that the Account Value in each Investment
Account and the Fixed Account(s) bears to the total Account Value in those
accounts on the date the loan is made.
AUL will charge interest on any outstanding loan at an annual rate of 5%.
Interest is due and payable on each Contract Anniversary while a loan is
outstanding. If interest is not paid when due, the amount of the interest is
added to the loan and becomes part of the loan. Due and unpaid interest will be
transferred each Contract Anniversary from each Investment Account and the Fixed
Account(s) to the Loan Account in the same proportion that each Investment
Account value and the Fixed Account(s) bears to the total unloaned Account
Value. The amount we transfer will be the amount by which the interest due
exceeds the interest which has been credited on the Loan Account.
The Loan Account will be credited with interest daily at an effective
annual rate of not less than 3.0%. Thus the maximum net cost of a loan is 2.0%
per year (the net cost of a loan is the difference between the rate of interest
charged on indebtedness and the amount credited to the Loan Account). Beginning
in the eleventh Policy Year, the amount in the Loan Account securing the loan
will be credited with interest at an effective annual rate in excess of the
minimum guaranteed rate of 3.0% (currently 4.0%). Thus, the current net cost of
the loan would be 1.0% per year. Any interest credited in excess of the minimum
guaranteed rate is not guaranteed.
Loans must be repaid in substantially level payments, not less frequently
than quarterly, within five years. Loans used to purchase the principal
residence of the Contract Owner may be repaid within 15 years. Loan repayments
will be processed in the same manner as a Premium Payment. A loan repayment must
be clearly marked as "loan repayment" or it will be credited as a premium.
If the Contract is surrendered while the loan is outstanding, the Cash
Value will be reduced by the amount of the loan outstanding plus accrued
interest. If the Contract Owner/Annuitant dies while the loan is outstanding,
the Death Benefit will be reduced by the amount of the outstanding loan plus
accrued interest. If annuity payments start while the loan is outstanding, the
Account Value will be reduced by the amount of the outstanding loan plus accrued
interest. Until the loan is repaid, the Company reserves the right to restrict
any transfer of the Contract which would otherwise qualify as a transfer as
permitted in the Internal Revenue Code.
If a loan payment is not made when due, interest will continue to accrue.
If a loan payment is not made when due, the entire loan will be treated as a
deemed Distribution, may be taxable to the borrower, and may be subject to a tax
penalty. Interest which subsequently accrues on defaulted amounts may also be
treated as additional deemed Distributions each year. Any defaulted amounts,
plus accrued interest, will be deducted from the Contract when the participant
becomes eligible for a Distribution of at least that amount, and this amount may
again be treated as a Distribution where required by law. Additional loans may
not be available while a previous loan remains in default.
The Company reserves the right to modify the term or procedures if there is
a change in applicable law. The Company also reserves the right to assess a loan
processing fee.
Loans may also be subject to additional limitations or restrictions under
the terms of the employer's plan. Loans permitted under this Contract may still
be taxable in whole or part if the participant has additional loans from other
plans or contracts.
Death Proceeds Payment Provisions
The value of the Death Proceeds will be determined as of the end of the
Valuation Period in which due proof of death and instructions regarding payment
are received by AUL at its Home Office.
At the time of application, Contract Owners may select one of two death
benefits available under the Contract as listed below (the enhanced death
benefit option rider may not be available in all states at the time of
application)
If no selection is made at the time of application, the Death Benefit will
be the Standard Contractual Death Benefit.
Standard Contractual Death Benefit
The Death Proceeds under the Standard Contractual Death Benefit are equal
to the greater of:
1) the Account Value less any outstanding loan and accrued interest
2) the total of all Premiums paid less an adjustment for amounts previously
surrendered and less any outstanding loan and accrued interest.
Enhanced One Year Step Up Death Benefit Rider
The Death Proceeds under the Enhanced One Year Step Up Death Benefit Rider
are equal to the greatest of:
1) the Account Value less any outstanding loan and accrued interest
2) the total of all Premiums paid less an adjustment for amounts previously
surrendered and less any outstanding loan and accrued interest.
3) the highest Account Value on any Contract Anniversary before the
Annuitant's 86th birthday, less an adjustment for amounts previously
surrendered, plus Premiums paid less any outstanding loan and accrued interest
after the last Contract Anniversary.
Death of the Owner
If the Contract Owner dies before the Annuity Date and the Beneficiary is
not the Contract Owner's surviving spouse, the Death Proceeds will be paid to
the Beneficiary. Such Death Proceeds will be paid in a lump-sum, unless the
Beneficiary elects to have this value applied under a settlement option. If a
settlement option is elected, the Beneficiary must be named the Annuitant and
payments must begin within one year of the Contract Owner's death. The option
also must have payments which are payable over the life of the Beneficiary or
over a period which does not extend beyond the life expectancy of the
Beneficiary.
<PAGE>
19
If the Contract Owner dies before the Annuity Date and the Beneficiary is
the Contract Owner's surviving spouse, the surviving spouse will become the new
Contract Owner. The Contract will continue with its terms unchanged and the
Contract Owner's spouse will assume all rights as Contract Owner. Within 120
days of the original Contract Owner's death, the Contract Owner's spouse may
elect to receive the Death Proceeds or withdraw any of the Account Value
without any early withdrawal charge. However, depending upon the circumstances,
a tax penalty may be imposed upon such a withdrawal.
Any amount payable under a Contract will not be less than the minimum
required by the law of the state where the Contract is delivered.
Death of the Annuitant
If the Annuitant dies before the Annuity Date and the Annuitant is not also
the Contract Owner, then: (1) if the Contract Owner is not an individual, the
Death Proceeds will be paid to the Contract Owner in a lump-sum; or (2) if the
Contract Owner is an individual, a new Annuitant may be named and the Contract
will continue. If a new Annuitant is not named within 120 days of the
Annuitant's death, the Account Value, less any withdrawal charges, will be paid
to the Contract Owner in a lump-sum.
The death benefit will be paid to the Beneficiary or Contract Owner, as
appropriate, in a single sum or under one of the Annuity Options, as directed by
the Contract Owner or as elected by the Beneficiary. If the Beneficiary is to
receive annuity payments under an Annuity Option, there may be limits under
applicable law on the amount and duration of payments that the Beneficiary may
receive, and requirements respecting timing of payments. A tax adviser should be
consulted in considering payout options.
Payments from the Variable Account
Payment of an amount from the Variable Account resulting from a surrender,
partial withdrawal, transfer from an Owner's Account Value allocated to the
Variable Account, or payment of the Death Proceeds, normally will be made within
seven days from the date Proper Notice is received at AUL's Home Office.
However, AUL can postpone the calculation or payment of such an amount to the
extent permitted under applicable law, which is currently permissible for any
period: (a) during which the New York Stock Exchange is closed other than
customary weekend and holiday closings; (b) during which trading on the New York
Stock Exchange is restricted, as determined by the SEC; (c) during which an
emergency, as determined by the SEC, exists as a result of which (i) disposal of
securities held by the Variable Account is not reasonably practicable, or (ii)
it is not reasonably practicable to determine the value of the assets of the
Variable Account; or (d) for such other periods as the SEC may by order permit
for the protection of investors. For information concerning payment of an amount
from the Fixed Account(s), see "The Fixed Account(s)."
Annuity Period
General
On the Annuity Date, the adjusted value of the Owner's Account Value may be
applied to provide an annuity option on a fixed or variable basis, or a
combination thereof. No withdrawal charge will apply if a life annuity or
survivorship annuity option is selected or if the Contract is in its fifth
Contract Year or later and a fixed income option for a period of 10 or more
years is chosen. Otherwise, Contract Proceeds are equal to the Account Value
less any applicable early withdrawal penalty.
The Annuity Date is the date chosen for annuity payments to begin. Such
date will be the first day of a calendar month unless otherwise agreed upon by
us. During the Accumulation Period, the Contract Owner may change the Annuity
Date subject to approval by us.
Annuitization is irrevocable once payments have begun. When you annuitize,
you must choose:
1. An annuity payout option, and
2. Either a fixed payment annuity, variable payment annuity, or any
available combination.
A Contract Owner may designate an Annuity Date, Annuity Option, contingent
Annuitant, and Beneficiary on an Annuity Election Form that must be received by
AUL at its Home Office prior to the Annuity Date. AUL may also require
additional information before annuity payments commence. If the Contract Owner
is an individual, the Annuitant may be changed at any time prior to the Annuity
Date. The Annuitant must also be an individual and must be the Contract Owner,
or someone chosen from among the Contract Owner's spouse, parents, brothers,
sisters, and children. Any other choice requires AUL's consent. If the Contract
Owner is not an individual, a change in the Annuitant will not be permitted
without AUL's consent. The Beneficiary, if any, may be changed at any time and
the Annuity Date and the Annuity Option may also be changed at any time prior to
the Annuity Date. For Contracts used in connection with a Qualified Plan,
reference should be made to the terms of the Qualified Plan for pertinent
limitations regarding annuity dates and options.
Fixed Payment Annuity
The payment amount under a Fixed Payment Annuity option will be determined
by applying the selected portion of the Contract Proceeds to the Fixed Payment
Annuity table then in effect, after deducting applicable premium taxes. The
annuity payments are based upon annuity rates that vary with the Annuity Option
selected and the age of the Annuitant, except that in the case of Option 1,
Income for a Fixed Period, age is not a consideration. Payments under the Fixed
Payment Annuity are guaranteed as to dollar amount for the duration of the
Annuity Period.
Variable Payment Annuity
The first payment amount under a Variable Payment Annuity option is set at
the first valuation date after the Annuity Date by applying the selected portion
of the Contract Proceeds to the Variable Payment Annuity table you select, after
deducting applicable premium taxes. Payments under the Variable Payment Annuity
option will vary depending on the performance of the underlying Investment
Accounts. The dollar amount of each variable payment may be higher or lower than
the previous payment.
1. Annuity Units and Payment Amount - The dollar amount of the first
payment is divided by the value of an Annuity Unit as of the Annuity Date
to establish the number of Annuity Units representing each annuity payment.
The number of Annuity Units established remains fixed during the annuity
payment period. The dollar amount of subsequent annuity payments is
determined by multiplying the fixed number of Annuity Units by the Annuity
Unit Value for the Valuation Period in which the payment is due.
2. Assumed Investment Rate - The Assumed Investment Rate (AIR) is the
investment rate built into the Variable Payment Annuity table used to
determine your first annuity payment. You may select an AIR from 3%, 4% or
5% when you annuitize. A higher AIR means you would receive a higher
initial payment, but subsequent payments would rise more slowly or fall
more rapidly. A lower AIR has the opposite effect. If actual investment
experience equals the AIR you choose, annuity payments will remain level.
3. Value of an Annuity Unit - The value of an Annuity Unit for an
Investment Account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the AIR built into the Variable Payment
Annuity table which you selected.
4. Transfers - During the Annuity Period, transfers between Investment
Accounts must be made in writing. We reserve the right to restrict
transfers to no more frequently than once a year. Currently, there are no
restrictions. A transfer will take place on the anniversary of the Annuity
Date unless otherwise agreed to by us.
Payment Options
All or any part of the proceeds paid at death or upon full surrender of
this Contract may be paid in one sum or according to one of the following
options:
1. Income for a Fixed Period. Proceeds are payable in monthly installments
for a specified number of years, not to exceed 20.
2. Life Annuity. Proceeds are payable in monthly installments for as long
as the payee lives. A number of payments can be guaranteed, such as 120, or
the number of payments required to refund the proceeds applied.
3. Survivorship Annuity. Proceeds are payable in monthly installments for
as long as either the first payee or surviving payee lives.
The Contract Proceeds may be paid in any other method or frequency of
payment acceptable by us.
Contract Proceeds payable in one sum will accumulate at interest from the
date of death or surrender to the payment date at the rate of interest then paid
by us or at the rate specified by statute, whichever is greater.
Selection of an Option
Contract Owners should carefully review the Annuity Options with their
financial or tax advisers. For Contracts used in connection with a Qualified
Plan, the terms of the applicable Qualified Plan should be referenced for
pertinent limitations respecting the form of annuity payments, the commencement
of distributions, and other matters. For instance, annuity payments under a
Qualified Plan generally must begin no later than April 1 of the calendar year
following the calendar year in which the Contract Owner reaches age 70 1/2 if
the Par-
<PAGE>
22
ticipant is no longer employed. For Option 1, Income for a Fixed Period,
the period elected for receipt of annuity payments under the terms of the
Annuity Option generally may be no longer than the joint life expectancy of the
Annuitant and Beneficiary in the year that the Annuitant reaches age 70 1/2 and
must be shorter than such joint life expectancy if the Beneficiary is not the
Annuitant's spouse and is more than 10 years younger than the Annuitant. Under
Option 3, Survivorship Annuity, if the contingent Annuitant is not the
Annuitant's spouse and is more than 10 years younger than the Annuitant, the
100% election specified above may not be available.
THE FIXED ACCOUNT(S)
Summary of Fixed Accounts
Premiums designated to accumulate on a fixed basis may be allocated to one
of several Fixed Accounts which are part of AUL's General Account. Either Market
Value Adjusted (MVA) Fixed Account(s) or a non-MVA fixed account will be
available under the contract. The MVA Fixed Account(s) may not be available in
all states. An Enhanced Averaging Fixed Account will be available in all states
in conjunction with the Dollar Cost Averaging program.
Contributions or transfers to the Fixed Account(s) become part of AUL's
General Account. The General Account is subject to regulation and supervision by
the Indiana Insurance Department as well as the insurance laws and regulations
of other jurisdictions in which the Contracts are distributed. In reliance on
certain exemptive and exclusionary provisions, interests in the Fixed Account(s)
have not been registered as securities under the Securities Act of 1933 (the
"1933 Act") and the Fixed Account(s) has not been registered as an investment
company under the 1940 Act. Accordingly, neither the Fixed Account(s) nor any
interests therein are generally subject to the provisions of the 1933 Act or the
1940 Act. AUL has been advised that the staff of the SEC has not reviewed the
disclosure in this Prospectus relating to the Fixed Account(s). This disclosure,
however, may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in the Prospectus. This Prospectus is generally intended to serve as a
disclosure document only for aspects of a Contract involving the Variable
Account and contains only selected information regarding the Fixed Account(s).
For more information regarding the Fixed Account(s), see the Contract itself.
Non-Market Value Adjusted Fixed Account
The Account Value in the Fixed Account earns interest at one or more
interest rates determined by AUL at its discretion and declared in advance
("Current Rate"), which are guaranteed by AUL to be at least an annual effective
rate of 3% ("Guaranteed Rate"). AUL will determine a Current Rate from time to
time and, generally, any Current Rate that exceeds the Guaranteed Rate will be
effective for the Contract for a period of at least one year. We reserve the
right to change the method of crediting from time to time, provided that such
changes do not have the effect of reducing the guaranteed rate of interest. AUL
bears the investment risk for Owner's non-MVA Fixed Account(s) values and for
paying interest at the Current Rate on amounts allocated to the non-MVA Fixed
Account(s).
Market Value Adjusted Fixed Account
Market Value Adjusted Fixed Accounts provide a guaranteed rate of interest
over five different Guaranteed Periods: one (1), three (3), five (5), seven (7)
or ten (10) years. A guaranteed interest rate, determined and declared by the
Company for any Guaranteed Period selected, will be credited unless a
distribution from the Market Value Adjusted Fixed Account occurs for any reason.
The minimum amount of any allocation made to a Market Value Adjusted Fixed
Account must be $1,000. MARKET VALUE ADJUSTED FIXED ACCOUNTS MAY NOT BE
AVAILABLE IN EVERY STATE JURISDICTION.
Generally, the market value adjustment will increase or decrease the value
of distributed proceeds depending on how prevailing interest rates compare to
the market value adjusted option rates in effect. When prevailing rates are
lower than the market value adjusted option rate in effect for the Guarantee
Period elected, distribution proceeds will increase in value. Conversely, when
prevailing rates are higher than the Market Value Adjusted option rate in effect
for the Guaranteed Period elected, distribution proceeds will decrease in value.
In no event will the adjustment reduce the Cash Value attributable to that MVA
Fixed Account below that necessary to satisfy statutory nonforfeiture
requirements.The effect of a market value adjustment should be carefully
considered before electing to surrender allocations in a Market Value Adjusted
Fixed Account.
During the MVA Free Window, you may transfer or withdraw amounts from MVA
Fixed Accounts with expiring Guarantee Periods without Market Value Adjustment.
The MVA Free Window is currently set at 30 days prior to the end of the maturity
duration selected. We reserve the right to change the MVA Free Window. Such
amounts may be transferred to the Investment Accounts or reinvested in different
MVA Fixed Accounts for different Guarantee Periods. If you take no such action,
the amount available at the end of the Guarantee Period will be remain in the
MVA Fixed Account and a new Guarantee Period will apply. We will notify you of
the interest rate declared on any such reinvestment.
Market Value Adjusted Fixed Accounts are available during the accumulation
phase of a Contract only and are not available as fixed accounts during the
annuitization phase of a Contract. In addition, Market Value Adjusted Fixed
Accounts are not available for use in conjunction with Contract Owner services
such as dollar cost averaging and portfolio rebalancing.
Enhanced Averaging Fixed Account
Initial and subsequent premiums in the first year may be allocated to the
Enhanced Averaging Fixed Account. Premiums deposited into this account must be
transferred to other Investment Accounts within one year after the deposit.
Amounts transferred out of the Enhanced Averaging Fixed Account will be
recalculated each month to assure account depletion within one year. Amounts
allocated to the Enhanced Averaging Fixed Account earn interest at rates
periodically determined by AUL that are guaranteed to be at least an effective
annual rate of 3%. The Enhanced Averaging Fixed Account is only available at
issue and requires an initial deposit of $10,000 therein.
Withdrawals
A Contract Owner may make a full surrender or a partial withdrawal from his
or her Fixed Account Value subject to the provisions of the Contract. A full
surrender of a Contract Owner's Fixed Account Value will result in a withdrawal
payment equal to the value of the Contract Owner's Fixed Account Value as of the
day the surrender is effected, minus any applicable withdrawal charge and
applicable market value adjustment. A partial withdrawal may be requested for a
specified percentage or dollar amount of the Contract Owner's Fixed Account
Value. For a further discussion of surrenders and partial withdrawals as
generally applicable to a Contract Owner's Variable Account Value and Fixed
Account Value, see "Cash Withdrawals."
Transfers
The Contract Owner's Fixed Account Values may be transferred from the Fixed
Account(s) to the Variable Account subject to certain limitations. The minimum
amount that may be transferred from a Fixed Account is $500 or, if that Fixed
Account Value is less than $500 after the transfer, the Contract Owner's
remaining Account Value in that Fixed Account. If the amount remaining in a
Fixed Account after a transfer would be less than $500, the remaining amount
will be transferred with the amount that has been requested.
The maximum amount that may be transferred in any one Contract Year from a
non-MVA Fixed Account is the lesser of 20% of that non-MVA Fixed Account Value
as of the last Contract Anniversary or the entire non-MVA Fixed Account Value if
it would be less than $500 after the transfer. Any transfer of Account Value
from the non-MVA Fixed Account to the Variable Account will reduce the Free
Withdrawal Amount by the amount transferred. Transfers and withdrawals of a
Contract Owner's non-MVA Fixed Account Value will be effected on a last-in
first-out basis.
Transfers from MVA Fixed Accounts may be subject to market value
adjustment. Transfers from MVA Fixed Accounts to the Variable Account are not
subject to the 20% Fixed Account transfer limitation and do not reduce the Free
Withdrawal Amount. Transfers and withdrawals of a Contract Owner's MVA Fixed
Account Value will be made from the Guarantee Periods you have indicated.
For a discussion of transfers as generally applicable to a Contract Owner's
Variable Account Value and Fixed Account Value, see "Transfers of Account
Value."
Contract Charges
The withdrawal charge will be the same for amounts surrendered or withdrawn
from a Contract Owner's Fixed Account Values as for amounts surrendered or
withdrawn from a Contract Owner's Variable Account Value. In addition, the
annual contract fee will be the same whether or not a Owner's Contract Value is
allocated to the Variable Account or the Fixed Account(s). The charge for
mortality and expense risks will not
<PAGE>
23
be assessed against the Fixed Account(s), and any amounts that AUL pays for
income taxes allocable to the Variable Account will not be charged against the
Fixed Account(s). In addition, the investment advisory fees and operating
expenses paid by the Funds will not be paid directly or indirectly by Contract
Owners to the extent the Account Value is allocated to the Fixed Account(s);
however, such Contract Owners will not participate in the investment experience
of the Variable Account. See "Charges and Deductions."
Payments from the Fixed Account(s)
Surrenders, cash withdrawals, and transfers from the Fixed Account(s) and
payment of Death Proceeds based upon a Contract Owner's Fixed Account Values may
be delayed for up to six months after a written request in proper form is
received by AUL at its Home Office. During the period of deferral, interest at
the applicable interest rate or rates will continue to be credited to the
Contract Owner's Fixed Account Values.
MORE ABOUT THE CONTRACTS
Designation and Change of Beneficiary
The Beneficiary designation contained in an application for the Contracts
will remain in effect until changed. The interests of a Beneficiary who dies
before the Contract Owner will pass to any surviving Beneficiary, unless the
Contract Owner specifies otherwise. Unless otherwise provided, if no designated
Beneficiary is living upon the death of the Contract Owner prior to the Annuity
Date, the Contract Owner's estate is the Beneficiary. Unless otherwise provided,
if no designated Beneficiary under an Annuity Option is living after the Annuity
Date, upon the death of the Annuitant, the Owner is the Beneficiary. If the
Contract Owner is not an individual, the Contract Owner will be the Beneficiary.
Subject to the rights of an irrevocably designated Beneficiary, the
designation of a Beneficiary may be changed or revoked at any time while the
Contract Owner is living by filing with AUL a written beneficiary designation or
revocation in such form as AUL may require. The change or revocation will not be
binding upon AUL until it is received by AUL at its Home Office. When it is so
received, the change or revocation will be effective as of the date on which the
beneficiary designation or revocation was signed, but the change or revocation
will be without prejudice to AUL if any payment has been made or any action has
been taken by AUL prior to receiving the change or revocation.
For Contracts issued in connection with Qualified Plans, reference should
be made to the terms of the particular Qualified Plan, if any, and any
applicable law for any restrictions on the beneficiary designation. For
instance, under an Employee Benefit Plan, the Beneficiary must be the Contract
Owner's spouse if the Contract Owner is married, unless the spouse properly
consents to the designation of a Beneficiary (or contingent Annuitant) other
than the spouse.
Assignability
A Contract Owner may assign a Contract, but the rights of the Contract
Owner and any Beneficiary will be secondary to the interests of the assignee.
AUL assumes no responsibility for the validity of an assignment. Any assignment
will not be binding upon AUL until received in writing at its Home Office.
Because an assignment may be a taxable event, Contract Owners should consult a
tax advisor as to the tax consequences resulting from such an assignment.
Proof of Age and Survival
AUL may require proof of age, sex, or survival of any person on whose life
annuity payments depend.
Misstatements
If the age or sex of any Annuitant has been misstated, the correct amount
paid or payable by AUL shall be such as the Contract would have provided for the
correct age and sex.
Acceptance of New Premiums
AUL reserves the right to refuse to accept new premiums for a Contract at
any time.
Optional Benefits
There are several riders available at time of application which are
described below. These riders carry their own charges which are described in the
Expense Table in this Prospectus.
Guaranteed Minimum Account Value Rider
For those contracts which have elected the Guaranteed Minimum Account Value
rider at the time of application, the following provisions apply. If your
Contract is still in force at end of the tenth, twentieth, and thirtieth
Contract Years, your Account Value will be adjusted to be the greater of:
1. The Account Value on that Contract Anniversary, or
2. The Premiums paid under the Contract multiplied by the appropriate factor
shown on the Policy Data Page, less an adjustment for amounts previously
withdrawn.
Any transfer of Account Value to any Investment Account not listed on the
Policy Data Page as approved for use with this benefit will terminate the rider.
The Guaranteed Minimum Account Value rider is only available on One Year
Flexible Premium Deferred Variable Annuity contracts.
Guaranteed Minimum Annuitization Benefit Rider
For those contracts which have elected the Guaranteed Minimum Annuitization
Benefit Rider at the time of application, the following provisions apply. If
your Contract is annuitized at any time after the tenth Contract Anniversary,
the amount applied to the annuity table then current will be the greater of:
1. The Contract Proceeds at that time, or
2. The total of all Premiums paid with interest credited at the rate shown on
the Policy Data Page, less an adjustment for amounts previously withdrawn.
Any transfer of Account Value to any Investment Account not listed on the
Policy Data Page as approved for use with this benefit will terminate the rider.
Long Term Care Facility and Terminal Illness Benefit Rider
For those Contracts which have elected a Long Term Care Facility and
Terminal Illness rider at the time of application, the following provisions
apply. Surrender charges on withdrawals will not apply if a Contract Owner is
confined for a continuous 90 day period to a Long Term Care Facility or a 30 day
period to a hospital, as defined by the rider provisions. In addition, upon
receipt of a physician's letter at the Company's Home Office, no surrender
charges will be deducted upon withdrawals if the Contract Owner has been
diagnosed by that physician to have a terminal illness as defined by the rider
provisions.
The Contract Owner may be subject to income tax on all or a portion of any
such withdrawals and to a tax penalty if the Contract Owner takes withdrawals
prior to age 591/2 (see "Federal Tax Matters, Additional Considerations,
Contracts Owned by Non-Natural Persons")
FEDERAL TAX MATTERS
INTRODUCTION
The Contracts described in this Prospectus are designed for use in
connection with non-tax qualified retirement plans for individuals and for use
by individuals in connection with retirement plans under the provisions of
Sections 401(a), 403(b), 457, 408 or 408A of the Internal Revenue Code ("Code").
The ultimate effect of Federal income taxes on values under a Contract, on
annuity payments, and on the economic benefits to the Owner, the Annuitant, and
the Beneficiary or other payee, may depend upon the type of plan for which the
Contract is purchased and a number of different factors. The discussion
contained herein and in the Statement of Additional Information is general in
nature. It is based upon AUL's understanding of the present Federal income tax
laws as currently interpreted by the Internal Revenue Service ("IRS"), and is
not intended as tax advice. No representation is made regarding the likelihood
of continuation of the present Federal income tax laws or of the current
interpretations by the IRS. Future legislation may affect annuity contracts
adversely. Moreover, no attempt is made to consider any applicable state or
other laws. Because of the inherent complexity of such laws and the fact that
tax results will vary according to the terms of the plan and the particular
circumstances of the individual involved, any person contemplating the purchase
of a Contract, or receiving annuity payments under a Contract, should consult a
tax adviser.
AUL DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY
TRANSACTION INVOLVING THE CONTRACTS. CONSULT YOUR TAX ADVISOR.
DIVERSIFICATION STANDARDS
Treasury Department regulations under Section 817(h) of the Code prescribe
asset diversification requirements which are expected to be met by the
investment companies whose shares are sold to the Investment Accounts. Failure
to meet these requirements would jeopardize the tax status of the Contracts. See
the Statement of Additional Information for additional details.
In connection with the issuance of the regulations governing
diversification under Section 817(h) of the Code, the Treasury Department
announced that it would issue future regulations or rulings addressing the
circumstances in which a variable contract owner's control of the investments of
a separate account may cause the contract owner, rather than the insurance
company, to be treated as the owner of the assets held by the separate account.
If the variable contract owner is considered the owner of the securities
underlying the separate account, income and gains produced by those securities
would be included currently in a contract owner's gross income. It is not clear,
at present, what these regulations or rulings may provide. It is possible that
when the regulations or rulings are issued, the Contracts may need to be
modified in order to remain in compliance. AUL intends to make reasonable
efforts to comply with any such regulations or rulings so that the Contracts
will be treated as annuity contracts for Federal income tax purposes and
reserves the right to make such changes as it deems appropriate for that
purpose.
TAXATION OF ANNUITIES IN GENERAL - NON-QUALIFIED PLANS
Section 72 of the Code governs taxation of annuities. In general, a
Contract Owner is not taxed on increases in value under an annuity contract
until some form of distribution is made under the contract. However, the
increase in value may be subject to tax currently under certain circumstances.
See "Contracts Owned by Non-Natural Persons" below and "Diversification
Standards" above.
1. Surrenders or Withdrawals Prior to the Annuity Date
Code Section 72 provides that amounts received upon a total or partial
surrender or withdrawal from a contract prior to the annuity date generally will
be treated as gross income to the extent that the cash value of the contract
(determined without regard to any surrender charge in the case of a partial
withdrawal) exceeds the "investment in the contract." In general, the
"investment in the contract" is that portion, if any, of premiums paid under a
contract less any distributions received previously under the contract that are
excluded from the recipient's gross income. The taxable portion is taxed at
ordinary income tax rates. For purposes of this rule, a pledge or assignment of
a contract is treated as a payment received on account of a partial withdrawal
of a contract. Similarly, loans under a
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contract generally are treated as distributions under the contract.
2. Surrenders or Withdrawals on or after the Annuity Date
Upon receipt of a lump-sum payment, the recipient is taxed if the cash
value of the contract exceeds the investment in the contract.
3. Amounts received as an Annuity
For amounts received as an Annuity, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which establishes
the ratio that the investment in the contract bears to the total expected amount
of annuity payments for the term of the contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. That remaining
portion of each payment is taxed at ordinary income rates. Once the excludable
portion of annuity payments to date equals the investment in the contract, the
balance of the annuity payments will be fully taxable.
Withholding of Federal income taxes on all distributions may be required
unless a recipient who is eligible elects not to have any amounts withheld and
properly notifies AUL of that election. Special rules apply to withholding on
distributions from Employee Benefit Plans that are qualified under Section
401(a) of the Internal Revenue Code.
4. Penalty Tax on Certain Surrenders and Withdrawals
With respect to amounts withdrawn or distributed before the recipient
reaches age 59 1/2, a penalty tax is imposed equal to 10% of the portion of such
amount which is includable in gross income. However, the penalty tax is not
applicable to withdrawals: (i) made on or after the death of the owner (or where
the owner is not an individual, the death of the "primary annuitant," who is
defined as the individual the events in whose life are of primary importance in
affecting the timing and amount of the payout under the contract); (ii)
attributable to the recipient's becoming totally disabled within the meaning of
Code Section 72(m)(7); or (iii) which are part of a series of substantially
equal periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the recipient, or the joint lives (or joint life
expectancies) of the recipient and his beneficiary. The 10% penalty also does
not apply in certain other circumstances described in Code Section 72.
If the penalty tax does not apply to a surrender or withdrawal as a result
of the application of item (iii) above, and the series of payments are
subsequently modified (other than by reason of death or disability), the tax for
the first year in which the modification occurs will be increased by an amount
(determined in accordance with IRS regulations) equal to the tax that would have
been imposed but for item (iii) above, plus interest for the deferral period, if
the modification takes place (a) before the close of the period which is five
years from the date of the first payment and after the recipient attains age 59
1/2, or (b) before the recipient reaches age 59 1/2.
ADDITIONAL CONSIDERATIONS
1. Distribution-at-Death Rules
In order to be treated as an annuity contract, a contract must provide the
following two distribution rules: (a) if the owner dies on or after the Annuity
Commencement Date, and before the entire interest in the contract has been
distributed, the remaining interest must be distributed at least as quickly as
the method in effect on the owner's death; and (b) if the owner dies before the
Annuity Date, the entire interest in the contract must generally be distributed
within five years after the date of death, or, if payable to a designated
beneficiary, must be annuitized over the life of that designated beneficiary or
over a period not extending beyond the life expectancy of that beneficiary,
commencing within one year after the date of death of the owner. If the
designated beneficiary is the spouse of the owner, the contract may be continued
in the name of the spouse as owner.
For purposes of determining the timing of distributions under the foregoing
rules, where the owner is not an individual, the primary annuitant is considered
the owner. In that case, a change in the primary annuitant will be treated as
the death of the owner. Finally, in the case of joint owners, the
distribution-at-death rules will be applied by treating the death of the first
owner as the one to be taken into account in determining how generally
distributions must commence, unless the sole surviving owner is the deceased
owner's spouse.
2. Gift of Annuity Contracts
Generally, a donor must recognize income tax on the gain of the Contract if
he makes a gift of the Contract before the Annuity Date. The donee's basis in
the Contract is increased by the amount included in the donor's income. This
provision does not apply to certain transfers incident to a divorce. The 10%
penalty tax on pre-age 59 1/2 withdrawals and distributions and gift tax also
may be applicable.
3. Contracts Owned by Non-Natural Persons
If the contract is held by a non-natural person (for example, a corporation
in connection with its non-tax qualified deferred compensation plan) the income
on that contract (generally the net surrender value less the premium payments
and amounts includable in gross income for prior taxable years with respect to
the contract) is includable in taxable income each year. Other taxes (such as
the alternative minimum tax and the environmental tax imposed under Code Section
59A) may also apply. The rule does not apply where the contract is acquired by
the estate of a decedent, where the contract is held by certain types of
retirement plans, where the contract is a qualified funding asset for structured
settlements, where the contract is purchased on behalf of an employee upon
termination of an Employee Benefit Plan, and in the case of a so-called
immediate annuity. Code Section 457 (deferred compensation) plans for employees
of state and local governments and tax-exempt organizations are not within the
purview of the exceptions. However, the income of state and local governments
and tax-exempt organizations generally is exempt from federal income tax.
4. Multiple Contract Rule
For purposes of determining the amount of any distribution under Code
Section 72(e) (amounts not received as annuities) that is includable in gross
income, all annuity contracts issued by the same insurer to the same contract
owner during any cal-
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endar year must be aggregated and treated as one contract. Thus, any amount
received under any such contract prior to the contract's Annuity Commencement
Date, such as a partial surrender, dividend, or loan, will be taxable (and
possibly subject to the 10% penalty tax) to the extent of the combined income in
all such contracts. In addition, the Treasury Department has broad regulatory
authority in applying this provision to prevent avoidance of the purposes of
this rule.
QUALIFIED PLANS
The Contract may be used with certain types of Qualified Plans as described
under "The Contracts." The tax rules applicable to participants in such
Qualified Plans vary according to the type of plan and the terms and conditions
of the plan itself. No attempt is made herein to provide more than general
information about the use of the Contract with the various types of Qualified
Plans. Contract Owners, Annuitants, and Beneficiaries, are cautioned that the
rights of any person to any benefits under such Qualified Plans will be subject
to the terms and conditions of the plans themselves and may be limited by
applicable law, regardless of the terms and conditions of the Contract issued in
connection therewith. For example, AUL may accept beneficiary designations and
payment instructions under the terms of the Contract without regard to any
spousal consents that may be required under the Code or the Employee Retirement
Income Security Act of 1974 ("ERISA"). Consequently, a Contract Owner's
Beneficiary designation or elected payment option may not be enforceable.
The following are brief descriptions of the various types of Qualified
Plans and the use of the Contract therewith:
1. Individual Retirement Annuities
Code Section 408 permits an eligible individual to contribute to an
individual retirement program through the purchase of Individual Retirement
Annuities ("IRAs"). The Contract may be purchased as an IRA. IRAs are subject to
limitations on the amount that may be contributed, the persons who may be
eligible, and the time when distributions must commence. Depending upon the
circumstances of the individual, contributions to an IRA may be made on a
deductible or non-deductible basis. IRAs may not be transferred, sold, assigned,
discounted, or pledged as collateral for a loan or other obligation. The annual
premium for an IRA may not exceed $2,000, reduced by any contribution to that
individual's Roth IRA. In addition, distributions from certain other types of
Qualified Plans may be placed on a tax-deferred basis into an IRA.
2. Roth IRA
Effective January 1, 1998, a Roth IRA under Code Section 408A is available
for retirement savings for individuals with earned income. The Contract may be
purchased as a Roth IRA. Roth IRA allows an individual to contribute
non-deductible contributions for retirement purposes, with the earnings income
tax-deferred, and the potential ability to withdraw the money income tax-free
under certain circumstances. Roth IRAs are subject to limitations on the amount
that may be contributed, the persons who may be eligible, and the time when
distributions must commence. Roth IRAs may not be transferred, sold, assigned,
discounted, or pledged as collateral for a loan or other obligation. The annual
premium for a Roth IRA may not exceed $2,000, reduced by any contribution to
that individual's IRA. In addition, a taxpayer may elect to convert an IRA to a
Roth IRA, accelerating deferred income taxes on previous earnings in the IRA to
a current year.
3. Corporate Pension and Profit Sharing Plans
Code Section 401(a) permits employers to establish various types of
retirement plans for their employees. For this purpose, self-employed
individuals (proprietors or partners operating a trade or business) are treated
as employees eligible to participate in such plans. Such retirement plans may
permit the purchase of Contracts to provide benefits thereunder.
In order for a retirement plan to be "qualified" under Code Section 401(a),
it must: (i) meet certain minimum standards with respect to participation,
coverage and vesting; (ii) not discriminate in favor of "highly compensated"
employees; (iii) provide contributions or benefits that do not exceed certain
limitations; (iv) prohibit the use of plan assets for purposes other than the
exclusive benefit of the employees and their beneficiaries covered by the plan;
(v) provide for distributions that comply with certain minimum distribution
requirements; (vi) provide for certain spousal survivor benefits; and (vii)
comply with numerous other qualification requirements.
A retirement plan qualified under Code Section 401(a) may be funded by
employer contributions, employee contributions or a combination of both. Plan
participants are not subject to tax on employer contributions until such amounts
are actually distributed from the plan. Depending upon the terms of the
particular plan, employee contributions may be made on a pre-tax or after-tax
basis. In addition, plan participants are not taxed on plan earnings derived
from either employer or employee contributions until such earnings are
distributed.
4. Tax-Deferred Annuities
Section 403(b) of the Code permits the purchase of "tax-deferred annuities"
by public schools and organizations described in Section 501(c)(3) of the Code,
including certain charitable, educational and scientific organizations. These
qualifying employers may pay premiums under the Contracts for the benefit of
their employees. Such premiums are not includable in the gross income of the
employee until the employee receives distributions from the Contract. The amount
of premiums to the tax-deferred annuity is limited to certain maximums imposed
by the Code. Furthermore, the Code sets forth additional restrictions governing
such items as transferability, distributions, nondiscrimination and withdrawals.
Any employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
5. Deferred Compensation Plans
Section 457 of the Code permits employees of state and local governments
and units and agencies of state and local governments as well as tax-exempt
organizations described in Section 501(c)(3) of the Code to defer a portion of
their compensation without paying current taxes. Distributions received by an
employee from a 457 Plan will be taxed as ordinary income.
Qualifed Plan Federal Taxation Summary
The above description of the Federal income tax consequences of the
different types of Qualified Plans which may be funded by the Contract offered
by this Prospectus is only a brief summary and is not intended as tax advice.
The rules governing the provisions of Qualified Plans are extremely complex and
often difficult to comprehend. Anything less than full compliance with the
applicable rules, all of which are subject to change, may have adverse tax
consequences. A prospective Contract Owner considering adoption of a Qualified
Plan and purchase of a Contract in connection therewith should first consult a
qualified and competent tax adviser with regard to the suitability of the
Contract as an investment vehicle for the Qualified Plan.
Periodic distributions (e.g., annuities and installment payments) from a
Qualified Plan (other than a 457 program) that will last for a period of ten or
more years are generally subject to voluntary income tax withholding. The amount
withheld on such periodic distributions is determined at the rate applicable to
wages. The recipient of a periodic distribution may generally elect not to have
withholding apply.
Nonperiodic distributions (e.g., lump-sums and annuities or installment
payments of less than 10 years) from a Qualified
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Plan (other than a 457 program or an IRA) are generally subject to mandatory 20%
income tax withholding. However, no withholding is imposed if the distribution
is transferred directly to another eligible Qualified Plan or IRA. Nonperiodic
distributions from an IRA are subject to income tax withholding at a flat 10%
rate. The recipient of such a distribution may elect not to have withholding
apply.
Distributions from a 457 program are subject to the normal wage withholding
rules.
403(b) PROGRAMS - CONSTRAINTS ON WITHDRAWALS
Section 403(b) of the Internal Revenue Code permits public school employees
and employees of organizations specified in Section 501(c)(3) of the Internal
Revenue Code, such as certain types of charitable, educational, and scientific
organizations, to purchase annuity contracts, and subject to certain
limitations, to exclude the amount of purchase payments from gross income for
federal tax purposes. Section 403(b) imposes restrictions on certain
distributions from tax-sheltered annuity contracts meeting the requirements of
Section 403(b) that apply to tax years beginning on or after January 1, 1989.
Section 403(b) requires that distributions from Section 403(b)
tax-sheltered annuities that are attributable to employee contributions made
after December 31, 1988 under a salary reduction agreement not begin before the
employee reaches age 59 1/2, separates from service, dies, becomes disabled, or
incurs a hardship. Furthermore, distributions of income or gains attributable to
such contributions accrued after December 31, 1988 may not be made on account of
hardship. Hardship, for this purpose, is generally defined as an immediate and
heavy financial need, such as paying for medical expenses, the purchase of a
principal residence, or paying certain tuition expenses.
An Owner of a Contract purchased as a tax-deferred Section 403(b) annuity
contract will not, therefore, be entitled to exercise the right of surrender or
withdrawal, as described in this Prospectus, in order to receive his or her
Contract Value attributable to premiums paid under a salary reduction agreement
or any income or gains credited to such Contract Owner under the Contract unless
one of the above-described conditions has been satisfied, or unless the
withdrawal is otherwise permitted under applicable federal tax law. In the case
of transfers of amounts accumulated in a different Section 403(b) contract to
this Contract under a Section 403(b) Program, the withdrawal constraints
described above would not apply to the amount transferred to the Contract
attributable to a Contract Owner's December 31, 1988 account balance under the
old contract, provided that the amounts transferred between contracts meets
certain conditions. An Owner's Contract may be able to be transferred to certain
other investment or funding alternatives meeting the requirements of Section
403(b) that are available under an employer's Section 403(b) arrangement.
403(b) PROGRAMS - LOAN PRIVILEGES
Generally, loans are non-taxable. However, loans under a 403(b) contract
are taxable in the event that the loan is in default. Please consult your tax
adviser for more details.
OTHER INFORMATION
VOTING OF SHARES OF THE FUNDS
AUL is the legal owner of the shares of the Portfolios of the Funds held by
the Investment Accounts of the Variable Account. In accordance with its view of
present applicable law, AUL will exercise voting rights attributable to the
shares of the Funds held in the Investment Accounts at any regular and special
meetings of the shareholders of the Funds on matters requiring shareholder
voting under the 1940 Act. AUL will exercise these voting rights based on
instructions received from persons having the voting interest in corresponding
Investment Accounts of the Variable Account and consistent with any requirements
imposed on AUL under contracts with any of the Funds, or under applicable law.
However, if the 1940 Act or any regulations thereunder should be amended, or if
the present interpretation thereof should change, and as a result AUL determines
that it is permitted to vote the shares of the Funds in its own right, it may
elect to do so.
The person having the voting interest under a Contract is the Contract
Owner. AUL or the pertinent Fund shall send to each Contract Owner a Fund's
proxy materials and forms of instruction by means of which instructions may be
given to AUL on how to exercise voting rights attributable to the Fund's shares.
Unless otherwise required by applicable law or under a contract with any of
the Funds, with respect to each of the Funds, the number of Fund shares as to
which voting instructions may be given to AUL is determined by dividing the
value of all of the Accumulation Units of the corresponding Investment Account
attributable to a Contract on a particular date by the net asset value per share
of that Fund as of the same date. After the Annuity Date, the number of Fund
shares as to which voting instructions may be given to AUL is determined by
dividing the value of all of the Annuity Units by the net asset value per share
of that Fund as of the same date. Fractional votes will be counted. The number
of votes as to which voting instructions may be given will be determined as of
the date coincident with the date established by a Fund for determining
shareholders eligible to vote at the meeting of the Fund. If required by the SEC
or under a contract with any of the Funds, AUL reserves the right to determine
in a different fashion the voting rights attributable to the shares of the Fund.
Voting instructions may be cast in person or by proxy.
Voting rights attributable to the Contracts for which no timely voting
instructions are received will be voted by AUL in the same proportion as the
voting instructions which are received in a timely manner for all Contracts
participating in that Investment Account. AUL will vote shares of any Investment
Account, if any, that it owns beneficially in its own discretion, except that if
a Fund offers it shares to any insurance company separate account that funds
variable life insurance contracts or if otherwise required by applicable law or
contract, AUL will vote its own shares in the same proportion as the voting
instructions that are received in a timely manner for Contracts participating in
the Investment Account.
Neither the Variable Account nor AUL is under any duty to inquire as to the
instructions received or the authority of Owners or others to instruct the
voting of shares of any of the Funds.
SUBSTITUTION OF INVESTMENTS
AUL reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, substitutions for, or combinations
of the securities that are held by
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the Variable Account or any Investment Account or that the Variable Account or
any Investment Account may purchase. If shares of any or all of the Funds should
no longer be available for investment, or if, in the judgment of AUL's
management, further investment in shares of any or all of the Funds should
become inappropriate in view of the purposes of the Contracts, AUL may
substitute shares of another fund for shares already purchased, or to be
purchased in the future under the Contracts. AUL may also purchase, through the
Variable Account, other securities for other classes of contracts, or permit a
conversion between classes of contracts on the basis of requests made by
Contract Owners or as permitted by Federal law.
Where required under applicable law, AUL will not substitute any shares
attributable to a Contract Owner's interest in an Investment Account or the
Variable Account without notice, Contract Owner approval, or prior approval of
the SEC or a state insurance commissioner, and without following the filing or
other procedures established by applicable state insurance regulators.
AUL also reserves the right to establish additional Investment Accounts of
the Variable Account that would invest in another investment company, a series
thereof, or other suitable investment vehicle. New Investment Accounts may be
established in the sole discretion of AUL, and any new Investment Account will
be made available to existing Contract Owners on a basis to be determined by
AUL. AUL may also eliminate or combine one or more Investment Accounts or cease
permitting new allocations to an Investment Account if, in its sole discretion,
marketing, tax, or investment conditions so warrant.
Subject to any required regulatory approvals, AUL reserves the right to
transfer assets of any Investment Account of the Variable Account to another
separate account or Investment Account.
In the event of any such substitution or change, AUL may, by appropriate
endorsement, make such changes in these and other Contracts as may be necessary
or appropriate to reflect such substitution or change. AUL reserves the right to
operate the Variable Account as a management investment company under the 1940
Act or any other form permitted by law, an Investment Account may be
deregistered under that Act in the event such registration is no longer
required, or it may be combined with other separate accounts of AUL or an
affiliate thereof. Subject to compliance with applicable law, AUL also may
combine one or more Investment Accounts and may establish a committee, board, or
other group to manage one or more aspects of the operation of the Variable
Account.
CHANGES TO COMPLY WITH LAW AND AMENDMENTS
AUL reserves the right, without the consent of Contract Owners, to make any
change to the provisions of the Contracts to comply with, or to give Contract
Owners the benefit of, any Federal or state statute, rule, or regulation,
including, but not limited to, requirements for annuity contracts and retirement
plans under the Internal Revenue Code and regulations thereunder or any state
statute or regulation.
RESERVATION OF RIGHTS
AUL reserves the right to refuse to accept new premiums under a Contract
and to refuse to accept any application for a Contract.
PERIODIC REPORTS
AUL will send quarterly statements showing the number, type, and value of
Accumulation Units credited to the Contract. AUL will also send statements
reflecting transactions in a Contract Owner's Account as required by applicable
law. In addition, every person having voting rights will receive such reports or
Prospectuses concerning the Variable Account and the Funds as may be required by
the 1940 Act and the 1933 Act.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Variable Account is a
party, or which would materially affect the Variable Account.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Contracts
described in this Prospectus and the organization of AUL, its authority to issue
the Contracts under Indiana law, and the validity of the forms of the Contracts
under Indiana law have been passed upon by the Associate General Counsel of AUL.
Legal matters relating to the Federal securities and Federal income tax
laws have been passed upon by Dechert Price & Rhoads, Washington, D.C.
FINANCIAL STATEMENTS
Financial statements of AUL as of December 31, 1997, are included in the
Statement of Additional Information.
YEAR 2000 ISSUES AND READINESS
In recent years, the Year 2000 problem has received extensive publicity.
The problem arises because most computer systems and programs were written with
dates expressed as a 2 digit code. Unless steps are taken, on January 1, 2000,
many systems may read the year "2000" as "1900" and date-related computations
either would not be processed or would be processed incorrectly. This could have
a material and adverse effect on financial institutions such as banks and
insurance companies like AUL. To prevent this, AUL began assessing the potential
impact in early 1996 and adopted a detailed written work plan in June, 1997 to
deal with Year 2000 issues.
Due to the complexity of this issue and the ever-increasing
interrelationships of computer systems in the United States, it would be
extremely difficult for any company to state that it has or will achieve
complete Year 2000 compliance or to guar-
27
<PAGE>
antee that its systems will not be affected in any way on January 1, 2000.
However, AUL currently believes that all critical computer systems and software
(those systems or software, which would cause great disruption to the Company if
they were inoperable for any length of time or if they were to generate
erroneous data) will, before January 1, 2000, be Year 2000 compliant. Although
AUL has no reason to believe that these steps will not be sufficient to avoid
any material adverse impact from Year 2000 issues and is addressing its Year
2000 issues by using both internal staff and external consultants, by replacing
hardware, operating systems, and application software, and by remediating
current application software, there can be no assurance that the Company's
efforts will be sufficient to avoid any adverse impact. This project is
currently expected to require more than 285,000 hours of labor at a cost of
approximately $17,000,000, which will be expensed against current operating
funds.
As a part of its plan, the Company has surveyed its primary service
providers to be sure that such providers have taken steps to address the Year
2000 issues. AUL will continue to periodically monitor the status of all service
providers' Year 2000 efforts.
PERFORMANCE INFORMATION
Performance information for the Investment Accounts is shown under
"Performance of the Investment Accounts." Performance information for the
Investment Accounts may also appear in promotional reports and sales literature
to current or prospective Contract Owners in the manner described in this
section. Performance information in promotional reports and literature may
include the yield and effective yield of the Investment Account investing in the
Money Market Investment Account, the yield of the remaining Investment Accounts,
the average annual total return and the total return of all Investment Accounts.
For information on the calculation of current yield and effective yield, see the
Statement of Additional Information.
Quotations of average annual total return for any Investment Account will
be expressed in terms of the average annual compounded rate of return on a
hypothetical investment in a Contract over a period of one, five and ten years
(or, if less, up to the life of the Investment Account), and will reflect the
deduction of the applicable withdrawal charge, the mortality and expense risk
charge, and if applicable, the administrative charge. Hypothetical quotations of
average annual total return may also be shown for an Investment Account for
periods prior to the time that the Investment Account commenced operations based
upon the performance of the mutual fund portfolio in which that Investment
Account invests, and will reflect the deduction of the applicable withdrawal
charge, the administrative charge, and the mortality and expense risk charge as
if, and to the extent, that such charges had been applicable. Quotations of
total return, actual and hypothetical, may simultaneously be shown that do not
take into account certain contractual charges such as the withdrawal charge and
the administrative charge and may be shown for different periods.
Performance information for any Investment Account reflects only the
performance of a hypothetical Contract under which Contract Value is allocated
to an Investment Account during a particular time period on which the
calculations are based. Performance information should be considered in light of
the investment objectives and policies, characteristics, and quality of the Fund
in which the Investment Account invests, and the market conditions during the
given time period, and should not be considered as representation of what may be
achieved in the future. For a description of the methods used to determine yield
and total return in promotional reports and literature for the Investment
Accounts, information on possible uses for performance, and other information,
see the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
and financial statements relating to AUL. The Table of Contents of the Statement
of Additional Information is set forth below:
<TABLE>
<S> <C>
GENERAL INFORMATION AND HISTORY.................................................................. 3
DISTRIBUTION OF CONTRACTS........................................................................ 3
CUSTODY OF ASSETS................................................................................ 3
TAX STATUS OF AUL AND THE VARIABLE ACCOUNT....................................................... 3
TAX TREATMENT OF AND LIMITS ON PREMIUMS UNDER RETIREMENT PLANS................................... 3-6
403(b) Programs................................................................................ 4
408 and 408A Programs.......................................................................... 4
457 Programs...................................................................................
Employee Benefit Plans......................................................................... 5
Tax Penalty for All Annuity Contracts.......................................................... 5
Withholding for Employee Benefit Plans and Tax-Deferred Annuities.............................. 5
INDEPENDENT ACCOUNTANTS.......................................................................... 6
PERFORMANCE INFORMATION.......................................................................... 6-7
FINANCIAL STATEMENTS............................................................................. 8-19
</TABLE>
A Statement of Additional Information may be obtained without charge by calling
or writing to AUL at the telephone number and address set forth in the front of
this Prospectus.
28
<PAGE>
================================================================================
No dealer, salesman or any other person is authorized by the AUL
American Individual Unit Trust or by AUL to give any information or to
make any representation other than as contained in this Prospectus in
connection with the offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended,
with respect to the offering herein described. For further information
with respect to the AUL American Individual Unit Trust, AUL and its
variable annuities, reference is made thereto and the exhibits filed
therewith or incorporated therein, which include all contracts or
documents referred to herein.
================================================================================
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
Individual Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46282
PROSPECTUS
Dated: December 31, 1998
================================================================================
29
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
Individual Variable Annuity Contracts
Offered By
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46282
(317) 263-4045
Individual Annuity Service Office Mail Address:
P.O. Box 7127, Indianapolis, Indiana 46206-7127
(800) 863-9354
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the current Prospectus for AUL
Individual Flexible Premium Variable Deferred Annuity, dated December
31, 1998.
A Prospectus is available without charge by calling the number listed
above or by mailing the Business Reply Mail card included in this
Statement of Additional Information to American United Life Insurance
Company(R) ("AUL") at the address listed above.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Description Page
<S> <C>
GENERAL INFORMATION AND HISTORY................................................................. 3
DISTRIBUTION OF CONTRACTS....................................................................... 3
CUSTODY OF ASSETS............................................................................... 3
TAX STATUS OF AUL AND THE VARIABLE ACCOUNT...................................................... 3
TAX TREATMENT OF AND LIMITS ON PREMIUMS UNDER RETIREMENT PROGRAMS............................... 3-6
403(b) Programs............................................................................... 4
408 and 408A Programs......................................................................... 4
457 Programs..................................................................................
Employee Benefit Plans........................................................................ 5
Tax Penalty for All Annuity Contracts......................................................... 5
Withholding for Employee Benefit Plans and Tax-Deferred Annuities............................. 5
INDEPENDENT ACCOUNTANTS......................................................................... 6
PERFORMANCE INFORMATION......................................................................... 6-7
FINANCIAL STATEMENTS............................................................................ 8-19
</TABLE>
2
<PAGE>
GENERAL INFORMATION AND HISTORY
For a general description of AUL and the AUL American Individual Variable
Annuity Unit Trust (the "Variable Account"), see the section entitled
"Information about AUL, The Variable Account, and The Funds" in the Prospectus.
Defined terms used in this Statement of Additional Information have the same
meaning as terms defined in the Prospectus.
DISTRIBUTION OF CONTRACTS
AUL is the Principal Underwriter for the variable annuity contracts (the
"Contracts") described in the Prospectus and in this Statement of Additional
Information. AUL is registered with the Securities and Exchange Commission (the
"SEC") as a broker-dealer. The Contracts are currently being sold in a
continuous offering. While AUL does not anticipate discontinuing the offering of
the Contracts, it reserves the right to do so. The Contracts are sold by
registered representatives of AUL who are also licensed insurance agents.
AUL also has sales agreements with various broker-dealers under which the
Contracts will be sold by registered representatives of the broker-dealers. The
registered representatives are required to be authorized under applicable state
regulations to sell variable annuity contracts. The broker-dealers are required
to be registered with the SEC and members of the National Association of
Securities Dealers, Inc.
AUL serves as the Principal Underwriter without compensation from the
Variable Account.
CUSTODY OF ASSETS
The assets of the Variable Account are held by AUL. The assets are
maintained separate and apart from the assets of other separate accounts of AUL
and from AUL's General Account assets. AUL maintains records of all purchases
and redemptions of shares of the Funds.
TAX STATUS OF AUL AND THE VARIABLE ACCOUNT
The operations of the Variable Account form a part of AUL, so AUL will be
responsible for any Federal income and other taxes that become payable with
respect to the income of the Variable Account. Each Investment Account will bear
its allocable share of such liabilities, but under current law, no dividend,
interest income, or realized capital gain attributable, at a minimum, to
appreciation of the Investment Accounts will be taxed to AUL to the extent it is
applied to increase reserves under the Contracts.
Each of the Funds in which the Variable Account invests has advised AUL
that it intends to qualify as a "regulated investment company" under the Code.
AUL does not guarantee that any Fund will so qualify. If the requirements of the
Code are met, a Fund will not be taxed on amounts distributed on a timely basis
to the Variable Account. Were such a Fund not to so qualify, the tax status of
the Contracts as annuities might be lost, which could result in immediate
taxation of amounts earned under the Contracts (except those held in Employee
Benefit Plans and 408 Programs).
Under regulations promulgated under Code Section 817(h), each Investment
Account must meet certain diversification standards. Generally, compliance with
these standards is determined by taking into account an Investment Account's
share of assets of the appropriate underlying Fund. To meet this test, on the
last day of each calendar quarter, no more than 55% of the total assets of a
Fund may be represented by any one investment, no more than 70% may be
represented by any two investments, no more than 80% may be represented by any
three investments, and no more than 90% may be represented by any four
investments. For the purposes of Section 817(h), securities of a single issuer
generally are treated as one investment, but obligations of the U.S. Treasury
and each U.S. Governmental agency or instrumentality generally are treated as
securities of separate issuers.
TAX TREATMENT OF AND LIMITS ON PREMIUMS UNDER RETIREMENT PROGRAMS
The Contracts may be offered for use with several types of qualified or
non-qualified retirement programs as described in the Prospectus. The tax rules
applicable to Owners of Contracts used in connection with qualified retirement
programs vary according to the type of retirement plan and its terms and
conditions. Therefore, no attempt is made herein to provide more than general
information about the use of the Contracts with the various types of qualified
retirement programs.
Owners, Annuitants, Beneficiaries and other payees are cautioned that the
rights of any person to any benefits under these programs may be subject to the
terms and conditions of the Qualified Plans themselves, regardless of the terms
and conditions of the Contracts issued in connection therewith.
Generally, no taxes are imposed on the increases in the value of a Contract
by reason of investment experience or employer contributions until a
distribution occurs, either as a lump-sum
3
<PAGE>
payment or annuity payments under an elected Annuity Option or in the form of
cash withdrawals, surrenders, or other distributions prior to the Annuity Date.
The amount of premiums that may be paid under a Contract issued in
connection with a Qualified Plan are subject to limitations that may vary
depending on the type of Qualified Plan. In addition, early distributions from
most Qualified Plans may be subject to penalty taxes, or in the case of
distributions of amounts contributed under salary reduction agreements, could
cause the Qualified Plan to be disqualified. Furthermore, distributions from
most Qualified Plans are subject to certain minimum distribution rules. Failure
to comply with these rules could result in disqualification of the Qualified
Plan or subject the Annuitant to penalty taxes. As a result, the minimum
distribution rules could limit the availability of certain Annuity Options to
Contract Owners and their Beneficiaries.
Below are brief descriptions of various types of qualified retirement
programs and the use of the Contracts in connection therewith. Unless otherwise
indicated in the context of the description, these descriptions reflect the
assumption that the Contract Owner is a participant in the retirement program.
For Employee Benefit Plans that are defined benefit plans, a Contract generally
would be purchased by a Participant, but owned by the plan itself.
403(b) PROGRAMS
Premiums paid pursuant to a 403(b) Program are excludable from a Contract
Owner's gross income if they do not exceed the smallest of the limits calculated
under Sections 402(g), 403(b)(2), and 415 of the Internal Revenue Code. Section
402(g) generally limits a Contract Owner's salary reduction premiums to a 403(b)
Program to $10,000 a year. The $10,000 limit may be reduced by salary reduction
premiums to another type of retirement plan. A Contract Owner with at least 15
years of service for a "qualified employer" (i.e., an educational organization,
hospital, home health service agency, health and welfare service agency, church
or convention or association of churches) generally may exceed the $10,000 limit
by $3,000 per year, subject to an aggregate limit of $15,000 for all years.
Section 403(b)(2) provides an overall limit on employer and Contract Owner
salary reduction premiums that may be made to a 403(b) Program. Section
403(b)(2) generally provides that the maximum amount of premiums a Contract
Owner may exclude from his gross income in any taxable year is equal to the
excess, if any, of:
(a) the amount determined by multiplying 20% of his includable compensation
by the number of his years of service with his employer, over
(b) the total amount contributed to retirement plans sponsored by his
employer, including the Section 403(b) Program, that were excludable from his
gross income in prior years.
Contract Owners employed by "qualified employers" may elect to have certain
alternative limitations apply.
Section 415(c) also provides an overall limit on the amount of employer and
Contract Owner's salary reduction premiums to a Section 403(b) Program that will
be excludable from an employee's gross income in a given year. The Section
415(c) limit is the lesser of (a) $30,000, or (b) 25% of the Contract Owner's
annual compensation (reduced by his salary reduction premiums to the 403(b)
Program and certain other employee plans). This limit will be reduced if a
Contract Owner also participates in an Employee Benefit Plan maintained by a
business that he or she controls.
The limits described above do not apply to amounts "rolled over" from
another Section 403(b) Program. A Contract Owner who receives an "eligible
rollover distribution" will be permitted either to roll over such amount to
another Section 403(b) Program or an IRA within 60 days of receipt or to make a
direct rollover to another Section 403(b) Program or an IRA without recognition
of income. An "eligible rollover distribution" means any distribution to a
Contract Owner of all or any taxable portion of the balance of his credit under
a Section 403(b) Program, other than a required minimum distribution to a
Contract Owner who has reached age 70 1/2 and excluding any distribution which
is one of a series of substantially equal payments made (1) over the life
expectancy of the Contract Owner or the joint life expectancy of the Contract
Owner and his beneficiary or (2) over a specified period of 10 years or more.
Provisions of the Internal Revenue Code require that 20% of every eligible
rollover distribution that is not directly rolled over be withheld by the payor
for federal income taxes.
408 AND 408A PROGRAMS
Code Sections 219, 408 and 408A permit eligible individuals to contribute
to an individual retirement program, including a Simplified Employee Pension
Plan, an Employer Association Established Individual Retirement Account Trust,
known as an Individual Retirement Account ("IRA"), and a Roth IRA. These IRA
accounts are subject to limitations on the amount that may be contributed, the
persons who may be eligible, and on the time when distributions may commence. In
addition, certain distributions from some other types of retirement plans may be
placed on a tax-deferred basis in an IRA. Sale of the Contracts for use with
IRAs may be subject to special requirements imposed by the Internal Revenue
Service. Purchasers of the Contracts for such purposes will be provided with
such supplementary information as may be required by the Internal Revenue
Service or other appropriate agency, and will have the right to revoke the
Contract under certain circumstances.
If an Owner of a Contract issued in connection with a 408 Program
surrenders the Contract or makes a partial withdrawal, the Contract Owner will
realize income taxable at ordinary tax rates on the amount received to the
extent that amount exceeds the 408 premiums that were not excludable from the
taxable income of the employee when paid.
Premiums paid to the individual retirement account of a Contract Owner
under a 408 Program that is described in Section 408(c) of the Internal Revenue
Code are subject to the
4
<PAGE>
limits on premiums paid to individual retirement accounts under Section 219(b)
of the Internal Revenue Code. Under Section 219(b) of the Code, premiums paid to
an individual retirement account are limited to the lesser of $2,000 per year or
the Contract Owner's annual compensation. For tax years beginning after 1996, if
a married couple files a joint return, each spouse may, in the great majority of
cases, make contributions to his or her IRA up to the $2,000 limit. The extent
to which a Contract Owner may deduct premiums paid in connection with this type
of 408 Program depends on his and his spouse's gross income for the year and
whether either participate in another employer-sponsored retirement plan.
Premiums paid in connection with a 408 Program that is a simplified
employee pension plan are subject to limits under Section 402(h) of the Internal
Revenue Code. Section 402(h) currently limits premiums paid in connection with a
simplified employee pension plan to the lesser of (a) 15% of the Contract
Owner's compensation, or (b) $30,000. Premiums paid through salary reduction are
subject to additional annual limits.
Withdrawals from Roth IRAs may be made tax-free under certain
circumstances. Please consult your tax adviser for more details.
457 PROGRAMS
Deferrals by an eligible individual to a 457 Program generally are limited
under Section 457(b) of the Internal Revenue Code to the lesser of (a) $7,500 or
(b) 33 1/3% of the Contract Owner's includable compensation. If the Contract
Owner participates in more than one 457 Program, the $7,500 limit applies to
contributions to all such programs. The $7,500 limit is reduced by the amount of
any salary reduction contribution the Contract Owner makes to a 403(b) Program,
a 408 Program, or an Employee Benefit Program. The Section 457(b) limit is
increased during the last three years ending before the Contract Owner reaches
his normal retirement age under the 457 Program. Effective 1/1/97 the $7,500
limit on deferrals is indexed in $500 increments.
EMPLOYEE BENEFIT PLANS
Code Section 401 permits business employers and certain associations to
establish various types of retirement plans for employees. Such retirement plans
may permit the purchase of Contracts to provide benefits thereunder.
If an Owner of a Contract issued in connection with an Employee Benefit
Plan who is a participant in the Plan receives a lump-sum distribution, the
portion of the distribution equal to any premiums that were taxable to the
Contract Owner in the year when paid is generally received tax free. The balance
of the distribution will generally be treated as ordinary income. Special
five-year forward averaging provisions under Code Section 402 may be utilized on
the amount subject to ordinary income tax treatment, provided that the Contract
Owner has reached age 59 1/2, has not previously elected forward averaging for a
distribution from any Employee Benefit Plan after reaching age 59 1/2, and has
not rolled over a distribution from the Employee Benefit Plan or a similar plan
into another Employee Benefit Plan or an individual retirement account or
annuity. Special ten-year averaging and a capital-gains election may be
available to a Contract Owner who reached age 50 before 1986.
Under an Employee Benefit Plan under Section 401 of the Code, when annuity
payments commence (as opposed to a lump-sum distribution), under Section 72 of
the Code, the portion of each payment attributable to premiums that were taxable
to the participant in the year made, if any, is excluded from gross income as a
return of the participant's investment. The portion so excluded is determined at
the time the payments commence by dividing the participant's investment in the
Contract by the expected return. The periodic payments in excess of this amount
are taxable as ordinary income. Once the participant's investment has been
recovered, the full annuity payment will be taxable. If the annuity should stop
before the investment has been received, the unrecovered portion is deductible
on the Annuitant's final return. If the Contract Owner paid no premiums that
were taxable to the Contract Owner in the year made, there would be no portion
excludable.
The applicable annual limits on premiums paid in connection with an
Employee Benefit Plan depend upon the type of plan. Total premiums paid on
behalf of a Contract Owner who is a participant to all defined contribution
plans maintained by an Employer are limited under Section 415(c) of the Internal
Revenue Code to the lesser of (a) $30,000, or (b) 25% of a participant's annual
compensation. Premiums paid through salary reduction to a cash-or-deferred
arrangement under a profit sharing plan are subject to additional annual limits.
Premiums paid to a defined benefit pension plan are actuarially determined based
upon the amount of benefits the participant will receive under the plan formula.
The maximum annual benefit any participant may receive under an Employer's
defined benefit plan is limited under Section 415(b) of the Internal Revenue
Code. The limits determined under Section 415(b) and (c) of the Internal Revenue
Code are further reduced for a participant who participates in a defined
contribution plan and a defined benefit plan maintained by the same employer.
TAX PENALTY FOR ALL ANNUITY CONTRACTS
Any distribution made to a Contract Owner who is a participant from an
Employee Benefit Plan or a 408 Program other than on account of one or more of
the following events will be subject to a 10% penalty tax on the amount
distributed:
(a) the Contract Owner has attained age 59 1/2;
(b) the Contract Owner has died; or
(c) the Contract Owner is disabled.
In addition, a distribution from an Employee Benefit Plan will not be
subject to a 10% excise tax on the amount distributed if the Contract Owner is
55 and has separated from service. Distributions received at least annually as
part of a series of substantially equal periodic payments made for the life of
the Participant will not be subject to an excise tax. Certain amounts paid for
medical care also may not be subject to an excise tax.
WITHHOLDING FOR EMPLOYEE BENEFIT PLANS AND
TAX-DEFERRED ANNUITIES
Distributions from an Employee Benefit Plan to an employee, surviving
spouse, or former spouse who is an alternate payee under a qualified domestic
relations order, in the form a lump-sum settlement or periodic annuity payments
for a fixed period of fewer than 10 years are subject to mandatory federal
income tax withholding of 20% of the taxable amount of the distribution, unless
the distributee directs the transfer of such amounts to another Employee Benefit
Plan or to an Individual Retirement Account under Code Section 408. The taxable
amount is the amount of the distribution, less the amount allocable to after-tax
premiums.
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All other types of distributions from Employee Benefit Plans and all
distributions from Individual Retirement Accounts, are subject to federal income
tax withholding on the taxable amount unless the distributee elects not to have
the withholding apply. The amount withheld is based on the type of distribution.
Federal tax will be withheld from annuity payments (other than those subject to
mandatory 20% withholding) pursuant to the recipient's withholding certificate.
If no withholding certificate is filed with AUL, tax will be withheld on the
basis that the payee is married with three withholding exemptions. Tax on all
surrenders and lump-sum distributions from Individual Retirement Accounts will
be withheld at a flat 10% rate.
Withholding on annuity payments and other distributions from the Contract
will be made in accordance with regulations of the Internal Revenue Service.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, independent accountants, performs certain
accounting and auditing services for AUL and performs similar services for the
Variable Account. The AUL financial statements included in this Statement of
Additional Information have been audited to the extent and for the periods
indicated in their report thereon.
PERFORMANCE INFORMATION
Performance information for the Investment Accounts is shown in the
prospectus under "Performance of the Investment Accounts." Performance
information for the Investment Accounts may also appear in promotional reports
and literature to current or prospective Contract Owners in the manner described
in this section. Performance information in promotional reports and literature
may include the yield and effective yield of the Investment Account investing in
the AUL American Money Market Portfolio ("Money Market Investment Account"), the
yield of the remaining Investment Accounts, the average annual total return and
the total return of all Investment Accounts.
Current yield for the Money Market Investment Account will be based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular 7-day period, less a pro rata share of the Investment
Account's expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figures carried to at least the nearest hundredth of
one percent.
Calculation of "effective yield" begins with the same "base period return"
used in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)**365/7] - 1
Quotations of yield for the remaining Investment Accounts will be based on all
investment income per Accumulation Unit earned during a particular 30-day
period, less expenses accrued during the period ("net investment income"), and
will be computed by dividing net investment income by the value of the
Accumulation Unit on the last day of the period, according to the following
formula:
YIELD = 2[(a-b/cd + 1)**6 - 1]
where a = net investment income earned during the period by the Portfolio
attributable to shares owned by the Investment Account
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Accumulation Units outstanding during
the period that were entitled to receive dividends, and
d = the value (maximum offering period) per Accumulation Unit on the
last day of the period.
Quotations of average annual total return for any Investment Account will
be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a Contract over a period of one, five, and ten years
(or, if less, up to the life of the Investment Account), calculated pursuant to
the following formula: P(1 + T)**n = ERV (where P = a hypothetical initial
payment of $1,000, T = the average annual total return, n = the number of years,
and ERV = the ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period). Hypothetical quotations of average total return
may also be shown for an Investment Account for periods prior to the time that
the Investment Account commenced operations based upon the performance of the
mutual fund portfolio in which that Investment Account invests, as adjusted for
applicable charges. All total return figures reflect the deduction of the
applicable withdrawal charge, the administrative charge, and the mortality and
expense risk charge. Quotations of total return, actual and hypothetical, may
simultaneously be shown that do not take into account certain contractual
charges such as the withdrawal charge and the administrative charge and
quotations of total return may reflect other periods of time.
The average annual return that the Investment Accounts achieved for the one
year, three year, five year, and the lesser of ten years or since inception for
the periods ending
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December 31, 1997 under a Flexible Premium Contract and a One Year Flexible
Premium Contract (assuming the withdrawal charge is taken into account in
computing the ending redeemable value) and all Contracts (assuming the
withdrawal charge is not taken into account in computing the ending redeemable
value) may be found in the Prospectus.
Performance information for an Investment Account may be compared, in
promotional reports and literature, to: (i) the Standard & Poor's 500 Composite
Index ("S&P 500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare an Investment Account's
results with those of a group of securities widely regarded by investors as
representative of the securities markets in general; (ii) other groups of
variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank such investment companies on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Contract. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for any Investment Account reflects only the
performance of a hypothetical Contract under which an Owner's Account Value is
allocated to an Investment Account during a particular time period on which the
calculations are based. Performance information should be considered in light of
the investment objectives and policies, characteristics and quality of the Funds
in which the Investment Account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future.
Promotional reports and literature may also contain other information
including (i) the ranking of any Investment Account derived from rankings of
variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services or by other rating services, companies, publications,
or other persons who rank separate accounts or other investment products on
overall performance or other criteria; (ii) the effect of tax-deferred
compounding on an Investment Account's investment returns, or returns in
general, which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a
tax-deferred basis; (assuming one or more tax rates) with the return on a
taxable basis; and (iii) AUL's rating or a rating of AUL's claim-paying ability
by firms that analyze and rate insurance companies and by nationally recognized
statistical rating organizations.
7
<PAGE>
FINANCIAL STATEMENTS
The financial statements of AUL, which are included in this Statement of
Additional Information, should be considered only as bearing on the ability of
AUL to meet its obligations under the Contracts. They should not be considered
as bearing on the investment performance of the assets held in the Variable
Account.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American United Life Insurance Company
Indianapolis, Indiana
We have audited the accompanying combined balance sheet of American United Life
Insurance Company(R) and affiliates as of December 31, 1997 and 1996, and the
related combined statements of operations, policyholders' 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.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of American United Life
Insurance Company(R) and affiliates as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 27, 1998
8
<PAGE>
COMBINED BALANCE SHEET
December 31, 1997 and 1996 1997(in millions)1996
-------------------------------------------------------------------------
Assets
Investments:
Fixed Maturities:
Available for sale at fair value ........... $ 1,653.8 $ 1,593.4
Held to maturity at amortized cost ......... 2,902.2 3,013.6
Equity securities at fair value ............. 18.6 15.2
Mortgage loans .............................. 1,120.4 1,114.6
Real estate ................................. 52.1 52.3
Policy loans ................................ 143.1 143.5
Short term and other invested assets ........ 102.0 43.8
Cash and cash equivalents ................... 41.2 20.2
-------------------------------------------------------------------------
Total investments ........................... 6,033.4 5,996.6
Accrued investment income ................... 79.3 82.1
Reinsurance receivables ..................... 244.3 209.5
Deferred acquisition costs .................. 421.2 348.2
Property and equipment ...................... 55.5 54.0
Insurance premiums in course of collection .. 72.9 47.5
Other assets ................................ 17.2 35.7
Assets held in separate accounts ............ 1,674.0 1,078.7
-------------------------------------------------------------------------
Total assets ................................ $ 8,597.8 $ 7,852.3
-------------------------------------------------------------------------
Liabilities and policyholders' surplus
Liabilities
Policy reserves ............................ $ 5,642.9 $ 5,688.6
Other policyholder funds ................... 175.2 176.2
Pending policyholder claims ................ 164.3 137.6
Surplus notes .............................. 75.0 75.0
Other liabilities and accrued expenses ..... 201.8 123.4
Liabilities related to separate accounts ... 1,674.0 1,078.7
-------------------------------------------------------------------------
Total liabilities ........................... 7,933.2 7,279.5
-------------------------------------------------------------------------
Unrealized appreciation of securities,
net of deferred income tax ................. 36.5 19.0
Policyholders' surplus ...................... 628.1 553.8
-------------------------------------------------------------------------
Total policyholders' surplus ................ 664.6 572.8
-------------------------------------------------------------------------
Total liabilities and policyholders' surplus $ 8,597.8 $ 7,852.3
-------------------------------------------------------------------------
COMBINED STATEMENT
OF POLICYHOLDERS' SURPLUS
Policyholders' surplus at beginning of year .... $ 572.8 $ 548.9
Net income ..................................... 74.3 52.1
Change in unrealized appreciation (depreciation)
of securities, net ............................. 17.5 (28.2)
- ----------------------------------------------------------------------------
Policyholders' surplus at end of year .......... $ 664.6 $ 572.8
- ----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
8
COMBINED STATEMENT OF OPERATIONS
December 31, 1997 and 1996 1997(in millions)1996
- ---------------------------------------------------------------------------
Revenues:
Insurance premiums and other
considerations ............................... $ 413.9 $ 401.1
Policy and contract charges ................... 69.3 50.4
Net investment income ......................... 464.9 471.8
Realized investment gains ..................... 13.7 6.6
Other income .................................. 5.9 1.2
- ----------------------------------------------------------------------------
Total revenues ................................. 967.7 931.1
- ----------------------------------------------------------------------------
Benefits and expenses:
Policy benefits ............................... $ 386.2 $ 381.9
Interest expense on annuities and
financial products ........................... 257.3 261.6
Underwriting, acquisition and
insurance expenses ........................... 126.6 111.2
Amortization of deferred acquisition costs .... 53.2 49.8
Dividends to policyholders .................... 25.0 26.3
Interest expense on surplus notes ............. 5.8 5.1
Other operating expenses ...................... 9.5 8.7
- ----------------------------------------------------------------------------
Total benefits and expenses ................... 863.6 844.6
- ----------------------------------------------------------------------------
Income before income tax expense .............. 104.1 86.5
Income tax expense ............................ 29.8 34.4
- ----------------------------------------------------------------------------
Net income .................................... $ 74.3 $ 52.1
- ----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
9
COMBINED STATEMENT OF CASH FLOWS
December 31, 1997 and 1996 1997(in millions)1996
- ---------------------------------------------------------------------------
Cash flows from operating activities:
- ---------------------------------------------------------------------------
Net Income ..................................... $ 74.3 $ 52.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred acquisition costs ..... 53.2 49.8
Depreciation ................................... 10.1 9.2
Deferred taxes ................................. 7.3 1.8
Realized investment gains ...................... (13.7) (6.6)
Policy acquisition costs capitalized ........... (90.8) (69.3)
Interest credited to deposit liabilities ....... 252.1 254.7
Fees charged to deposit liabilities ............ (32.9) (19.8)
Amortization and accrual of investment income .. (8.2) (6.2)
Increase in insurance liabilities .............. 140.2 93.9
Increase in noninvested assets ................. (66.3) (44.4)
Increase in other liabilities .................. 35.1 19.6
Net cash provided by operating activities ...... 360.4 334.8
Cash flows from investing activities:
Purchases:
Fixed maturities, Held to Maturity ............. (120.8) (194.4)
Fixed maturities, Available for Sale ........... (348.3) (477.7)
Equity securities .............................. (9.4) (24.7)
Mortgage loans ................................. (155.4) (169.1)
Real estate .................................... (1.9) (3.9)
Short term and other invested assets ........... (43.3) (2.6)
Proceeds from sales, calls or maturities:
Fixed maturities, Held to Maturity ............. 241.2 158.8
Fixed maturities, Available for Sale ........... 335.1 466.4
Equity securities .............................. 7.2 28.7
Mortgage loans ................................. 149.7 175.0
Real estate .................................... 4.3 3.1
Short term and other invested assets ........... 1.6 27.6
Net cash provided (used) by investing activities 60.0 (12.8)
Cash flows from financing activities:
Proceeds from issuance of surplus notes ........ 0 75.0
Deposits to insurance liabilities .............. 713.6 595.2
Withdrawals from insurance liabilities ......... (1,112.5) (984.6)
Change in policyholder dividend liability ...... (.9) 3.6
Decrease (increase) in policy loans ............ .4 (1.9)
Net cash used by financing activities .......... (399.4) (312.7)
Net increase in cash and cash equivalents ...... 21.0 9.3
Cash and cash equivalents beginning of year .... 20.2 10.9
Cash and cash equivalents end of year .......... $ 41.2 $ 20.2
The accompanying notes are an integral part of the financial statements.
<PAGE>
10
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Presentation
American United Life Insurance Company (AUL) is an Indiana domiciled mutual life
insurance company with headquarters in Indianapolis. AUL is licensed to do
business in 48 states and the District of Columbia and is an authorized
reinsurer in all states. AUL offers individual life and annuity products through
its career agent distribution system. AUL's qualified group retirement plans,
tax deferred annuities and other non-medical group products are marketed through
independent agents and brokers, as well as career agents who are supported by 29
regional sales offices located throughout the country. Life and pooled
reinsurance is marketed directly to other insurance companies. In 1997, AUL
International began operations to develop reinsurance partners in Central and
South America. The combined Company financial statements include the accounts of
AUL and its affiliate, The State Life Insurance Company (State Life).
Significant intercompany transactions have been excluded.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP). AUL and State Life file
separate financial statements with insurance regulatory authorities which are
prepared on the basis of statutory accounting practices which are significantly
different from financial statements prepared in accordance with GAAP. These
differences are described in detail in Note 9 - Statutory Information.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Investments
Fixed maturity securities which may be sold to meet liquidity and other needs of
the Company are categorized as available for sale and are stated at fair value.
Fixed maturity securities which the Company has the positive intent and ability
to hold to maturity are categorized as held-to-maturity and are stated at
amortized cost. Equity securities are stated at fair value. Mortgage loans on
real estate are carried at amortized cost less an impairment allowance for
estimated uncollectible amounts. Real estate is reported at cost less allowances
for depreciation. Depreciation is provided (straight line) over the estimated
useful lives of the related assets. Investment real estate is net of accumulated
depreciation of $31.7 million and $28.8 million at December 31, 1997 and 1996,
respectively. Depreciation expense for investment real estate amounted to $2.5
million and $2.4 million for 1997 and 1996, respectively. Policy loans are
carried at their unpaid balance. Other invested assets are reported at cost plus
the Company's equity in undistributed net equity since acquisition. Short term
investments include investments with maturities of one-year or less and are
carried at cost which approximates market. Short term certificates of deposit
and savings certificates are considered to be cash equivalents. The carrying
amount for cash and cash equivalents approximates market.
Realized gains and losses on sale or maturity of investments are based upon
specific identification of the investments sold and do not include amounts
allocable to separate accounts. At the time a decline in value of an investment
is determined to be other than temporary, a provision for loss is recorded which
is included in realized investment gains and losses. Unrealized gains and
losses, resulting from carrying available-for-sale securities at fair value, are
reported in policyholders' surplus, net of deferred taxes.
Deferred Policy Acquisition Costs
Those costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable. Such costs include commissions, certain costs of
policy underwriting and issue and certain variable agency expenses. These costs
are amortized with interest as follows:
For participating whole life insurance products, over the lesser of 30
years or the lifetime of the policy in relation to the present value of
estimated gross margins from expenses, investments and mortality,
discounted using the expected investment yield.
For universal life-type policies and investment contracts, over the lesser
of the lifetime of the policy or 30 years for life policies or 20 years for
other policies in relation to the present value of estimated gross profits
from surrender charges and investment, mortality and expense margins,
discounted using the interest rate credited to the policy.
For term life insurance products and life reinsurance policies, over the
lesser of the benefit period or 30 years for term life or 20 years for life
reinsurance policies in relation to the ratio of anticipated annual premium
revenue to the anticipated total premium revenue, using the same
assumptions used in calculating policy benefits.
For miscellaneous group life and individual and group health policies,
straight line over the expected life of the policy.
For credit insurance policies, the deferred acquisition cost balance is
primarily equal to the unearned premium reserve multiplied by the ratio of
deferrable commissions to premiums written.
Recoverability of the unamortized balance of deferred policy acquisition costs
is evaluated regularly. For universal life-type contracts, investment contracts
and participating whole life policies, the accumulated amortization is adjusted
(increased or decreased) whenever there is a material change in the estimated
gross profits or gross margins expected over the life of a block of business in
order to maintain a constant relationship between cumulative amortization and
the present value of gross profits or gross margins. For most other contracts,
the unamortized asset balance is reduced by a charge to income only when the
present value of future cash flows, net of the policy liabilities, is not
sufficient to cover such asset balance.
<PAGE>
11
NOTES TO FINANCIAL STATEMENTS
Assets Held in Separate Accounts
Separate accounts are funds on which investment income and gains or losses
accrue directly to certain policies, primarily variable annuity contracts and
equity-based pension and profit sharing plans. The assets of these accounts are
legally segregated, and are valued at fair value. The related liabilities are
recorded at amounts equal to the underlying assets; the fair value of these
liabilities is equal to their carrying amount.
Property and Equipment
Property and equipment includes real estate owned and occupied by the Company.
Property and equipment is carried at cost, net of accumulated depreciation of
$41.6 million and $37.2 million as of December 31, 1997 and 1996, respectively.
The Company provides for depreciation of property and equipment using the
straight-line method over its estimated useful life. Depreciation expense for
1997 and 1996 was $7.6 million and $6.8 million, respectively.
Premium Revenue and Benefits to Policyholders
The premiums and benefits for whole life and term insurance products and certain
annuities with life contingencies (immediate annuities) are fixed and
guaranteed. Such premiums are recognized as premium revenue when due. Group
insurance premiums are recognized as premium revenue over the time period to
which the premiums relate. Benefits and expenses are associated with earned
premiums so as to result in recognition of profits over the life of the
contracts. This association is accomplished by means of the provision for
liabilities for future policy benefits and the amortization of deferred policy
acquisition costs.
Universal life policies and investment contracts are policies with terms that
are not fixed and guaranteed. The terms that may be changed could include one or
more of the amounts assessed the policyholder, premiums paid by the policyholder
or interest accrued to policyholder balances. The amounts collected from
policyholders for these policies are considered deposits, and only the
deductions during the period for cost of insurance, policy administration and
surrenders are included in revenue. Policy benefits and claims that are charged
to expense include interest credited to contracts and benefit claims incurred in
the period in excess of related policy account balances.
Reserves for Future Policy and Contract Benefits
Liabilities for future policy benefits for participating whole life policies are
calculated using the net level premium method and assumptions as to interest and
mortality. The interest rate is the dividend fund interest rate and the
mortality rates are those guaranteed in the calculation of cash surrender values
described in the contract. Liabilities for future policy benefits for term life
insurance and life reinsurance policies are calculated using the net level
premium method and assumptions as to investment yields, mortality and
withdrawals. The assumptions are based on projections of past experience and
include provisions for possible unfavorable deviation. These assumptions are
made at the time the contract is issued. Liabilities for future policy benefits
on universal life and investment contracts consist principally of policy account
values plus certain deferred policy fees which are amortized using the same
assumptions and factors used to amortize the deferred policy acquisition costs.
If the future benefits on investment contracts are guaranteed (immediate
annuities with benefits paid for a period certain) the liability for future
benefits is the present value of such guaranteed benefits. Claim liabilities
include provisions for reported claims and estimates based on historical
experience, for claims incurred but not reported.
Income Taxes
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the temporary differences in the assets and
liabilities determined on a tax and financial reporting basis.
<PAGE>
12
NOTES TO FINANCIAL STATEMENTS
2. Investments:
The book value and fair value of investments in fixed maturity securities by
type of investment were as follows:
<TABLE>
<CAPTION>
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------
Available for sale: (in millions)
<S> <C> <C> <C> <C>
Obligations of U.S. government states,
political subdivisions end foreign governments $ 47.8 $ 4.0 $0.0 $ 51.8
Corporate securities ......................... 1,064.1 55.5 1.8 1,117.8
Mortgage-backed securities ................... 456.8 27.6 0.2 484.2
- ----------------------------------------------------------------------------------------------------------------
$ 1,568.7 $ 87.1 $2.0 $ 1,653.8
- ----------------------------------------------------------------------------------------------------------------
Held to maturity
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 124.2 $ 6.2 $0.3 $ 130.1
Corporate securities ......................... 1,854.4 123.4 3.6 1,9742
Mortgage-backed securities ................... 923.6 55.5 0.2 978.9
- ----------------------------------------------------------------------------------------------------------------
$ 2,902.2 $185.1 $4.1 $ 3,083.2
- ----------------------------------------------------------------------------------------------------------------
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------
Available for sale: (in millions)
<S> <C> <C> <C> <C>
Obligations of U.S. government, states,
political subdivisions end foreign governments $ 85.2 $ 1.9 $ 1.3 $ 85.8
Corporate securities ......................... 1,000.0 33.9 7.0 1,026.9
Mortgage-backed securities ................... 463.0 19.1 1.4 480.7
- ----------------------------------------------------------------------------------------------------------------
$ 1,548.2 $ 54.9 $ 9.7 $ 1,593.4
- ----------------------------------------------------------------------------------------------------------------
Held to maturity:
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 132.0 $ 5.5 $ 1.1 $ 136.4
Corporate securities ......................... 1,891.1 100.1 14.0 1,977.2
Mortgage-backed securities ................... 990.5 44.9 4.4 1,031.0
- ----------------------------------------------------------------------------------------------------------------
$ 3,013.6 $ 150.5 $ 19.5 $ 3,144.6
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
13
NOTES TO FINANCIAL STATEMENTS
The amortized cost and fair value of fixed maturity securities at December
31,1997, by contractual average maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Available for Sale Held to Maturity Total
Amortized Fair Amortized Fair Amortized Fair
(in millions) Cost Value Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------------
Due in one year or less .............. $ 127.0 $ 127.2 $ 60.8 $ 61.5 $ 187.8 $ 188.7
Due after one year through five years 311.6 318.4 768.5 798.0 1,080.1 1,116.4
Due after five years through ten years 368.9 388.5 738.9 794.7 1,107.8 1,183.2
Due after ten years .................. 304.4 335.5 410.4 450.1 714.8 785.6
- -----------------------------------------------------------------------------------------------------------
1,111.9 1,169.6 1,978.6 2,104.3 3,090.5 3,273.9
Mortgage-backed securities ........... 456.8 484.2 923.6 978.9 1,380.4 1,463.1
- -----------------------------------------------------------------------------------------------------------
$ 1,568.7 $ 1,653.8 $ 2,902.2 $ 3,083.2 $ 4,470.9 $ 4,737.0
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Net investment income consisted of the following:
for years ended December 31 1997(in millions)1996
- ----------------------------------------------------------------------------
Fixed maturity securities $359.4 $364.0
Equity securities 2.5 2.0
Mortgage loans 100.9 104.4
Real estate 11.5 10.8
Policy loans 8.8 9.0
Other 7.3 6.1
- ----------------------------------------------------------------------------
Gross investment income 490.4 496.3
Investment expenses 25.5 24.5
- ----------------------------------------------------------------------------
Net investment income $464.9 $471.8
- ----------------------------------------------------------------------------
Net realized investment gains and (losses) include write downs and changes in
the reserve for losses on mortgage loans and foreclosed real estate of $(1.3)
million and $.5 million for 1997 and 1996, respectively. Proceeds from the
sales, maturities or calls of investments in fixed maturities during 1997 and
1996 were approximately $576.3 million and $625.2 million, respectively. Gross
gains of $11.6 million and $12.0 million, and gross losses of $1.3 million and
$6.9 million were realized in 1997 and 1996, respectively. The changes in
unrealized appreciation (depreciation) of fixed maturities amounted to
approximately $39.9 million and $(64.3) million in 1997 and 1996, respectively.
At December 31, 1997, the unrealized appreciation on equity securities of
approximately $2.3 million is comprised of $3.8 million in unrealized gains and
$1.5 million of unrealized losses and has been reflected directly in
policyholders' surplus. The change in the unrealized appreciation (depreciation)
of equity securities amounted to approximately $.9 million and $(1.1)million in
1997 and 1996, respectively.
The Company maintains a diversified mortgage loan portfolio and exercises
internal limits on concentrations of loans by geographic area, industry, use and
individual mortgagor. At December 31, 1997, the largest geographic concentration
of commercial mortgage loans was in California, Indiana, and Florida where
approximately 33% of the portfolio was invested. A total of 40% of the mortgage
loans have been issued on retail properties, primarily backed by long term
leases or guarantees from strong credits.
The Company has outstanding mortgage loan commitments at December 31, 1997, of
approximately $117.2 million. As of December 31, 1997, the carrying value of
investments that produced no income for the previous twelve month period was
$1.8 million.
<PAGE>
14
NOTES TO FINANCIAL STATEMENTS
3. Insurance Liabilities:
At December 31, 1997 and 1996, insurance liabilities consisted of the following:
<TABLE>
<CAPTION>
(in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Withdrawal Mortality or morbidity Interest rate
assumption assumption assumption 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Future policy benefits:
Participating whole life contracts ........... Company Company 2.5% to 6.0% $ 594.5 $ 554.9
experience experience
Universal life-type contracts ................ n/a n/a n/a 376.4 352.0
Other individual life contracts .............. Company Company 6.8% to 10.0% 216.4 183.6
experience experience
Accident and health .......................... n/a n/a n/a 51.0 43.7
Annuity products ............................. n/a n/a n/a 4,213.6 4,397.1
Group life and health ........................ n/a n/a n/a 191.0 157.3
Other policyholder funds ..................... n/a n/a n/a 175.2 176.2
Pending policyholder claims .................. n/a n/a n/a 164.3 137.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total insurance liabilities $ 5,982.4 $6,002.4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Participating life insurance policies under generally accepted accounting
principles represent approximately 9% and 11 % of the total individual life
insurance in force at December 31, 1997 and 1996, respectively. Participating
policies represented approximately 39% and 40% of life premium income for 1997
and 1996, respectively. The amount of dividends to be paid is determined
annually by the Board of Directors.
4. Employees' and Agents' Benefit Plans:
The Company has a noncontributory defined benefit pension plan covering
substantially all employees. Company contributions to the employee plan are made
annually in an amount between the minimum ERISA required contribution and the
maximum tax-deductible contribution. Contributions made to the Plan were $2.6
million in 1997 and $2.4 million in 1996. The net periodic pension cost was
$(.5) million and $.6 million for the years ended December 31, 1997 and 1996,
respectively. This includes service cost of $2.2 million and $3.5 million,
interest cost of $1.6 million and $1.4 million, and return on plan assets of
$4.3 million, and $4.3 million for the years ended December 31, 1997 and 1996,
respectively.
The following benefit information for the employees' defined benefit plan was
determined by independent actuaries as of January 1, 1997 and 1996,
respectively, the most recent actuarial valuation dates:
1997 (in millions) 1996
Actuarial present value of accumulated benefits
for the employees' defined benefit plan:
Vested $20.5 $20.1
Nonvested 2.0 .2
- --------------------------------------------------------------------------------
Total accumulated benefits $22.5 $20.3
- --------------------------------------------------------------------------------
Related net assets available for plan benefits $34.0 $28.8
- --------------------------------------------------------------------------------
The Company has a defined contribution plan and a 401(k) plan covering employees
who have completed one full calendar year of service. Annual contributions are
made by the Company in amounts based upon the Company's financial results.
Company contributions to the plan during 1997 and 1996 were $1.4 million and
$1.7 million, respectively.
<PAGE>
15
NOTES TO FINANCIAL STATEMENTS
The Company has a defined contribution pension plan and a 401(k) plan covering
substantially all of the agents, except general agents. Contributions of 3% of
defined commissions (plus 3% for commissions over the Social Security wage base)
are made to the pension plan. An additional contribution of 3% of defined
commissions are made to a 401(k) plan. Company contributions expensed for these
plans for 1997 and 1996 were $268,000 and $612,000, respectively.
The funds for all plans are held by the Company under deposit administration and
group annuity contracts.
The Company also provides certain health care and life insurance benefits (post
retirement benefits) for retired employees and certain agents (retirees).
Employees and agents with at least 10 years of plan participation may become
eligible for such benefits if they reach retirement age while working for the
Company.
The net periodic post retirement benefit cost was $1,035,000 and $956,000 for
the year ended December 31, 1997 and 1996, respectively. This includes service
cost of $336,000 and $255,000, interest cost of $697,000 and $645,000,
amortization of unrecognized loss of $2,000 and $56,000 for the years ended
December 31, 1997 and 1996, respectively.
Accrued post retirement benefits as of December 31: 1997(in millions) 1996
- --------------------------------------------------------------------------------
Accumulated post retirement benefit obligation (APBO):
Retirees and their dependents $5.2 $ 4.6
Active employees fully eligible to retire and
receive benefits 3.1 2.6
Active employees not fully eligible 2.6 2.7
Unrecognized loss (1.6) (1.0)
- --------------------------------------------------------------------------------
Total APBO $9.3 $ 8.9
- --------------------------------------------------------------------------------
The assumed discount rate used in determining the accumulated post retirement
benefit was 7.00% and the assumed health care cost trend rate was 10% graded to
5% until 2004. Compensation rates were assumed to increase 6% at each year end.
The health coverage for retirees 65 and over is capped in the year 2000. The
health care cost trend rate assumption has an effect on the amounts reported. An
increase in the assumed health care cost trend rates by one percentage point
would increase the accumulated post retirement benefit obligation as of December
31, 1997, by $885,000 and increase the accumulated post retirement benefit cost
for 1997 by $126,000.
5. Federal Income Taxes:
A reconciliation of the income tax attributable to continuing operations
computed at U.S. federal statutory tax rates to the income tax expense included
in the statement of operations follows:
for years ended December 31 1997 (in millions) 1996
- --------------------------------------------------------------------------------
Income tax computed at statutory tax rate $36.3 $30.3
Tax exempt income (1.5) (1.6)
Mutual company differential earnings amount 6.1 7.5
Prior year differential earnings amount (3.7) (5.6)
Other (7.4) 3.8
- --------------------------------------------------------------------------------
Federal income tax $29.8 $34.4
- --------------------------------------------------------------------------------
The components of the provision for income taxes on earnings included current
tax provisions of $22.5 million and $32.6 million for the years ended December
31, 1997 and 1996, respectively, and deferred tax expense of $7.3 million and
$1.8 million for the years ended December 31, 1997 and 1996, respectively.
<PAGE>
16
NOTES TO FINANCIAL STATEMENTS
Deferred income tax assets (liabilities)
as of December 31: 1997 1996
- --------------------------------------------------------------------------------
(in millions)
Deferred policy acquisition costs $(137.0) $(110.9)
Investments (12.0) (8.1)
Insurance liabilities 154.7 139.0
Unrealized appreciation of securities (21.9) (11.2)
Other (4.7) (4.9)
- --------------------------------------------------------------------------------
Deferred income tax assets (liabilities) $ (20.9) $ 3.9
- --------------------------------------------------------------------------------
Federal income taxes paid were $28.6 million and $39.0 million for 1997 and
1996, respectively.
6. Reinsurance:
The Company is a party to various reinsurance contracts under which it receives
premiums as a reinsurer and reimburses the ceding companies for portions of the
claims incurred. At December 31,1997 and 1996, life Reinsurance assumed was
approximately 71% and 67%, respectively, of life insurance in force.
The Company cedes that portion of the total risk on an individual life in excess
of $1,500,000. For accident and health and disability policies, the Company has
established various limits of coverage it will retain on any one policy owner
and cedes the remainder of such coverage.
Certain statistical data with respect to reinsurance follows:
for years ended December 31 1997 1996
- --------------------------------------------------------------------------------
(in millions)
Direct statutory premiums $369.4 $353.1
Reinsurance assumed 253.9 214.8
Reinsurance ceded 132.3 109.8
- --------------------------------------------------------------------------------
Net premiums 491.0 458.1
- --------------------------------------------------------------------------------
Reinsurance recoveries $103.4 $ 73.5
- --------------------------------------------------------------------------------
The Company accounts for all reinsurance agreements as transfers of risk. If
companies to which reinsurance has been ceded are unable to meet obligations
under the reinsurance agreements, the Company would remain liable. Six
reinsurers account for approximately 57% of the Company's December 31, 1997,
ceded reserves for life and accident and health insurance. The remainder of such
ceded reserves is spread among numerous reinsurers.
7. Surplus Notes and Lines of Credit:
On February 16, 1996, the Company issued $75 million of Surplus Notes, due March
30, 2026. Interest is payable semi-annually on March 30, and September 30 at a
7.75% annual rate. Any payment of interest on or principal of the Notes may be
made only with the prior approval of the Commissioner of the Indiana Department
of Insurance. The Surplus Notes may not be redeemed at the option of AUL or any
holder of the Surplus Notes. Interest paid during 1997 was $5.8 million. The
Company has available a $125 million committed credit facility. No amounts have
been drawn as of December 31, 1997.
8. Commitments and Contingencies:
Various lawsuits have arisen in the ordinary course of the Company's business.
In each of the matters, the Company believes the ultimate resolution of such
litigation will not result in any material adverse impact to operations or
financial condition of the Company.
Pursuant to an Investment Agreement with Indianapolis Life Insurance Company and
the Indianapolis Life Group of Companies (IL Group), the Company has agreed to
purchase from IL Group $27 million of common stock. As of December 31,1997, $8.9
million of this stock was purchased, with an additional $18.1 million committed
to be purchased upon the approval of the Insurance Departments of various
states. Upon purchase of the full commitment, the Company will own 25% of IL
Group's issued and outstanding stock.
<PAGE>
17
NOTES TO FINANCIAL STATEMENTS
9. Statutory Information:
AUL and State Life prepare statutory financial statements in accordance with
accounting Principles and practices prescribed or permitted by the Indiana
Department of Insurance. Prescribed statutory accounting practices (SAP)
currently include state laws, regulations and general administrative rules
applicable to all insurance enterprises domiciled in a particular state, as well
as practices described in National Association of Insurance Commissioners'
(NAIC) publications.
A reconciliation of SAP surplus to GAAP surplus at December 31 follows:
for years ended December 31 1997 (in millions) 1996
- --------------------------------------------------------------------------------
SAP surplus $464.2 $407.9
Deferred policy acquisition costs 447.4 362.7
Adjustments to policy reserves (303.1) (278.3)
Asset valuation and interest maintenance reserves 86.1 106.4
Unrealized gain on invested assets, net 36.5 19.0
Surplus notes (75.0) (75 0)
Deferred income taxes 1.0 16.8
Other, net 7.5 13.3
- --------------------------------------------------------------------------------
GAAP surplus $664.6 $572.8
- --------------------------------------------------------------------------------
A reconciliation of SAP net income to GAAP net income for the years ended
December 31 follows:
for years ended December 31 1997 (in millions) 1996
- --------------------------------------------------------------------------------
SAP income $41.8 $ 51.4
Deferred policy acquisition costs 37.6 19.5
Adjustments to policy reserves (9.2) (15.0)
Deferred income taxes (7.3) (1.8)
Other, net 11.4 (2.0)
- --------------------------------------------------------------------------------
GAAP net income $74.3 $ 52.1
- --------------------------------------------------------------------------------
Life insurance companies are required to maintain certain amounts of assets on
deposit with state regulatory authorities. Such assets had an aggregate carrying
value of $4.5 million at December 31,1997.
10. Fair Value of Financial Instruments:
The disclosure of fair value information about certain financial instruments is
based primarily on quoted market prices. The fair values of short-term
investments and accrued investment income approximate the carrying amounts
reported in the balance sheets. Fair values for fixed maturity and equity
securities, and surplus notes are based on quoted market prices where available.
For fixed maturity securities not actively traded, fair values are estimated
using values obtained from independent pricing services, or in the case of
private placements, are estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality and maturity
of the investments. The fair value of the aggregate mortgage loan portfolio was
estimated by discounting the future cash flows using current rates at which
similar loans would be made to borrowers with similar credit ratings for similar
maturities.
The estimated fair values of the liabilities for policyholder funds approximate
the statement values because interest rates credited to account balances
approximate current rates paid on similar funds and are not generally guaranteed
beyond one year. Fair values for other insurance reserves are not required to be
disclosed. However, the estimated fair values for all insurance liabilities are
taken into consideration in the Company's overall management of interest rate
risk, which minimizes exposure to changing interest rates through the matching
of investment maturities with amounts due under insurance contracts. The fair
values of certain financial instruments along with their corresponding carrying
values at December 31,1997 and 1996 follow.
- --------------------------------------------------------------------------------
1997 (in millions) 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------------
Fixed maturity securities:
Available for sale $1,653.8 $1,653.8 $1,593 4 $1,593.4
Held to Maturity 2,902.2 3,083.2 3,013.6 3,144.6
Equity securities 18.6 18.6 15.2 15.2
Mortgage loans 1,120.4 1,201.0 1,114.6 1,186.3
Policy loans 143.1 143.1 143.5 143.5
Surplus notes 75.0 79.5 75.0 73.0
- --------------------------------------------------------------------------------
19
<PAGE>
================================================================================
No dealer, salesman or any other person is authorized by the AUL
American Individual Unit Trust to give any information or to make any
representation other than as contained in this Statement of Additional
Information in connection with the offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended,
with respect to the offering herein described. For further information
with respect to the AUL American Individual Unit Trust, AUL and its
variable annuities, reference is made thereto and the exhibits filed
therewith or incorporated therein, which include all contracts or
documents referred to herein.
================================================================================
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
Individual Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46282
STATEMENT OF ADDITIONAL INFORMATION
Dated: December 31, 1998
================================================================================
20
<PAGE>
Part C: Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements
1. Included in Prospectus (Part A):
Condensed Financial Information
2. Included in Statement of Additional Information (Part B):
(a) Financial Statements of American United Life Insurance Company(R)
Report of Independent Accountants
Combined Balance Sheet - Assets, Liabilities and Policyowners'
Surplus as of December 31, 1997 and 1996
Combined Statement of Operations for the years ended December 31,
1997 and 1996
Combined Statement of Policyowners' Surplus for the years ended
December 31, 1997 and 1996
Combined Statement of Cash Flows for the years ended December 31,
1997 and 1996
Notes to Financial Statements
(b) Financial Statements of AUL American Individual Variable Annuity
Unit Trust
Not applicable
(b) Exhibits
1. Resolution of the Executive Committee of American United Life
Insurance Company(R) ("AUL") establishing AUL American Individual
Unit Trust(1)
2. Not applicable
3. Not applicable
4. Individual Variable Annuity Contract Forms
4.1 Flexible Premium Variable Annuity Contract (1)
4.2 One Year Flexible Premium Variable Annuity Contract (1)
5. Individual Variable Annuity Enrollment Form(2)
6. Certificate of Incorporation and By-Laws of the Depositor
6.1 Articles of Merger between American Central Life Insurance
Company and United Mutual Life Insurance Company(1)
6.2 Certification of the Indiana Secretary of State as to the filing
of the Articles of Merger between American Central Life
Insurance Company and United Mutual Life Insurance Company(1)
6.3 Code of By-Laws of American United Life Insurance Company(R)(1)
7. Not applicable
8. Form of Participation Agreements:
8.1 Form of Participation Agreement with Alger American Fund(2)
8.2 Form of Participation Agreement with American Century Variable
Portfolios(2)
8.3 Form of Participation Agreement with Calvert Variable Series(2)
8.4 Form of Participation Agreement with Fidelity Variable Insurance
Products Fund(2)
8.5 Form of Participation Agreement with Fidelity Variable Insurance
Products Fund II(2)
8.6 Form of Participation Agreement with PBHG Funds, Inc.(2)
8.7 Form of Participation Agreement with T. Rowe Price Equity
Series, Inc.(2)
9. Opinion and Consent of Associate General Counsel of AUL as to the
legality of the Contracts being registered(1)
10. Miscellaneous Consents
10.1 Consent of Independent Accountants(1)
10.2 Consent of Dechert Price & Rhoads(1)
10.3 Powers of Attorney(1)
11. Financial Statements of AUL American Individual Variable Annuity
Unit Trust(2)
12. Not applicable
13. Computation of Performance Quotations(1)
14. Financial Data Schedules(2)
(1) Filed with the Registrant's Registration Statement on December 31, 1998
(2) Filed with the Registrant's Pre-Effective Amendment No. 1 to the Registr-
ation Statement.
<TABLE>
<PAGE>
<CAPTION>
Item 25. Directors and Officers of AUL
<S> <C>
Name and Address Positions and Offices with AUL
- ---------------- ------------------------------
John H. Barbre* Senior Vice President
Steven C. Beering M.D. Director
Purdue University
West Lafayette, Indiana
William R. Brown* General Counsel and Secretary, AUL
Secretary, State Life Insurance Co.
Arthur L. Bryant Director
141 E. Washington St.
Indianapolis, Indiana
James M. Cornelius Director
P.O. Box 44906
Indianapolis, Indiana
James E. Dora Director
P.O. Box 42908
Indianapolis, Indiana
Otto N. Frenzel III Director and Chairman of the Audit
101 W. Washington St., Suite 400E Committee
Indianapolis, Indiana
David W. Goodrich Director
One American Square, Suite 2500
Indianapolis, Indiana
William P. Johnson Director
P.O. Box 517
Goshen, Indiana
Scott A. Kincaid* Senior Vice President
Charles D. Lineback* Senior Vice President
James T. Morris Director
1220 Waterway Boulevard
Indianapolis, Indiana
James W. Murphy* Senior Vice President
Jerry L. Plummer* Senior Vice President
R. Stephen Radcliffe* Director and Executive Vice President
Thomas E. Reilly Jr. Director and Chairman of the Finance
300 N. Meridian, Suite 1500 Committee
Indianapolis, Indiana
William R. Riggs Director
P.O. Box 82001
Indianapolis, Indiana
G. David Sapp* Senior Vice President
John C. Scully Director
2636 Ocean Dr., # 505
Vero Beach, Florida
Jerry D. Semler* Chairman of the Board, President, Chief
Executive Officer and Chairman of the
Executive Committee, Chairman the Board,
Chief Executive Officer, State Life
Insurance Co.
- ---------------------------------------------
*One American Square, Indianapolis, Indiana
2
<PAGE>
Item 25. Directors and Officers of AUL (Continued)
Name and Address Positions and Offices with AUL
- ---------------- ------------------------------
Yvonne H. Shaheen Director
1310 S. Franklin Road
Indianapolis, Indiana
William L. Tindall* Senior Vice President
Frank D. Walker Director
P.O. Box 40972
Indianapolis, Indiana
Gerald T. Walker* Senior Vice President
- ----------------------------------------------
*One American Square, Indianapolis, Indiana
</TABLE>
Item 26. Persons Controlled by or Under Common Control with Registrant
In accordance with current law, it is anticipated that American United Life
Insurance Company(R) ("AUL") will request voting instructions from owners or
participants of any Contracts that are funded by separate accounts that are
registered investment companies under the Investment Company Act of 1940 and
will vote shares in any such separate account attributable to the Contracts in
proportion to the voting instructions received. AUL may vote shares of any
Portfolio, if any, that it owns beneficially in its own discretion.
Registrant, AUL American Individual Unit Trust and AUL American Unit Trust are
separate accounts of AUL, organized for the purpose of the respective sale of
individual and group variable annuity contracts.
AUL American Individual Variable Life Unit Trust is a separate account of AUL,
organized for the purpose of the sale of individual variable life contracts.
American United Life Pooled Equity Fund B is a separate account of AUL organized
for the purpose of the sale of group variable annuity contracts.
AUL Equity Sales Corp. is a wholly owned subsidiary of AUL, organized under the
laws of the State of Indiana in 1969 as a broker-dealer to market mutual funds.
AUL may also be deemed to control State Life Insurance Company(R) ("State Life")
since a majority of AUL's Directors also serve as Directors of State Life. By
virtue of an agreement between AUL and State Life, AUL provides investment and
other support services for State Life on a contractual basis.
AUL owns a 20% share of the stock of Princeton Reinsurance Managers, LLC, a
limited liability Delaware company. AUL's affiliation provides an alternative
marketing channel for its Reinsurance Division.
AUL American Series Fund, Inc. (the "Fund") was incorporated under the laws of
Maryland on July 26, 1989 and is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940. As a
"series" type of mutual Fund, the Fund issues shares of common stock relating to
separate investment portfolios. Substantially all of the Fund's shares were
originally purchased by AUL in connection with the initial capitalization of the
Fund. On December 31, 1997, AUL owned 8.11% of the outstanding shares of the
Fund's Equity portfolio and 13.97% of the Fund's Tactical Asset Allocation
Portfolio. At a meeting of the Board of Directors held on November 19, 1997, the
Board approved the addition of three new Portfolios to the Fund, namely, the AUL
American Conservative Investor Portfolio, the AUL American Moderate Investor
Portfolio and the AUL American Aggressive Investor Portfolio, collectively
referred to as the LifeStyle Portfolios. On March 31, 1998, AUL provided the
initial capitalization for the LifeStyle Portfolios and therefore, would be able
to control any issue submitted to the vote of shareholders of the LifeStyle
Portfolios.
Indianapolis Life Insurance company ("IL") is an Indiana domestic mutual
insurance company, whose principal business is the sale of life insurance and
annuity contracts. On November 3, 1997, AUL entered into an agreement with IL to
invest $27 million in its wholly owned downstream holding company, Indianapolis
Life Group of Companies, Inc., in exchange for a 25% equity interest. AUL paid
the balance of the $27 million on March 30, 1998; therefore, AUL currently owns
a 25% equity interest in Indianapolis Group of Companies, Inc.
3
<PAGE>
Item 27. Number of Contractholders
As of December 31, 1997, AUL has issued 0 Individual variable annuity
contracts associated with the Registrant.
Item 28. Indemnification
Article IX, Section 1 of the by-laws of AUL provides as follows:
The corporation shall indemnify any director or officer or former director or
officer of the corporation against expenses actually and reasonably incurred by
him (and for which he is not covered by insurance) in connection with the de-
fense of any action, suit or proceeding (unless such action, suit or proceeding
is settled) in which he is made a party by reason of being or having been such
director or officer, except in relation to matters as to which he shall be ad-
judged in such action, suit or proceeding, to be liable for negligence or mis-
conduct in the performance of his duties. The corporation may also reimburse
any director or officer or former director or officer of the corporation for the
reasonable costs of settlement of any such action, suit or proceeding, if it
shall be found by a majority of the directors not involved in the matter in
controversy (whether or not a quorum) that it was to the interest of the corpor-
ation that such settlement be made and that such director or officer was not
guilty of negligence or misconduct. Such rights of indemnification and reim-
bursement shall not be exclusive of any other rights to which such director or
officer may be entitled under any By-law, agreement, vote of members or other-
wise.
Item 29. Principal Underwriters
(a) AUL acts as Investment Adviser to American United Life Pooled Equity Fund B
(File No. 2-27832) and to AUL American Series Fund, Inc. (File No. 33-30156)
(b) For information regarding AUL's Officers and Directors, see Item 25 above.
(c) Not applicable
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the investment Company Act of 1940 and the rules
under that section will be maintained at One American Square, Indianapolis, IN
46282.
Item 31. Management Services
There are no management-related service contracts not discussed in Part A or
Part B.
4
<PAGE>
Item 32. Undertakings
The registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in this registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted, unless otherwise permitted.
(b) to 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) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.
Additional Representations:
(a) The Registrant and its Depositor are relying upon American Council of
Life Insurance, SEC No-Action Letter, SEC Ref. No. IP-6-88 (November
28, 1988) with respect to annuity contract offered as funding vehicles
for retirement plans meeting the requirements of Section 403(b) of the
Internal Revenue Code, and the provisions of paragraphs (1) - (4) of
this letter have been complied with.
(b) The Registrant represents that the aggregate fees and charges deducted
under the variable annuity contracts are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the
risks assumed by the Insurance Company.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) of the Securities Act of 1933 and
has duly caused this Post-Effective Amendment to the Registration Statement
(Form N-4) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis and the State of Indiana on this 30th
day of December, 1998.
AUL AMERICAN INDIVIDUAL VARIABLE ANNUITY UNIT TRUST
(Registrant)
By: American United Life Insurance Company(R)
------------------------------------------
By: Jerry D. Semler*, Chairman of the Board,
President, and Chief Executive Officer
/s/ William R. Brown
_____________________________________
*By: William R. Brown as Attorney-in-fact
Date: December 30, 1998
Pursuant to the requirements of the Securities Act of 1933, this Post Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
_______________________________________________ Director December 30, 1998
Steven C. Beering M.D.*
_______________________________________________ Director December 30, 1998
Arthur L. Bryant*
_______________________________________________ Director December 30, 1998
James E. Cornelius*
_______________________________________________ Director December 30, 1998
James E. Dora*
_______________________________________________ Director December 30, 1998
Otto N. Frenzel III*
_______________________________________________ Director December 30, 1998
David W. Goodrich*
_______________________________________________ Director December 30, 1998
William P. Johnson*
_______________________________________________ Director December 30, 1998
James T. Morris*
<PAGE>
SIGNATURES (Continued)
Signature Title Date
- --------- ----- ----
_______________________________________________ Principal December 30, 1998
James W. Murphy* Financial and
Accounting Officer
_______________________________________________ Director December 30, 1998
R. Stephen Radcliffe*
_______________________________________________ Director December 30, 1998
Thomas E. Reilly Jr*
_______________________________________________ Director December 30, 1998
William R. Riggs*
_______________________________________________ Director December 30, 1998
John C. Scully*
_______________________________________________ Director December 30, 1998
Yvonne H. Shaheen*
_______________________________________________ Director December 30, 1998
Frank D. Walker*
</TABLE>
/s/ William R. Brown
_____________________________________
*By: William R. Brown as Attorney-in-fact
Date: December 30, 1998
* Powers of Attorney have been refiled in electronic format in this
Post-Effective Amendment to Registrant's Registration Statement.
<PAGE>
<TABLE>
EXHIBIT LIST
<S> <C> <C>
Exhibit Exhibit
Number in Form Numbering
N-4, Item 24(b) Value Name of Exhibit
- ---------------- --------- ---------------
1 EX-99.B1 Resolution of the Executive Committee of
American United Life Insurance Company(R)
establishing the AUL American Individual
Variable Annuity Unit Trust
4.1 EX-99.B4.1 Form of Flexible Premium Variable Annuity
Contract FPIVA99
4.2 EX-99.B4.2 Form of One Year Flexible Premium Variable
Annuity Contract SPIVA99
4.3 EX-99.B4.3 Form of Enhanced Death Benefit Rider
LR-162
4.4 EX-99.B4.4 Form of Guaranteed Minimum Annuitization
Benefit Rider LR-163
4.5 EX-99.B4.5 Form of Guaranteed Minimum Account Value
Rider LR-164
4.6 EX-99.B4.6 Form of Long Term Care Facility and
Terminal Illness Benefit Rider
LR-165
6.1 EX-99.B6.1 Articles of Merger between American Central Life
Insurance Company and United Mutual Life Insurance
Company
6.2 EX-99.B6.2 Certification of the Indiana Secretary of State as
to the filing of the Articles of Merger between American
Central Life Insurance Company and United Mutual Life
Insurance Company
6.3 EX-99.B6.3 Code of By-Laws of American United Life Insurance Company(R
10.1 EX-99.B10.1 Consent of Independent Accountants
10.3 EX-99.B10.3 Powers of Attorney
13 EX-99.B13 Computation of Performance Quotations
</TABLE>
- --------------------------------------------------------------------------------
EXHIBIT B1
RESOLUTION OF THE EXECUTIVE COMMITTEE
ESTABLISHING THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
AMERICAN UNITED LIFE INSURANCE COMPANY
CORPORATE RESOLUTIONS
BE IT RESOLVED, that American United Life Insurance Company (the
"Company"), pursuant to the provisions of Section 27-1-5-1 Class 1(c) of the
Indiana Insurance Code, hereby establishes a separate account which shall be
known as the AUL American Individual Variable Annuity Separate Account
(hereinafter "Separate Account") as hereinafter set forth:
FURTHER RESOLVED, that the Separate Account is established for the purpose
of providing for the funding of individual variable annuity contracts
("Contracts") to be issued by the Company and shall constitute a separate
account into which allocated amounts are paid to or held by the Company under
such Contracts; and
FURTHER RESOLVED, that the income, gains, and losses, whether or not
realized, from assets allocated to the Separate Account shall, in accordance
with the Contracts, be credited to or charged against such Separate Account
without regard to other income, gains, or losses of the Company; and
FURTHER RESOLVED, that the Separate Account may be divided into a number of
Variable Accounts to which net payments under the Contracts will be allocated in
accordance with instructions received from contract owners, and that the
President or a Senior Vice President be, and hereby is, authorized to establish,
increase, or decrease the number of Variable Accounts in the Separate Account as
such officer may deem necessary or appropriate; and
FURTHER RESOLVED, that each such Variable Account shall invest only in the
shares of an open-end management investment company, a single portfolio of an
open-end management investment company organized as a series fund, or other
investment vehicle designated in the Contract; and
FURTHER RESOLVED, that the appropriate officers of the Company, with the
assistance of counsel, be, and they hereby are, authorized to take any and all
actions necessary to sponsor and promote an open-end management investment
company that will serve as the investment vehicle for the Contracts and will be
eligible for investment by the Separate Account; and
FURTHER RESOLVED, that the President or a Senior Vice President of the
Company be, and hereby is, authorized to establish and change the designation of
the Separate Account and any Variable Account thereof to such designation as
such officer may deem appropriate; and
FURTHER RESOLVED, that the appropriate officers of the Company, with such
assistance from the Company's auditors, legal counsel, or others as such
officers may determine are appropriate, be, and they hereby are, authorized and
directed to take all action necessary to: (a) register the Separate Account as a
unit investment trust under the Investment Company Act of 1940, as amended; (b)
register the Contracts or interests therein in such amounts, which may be an
indefinite amount, as the officers of the Company shall from time to time deem
appropriate under the Securities Act of 1933; and (c) take all other actions
which are necessary in connection with the offering of said Contracts for sale
and the operation of the Separate Account in order to comply with the Investment
Company Act of 1940, the Securities Exchange Act of 1934, the Securities Act of
1933, and other applicable federal laws, including the filing of any amendments
to registration statements, the seeking of any interpretations that are
necessary or advisable from the Securities and Exchange Commission or any other
agency of the U.S. government, the provision of any undertakings, and seeking of
any applications for orders or exemptions from the Investment Company Act of
1940 or other applicable federal laws as the officers of the Company shall deem
necessary or appropriate; and
FURTHER RESOLVED, that the appropriate officers of the Company be, and they
hereby are, authorized on behalf of the Separate Account and on behalf of the
Company to take any and all action that they may deem necessary or advisable to
register, file, or qualify the Contracts for sale, including the preparation and
filing of any registrations or filings, and seeking the qualification of the
Company, its officers, agents, and employees, and the Contracts under any
applicable insurance, securities, or other laws of any of the states of the
United States or other jurisdictions, and in connection therewith to prepare,
execute, deliver, and file all such applications, reports, covenants,
resolutions, applications for orders or exemptions, consents to service or
process, surety bonds, and other papers and instruments as may be required under
such laws, to pay all necessary fees and expenses, and to take any and all
further action which said officers or counsel of the Company may deem necessary
or desirable (including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications for as long
as said officers deem it to be appropriate; and
FURTHER RESOLVED, that the President or any Senior Vice President of the
Company is hereby authorized to execute such agreement or agreements as are
deemed necessary and appropriate (a) with any qualified entity under which such
entity will be appointed principal underwriter and distributor for the Contracts
and (b) with one or more qualified banks or other qualified entities to provide
administrative and/or custodial services in connection with the establishment
and maintenance of the Separate Account and the design, issuance, and
administration of the Contracts; and
FURTHER RESOLVED, that, since it is expected that the Separate Account will
invest in the securities issued by one or more registered investment companies,
the President or any Senior Vice President of the Company is hereby authorized
to execute whatever agreement or agreements as may be necessary or appropriate
to enable such investments to be made; and
FURTHER RESOLVED, that, the assets of the Separate Account shall be
insulated from the creditors of AUL's general account to the extent permitted by
Indiana law; and
FINALLY RESOLVED, that the appropriate officers of the Company are hereby
authorized and directed, on behalf of the Company and the Separate Account, to
take whatever action may be necessary or advisable to do or cause to be done all
such acts and things to carry out the foregoing resolutions and the intent and
purposes thereof, to execute and file all requisite papers and documents,
including but not limited to registration statements, notifications of
registration, agreements, applications, reports, surety bonds, irrevocable
consents, powers of attorneys, and appointment of agents for service of process,
and to pay all necessary fees and expenses as in such officer's judgment may be
necessary or advisable.
- --------------------------------------------------------------------------------
EXHIBIT 4.1
FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACT
FPIVA99
- --------------------------------------------------------------------------------
American United Life Insurance Company
One American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368
Name of Owner Policy Number
JOHN DOE 00000001
Name of Annuitant
JOHN DOE
American United Life Insurance Company (AUL) will begin an annuity on the
Annuity Date, in accordance with the Settlement provisions, if the Annuitant and
the Owner are both living. If either the Annuitant or the Owner dies before the
Annuity Date, AUL will provide benefits as described in the Death of Annuitant
or Death of Owner provisions.
10-DAY RIGHT TO EXAMINE THE POLICY
THIS POLICY MAY BE SENT BACK TO AUL OR ITS REPRESENTATIVE WITHIN 10 DAYS
AFTER IT IS RECEIVED. IN SUCH CASE, THIS POLICY WILL BE VOID FROM THE
BEGINNING. AUL WILL REFUND THE ACCOUNT VALUE WITHIN SEVEN DAYS AFTER THIS
POLICY IS RETURNED. NOTIFICATION OF THE RIGHT TO EXAMINE PERIOD WILL BE
SENT WITH THE POLICY WHEN ISSUED.
ALL BENEFITS, PAYMENTS, AND VALUES UNDER THIS CONTRACT WHICH ARE BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT ARE VARIABLE AND MAY INCREASE OR
DECREASE. VARIABLE BENEFITS ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
______________________________________________________________________________
READ YOUR POLICY CAREFULLY
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY POLICY
PARTICIPATING
Annuity will begin on Annuity Date in accordance with the Settlement provisions.
This policy is a legal contract between the Owner and AUL.
______________________________________________________________________________
Signed for American United Life Insurance Company by
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
Secretary Chairman of the Board, President,
and Chief Executive Officer
FPIVA99 01-99
Mutual Company Established 1877
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page No.
Policy Data Page...........................................................................................3
Definitions................................................................................................4
Premium Provisions.........................................................................................6
Premium...........................................................................................6
Net Purchase Payments.............................................................................6
Allocation of Net Purchase Payments...............................................................6
Account Value Provisions...................................................................................6
Account Value.....................................................................................6
Cash Value........................................................................................7
Net Cash Value....................................................................................7
Variable Account Provisions................................................................................7
Separate Account..................................................................................7
Investment Account................................................................................7
Variable Account Value............................................................................7
Crediting of Accumulation Units...................................................................7
Accumulation Unit Value...........................................................................7
Net Investment Factor.............................................................................8
Addition, Deletion and Substitution of Investments................................................8
Fixed Account Provisions...................................................................................9
Fixed Account Value...............................................................................9
MVA Fixed Accounts and Guaranteed Periods.........................................................9
Market Value Adjustment...........................................................................9
MVA Free Window and Reinvestment..................................................................9
MVA Adjustment Factor Formula.....................................................................10
Transfer Provision.........................................................................................10
Contract Charges...........................................................................................11
Premium Tax.......................................................................................11
Annual Contract Fee...............................................................................11
Monthly Administrative Charge.....................................................................11
Mortality and Expense Risk Charge.................................................................11
Withdrawal Charge.................................................................................11
Taxes.............................................................................................11
Withdrawal Provisions......................................................................................11
Free Withdrawal Amount............................................................................11
Withdrawals.......................................................................................11
Deferral of Payments..............................................................................12
Death Benefit Provisions...................................................................................12
Death Proceeds....................................................................................12
Death of the Owner................................................................................12
Death of the Annuitant............................................................................12
FPIVA99 01-99
2
TABLE OF CONTENTS
<S> <C>
Page No.
Loans . . . . . ........................................................................................13
Interest Charged on Loans.........................................................................13
Loan Account......................................................................................13
Loan Payments.....................................................................................13
Ownership, Assignment and Beneficiary Provisions...........................................................13
Ownership.........................................................................................13
Assignment........................................................................................13
Beneficiary.......................................................................................13
Change of Beneficiary.............................................................................14
Change of Annuitant...............................................................................14
Other Contract Provisions..................................................................................14
Contract..........................................................................................14
Incontestability..................................................................................14
Annual Report.....................................................................................14
Conformity with Laws..............................................................................14
Participation.....................................................................................15
Settlement Provisions......................................................................................15
Contract Proceeds.................................................................................15
Annuity Date......................................................................................15
Fixed Payment Annuity.............................................................................15
Variable Payment Annuity..........................................................................15
Annuity Units and Payment Amount...........................................................15
Assumed Investment Rate....................................................................16
Value of an Annuity Unit...................................................................16
Transfers..................................................................................16
Payment Options...................................................................................16
Adjusted Age......................................................................................16
Payee 16
Claims of Creditors...............................................................................17
Misstatement of Age or Sex........................................................................17
Evidence of Age and Sex...........................................................................17
Evidence that Annuitant is Alive..................................................................17
Settlement Option Tables...................................................................................18
</TABLE>
FPIVA99 01-99
2A
POLICY DATA PAGE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
CONTRACT DATE: SEPT 01, 1997 POLICY NUMBER: 00000001
NAME OF ANNUITANT: JOHN DOE INITIAL PREMIUM: 1000.00
NAME OF OWNER: JOHN DOE PLANNED PREMIUM: 1000.00
ANNUITY DATE: SEPT 01, 2027 MODE: ANNUAL
SEPARATE ACCOUNT: [AUL AMERICAN INDIVIDUAL VARIABLE ANNUITY UNIT
TRUST]
RIDERS ATTACHED: [NONE]
MINIMUM PREMIUM ALLOCATION TO ANY INVESTMENT ACCOUNT OR THE
FIXED ACCOUNT:
[1% of the premium payment]
All allocations must be in whole percentages.
MINIMUM PREMIUM PAYMENT SUBSEQUENT TO THE INITIAL PREMIUM:
[$50 ]
MAXIMUM PREMIUM ACCEPTABLE IN A CONTRACT YEAR:
[$1,000,000 in the first two Contract Years]
[$30,000 in any Contract Year thereafter for Qualified Plans]
[$15,000 in any Contract Year thereafter for Non-Qualified Plans]
PREMIUM TAX CHARGE:
[ 0%]
ANNUAL CONTRACT FEE:
[$30, waived for Contracts with Account Value in excess of $50,000]
MONTHLY MORTALITY AND EXPENSE RISK CHARGE:
1/12 of the following percentage of the Variable Account Value:
[1.00% during the first ten Contract Years]
[0.90% thereafter]
TRANSFER CHARGE:
Current: [$0]
Guaranteed: [$0] for the first [12] transfers in any Policy Year
[$25] for each subsequent transfer in the Policy Year
</TABLE>
FPIVA99 01-99
3
WITHDRAWAL CHARGES
Withdrawal Charge as %
Policy Year of Account Value Withdrawn
1 10%
2 9%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 2%
10 1%
11 and thereafter 0%
FREE WITHDRAWAL AMOUNT:
[12%] OF THE ACCOUNT VALUE AS OF THE MOST RECENT
CONTRACT ANNIVERSARY
INTEREST RATES FOR LOANS (if available):
RATE CHARGED ON LOAN BALANCES: [6%]
RATE CREDITED TO LOAN ACCOUNT: [4%]
MINIMUM TRANSFER AMOUNT: [$500]
MINIMUM LOAN AMOUNT: [$1,000]
MINIMUM PARTIAL WITHDRAWAL AMOUNT: [$200]
ASSUMED DATE OF DELIVERY OF THE POLICY, FOR PURPOSES OF THE TRANSFER
AT THE END OF THE RIGHT TO EXAMINE PERIOD:
[5] days after the Contract Date
CONTRACT YEAR IN WHICH CONTRACT PROCEEDS EQUAL ACCOUNT VALUE: [5]
FPIVA99 01-99
3A
______________________________________________________________________________
Definitions
Account Value - The Account Value is the sum of your interest in the Variable
Account, the Fixed Account, and the Loan Account.
Accumulation Period - The period beginning on the Contract Date and ending when
the Contract is surrendered or annuitized.
Annuitant - The person or persons upon whose life annuity payments depend.
Annuity Date - The first day of any month in which an annuity begins. See Policy
Data Page.
Cash Value - The Cash Value is the Account Value less any applicable Withdrawal
Charge. The Net Cash Value is the Cash Value less any outstanding loan and loan
interest.
Contract Date - The date shown as the Contract Date in the Policy Data pages. It
will not be later than the date the initial premium is accepted under the
Contract, and it is the date used to determine Contract Months, Contract Years,
and Contract Anniversaries.
Contract Owner - see Owner
Contract Year - A period beginning with one Contract Anniversary, or in the case
of the first Contract Year, beginning on the Contract Date, and ending the day
before the next Contract Anniversary.
Death Proceeds - The amount payable by reason of the death of the Annuitant or
Owner during the Accumulation Period in accordance with the terms of the Death
Benefit provisions.
Fixed Account - An account which is part of our General Account, and is not part
of or dependent on the investment performance of the Variable Account.
Free Withdrawal Amount - The amount that may be withdrawn without incurring
withdrawal charges.
Guaranteed Period - The period of time in years that the interest rate on an MVA
Fixed Account is guaranteed. Guaranteed Periods may be 1, 3, 5, 7, or 10 years
in length.
Home Office - The Variable Products Service Office at AUL's principal business
office, One American Square, Indianapolis, Indiana 46282.
Investment Accounts - One or more of the subdivisions of the Separate Account.
Each Investment Account is invested in a corresponding Portfolio of a particular
mutual fund.
FPIVA99 01-99
4
Loan Account - A portion of the Account Value which is collateral for loan
amounts.
Market Value Adjustment - An upward or downward adjustment in the value of an
MVA Fixed Account if withdrawals or transfers are made prior to the expiration
of the Guaranteed Period.
MVA Fixed Account - A subaccount of the Fixed Account, having a particular
Guaranteed Period, and subject to a Market Value Adjustment.
Net Cash Value - The Cash Value less outstanding loans and loan interest.
Net Purchase Payments - The premiums paid less any applicable premium tax.
Owner - The person entitled to the ownership rights under the Contract and in
whose name the Contract is issued.
Partial Withdrawal - A withdrawal of a portion of the Account Value
Policy Data Page - The Policy Data Page or the supplemental Policy Data Page
most recently sent to You by Us.
Proper Notice - Notice that is received at our Home Office in a form acceptable
to Us.
Premiums - The amounts paid to AUL as considerations for the Contract.
Separate Account - The Separate Account of AUL identified on the Policy Data
Page. The Separate Account is segregated into several Investment Accounts.
Valuation Date - Valuation Dates are the dates on which the Investment Accounts
are valued. A Valuation Date is any date on which the New York Stock Exchange is
open for trading and we are open for business.
Valuation Period - A Valuation Period begins at the close of one Valuation Date
and ends at the close of the next succeeding Valuation Date.
Variable Account - The Account Value of this Contract which is invested in one
or more Investment Accounts.
We - "We", "us" or "our" means AUL.
You - "You" or "your" means the Owner of this Contract.
FPIVA99 01-99
5
_____________________________________________________________________________
Premium Provisions
Premium - Premiums are payable at our home office. A receipt will be given upon
request. Premium payments are flexible and can be paid at any time and in any
amount subject to the following conditions:
1. Each premium payment must be at least the Minimum Premium Amount as stated on
the Policy Data Page.
2. All premiums received in any one Contract Year may not exceed the Maximum
Premium Amount listed on the Policy Data Page, unless a higher amount is agreed
to by us.
Net Purchase Payments - A Net Purchase Payment is equal to the premium paid LESS
any applicable state premium tax as shown on the Policy Data Page.
Allocation of Net Purchase Payments - The initial Net Purchase Payment is
allocated to the Fixed and/or Variable Accounts on the later of the Contract
Date or the date we receive the premium at our Home Office. Subsequent Net
Purchase Payments are allocated as of the end of the Valuation Period during
which we receive the premium at our Home Office.
All Net Purchase Payments are allocated to the Fixed Account(s) and the
Investment Accounts based on the percentages you have selected in the
application.
You may change the allocation of subsequent Net Purchase Payments at any time by
Proper Notice, or by telephone if written authorization is on file with us.
______________________________________________________________________________
Account Value Provisions
Account Value - The Account Value is the sum of your interest in the Fixed
Account(s), the Variable Account, and the Loan Account, if available.
The Account Value on the Contract Date of this policy is the initial Net
Purchase Payment received for this policy as of the Contract Date.
The Account Value on each Valuation Date after the Contract Date will be:
1. the Account Value on the prior Valuation Date; plus
2. interest credited to amounts allocated to the Fixed Account(s) and the Loan
Account; plus
3. the positive or negative investment experience on amounts allocated to the
Variable Account, as reflected by the change in value of the Accumulation Units;
plus
4. any Net Purchase Payment for the policy allocated since the prior Valuation
Date; less
FPIVA99 01-99
6
5. any Partial Withdrawal paid since the prior Valuation Date; less
6. any Mortality and Expense Charge, Annual Contract Fee, or transfer charges
assessed.
Cash Value - The Cash Value of this Contract is:
1. the Account Value; plus 2. any positive or negative Market Value Adjustment
on the amounts allocated to the MVA Fixed Accounts, less 3. the Withdrawal
Charge, if any, shown on the Policy Data Page.
Net Cash Value - The Net Cash Value is the Cash Value less any outstanding loan
and loan interest.
______________________________________________________________________________
Variable Account Provisions
Separate Account - The Separate Account is shown on the Policy Data Page. It is
a separate account established and owned by us. The assets of the Separate
Account will be used to provide values and benefits under this contract and
similar contracts. The assets of the Separate Account may not be charged with
liabilities arising from any other business in which we take part.
Investment Accounts - One or more of the subdivisions of the Separate Account.
Each Investment Account is invested in a corresponding Portfolio of a particular
mutual fund.
Variable Account Value - The Variable Account Value of this policy equals the
sum for all Investment Accounts of:
(a) the number of accumulation units credited to an Investment Account;
multiplied by
(b) the appropriate accumulation unit value.
Crediting of Accumulation Units - We credit amounts allocated to the Investment
Accounts in the form of accumulation units. The number of accumulation units to
be credited is determined by dividing:
1 the dollar amount allocated to the particular Investment Account, by
2. the accumulation unit value for the particular Investment Account at the end
of the Valuation Period during which the allocation is made.
Accumulation units are credited when Net Purchase Payments are allocated or
amounts are transferred into an Investment Account. Accumulation units are
deducted when expense charges are assessed or when amounts are partially
withdrawn or transferred from an Investment Account.
FPIVA99 01-99 7
Accumulation Unit Value - We determine the accumulation unit
value for each Investment Account on each Valuation Date. The accumulation unit
value for the Money Market account was initially set at one dollar ($1) and the
value of each of the other Investment Accounts was set at five dollars ($5) when
operations commenced. The value for any later Valuation Period is found by
multiplying: 1. the net investment factor for the particular Investment Account,
by 2. the accumulation unit value for the same Investment Account for the
preceding Valuation Period.
The accumulation unit value may increase or decrease from one Valuation Period
to the next.
Net Investment Factor - The net investment factor is used to measure the
investment performance of an Investment Account from one Valuation Period to the
next. For any Investment Account, the net investment factor for a Valuation
Period is determined by dividing (a) by (b), where:
(a) is equal to:
1. the net asset value per share of the mutual fund held in the
Investment Account determined at the end of the current Valuation
Period; plus
2. the per share amount of any dividend or capital gain distribution
paid by the mutual fund during the Valuation Period; plus
3. the per share credit or charge with respect to taxes, if any, paid
or reserved for by us during the Valuation Period that are determined
by us to be attributable to the operation of the Investment Account.
(b) is equal to:
1. the net asset value per share of the mutual fund held in the
Investment Account determined at the end of the preceding Valuation
Period; plus
2. the per share credit or charge for any taxes reserved for the
immediately preceding Valuation Period.
Addition, Deletion, or Substitution of Investments - We reserve the right,
subject to applicable law, to make additions to, deletions from, or
substitutions for the portfolio shares that are held by the Separate Account or
that the Separate Account may purchase. We reserve the right to eliminate the
shares of any of the eligible portfolios and to substitute shares of another
portfolio, or of another open-end, registered investment company, if the shares
of an eligible portfolio are no longer available for investment, or if in our
judgment further investment in any eligible portfolio should become
inappropriate in view of the purposes of the Separate Account. We will not
substitute any shares attributable to your interest in an Investment Account
without written notice to you and prior approval of the Securities and Exchange
Commission, to the extent required by the Investment Company Act of 1940.
We reserve the right to establish additional Investment Accounts, each of which
would invest in a new portfolio, or in shares of another open-end registered
investment company. We also reserve the right to eliminate existing Investment
Accounts. If deemed by us to be in the best interest of
FPIVA99 01-99
8
persons having voting rights under the policies, the Separate Account may be
operated as a management company under the Investment Company Act of 1940, or it
may be deregistered under such Act in the event such registration is no longer
required, or it may be combined with other AUL Separate Accounts.
We may, by appropriate endorsement, make such changes in this Contract as may be
necessary to reflect any substitution or change.
The investment policy of the Separate Account will not be changed without the
approval of the Insurance Commissioner of the State of Indiana. If required, the
approval process is on file with the Commissioner of the state in which this
Contract is issued.
______________________________________________________________________________
Fixed Account Provisions
Fixed Account Value - The Fixed Account Value of this Contract at any time
equals:
(a) the total of all Net Purchase Payments allocated to the Fixed Account(s);
plus
(b) the total of all amounts transferred to the Fixed Account(s) from the
Variable Account or the Loan Account; plus
(c) interest credited to the Fixed Account(s); minus
(d) the total of all amounts transferred from the Fixed Account(s) to the
Variable Account or the Loan Account; minus
(e) the total of all charges deducted from the Fixed Account(s); minus
(f) the total of all Partial Withdrawals from the Fixed Account(s).
MVA Fixed Accounts and Guaranteed Periods - Amounts allocated to the Fixed
Account may be distributed among the available MVA Fixed Accounts as shown on
the Policy Data Page. When funds are allocated to a particular MVA Fixed
Account, the interest rate declared on such deposit will remain unchanged for
the entire Guaranteed Period applicable to that MVA Fixed Account.
Market Value Adjustment - In the event you transfer or withdraw amounts from an
MVA Fixed Account prior to the end of the Guaranteed Period and not in the MVA
Free Window, we will apply a Market Value Adjustment to the amounts so withdrawn
or transferred. The Market Value Adjustment may be positive, negative, or zero,
depending on current interest rates and the time remaining to the end of the
Guaranteed Period. In no event will the adjustment reduce the Cash Value
attributable to that MVA Fixed Account below that necessary to satisfy statutory
nonforfeiture requirements.
MVA Free Window and Reinvestment - During the MVA Free Window as shown on the
Policy Data Page, you may transfer or withdraw amounts from MVA Fixed Accounts
with expiring Guaranteed Periods without Market Value Adjustment. Such amounts
may be transferred to the Investment Accounts or reinvested in different MVA
Fixed Accounts for different Guaranteed Periods. If you take no such action, the
amount available at the end of the
FPIVA99 01-99
9
Guaranteed Period will be remain in the MVA Fixed Account and a new Guaranteed
Period will apply. We will notify you of the interest rate declared on any such
reinvestment.
MVA Adjustment Factor Formula - A formula will be used to determine the Market
Value Adjustment. Amounts withdrawn or transferred from an MVA Fixed Account
will be multiplied by the result of the following formula to determine the
Market Value Adjustment: (N/12) [ ( 1 + I ) / ( 1 + J ) ]
where:
I is the current interest rate earned by the deposit
J is the interest rate applicable on new deposits in the MVA Fixed Account
with a Guaranteed Period nearest but no shorter than N/12.
N is the number of completed months between the date of withdrawal or
transfer and the expiration of the Guaranteed Period.
______________________________________________________________________________
Transfer Provision
Transfers - You may transfer amounts between the Fixed Account and Investment
Accounts or among Investment Accounts at any time after the Right to Examine
period. The transfer will be made as of the end of the Valuation Period during
which we receive the request.
The minimum transfer amount is shown on the Policy Data Page. The transfer must
be at least for the minimum amount, or, if less, the entire amount in the Fixed
Account or an Investment Account each time that a transfer is made. If after the
transfer the amount remaining in any account is less than $25, we have the right
to transfer the entire amount. Any applicable transfer charge shown on the
Policy Data Page will be assessed. The charge will be deducted from the
account(s) from which the transfer is made on a prorata basis; and, if those
remaining account values are not sufficient, from account values determined by
us.
Transfers are made such that the Account Value on the date of transfer will not
be affected by the transfer, except for the deduction of any transfer charge.
We reserve the right to limit the number of transfers to 12 per year, or to
restrict transfers from being made on consecutive Valuation Dates.
If we determine that the transfers made by or on behalf of one or more Owners is
to the disadvantage of other Owners, we may restrict the rights of certain
Owners. Such restrictions would be applied in any manner reasonably designed to
prevent transfers of some Owners from being disadvantageous to other Owners. We
also reserve the right to limit the size of transfers and remaining balances, to
require a minimum time period between transfers, to limit the number and
frequency of transfers, and to discontinue telephone transfers.
FPIVA99 01-99
10
______________________________________________________________________________
Contract Charges
Premium Tax - The Premium Tax is shown on the Policy Data Page. The Net Purchase
Payment is the premium less any applicable Premium Tax.
Annual Contract Fee - The Annual Contract Fee is shown on the Policy Data Page.
If applicable, it will be deducted as of the Contract Anniversary from the Fixed
Account and Investment Accounts prorata based on your amounts in each account.
Monthly Administrative Charge - The Monthly Administrative Charge is the sum of
the Rider Charges shown on the Policy Data Page.
Mortality and Expense Risk Charge - The Mortality and Expense Risk Charge is
compensation for our assumption of the mortality and expense risks. This charge
will be deducted from the Investment Accounts monthly prorata based on your
amounts in each account. The amount of this charge is shown on the Policy Data
Page.
Withdrawal Charge - We will deduct the Withdrawal Charge from the Account Value
on the date this Contract is surrendered for cash. The Withdrawal Charge is
shown on the Policy Data Page.
Taxes - We reserve the right to deduct any taxes levied by any government entity
which, at our sole discretion, are determined to have resulted from the
establishment or maintenance or operation of the Separate Account, or from the
investment performance of the Separate Account.
______________________________________________________________________________
Withdrawal Provisions
Free Withdrawal Amount - The Free Withdrawal Amount for each Contract year is
shown on the Policy Data Page.
Withdrawals - You may withdraw all or part of your Account Value at any time
after the end of the Right to Examine period by Proper Notice to us. The minimum
amount of any Partial Withdrawal is shown on the Policy Data Page. The
withdrawal will be made from the Investment Accounts and the Fixed Account(s) in
proportion to your amounts in each account, unless you request deduction from
specific Investment Accounts or Fixed Accounts.
There may be any Withdrawal Charge. Whenever the total amount withdrawn in a
Contract Year exceeds the Free Withdrawal Amount, there is a Withdrawal Charge
on the excess. The charge will be a percentage of the excess as shown on the
Policy Data Page. In no event will the Withdrawal Charge exceed the limit set by
state or federal authority.
FPIVA99 01-99
11
Deferral of Payments - For withdrawals from the Fixed Account, we may defer
payment for up to six months. If we do, interest on the Fixed Account will
continue to be earned at the declared rates. We will not defer any amounts
needed to pay premiums for other policies in force with us.
While payments will generally be made within 7 days of Proper Notice, we may
suspend or delay withdrawal payments or transfers from the Variable Account when
permitted under applicable federal laws, rules and regulations.
______________________________________________________________________________
Death Benefit Provisions
Death Proceeds - The Death Proceeds under this Contract are the greater of:
1. the Account Value less any outstanding loan and accrued interest,
and
2. the total Premiums paid less an adjustment for prior withdrawals,
less any outstanding loan and accrued interest.
Death of the Owner - If you die before the Annuity Date and the beneficiary is
your surviving spouse:
Your surviving spouse will become the new Owner. The policy will continue
with its terms unchanged and your spouse will assume all rights as its
Owner. Within 120 days of your death, your spouse may elect to receive the
Death Proceeds or withdraw any of the Account Value without any early
withdrawal penalty.
If you die before the Annuity Date and the beneficiary is not your surviving
spouse:
The Death Proceeds will be paid to the beneficiary in a lump sum no later
than 120 days after your death, unless the beneficiary elects to have this
value applied under a settlement option. If a settlement option is elected,
the beneficiary must be named the Annuitant, and payments must begin within
one year of your death. The option must also have payments which are
payable over the life of the beneficiary or over a period which does not
extend beyond the life expectancy of the beneficiary.
Any amount payable hereunder will not be less than the minimum required by the
law of the state where this Contract is delivered.
Death of the Annuitant - If the Annuitant dies before the Annuity Date and the
Annuitant is not also the Owner, then:
1. If the Owner is not an individual, the Death Proceeds will be paid to the
Owner in a lump sum no more than 120 days after the Annuitant's death; or
2. If the Owner is an individual, a new Annuitant may be named and the Contract
will continue. If a new Annuitant is not named within 120 days of the former
Annuitant's death, the Account Value, less any Withdrawal Charge, will be paid
to the Owner in a lump sum.
FPIVA99 01-99
12
______________________________________________________________________________
Loans
Prior to the Annuity Date, Owners of Contracts qualified under section 403(b) of
the Internal Revenue Code may receive loans from the Contract. The plan and the
Internal Revenue Code may impose restrictions on loans. The minimum amount of a
new loan is shown on the Policy Data Page.
Interest Charged on Loans - Interest accrues daily from the date of the loan at
the rate shown on the Policy Data Page. Interest is due on each Contract
Anniversary. If you do not pay interest when due, we will add that amount to the
loan.
Loan Account - At the time any loan is issued, we transfer an amount equal to
the loan from the Investment Accounts and the Fixed Account(s) into a Loan
Account as collateral for the loan. On your loan request, you may specify that
the transfer is to be made from specific Investment Accounts or Fixed
Account(s). If you make no specification, this transfer is made from each
account in proportion to the Account Value in the Investment Accounts and the
Fixed Account.
The Loan Account will be credited with interest daily which will be at least
equal to the rate shown on the Policy Data Page. We may credit a higher rate.
Loan Payments - Loans must be repaid in substantially level payments, not less
frequently than quarterly, within five years. Loans used to purchase the
principal residence of the Owner may be repaid within 15 years. If a loan
payment is not paid when due, interest will continue to accrue. If a loan
payment is not paid when due, the entire loan will be treated as a deemed
distribution, may be taxable to the borrower, and may result in a tax penalty.
_____________________________________________________________________________
Ownership, Assignment and Beneficiary Provisions
Ownership - As the Owner of this Contract, you are entitled to all rights given
by its terms. You may exercise these rights without the consent of the
Annuitant, Beneficiary, or Payee. Your rights are subject to the interests of
any assignee or irrevocable beneficiary.
Assignment - You may assign this policy. Your rights and the rights of any
beneficiary will be secondary to the rights of the assignee. We assume no
responsibility for the validity of an assignment. Any assignment will not be
binding upon us until we receive Proper Notice.
Because an assignment may be a taxable event, you should consult competent tax
advisors as to the tax consequences resulting from such an assignment.
Beneficiary - The beneficiary is as named in the application unless later
changed by you. A beneficiary may only be named by the Owner if the Owner is an
individual. If the Owner is not an
FPIVA99 01-99
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individual, the Owner will be the Beneficiary.
The interests of a beneficiary who dies before the Owner will pass to any
surviving beneficiaries unless you specify otherwise. If no beneficiary survives
the Owner, the rights to Contract Proceeds will vest in your estate.
Change of Beneficiary - You may change the beneficiary of this Contract by
giving Proper Notice. A change will take effect on the date the notice is
signed. However, the change will not apply to any payments made or actions taken
by us before we received the notice. We reserve the right to require that this
Contract be presented for endorsement of any change. An irrevocable beneficiary
may be changed only with written consent of that beneficiary.
Change of Annuitant - If the Owner is an individual, the Annuitant may be
changed by Proper Notice any time prior to the Annuity Date. The Annuitant must
also be an individual and must be you, or someone chosen from among your spouse,
parents, brothers, sisters and children. Any other choice will need our consent.
If the Owner is not an individual, a change in the Annuitant will not be
permitted without our consent.
______________________________________________________________________________
Other Contract Provisions
Contract - The entire Contract consists of:
1. the basic contract;
2. riders and endorsements, if any;
3. the attached copy of your application.
This Contract is issued in consideration of the application and payment of the
initial premium.
Any change in this Contract must be approved by AUL's President, Vice President
or Secretary. No Representative is authorized to change or waive any Contract
provision.
Incontestability - This Contract will not be contested after it has been in
force two years from the Contract Date.
Annual Report - At least once a year we will send you a report showing the
current Account Value, Cash Value, amount of interest credited to amounts in the
Fixed Account(s), change in value of amounts in the Variable Account, premiums
paid, loans, Partial Withdrawals, and expense charges since the prior report.
Any other information required by the Insurance Department of the state where
the application is signed will also be included in the annual report.
Conformity With Laws - This Contract is subject to the laws of the state where
the application is signed. We reserve the right to make any changes without your
consent which are necessary to comply with any federal or state statute, rule,
or regulation.
FPIVA99 01-99
14
Participation - While this Contract is in force prior to the Annuity Date, its
share of divisible surplus, if any, will be determined each year by AUL and
credited to the Fixed Account.
______________________________________________________________________________
Settlement Options
Contract Proceeds - If the Contract is in the applicable Contract Year reflected
on the Policy Data Page or later and you select the life annuity or survivorship
annuity option, the Contract Proceeds are equal to the Account Value. Otherwise,
Contract Proceeds are equal to the Account Value less any applicable Withdrawal
Charge.
Annuity Date - The Annuity Date is the date chosen for annuity payments to
begin. Such date will be the first day of a calendar month unless otherwise
agreed upon by us. During the Accumulation Period, you may change the Annuity
Date subject to approval by us.
Annuitization - Annuitization is irrevocable once payments have begun. When you
annuitize, you must choose:
1. An annuity payout option, and
2. Either a fixed payment annuity, variable payment annuity, or any
available combination.
Fixed Payment Annuity - The payment amount under a Fixed Payment Annuity option
will be determined by applying the selected portion of the Contract Proceeds to
the Fixed Payment Annuity table then in effect, after deducting applicable
premium taxes. The Settlement Option Tables show the guaranteed monthly payments
available for Fixed Payment Annuities. Payments under the Fixed Payment Annuity
are guaranteed as to dollar amount for the duration of the annuity period.
Variable Payment Annuity - The first payment amount under a Variable Payment
Annuity option is set at annuitization by applying the selected portion of the
Contract Proceeds to the Variable Payment Annuity table you select, after
deducting applicable premium taxes. Payments under the Variable Payment Annuity
option will vary depending on the performance of the underlying Investment
Accounts. The dollar amount of each variable payment may be higher or lower than
the previous payment.
1. Annuity Units and Payment Amount - The dollar amount of the first payment is
divided by the value of an Annuity Unit of the respective Investment Accounts as
of the Annuity Date to establish the number of Annuity Units of each Investment
Account representing each annuity payment. The number of Annuity Units
established remains fixed during the annuity payment period. The dollar amount
of subsequent annuity payments is determined by multiplying the fixed number of
Annuity Units by the Annuity Unit Value for the Valuation Period in which the
payment is due.
2. Assumed Investment Rate - The Assumed Investment Rate (AIR) is the investment
rate built into the Variable Payment Annuity table used to determine your first
annuity payment.
FPIVA99 01-99
15
You may select an AIR from 3% to 5%, in 1% increments, when you annuitize. A
higher AIR means you would receive a higher initial payment, but subsequent
payments would rise more slowly or fall more rapidly. A lower AIR has the
opposite effect. If actual investment experience equals the AIR you choose,
annuity payments will remain level.
3. Value of an Annuity Unit - The value of an Annuity Unit for an Investment
Account for any subsequent Valuation Period is determined by multiplying the
Annuity Unit Value for the immediately preceding Valuation Period by the Net
Investment Factor for the Valuation Period for which the Annuity Unit Value is
being calculated, and multiplying the result by an interest factor to neutralize
the AIR built into the Variable Payment Annuity table which you selected.
4. Transfers - During the Annuity Period, transfers between Investment Accounts
must be made in writing. We reserve the right to restrict such transfers to one
per year and to require that they take place on the anniversary of the Annuity
Date. Upon transfer, the number of Annuity Units for each Investment Account
will be redetermined as of the Valuation Date of the transfer.
Payment Options - All or any part of the proceeds paid at death or upon full
surrender of this Contract may be paid in one sum or according to one of the
following options:
1. Income for a Fixed Period. Proceeds are payable in monthly installments for a
specified number of years, not to exceed 20.
2. Life Annuity. Proceeds are payable in monthly installments for as long as the
payee lives. A number of payments can be guaranteed, such as 120, or the number
of payments required to refund the proceeds applied.
3. Survivorship Annuity. Proceeds are payable in monthly installments for as
long as either the first payee or surviving payee lives.
The Contract Proceeds may be paid in any other method or frequency of payment
acceptable by us.
Contract Proceeds payable in one sum will accumulate at interest from the date
of death or surrender to the payment date at the rate of interest then paid by
us or at the rate specified by statute, whichever is greater.
Adjusted Age - An adjusted age is calculated as follows:
(a) Determine a payee's actual age in years and full months on the date payments
are to begin.
(b) Subtract 1 1/2 months for each year the payee's year of birth exceeds 1900.
Payee - Payee means the person(s) designated by the Owner to receive annuity
payments. The
FPIVA99 01-99
16
Owner may change the payee at any time by giving us 30 days written notice.
Payees may be named regardless of whether the Owner is an individual. If a payee
dies and there is no surviving payee, the Owner must name a new payee, or we
will pay a single sum to the Owner. This single sum will be the commuted value
of any remaining guaranteed payments.
Claims of Creditors - Settlement option payments will be exempt from the claims
of creditors to the maximum extent permitted by law.
Misstatement of Age or Sex - If the Annuitant's age or sex has been misstated,
we will adjust any amount payable under this Contract to that based on the
correct age and sex.
Evidence of Age and Sex - Evidence of age and sex for any Annuitant will be
required before payments begin.
Evidence that the Annuitant is Alive - We may ask for evidence that the
Annuitant is still alive when any annuity payment is due.
FPIVA99 01-99
17
<TABLE>
<CAPTION>
SETTLEMENT OPTION TABLES
Guaranteed Monthly Income Per $1,000 of Proceeds
<CAPTION>
OPTION 1 - Income for Fixed Period
<S> <C> <C>
Number Monthly Number Monthly
of Years Income of Years Income
1 $84.47 11 $8.86
2 42.86 12 8.24
3 28.99 13 7.71
4 22.06 14 7.26
5 17.91 15 6.87
6 15.14 16 6.53
7 13.16 17 6.23
8 11.68 18 5.96
9 10.53 19 5.73
10 9.61 20 5.51
Quarterly Income is 2.993 times the monthly income and annual income is 11.839 times the monthly income.
OPTION 2 - Life Annuity
The amount of income is based on the adjusted age of the annuitant on the date of the first payment.
<CAPTION>
Adjusted Number of Guaranteed Payments Adjusted Number of Guaranteed Payments
Age None 120 Refund* Age None 120 Refund*
<S> <C> <C> <C> <C> <C> <C> <C>
55 $4.34 $4.30 $4.17 63 $5.21 $5.10 $4.86
56 4.42 4.38 4.24 64 5.35 5.22 4.96
57 4.52 4.47 4.31 65 5.51 5.35 5.08
58 4.61 4.56 4.39 66 5.67 5.49 5.20
59 4.72 4.65 4.47 67 5.85 5.64 5.33
60 4.83 4.76 4.56 68 6.04 5.80 5.46
61 4.95 4.86 4.66 69 6.24 5.96 5.61
62 5.08 4.98 4.75 70 6.46 6.13 5.76
*The sum of all guaranteed payments will equal the amount applied under this option.
OPTION 3 - Survivorship Annuity
The amount of income is based on the adjusted age of each of the annuitants on the date of
the first payment.
50% to Survivor 100% to Survivor
120 Guaranteed Payments 120 Guaranteed Payments
Payee #2 Age Payee #2 Age
Payee #1 Payee #1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Age 50 55 60 65 70 Age 50 55 60 65 70
50 $3.95 $4.12 $4.31 $4.55 $4.80 50 $3.56 $3.67 $3.76 $3.83 $3.88
55 4.12 4.30 4.52 4.77 5.05 55 3.67 3.83 3.97 4.08 4.17
60 4.31 4.52 4.76 5.04 5.36 60 3.76 3.97 4.17 4.36 4.51
65 4.55 4.77 5.04 5.35 5.72 65 3.83 4.08 4.36 4.64 4.90
70 4.80 5.05 5.36 5.72 6.13 70 3.88 4.17 4.51 4.90 5.28
</TABLE>
Income for other combinations of ages will be furnished on request.
FPIVA99 01-99
18
NOTICE OF ANNUAL MEETING
Since AUL is a mutual company, its policyowners are owners of the company, and
they are invited to attend the annual policyholders' meeting at the home office
in Indianapolis, Indiana.
By-law, Art. III, Sec. 1: The regular annual meeting of the members of this
corporation shall be held at its principal place of business on the third
Thursday in February of each year at the hour of 10:00 o'clock a.m.; Elections
for the directors shall be held at such annual meeting.
American United Life Insurance Company
Indianapolis, Indiana
______________________________________________________________________________
READ YOUR POLICY CAREFULLY
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
PARTICIPATING
PERIOD OF COVERAGE NOT GUARANTEED
This policy is a legal contract between the owner and AUL.
FPIVA99 01-99
- --------------------------------------------------------------------------------
EXHIBIT 4.2
ONE YEAR FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACT
SPIVA99
- --------------------------------------------------------------------------------
American United Life Insurance Company
One American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368
Name of Owner Policy Number
JOHN DOE 00000001
Name of Annuitant
JOHN DOE
American United Life Insurance Company(R) (AUL) will begin an annuity on the
Annuity Date, in accordance with the Settlement provisions, if the Annuitant and
the Owner are both living. If either the Annuitant or the Owner dies before the
Annuity Date, AUL will provide benefits as described in the Death of Annuitant
or Death of Owner provisions.
10-DAY RIGHT TO EXAMINE THE POLICY
THIS POLICY MAY BE SENT BACK TO AUL OR ITS REPRESENTATIVE WITHIN 10 DAYS
AFTER IT IS RECEIVED. IN SUCH CASE, THIS POLICY WILL BE VOID FROM THE
BEGINNING. AUL WILL REFUND THE ACCOUNT VALUE WITHIN SEVEN DAYS AFTER THIS
POLICY IS RETURNED. NOTIFICATION OF THE RIGHT TO EXAMINE PERIOD WILL BE
SENT WITH THE POLICY WHEN ISSUED.
ALL BENEFITS, PAYMENTS, AND VALUES UNDER THIS CONTRACT WHICH ARE BASED ON
THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT ARE VARIABLE AND MAY
INCREASE OR DECREASE. VARIABLE BENEFITS ARE NOT GUARANTEED AS TO FIXED
DOLLAR AMOUNT.
READ YOUR POLICY CAREFULLY
ONE YEAR FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY POLICY
PARTICIPATING
Annuity will begin on Annuity Date in accordance with the Settlement provisions.
This policy is a legal contract between the Owner and AUL.
Signed for American United Life Insurance Company(R) by
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
Secretary Chairman of the Board, President,
and Chief Executive Officer
SPIVA99 01-99
Mutual Company Established 1877
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page No.
Policy Data Page...........................................................................................3
Definitions................................................................................................4
Premium Provisions.........................................................................................6
Premium...........................................................................................6
Net Purchase Payments.............................................................................6
Allocation of Net Purchase Payments...............................................................6
Account Value Provisions...................................................................................6
Account Value.....................................................................................6
Cash Value........................................................................................7
Net Cash Value....................................................................................7
Variable Account Provisions................................................................................7
Separate Account..................................................................................7
Investment Account................................................................................7
Variable Account Value............................................................................7
Crediting of Accumulation Units...................................................................7
Accumulation Unit Value...........................................................................7
Net Investment Factor.............................................................................8
Addition, Deletion and Substitution of Investments................................................8
Fixed Account Provisions...................................................................................9
Fixed Account Value...............................................................................9
MVA Fixed Accounts and Guaranteed Periods.........................................................9
Market Value Adjustment...........................................................................9
MVA Free Window and Reinvestment..................................................................9
MVA Adjustment Factor Formula.....................................................................10
Transfer Provision.........................................................................................10
Contract Charges...........................................................................................11
Premium Tax.......................................................................................11
Annual Contract Fee...............................................................................11
Monthly Administrative Charge.....................................................................11
Mortality and Expense Risk Charge.................................................................11
Withdrawal Charge.................................................................................11
Taxes.............................................................................................11
Withdrawal Provisions......................................................................................11
Free Withdrawal Amount............................................................................11
Withdrawals.......................................................................................11
Deferral of Payments..............................................................................12
Death Benefit Provisions...................................................................................12
Death Proceeds....................................................................................12
Death of the Owner................................................................................12
Death of the Annuitant............................................................................12
SPIVA99 01-99
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TABLE OF CONTENTS
Page No.
Loans . . . . . ........................................................................................13
Interest Charged on Loans.........................................................................13
Loan Account......................................................................................13
Loan Payments.....................................................................................13
Ownership, Assignment and Beneficiary Provisions...........................................................13
Ownership.........................................................................................13
Assignment........................................................................................13
Beneficiary.......................................................................................13
Change of Beneficiary.............................................................................14
Change of Annuitant...............................................................................14
Other Contract Provisions..................................................................................14
Contract..........................................................................................14
Incontestability..................................................................................14
Annual Report.....................................................................................14
Conformity with Laws..............................................................................14
Participation.....................................................................................15
Settlement Provisions......................................................................................15
Contract Proceeds.................................................................................15
Annuity Date......................................................................................15
Fixed Payment Annuity.............................................................................15
Variable Payment Annuity..........................................................................15
Annuity Units and Payment Amount...........................................................15
Assumed Investment Rate....................................................................16
Value of an Annuity Unit...................................................................16
Transfers..................................................................................16
Payment Options...................................................................................16
Adjusted Age......................................................................................16
Payee 16
Claims of Creditors...............................................................................17
Misstatement of Age or Sex........................................................................17
Evidence of Age and Sex...........................................................................17
Evidence that Annuitant is Alive..................................................................17
Settlement Option Tables...................................................................................18
</TABLE>
SPIVA99 01-99
2A
POLICY DATA PAGE
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT DATE: SEPT 01, 1997 POLICY NUMBER: 00000001
NAME OF ANNUITANT: JOHN DOE INITIAL PREMIUM: 1,000,000.00
NAME OF OWNER: JOHN DOE
ANNUITY DATE: SEPT 01, 2027
SEPARATE ACCOUNT: [AUL AMERICAN INDIVIDUAL VARIABLE ANNUITY UNIT
TRUST]
RIDERS ATTACHED: [NONE]
MINIMUM PREMIUM ALLOCATION TO ANY INVESTMENT ACCOUNT OR THE
FIXED ACCOUNT:
[1% of the premium payment]
All allocations must be in whole percentages.
MINIMUM PREMIUM PAYMENT SUBSEQUENT TO THE INITIAL PREMIUM:
[$500 ]
MAXIMUM PREMIUM ACCEPTABLE IN A CONTRACT YEAR:
[$1,000,000 in the first Contract Years]
[$0 in any Contract Year thereafter]
PREMIUM TAX CHARGE:
[ 0%]
ANNUAL CONTRACT FEE:
[$30, waived for Contracts with Account Value in excess of $50,000]
MONTHLY MORTALITY AND EXPENSE RISK CHARGE:
1/12 of the following percentage of the Variable Account Value:
[1.00% during the first ten Contract Years]
[0.90% thereafter]
TRANSFER CHARGE:
Current: [$0]
Guaranteed: [$0] for the first [12] transfers in any Policy Year
[$25] for each subsequent transfer in the Policy Year
SPIVA99 01-99
3
WITHDRAWAL CHARGES
Withdrawal Charge as %
Policy Year of Account Value Withdrawn
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 and thereafter 0%
FREE WITHDRAWAL AMOUNT:
[12%] OF THE ACCOUNT VALUE AS OF THE MOST RECENT
CONTRACT ANNIVERSARY
INTEREST RATES FOR LOANS (if available):
RATE CHARGED ON LOAN BALANCES: [6%]
RATE CREDITED TO LOAN ACCOUNT: [4%]
MINIMUM TRANSFER AMOUNT: [$500]
MINIMUM LOAN AMOUNT: [$1,000]
MINIMUM PARTIAL WITHDRAWAL AMOUNT: [$200]
ASSUMED DATE OF DELIVERY OF THE POLICY, FOR PURPOSES OF THE TRANSFER
AT THE END OF THE RIGHT TO EXAMINE PERIOD:
[5] days after the Contract Date
CONTRACT YEAR IN WHICH CONTRACT PROCEEDS EQUAL ACCOUNT VALUE: [5]
</TABLE>
SPIVA99 01-99
3A
______________________________________________________________________________
Definitions
Account Value - The Account Value is the sum of your interest in the Variable
Account, the Fixed Account, and the Loan Account.
Accumulation Period - The period beginning on the Contract Date and ending when
the Contract is surrendered or annuitized.
Annuitant - The person or persons upon whose life annuity payments depend.
Annuity Date - The first day of any month in which an annuity begins. See Policy
Data Page.
Cash Value - The Cash Value is the Account Value less any applicable Withdrawal
Charge. The Net Cash Value is the Cash Value less any outstanding loan and loan
interest.
Contract Date - The date shown as the Contract Date in the Policy Data pages. It
will not be later than the date the initial premium is accepted under the
Contract, and it is the date used to determine Contract Months, Contract Years,
and Contract Anniversaries.
Contract Owner - see Owner
Contract Year - A period beginning with one Contract Anniversary, or in the case
of the first Contract Year, beginning on the Contract Date, and ending the day
before the next Contract Anniversary.
Death Proceeds - The amount payable by reason of the death of the Annuitant or
Owner during the Accumulation Period in accordance with the terms of the Death
Benefit provisions.
Fixed Account - An account which is part of our General Account, and is not part
of or dependent on the investment performance of the Variable Account.
Free Withdrawal Amount - The amount that may be withdrawn without incurring
withdrawal charges.
Guaranteed Period - The period of time in years that the interest rate on an MVA
Fixed Account is guaranteed. Guaranteed Periods may be 1, 3, 5, 7, or 10 years
in length.
Home Office - The Variable Products Service Office at AUL's principal business
office, One American Square, Indianapolis, Indiana 46282.
Investment Accounts - One or more of the subdivisions of the Separate Account.
Each Investment Account is invested in a corresponding Portfolio of a particular
mutual fund.
SPIVA99 01-99
4
Loan Account - A portion of the Account Value which is collateral for loan
amounts.
Market Value Adjustment - An upward or downward adjustment in the value of an
MVA Fixed Account if withdrawals or transfers are made prior to the expiration
of the Guaranteed Period.
MVA Fixed Account - A subaccount of the Fixed Account, having a particular
Guaranteed Period, and subject to a Market Value Adjustment.
Net Cash Value - The Cash Value less outstanding loans and loan interest.
Net Purchase Payments - The premiums paid less any applicable premium tax.
Owner - The person entitled to the ownership rights under the Contract and in
whose name the Contract is issued.
Partial Withdrawal - A withdrawal of a portion of the Account Value
Policy Data Page - The Policy Data Page or the supplemental Policy Data Page
most recently sent to You by Us.
Proper Notice - Notice that is received at our Home Office in a form acceptable
to Us.
Premiums - The amounts paid to AUL as considerations for the Contract.
Separate Account - The Separate Account of AUL identified on the Policy Data
Page. The Separate Account is segregated into several Investment Accounts.
Valuation Date - Valuation Dates are the dates on which the Investment Accounts
are valued. A Valuation Date is any date on which the New York Stock Exchange is
open for trading and we are open for business.
Valuation Period - A Valuation Period begins at the close of one Valuation Date
and ends at the close of the next succeeding Valuation Date.
Variable Account - The Account Value of this Contract which is invested in one
or more Investment Accounts.
We - "We", "us" or "our" means AUL.
You - "You" or "your" means the Owner of this Contract.
SPIVA99 01-99
5
______________________________________________________________________________
Premium Provisions
Premium - Premiums are payable at our home office. A receipt will be given upon
request. Premium payments are flexible and can be paid at any time and in any
amount subject to the following conditions:
1. Each premium payment must be at least the Minimum Premium Amount as stated on
the Policy Data Page.
2. All premiums received in any one Contract Year may not exceed the Maximum
Premium Amount listed on the Policy Data Page, unless a higher amount is agreed
to by us.
3. Premiums may be paid during the first Contract Year only.
Net Purchase Payments - A Net Purchase Payment is equal to the premium paid LESS
any applicable state premium tax as shown on the Policy Data Page.
Allocation of Net Purchase Payments - The initial Net Purchase Payment is
allocated to the Fixed and/or Variable Accounts on the later of the Contract
Date or the date we receive the premium at our Home Office. Subsequent Net
Purchase Payments are allocated as of the end of the Valuation Period during
which we receive the premium at our Home Office.
All Net Purchase Payments are allocated to the Fixed Account(s) and the
Investment Accounts based on the percentages you have selected in the
application.
You may change the allocation of subsequent Net Purchase Payments at any time by
Proper Notice, or by telephone if written authorization is on file with us.
______________________________________________________________________________
Account Value Provisions
Account Value - The Account Value is the sum of your interest in the Fixed
Account(s), the Variable Account, and the Loan Account, if available.
The Account Value on the Contract Date of this policy is the initial Net
Purchase Payment received for this policy as of the Contract Date.
The Account Value on each Valuation Date after the Contract Date will be:
1. the Account Value on the prior Valuation Date; plus
2. interest credited to amounts allocated to the Fixed Account(s) and the Loan
Account; plus
3. the positive or negative investment experience on amounts allocated to the
Variable Account,
SPIVA99 01-99
6
as reflected by the change in value of the Accumulation Units; plus
4. any Net Purchase Payment for the policy allocated since the prior Valuation
Date; less
5. any Partial Withdrawal paid since the prior Valuation Date; less
6. any Mortality and Expense Charge, Annual Contract Fee, or transfer charges
assessed.
Cash Value - The Cash Value of this Contract is:
1. the Account Value; plus
2. any positive or negative Market Value Adjustment on the amounts allocated to
the MVA Fixed Accounts, less 3. the Withdrawal Charge, if any, shown on the
Policy Data Page.
Net Cash Value - The Net Cash Value is the Cash Value less any outstanding loan
and loan interest.
______________________________________________________________________________
Variable Account Provisions
Separate Account - The Separate Account is shown on the Policy Data Page. It is
a separate account established and owned by us. The assets of the Separate
Account will be used to provide values and benefits under this contract and
similar contracts. The assets of the Separate Account may not be charged with
liabilities arising from any other business in which we take part.
Investment Accounts - One or more of the subdivisions of the Separate Account.
Each Investment Account is invested in a corresponding Portfolio of a particular
mutual fund.
Variable Account Value - The Variable Account Value of this policy equals the
sum for all Investment Accounts of:
(a) the number of accumulation units credited to an Investment Account;
multiplied by
(b) the appropriate accumulation unit value.
Crediting of Accumulation Units - We credit amounts allocated to the Investment
Accounts in the form of accumulation units. The number of accumulation units to
be credited is determined by dividing:
1 the dollar amount allocated to the particular Investment Account, by
2. the accumulation unit value for the particular Investment Account at the end
of the Valuation Period during which the allocation is made.
Accumulation units are credited when Net Purchase Payments are allocated or
amounts are transferred into an Investment Account. Accumulation units are
deducted when expense charges are assessed or when amounts are partially
withdrawn or transferred from an Investment Account.
SPIVA99 01-99
7
Accumulation Unit Value - We determine the accumulation unit value for each
Investment Account on each Valuation Date. The accumulation unit value for the
Money Market account was initially set at one dollar ($1) and the value of each
of the other Investment Accounts was set at five dollars ($5) when operations
commenced. The value for any later Valuation Period is found by multiplying: 1.
the net investment factor for the particular Investment Account, by 2. the
accumulation unit value for the same Investment Account for the preceding
Valuation Period.
The accumulation unit value may increase or decrease from one Valuation Period
to the next.
Net Investment Factor - The net investment factor is used to measure the
investment performance of an Investment Account from one Valuation Period to the
next. For any Investment Account, the net investment factor for a Valuation
Period is determined by dividing (a) by (b), where:
(a) is equal to:
1. the net asset value per share of the mutual fund held in the Investment
Account determined at the end of the current Valuation Period; plus
2. the per share amount of any dividend or capital gain distribution paid
by the mutual fund during the Valuation Period; plus
3. the per share credit or charge with respect to taxes, if any, paid or
reserved for by us during the Valuation Period that are determined by us to
be attributable to the operation of the Investment Account.
(b) is equal to:
1. the net asset value per share of the mutual fund held in the Investment
Account determined at the end of the preceding Valuation Period; plus
2. the per share credit or charge for any taxes reserved for the
immediately preceding Valuation Period.
Addition, Deletion, or Substitution of Investments - We reserve the right,
subject to applicable law, to make additions to, deletions from, or
substitutions for the portfolio shares that are held by the Separate Account or
that the Separate Account may purchase. We reserve the right to eliminate the
shares of any of the eligible portfolios and to substitute shares of another
portfolio, or of another open-end, registered investment company, if the shares
of an eligible portfolio are no longer available for investment, or if in our
judgment further investment in any eligible portfolio should become
inappropriate in view of the purposes of the Separate Account. We will not
substitute any shares attributable to your interest in an Investment Account
without written notice to you and prior approval of the Securities and Exchange
Commission, to the extent required by the Investment Company Act of 1940.
We reserve the right to establish additional Investment Accounts, each of which
would invest in a new portfolio, or in shares of another open-end registered
investment company. We also reserve the right to eliminate existing Investment
Accounts. If deemed by us to be in the best interest of
SPIVA99 01-99
8
persons having voting rights under the policies, the Separate Account may be
operated as a management company under the Investment Company Act of 1940, or it
may be deregistered under such Act in the event such registration is no longer
required, or it may be combined with other AUL Separate Accounts.
We may, by appropriate endorsement, make such changes in this Contract as may be
necessary to reflect any substitution or change.
The investment policy of the Separate Account will not be changed without the
approval of the Insurance Commissioner of the State of Indiana. If required, the
approval process is on file with the Commissioner of the state in which this
Contract is issued.
______________________________________________________________________________
Fixed Account Provisions
Fixed Account Value - The Fixed Account Value of this Contract at any time
equals:
(a) the total of all Net Purchase Payments allocated to the Fixed Account(s);
plus
(b) the total of all amounts transferred to the Fixed Account(s) from the
Variable Account or the Loan Account; plus
(c) interest credited to the Fixed Account(s); minus
(d) the total of all amounts transferred from the Fixed Account(s) to the
Variable Account or the Loan Account; minus
(e) the total of all charges deducted from the Fixed Account(s); minus
(f) the total of all Partial Withdrawals from the Fixed Account(s).
MVA Fixed Accounts and Guaranteed Periods - Amounts allocated to the Fixed
Account may be distributed among the available MVA Fixed Accounts as shown on
the Policy Data Page. When funds are allocated to a particular MVA Fixed
Account, the interest rate declared on such deposit will remain unchanged for
the entire Guaranteed Period applicable to that MVA Fixed Account.
Market Value Adjustment - In the event you transfer or withdraw amounts from an
MVA Fixed Account prior to the end of the Guaranteed Period and not in the MVA
Free Window, we will apply a Market Value Adjustment to the amounts so withdrawn
or transferred. The Market Value Adjustment may be positive, negative, or zero,
depending on current interest rates and the time remaining to the end of the
Guaranteed Period. In no event will the adjustment reduce the Cash Value
attributable to that MVA Fixed Account below that necessary to satisfy statutory
nonforfeiture requirements.
MVA Free Window and Reinvestment - During the MVA Free Window as shown on the
Policy Data Page, you may transfer or withdraw amounts from MVA Fixed Accounts
with expiring Guaranteed Periods without Market Value Adjustment. Such amounts
may be transferred to the Investment Accounts or reinvested in different MVA
Fixed Accounts for different Guaranteed Periods. If you take no such action, the
amount available at the end of the
SPIVA99 01-99
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Guaranteed Period will be remain in the MVA Fixed Account and a new Guaranteed
Period will apply. We will notify you of the interest rate declared on any such
reinvestment.
MVA Adjustment Factor Formula - A formula will be used to determine the Market
Value Adjustment. Amounts withdrawn or transferred from an MVA Fixed Account
will be multiplied by the result of the following formula to determine the
Market Value Adjustment: (N/12) [ ( 1 + I ) / ( 1 + J ) ]
where:
I is the current interest rate earned by the deposit
J is the interest rate applicable on new deposits in the MVA Fixed Account
with a Guaranteed Period nearest but no shorter than N/12.
N is the number of completed months between the date of withdrawal or
transfer and the expiration of the Guaranteed Period.
______________________________________________________________________________
Transfer Provision
Transfers - You may transfer amounts between the Fixed Account and Investment
Accounts or among Investment Accounts at any time after the Right to Examine
period. The transfer will be made as of the end of the Valuation Period during
which we receive the request.
The minimum transfer amount is shown on the Policy Data Page. The transfer must
be at least for the minimum amount, or, if less, the entire amount in the Fixed
Account or an Investment Account each time that a transfer is made. If after the
transfer the amount remaining in any account is less than $25, we have the right
to transfer the entire amount. Any applicable transfer charge shown on the
Policy Data Page will be assessed. The charge will be deducted from the
account(s) from which the transfer is made on a prorata basis; and, if those
remaining account values are not sufficient, from account values determined by
us.
Transfers are made such that the Account Value on the date of transfer will not
be affected by the transfer, except for the deduction of any transfer charge.
We reserve the right to limit the number of transfers to 12 per year, or to
restrict transfers from being made on consecutive Valuation Dates.
If we determine that the transfers made by or on behalf of one or more Owners is
to the disadvantage of other Owners, we may restrict the rights of certain
Owners. Such restrictions would be applied in any manner reasonably designed to
prevent transfers of some Owners from being disadvantageous to other Owners. We
also reserve the right to limit the size of transfers and remaining balances, to
require a minimum time period between transfers, to limit the number and
frequency of transfers, and to discontinue telephone transfers.
SPIVA99 01-99
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______________________________________________________________________________
Contract Charges
Premium Tax - The Premium Tax is shown on the Policy Data Page. The Net Purchase
Payment is the premium less any applicable Premium Tax.
Annual Contract Fee - The Annual Contract Fee is shown on the Policy Data Page.
If applicable, it will be deducted as of the Contract Anniversary from the Fixed
Account and Investment Accounts prorata based on your amounts in each account.
Monthly Administrative Charge - The Monthly Administrative Charge is the sum of
the Rider Charges shown on the Policy Data Page.
Mortality and Expense Risk Charge - The Mortality and Expense Risk Charge is
compensation for our assumption of the mortality and expense risks. This charge
will be deducted from the Investment Accounts monthly prorata based on your
amounts in each account. The amount of this charge is shown on the Policy Data
Page.
Withdrawal Charge - We will deduct the Withdrawal Charge from the Account Value
on the date this Contract is surrendered for cash. The Withdrawal Charge is
shown on the Policy Data Page.
Taxes - We reserve the right to deduct any taxes levied by any government entity
which, at our sole discretion, are determined to have resulted from the
establishment or maintenance or operation of the Separate Account, or from the
investment performance of the Separate Account.
______________________________________________________________________________
Withdrawal Provisions
Free Withdrawal Amount - The Free Withdrawal Amount for each Contract year is
shown on the Policy Data Page.
Withdrawals - You may withdraw all or part of your Account Value at any time
after the end of the Right to Examine period by Proper Notice to us. The minimum
amount of any Partial Withdrawal is shown on the Policy Data Page. The
withdrawal will be made from the Investment Accounts and the Fixed Account(s) in
proportion to your amounts in each account, unless you request deduction from
specific Investment Accounts or Fixed Accounts.
There may be any Withdrawal Charge. Whenever the total amount withdrawn in a
Contract Year exceeds the Free Withdrawal Amount, there is a Withdrawal Charge
on the excess. The charge will be a percentage of the excess as shown on the
Policy Data Page. In no event will the Withdrawal Charge exceed the limit set by
state or federal authority.
SPIVA99 01-99
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Deferral of Payments - For withdrawals from the Fixed Account, we may defer
payment for up to six months. If we do, interest on the Fixed Account will
continue to be earned at the declared rates. We will not defer any amounts
needed to pay premiums for other policies in force with us.
While payments will generally be made within 7 days of Proper Notice, we may
suspend or delay withdrawal payments or transfers from the Variable Account when
permitted under applicable federal laws, rules and regulations.
______________________________________________________________________________
Death Benefit Provisions
Death Proceeds - The Death Proceeds under this Contract are the greater of:
1. the Account Value less any outstanding loan and accrued interest, and
2. the total Premiums paid less an adjustment for prior withdrawals, less
any outstanding loan and accrued interest.
Death of the Owner - If you die before the Annuity Date and the beneficiary is
your surviving spouse: Your surviving spouse will become the new Owner. The
policy will continue with its terms unchanged and your spouse will assume all
rights as its Owner. Within 120 days of your death, your spouse may elect to
receive the Death Proceeds or withdraw any of the Account Value without any
early withdrawal penalty.
If you die before the Annuity Date and the beneficiary is not your surviving
spouse:
The Death Proceeds will be paid to the beneficiary in a lump sum no later
than 120 days after your death, unless the beneficiary elects to have this
value applied under a settlement option. If a settlement option is elected,
the beneficiary must be named the Annuitant, and payments must begin within
one year of your death. The option must also have payments which are
payable over the life of the beneficiary or over a period which does not
extend beyond the life expectancy of the beneficiary.
Any amount payable hereunder will not be less than the minimum required by the
law of the state where this Contract is delivered.
Death of the Annuitant - If the Annuitant dies before the Annuity Date and the
Annuitant is not also the Owner, then:
1. If the Owner is not an individual, the Death Proceeds will be paid to the
Owner in a lump sum no more than 120 days after the Annuitant's death; or
2. If the Owner is an individual, a new Annuitant may be named and the Contract
will continue. If a new Annuitant is not named within 120 days of the former
Annuitant's death, the Account Value, less any Withdrawal Charge, will be paid
to the Owner in a lump sum.
SPIVA99 01-99
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______________________________________________________________________________
Loans
Prior to the Annuity Date, Owners of Contracts qualified under section 403(b) of
the Internal Revenue Code may receive loans from the Contract. The plan and the
Internal Revenue Code may impose restrictions on loans. The minimum amount of a
new loan is shown on the Policy Data Page.
Interest Charged on Loans - Interest accrues daily from the date of the loan at
the rate shown on the Policy Data Page. Interest is due on each Contract
Anniversary. If you do not pay interest when due, we will add that amount to the
loan.
Loan Account - At the time any loan is issued, we transfer an amount equal to
the loan from the Investment Accounts and the Fixed Account(s) into a Loan
Account as collateral for the loan. On your loan request, you may specify that
the transfer is to be made from specific Investment Accounts or Fixed
Account(s). If you make no specification, this transfer is made from each
account in proportion to the Account Value in the Investment Accounts and the
Fixed Account.
The Loan Account will be credited with interest daily which will be at least
equal to the rate shown on the Policy Data Page. We may credit a higher rate.
Loan Payments - Loans must be repaid in substantially level payments, not less
frequently than quarterly, within five years. Loans used to purchase the
principal residence of the Owner may be repaid within 15 years. If a loan
payment is not paid when due, interest will continue to accrue. If a loan
payment is not paid when due, the entire loan will be treated as a deemed
distribution, may be taxable to the borrower, and may result in a tax penalty.
_____________________________________________________________________________
Ownership, Assignment and Beneficiary Provisions
Ownership - As the Owner of this Contract, you are entitled to all rights given
by its terms. You may exercise these rights without the consent of the
Annuitant, Beneficiary, or Payee. Your rights are subject to the interests of
any assignee or irrevocable beneficiary.
Assignment - You may assign this policy. Your rights and the rights of any
beneficiary will be secondary to the rights of the assignee. We assume no
responsibility for the validity of an assignment. Any assignment will not be
binding upon us until we receive Proper Notice.
Because an assignment may be a taxable event, you should consult competent tax
advisors as to the tax consequences resulting from such an assignment.
Beneficiary - The beneficiary is as named in the application unless later
changed by you. A beneficiary may only be named by the Owner if the Owner is an
individual. If the Owner is not an
SPIVA99 01-99
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individual, the Owner will be the Beneficiary.
The interests of a beneficiary who dies before the Owner will pass to any
surviving beneficiaries unless you specify otherwise. If no beneficiary survives
the Owner, the rights to Contract Proceeds will vest in your estate.
Change of Beneficiary - You may change the beneficiary of this Contract by
giving Proper Notice. A change will take effect on the date the notice is
signed. However, the change will not apply to any payments made or actions taken
by us before we received the notice. We reserve the right to require that this
Contract be presented for endorsement of any change. An irrevocable beneficiary
may be changed only with written consent of that beneficiary.
Change of Annuitant - If the Owner is an individual, the Annuitant may be
changed by Proper Notice any time prior to the Annuity Date. The Annuitant must
also be an individual and must be you, or someone chosen from among your spouse,
parents, brothers, sisters and children. Any other choice will need our consent.
If the Owner is not an individual, a change in the Annuitant will not be
permitted without our consent.
______________________________________________________________________________
Other Contract Provisions
Contract - The entire Contract consists of:
1. the basic contract;
2. riders and endorsements, if any;
3. the attached copy of your application.
This Contract is issued in consideration of the application and payment of the
initial premium.
Any change in this Contract must be approved by AUL's President, Vice President
or Secretary. No Representative is authorized to change or waive any Contract
provision.
Incontestability - This Contract will not be contested after it has been in
force two years from the Contract Date.
Annual Report - At least once a year we will send you a report showing the
current Account Value, Cash Value, amount of interest credited to amounts in the
Fixed Account(s), change in value of amounts in the Variable Account, premiums
paid, loans, Partial Withdrawals, and expense charges since the prior report.
Any other information required by the Insurance Department of the state where
the application is signed will also be included in the annual report.
Conformity With Laws - This Contract is subject to the laws of the state where
the application is signed. We reserve the right to make any changes without your
consent which are necessary to comply with any federal or state statute, rule,
or regulation.
SPIVA99 01-99
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Participation - While this Contract is in force prior to the Annuity Date, its
share of divisible surplus, if any, will be determined each year by AUL and
credited to the Fixed Account.
______________________________________________________________________________
Settlement Options
Contract Proceeds - If the Contract is in the applicable Contract Year reflected
on the Policy Data Page or later and you select the life annuity or survivorship
annuity option, the Contract Proceeds are equal to the Account Value. Otherwise,
Contract Proceeds are equal to the Account Value less any applicable Withdrawal
Charge.
Annuity Date - The Annuity Date is the date chosen for annuity payments to
begin. Such date will be the first day of a calendar month unless otherwise
agreed upon by us. During the Accumulation Period, you may change the Annuity
Date subject to approval by us.
Annuitization - Annuitization is irrevocable once payments have begun. When you
annuitize, you must choose:
1. An annuity payout option, and
2. Either a fixed payment annuity, variable payment annuity, or any
available combination.
Fixed Payment Annuity - The payment amount under a Fixed Payment Annuity option
will be determined by applying the selected portion of the Contract Proceeds to
the Fixed Payment Annuity table then in effect, after deducting applicable
premium taxes. The Settlement Option Tables show the guaranteed monthly payments
available for Fixed Payment Annuities. Payments under the Fixed Payment Annuity
are guaranteed as to dollar amount for the duration of the annuity period.
Variable Payment Annuity - The first payment amount under a Variable Payment
Annuity option is set at annuitization by applying the selected portion of the
Contract Proceeds to the Variable Payment Annuity table you select, after
deducting applicable premium taxes. Payments under the Variable Payment Annuity
option will vary depending on the performance of the underlying Investment
Accounts. The dollar amount of each variable payment may be higher or lower than
the previous payment.
1. Annuity Units and Payment Amount - The dollar amount of the first payment is
divided by the value of an Annuity Unit of the respective Investment Accounts as
of the Annuity Date to establish the number of Annuity Units of each Investment
Account representing each annuity payment. The number of Annuity Units
established remains fixed during the annuity payment period. The dollar amount
of subsequent annuity payments is determined by multiplying the fixed number of
Annuity Units by the Annuity Unit Value for the Valuation Period in which the
payment is due.
2. Assumed Investment Rate - The Assumed Investment Rate (AIR) is the investment
rate built into the Variable Payment Annuity table used to determine your first
annuity payment.
SPIVA99 01-99
15
You may select an AIR from 3% to 5%, in 1% increments, when you annuitize. A
higher AIR means you would receive a higher initial payment, but subsequent
payments would rise more slowly or fall more rapidly. A lower AIR has the
opposite effect. If actual investment experience equals the AIR you choose,
annuity payments will remain level.
3. Value of an Annuity Unit - The value of an Annuity Unit for an Investment
Account for any subsequent Valuation Period is determined by multiplying the
Annuity Unit Value for the immediately preceding Valuation Period by the Net
Investment Factor for the Valuation Period for which the Annuity Unit Value is
being calculated, and multiplying the result by an interest factor to neutralize
the AIR built into the Variable Payment Annuity table which you selected.
4. Transfers - During the Annuity Period, transfers between Investment Accounts
must be made in writing. We reserve the right to restrict such transfers to one
per year and to require that they take place on the anniversary of the Annuity
Date. Upon transfer, the number of Annuity Units for each Investment Account
will be redetermined as of the Valuation Date of the transfer.
Payment Options - All or any part of the proceeds paid at death or upon full
surrender of this Contract may be paid in one sum or according to one of the
following options:
1. Income for a Fixed Period. Proceeds are payable in monthly installments for a
specified number of years, not to exceed 20.
2. Life Annuity. Proceeds are payable in monthly installments for as long as the
payee lives. A number of payments can be guaranteed, such as 120, or the number
of payments required to refund the proceeds applied.
3. Survivorship Annuity. Proceeds are payable in monthly installments for as
long as either the first payee or surviving payee lives.
The Contract Proceeds may be paid in any other method or frequency of payment
acceptable by us.
Contract Proceeds payable in one sum will accumulate at interest from the date
of death or surrender to the payment date at the rate of interest then paid by
us or at the rate specified by statute, whichever is greater.
Adjusted Age - An adjusted age is calculated as follows:
(a) Determine a payee's actual age in years and full months on the date payments
are to begin.
(b) Subtract 1 1/2 months for each year the payee's year of birth exceeds 1900.
Payee - Payee means the person(s) designated by the Owner to receive annuity
payments. The
SPIVA99 01-99
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Owner may change the payee at any time by giving us 30 days written notice.
Payees may be named regardless of whether the Owner is an individual. If a payee
dies and there is no surviving payee, the Owner must name a new payee, or we
will pay a single sum to the Owner. This single sum will be the commuted value
of any remaining guaranteed payments.
Claims of Creditors - Settlement option payments will be exempt from the claims
of creditors to the maximum extent permitted by law.
Misstatement of Age or Sex - If the Annuitant's age or sex has been misstated,
we will adjust any amount payable under this Contract to that based on the
correct age and sex.
Evidence of Age and Sex - Evidence of age and sex for any Annuitant will be
required before payments begin.
Evidence that the Annuitant is Alive - We may ask for evidence that the
Annuitant is still alive when any annuity payment is due.
SPIVA99 01-99
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<TABLE>
<CAPTION>
SETTLEMENT OPTION TABLES
Guaranteed Monthly Income Per $1,000 of Proceeds
OPTION 1 - Income for Fixed Period
<S> <C> <C> <C>
Number Monthly Number Monthly
of Years Income of Years Income
1 $84.47 11 $8.86
2 42.86 12 8.24
3 28.99 13 7.71
4 22.06 14 7.26
5 17.91 15 6.87
6 15.14 16 6.53
7 13.16 17 6.23
8 11.68 18 5.96
9 10.53 19 5.73
10 9.61 20 5.51
Quarterly Income is 2.993 times the monthly income and annual income is 11.839 times the monthly income.
OPTION 2 - Life Annuity
The amount of income is based on the adjusted age of the annuitant on the date of the first payment.
<CAPTION>
Adjusted Number of Guaranteed Payments Adjusted Number of Guaranteed Payments
Age None 120 Refund* Age None 120 Refund*
<S> <C> <C> <C> <C> <C> <C> <C>
55 $4.34 $4.30 $4.17 63 $5.21 $5.10 $4.86
56 4.42 4.38 4.24 64 5.35 5.22 4.96
57 4.52 4.47 4.31 65 5.51 5.35 5.08
58 4.61 4.56 4.39 66 5.67 5.49 5.20
59 4.72 4.65 4.47 67 5.85 5.64 5.33
60 4.83 4.76 4.56 68 6.04 5.80 5.46
61 4.95 4.86 4.66 69 6.24 5.96 5.61
62 5.08 4.98 4.75 70 6.46 6.13 5.76
*The sum of all guaranteed payments will equal the amount applied under this option.
OPTION 3 - Survivorship Annuity
The amount of income is based on the adjusted age of each of the annuitants on the date of
the first payment.
50% to Survivor 100% to Survivor
120 Guaranteed Payments 120 Guaranteed Payments
Payee #2 Age Payee #2 Age
Payee #1 Payee #1
Age 50 55 60 65 70 Age 50 55 60 65 70
50 $3.95 $4.12 $4.31 $4.55 $4.80 50 $3.56 $3.67 $3.76 $3.83 $3.88
55 4.12 4.30 4.52 4.77 5.05 55 3.67 3.83 3.97 4.08 4.17
60 4.31 4.52 4.76 5.04 5.36 60 3.76 3.97 4.17 4.36 4.51
65 4.55 4.77 5.04 5.35 5.72 65 3.83 4.08 4.36 4.64 4.90
70 4.80 5.05 5.36 5.72 6.13 70 3.88 4.17 4.51 4.90 5.28
Income for other combinations of ages will be furnished on request.
</TABLE>
SPIVA99 01-99
18
NOTICE OF ANNUAL MEETING
Since AUL is a mutual company, its policyowners are owners of the company, and
they are invited to attend the annual policyholders' meeting at the home office
in Indianapolis, Indiana.
By-law, Art. III, Sec. 1: The regular annual meeting of the members of this
corporation shall be held at its principal place of business on the third
Thursday in February of each year at the hour of 10:00 o'clock a.m.; Elections
for the directors shall be held at such annual meeting.
American United Life Insurance Company(R)
Indianapolis, Indiana
______________________________________________________________________________
READ YOUR POLICY CAREFULLY
ONE YEAR FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
PARTICIPATING
PERIOD OF COVERAGE NOT GUARANTEED
This policy is a legal contract between the owner and AUL.
SPIVA99 01-99
- --------------------------------------------------------------------------------
EXHIBIT 4.3
ENHANCED DEATH BENEFIT RIDER
LR-162
- --------------------------------------------------------------------------------
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
ENHANCED DEATH BENEFIT RIDER
This rider is made part of the Contract to which it is attached and is effective
on the Issue Date of the Contract. The benefits of this rider will cease upon
termination of the Contract.
Benefit
The Death Proceeds Provision of the Contract is amended to read:
Death Proceeds - The Death Proceeds under this Contract are the greatest
of:
1. the Account Value less any outstanding loan and accrued interest;
2. the total Premiums paid less an adjustment for prior withdrawals,
less any outstanding loan and accrued interest; and
3. the greatest Account Value on any Contract Anniversary prior to the
Owner's 86th birthday, less an adjustment for prior withdrawals, less
any outstanding loan and accrued interest, plus Net Purchase Payments
received after that Contract Anniversary.
Cost for the Rider
The cost for this rider is shown on the Policy Data Page. Charges cease upon
termination of this rider.
[GRAPHIC OMITTED]
American United Life Insurance Company(R)
Secretary
LR-162 12-98
- --------------------------------------------------------------------------------
EXHIBIT 4.4
Guaranteed Minimum Annuitization Benefit Rider
LR-163
- --------------------------------------------------------------------------------
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
GUARANTEED MINIMUM ANNUITIZATION BENEFIT RIDER
This rider is made part of the Contract to which it is attached and is effective
on the Issue Date of the Contract.
Benefit
If your Contract is annuitized at any time after the tenth Contract Anniversary,
the amount applied to the annuity table then current will be the greater of:
1. The Contract Proceeds at that time, or
2. The total of all Premiums paid with interest credited at the rate shown on
the Policy Data Page, less an adjustment for amounts previously withdrawn.
Cost for the Rider
The charge for this rider is shown on the Policy Data Page. Charges for this
rider will cease upon termination of the rider.
Termination
This rider will terminate when the Contract is terminated or annuitized. Any
transfer of Account Value to any Investment Account not listed on the Policy
Data Page as approved for use with this benefit will also terminate the rider.
If the rider is terminated, it may not be reinstated.
[GRAPHIC OMITTED]
American United Life Insurance Company(R)
Secretary
LR-163 12-98
- --------------------------------------------------------------------------------
EXHIBIT 4.5
Guaranteed Minimum Account Value Rider
LR-164
- --------------------------------------------------------------------------------
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
[GRAPHIC OMITTED]
GUARANTEED MINIMUM ACCOUNT VALUE RIDER
This rider is made part of the Contract to which it is attached and is effective
on the Issue Date of the Contract.
Benefit
If your Contract is still in force at end of the tenth, twentieth, and thirtieth
Contract Years, your Account Value will be adjusted to be the greater of:
1. The Account Value on that Contract Anniversary, or
2. The Premiums paid under the Contract multiplied by the appropriate factor
shown on the Policy Data Page, less an adjustment for amounts previously
withdrawn.
Cost for the Rider
The charge for this rider is shown on the Policy Data Page. Charges for this
rider will cease upon termination of the rider.
Termination
This rider will terminate when the Contract is terminated or annuitized. Any
transfer of Account Value to any Investment Account not listed on the Policy
Data Page as approved for use with this benefit will also terminate the rider.
If the rider is terminated, it may not be reinstated.
American United Life Insurance Company(R)
Secretary
LR-164 12-98
- --------------------------------------------------------------------------------
EXHIBIT 4.6
Long Term Care Facility and Terminal Illness Benefit Rider
LR-165
- --------------------------------------------------------------------------------
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
LONG TERM CARE FACILITY AND TERMINAL ILLNESS BENEFIT RIDER
This rider is made part of the Contract to which it is attached and is effective
on the Issue Date of the Contract. The benefits of this rider will cease upon
termination of the Contract.
Benefit
Withdrawal Charges as defined in the Contract will be waived as further defined
below.
Cost for the Rider
The charge for this rider is shown on the Policy Data Page.
1. Hospitalization
Benefit: The Withdrawal Charge will not apply if the Owner is confined
to a Hospital and has been so confined for at least thirty consecutive
days.
Notice and Proof of Claim: Proper Notice and proof of confinement in a
Hospital must be received at our Home Office within one year after
confinement before we will waive Withdrawal Charges.
Definitions
"Confined" means confined as an inpatient. Confinement must:
a) be required as a result of injury or sickness;
b) be recommended by a physician; and
c) occur while the Contract is in force.
"Hospital" means a facility which is state licensed and operated as a
hospital according to the law of the jurisdiction in which it is
located; operates primarily for the care and treatment of sick or
injured persons as inpatients; provides continuous 24 hours a day
nursing service by or under the supervision of a registered graduate
professional nurse (R.N.); is supervised by a staff of physicians; and
has medical, diagnostic and major surgical facilities or has access to
such facilities on a pre-arranged basis.
"Inpatient" means a person who is confined in a Hospital as a resident
patient for whom a charge of at least one day's room and board is
assessed by the Hospital.
"Injury" means accidental bodily injury which occurs while the
Contract is in force.
"Sickness" means illness or disease which first manifests itself while
the Contract is in force.
"Physician" means a duly licensed physician. The recommending
physician may not
LR-165 12-98
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
include the Owner or the Owner's spouse, or the child, parent, brother
or sister of either the Owner or the Owner's spouse.
2. Nursing Home Confinement
Benefit
The Withdrawal Charge will not apply if the Owner is confined to a
Long Term Care Facility and has been so confined for at least ninety
consecutive days.
Notice and Proof of Claim
Proper Notice and proof of confinement in a Long Term Care Facility
must be received at our Home Office within one year after confinement
before we will waive Withdrawal Charges.
Definitions
"Confined" means confined as an inpatient. Confinement must:
a) be required as a result of injury or sickness;
b) be recommended by a physician; and
c) occur while the Contract is in force.
"Long Term Care Facility" means a state licensed Skilled Nursing
Facility or Intermediate Care Facility. Long Term Care Facility does
not mean: a Hospital; a facility that primarily treats drug addicts or
alcoholics; a home for the aged or mentally ill, a community living
center; or a facility that primarily provides domiciliary, residency,
or retirement care; or a facility owned or operated by a member of the
Owner's immediate family.
"Inpatient" means a person who is confined in a Long Term Care
Facility as a resident patient for whom a charge of at least one day's
room and board is assessed by the Long Term Care Facility.
"Injury" means accidental bodily injury which occurs while the
Contract is in force.
"Sickness" means illness or disease which first manifests itself while
the Contract is in force.
"Physician" means a duly licensed physician. The recommending
physician may not include the Owner or the Owner's spouse, or the
child, parent, brother or sister of either the Owner or the Owner's
spouse. . "Skilled Nursing Facility" means a facility which: is
operated as an Intermediate Care Facility according to the law of the
jurisdiction in which it is located; provides continuous 24 hour per
day nursing service by or under the supervision of a registered
graduate professional nurse (R.N.) or a licensed practical nurse
(L.P.N.); and maintains a daily medical record of each patient.
LR-165 12-98
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
Neither "registered graduate professional nurse" nor "licensed
practical nurse" includes the Owner or the Owner's spouse, or the
child, parent, brother or sister of either the Owner or the Owner's
spouse.
3. Terminal Illness
Benefit
The Withdrawal Charge will not apply if the Owner is diagnosed with a
Terminal Illness while the Contract is in force.
Notice and Proof of Claim
Proper Notice and proof of Terminal Illness must be completed by you
and your Physician and received at our Home Office during your
lifetime. We may request additional medical information. We may also,
at our expense, have you examined by a Physician of our choice before
Withdrawal Charges are waived.
Definitions
"Terminal Illness" means an incurable medical condition that, despite
appropriate medical care, is reasonably expected to result in the
death of the Owner within 12 months from the date of the physician's
diagnosis.
"Physician" means a duly licensed physician. The physician may not
include the Owner or the Owner's spouse, or the child, parent, brother
or sister of either the Owner or the Owner's spouse.
[GRAPHIC OMITTED]
American United Life Insurance Company(R)
Secretary
LR-165 12-98
To be included with the Registrant's Pre-effective amendment to the Registration
statement.
- --------------------------------------------------------------------------------
EXHIBIT 6.1
ARTICLES OF MERGER
BETWEEN AMERICAN CENTRAL LIFE INSURANCE COMPANY
AND UNITED MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
ARTICLES OF MERGER
OF
AMERICAN CENTRAL LIFE
INSURANCE COMPANY
INDIANAPOLIS, INDIANA
AND
UNITED MUTUAL LIFE
INSURANCE COMPANY
INDIANAPOLIS, INDIANA
<PAGE>
(This page was left blank intentionally)
<PAGE>
ARTICLES OF MERGER
IT IS HEREBY CERTIFIED by the American Central Life Insurance Company and the
United Mutual Life Insurance Company that the following Joint Agreement of
Merger between said corporations has been duly adopted and executed by them,
viz:
THIS JOINT AGREEMENT OF MERGER, made and entered into this 17th day of December,
A. D., 1936, at Indianapolis, Indiana, by and between the AMERICAN CENTRAL LIFE
INSURANCE COMPANY, a corporation duly organized, established, and existing under
and by virtue of the laws of the State of Indiana, as a capital stock life
insurance company (hereinafter designated as the "American Central"), and the
UNITED MUTUAL LIFE INSURANCE COMPANY, a corporation duly organized, established,
and existing under and by virtue of the laws of the State of Indiana, as a
mutual life insurance company (hereinafter designated as the "United Mutual"),
each with its principal office and place of business at Indianapolis, Indiana,
WITNESSETH THAT,
WHEREAS, The laws of the State of Indiana by Acts 1935, Chapter 162,
authorize and empower domestic insurance corporations to enter into joint
agreements of merger and provide the method and procedure for the approval,
adoption, and execution of such agreements and the approval of articles of
merger,
NOW THEREFORE, In consideration of the mutual promises, covenants, and
agreements herein contained and to effectuate a merger of the American Central
and the United Mutual pursuant to the approval and authorization of their
respective boards of directors, the stockholders of the American Central and the
members of the United Mutual and subject to the approval of the necessary
officials and departments of the State of Indiana, all as provided by law, IT IS
HEREBY MUTUALLY AGREED by and between the parties hereto as follows:
1. Merger Agreement and Name of Surviving Corporation:
The American Central Life Insurance Company shall merge into the United
Mutual Life Insurance Company, (which, with its name changed to "AMERICAN UNITED
LIFE INSURANCE COMPANY," shall be and is hereinafter designated as the
"Surviving Corporation"), under the present certificate of authority of the
United Mutual, except for such modification and changes as are specifically set
forth in this Joint Merger Agreement and restatement of its Articles of
Incorporation.
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<PAGE>
2. Surrender of American Central Stock and Issuance of Participation
Certificates:
Immediately upon the issuance of the Certificate of Merger by the Secretary
of State, stock certificates evidencing ownership of at least eighty-five per
centum (85%) in amount of the capital stock of the American Central shall be
surrendered by Herbert M. Woollen and Harry R. Wilson, as Trustees for American
Central stockholders and owners of Participation Certificates, free and clear of
any pledge, lien or claim of any nature whatsoever to the Surviving Corporation
for cancellation; provided that surrender of a substantial part of the remaining
shares shall be completed within four (4) months from the effective date of said
merger; and provided that coincident with any such surrender and cancellation
and in exchange for said stock certificates and in consideration therefor, there
shall be issued by the Surviving Corporation to said Trustees for delivery to
each owner, in lieu of his certificates of stock in the American Central,
Participation Certificates, in the form hereinafter set forth, entitling him to
such fractional part of the amounts herein called "Conversion Proceeds" less
deductions herein set out as the number of his surrendered shares of stock bears
to 2,740, the total outstanding shares of stock in the American Central. In the
event any shares of American Central stock shall be acquired in accordance with
the provisions of Chapter III, Article V, Section 123 of the Indiana Insurance
Law, or by purchase, Participation Certificates shall be issued for such stock
so acquired or purchased and shall share in the regular distribution of
Conversion Proceeds. Such Participation Certificates shall be held by the
Surviving Corporation as Trustee for the remaining Participation Certificate
owners and the share thereof in the Conversion Proceeds shall be equitably
distributed by the said Trustee among the remaining Participation Certificate
owners. The Surviving Corporation may purchase Participation Certificates for
its own account. The Participation Certificates shall be registered on the books
of the Surviving Corporation and shall be transferable. They shall give the
owners and holders thereof no other or greater rights than stated in such
Certificates and this Agreement, and shall create no liability against the
Surviving Corporation except for Conversion Proceeds, as hereinafter defined,
when, if, and as determined in the manner herein provided.
3. Segregation of American Central Assets and Liabilities American Central
Fund
There shall be created, by proper segregation, designations, and entries
upon the books of the Surviving Corporation, a complete separation, listing, and
accounting of all assets, liabilities, and business of the American Central,
(except those assets taken over by the Surviving Corporation by agreement,) as
the same exist
4
<PAGE>
and are shown by the books and records in the accounting for the American
Central at the close of business on December 31, 1936, which, with all
accretions thereto and depletions therefrom, shall constitute and be known as
the "American Central Fund" and shall continue until all Participation
Certificates are retired as hereinafter provided.
4. Conversion Proceeds Determined Annually and Distributed:
The Conversion Proceeds above mentioned shall be determined in the
following manner: As of December 31, 1936, and annually thereafter until and
including December 31, 1956, a complete annual accounting of the business of the
American Central Fund shall be prepared in the form required for annual
statements to the Indiana Insurance Department.
A. In these statements there shall be credited to the American Central Fund
the following:
a. In the first accounting as of December 31, 1936, all assets received
from the American Central at book values. Subsequent accountings shall
start with the ledger assets at the date of the preceding accounting.
b. All income of any sort derived from business and assets of the
American Central Fund.
c. All profits on sales and maturities of ledger assets and gross
increase by adjustment in book value of ledger assets of the American
Central Fund.
d. Interest, rents and other income, including profits on sales or
maturities and increases by adjustments on that portion, if any, of
the general assets of the Surviving Corporation which is derived from
the business and assets of the American Central Fund, at the net rate
realized by the Surviving Corporation on all of its assets acquired
after this Merger, excluding those transferred from the American
Central and the United Mutual.
B. In said annual statements, there shall be charged as disbursements:
a. All disbursements specifically chargeable to the business and assets
of the American Central Fund. The expenses which cannot be
specifically allocated to the business of the American Central or the
Surviving Corporation, shall be pro-rated between the respective
businesses and assets on the basis hereinafter set forth, it being
expressly understood that no part of the acquisition expense of the
Surviving Corporation shall be charged to the American Central Fund.
5
<PAGE>
b. All investment expenses and investment losses on account of assets of
the American Central Fund.
c. All payments made or credited to owners of Participation Certificates
and dissenting stockholders.
C. In preparing the statements of assets and liabilities, the following
principles shall be followed:
a. All assets received from the American Central with accretions and
substitutions less depletions, shall be included.
b. An amount equal to the value of the undivided part of the general
assets of the Surviving Corporation derived from income from the
business and assets of the American Central Fund shall be included.
c. All policy assets and liabilities and all other non-ledger assets and
liabilities shall be included as required by the Insurance Department
Annual Statement Blank unless otherwise specified herein. Disability
reserves shall be based upon the tables heretofore used by the
American Central.
From the statements prepared as provided herein, the gain or loss of the
Surviving Corporation on account of the business of the American Central shall
be determined. The amount thereof shall constitute the Conversion Proceeds. Any
such loss in excess of gains from other sources and of the existing Fluctuation
Fund as hereinafter provided shall be a first charge against the Conversion
Proceeds of the succeeding year or years until equalized. The determination of
Conversion Proceeds, as herein provided, shall be made annually as of December
31st, and after deducting the amounts provided in Sections 5, 6 and 7 hereof,
the remainder of said Conversion Proceeds shall within ninety (90) days
thereafter be distributed in cash annually for a period ending December 31,
1956, to the registered owners of the Participation Certificates. The Trustees
shall have access at all times to the books and records of the Surviving
Corporation for the purpose of determining the correctness of the accounting, or
for any other purposes. Any expense of any examinations or audits at the request
of the Trustees shall be paid by the Surviving Corporation and charged against
the American Central Fund.
5. Equalization of American Central Surplus as of December 31, 1935:
It is agreed that the capital and surplus of the American Central as of
December 31, 1935, and the surplus of the United Mutual constitute the surplus
of the Surviving Corporation. If necessary to equalize the surplus of the
American Central at the effective date hereof to the amount thereof as of
December 31,
6
<PAGE>
1935, there shall be deducted from the Conversion Proceeds each year beginning
with the accounting for the year 1937 an amount not in excess of ten per centum
(10%) of the Conversion Proceeds created by the operations of that year, which
amounts so deducted shall remain in the American Central Fund.
6. Provision for Fluctuations and Losses" Final Accounting December 31, 1956 -
Appraisal:
In order to provide for fluctuations in the value of investments and other
losses, there shall be deducted an amount equal to twenty per centum (20%) of
the remainder of the Conversion Proceeds after the deduction provided in Section
5 hereof has been made, beginning with the accounting for the year 1939, which
amounts so deducted shall remain in the American Central Fund and be carried as
a liability to be known as the "Fluctuation Fund," against which losses in
excess of gains from other sources may be charged, until December 31,1956,
provided that the maximum of said Fund shall not at any accounting exceed ten
per centum (10%) of the book value of the assets of the American Central Fund,
and provided further that the American Central Committee, as hereinafter
created, shall annually determine the extent to which the further maintenance of
this Fund is reasonably necessary. In the accounting as of December 31, 1956,
the reasonable, fair, normal, average market value of all assets in the American
Central Fund shall be determined by agreement between the American Central
Committee and the Surviving Corporation; or, in the event they are unable so to
agree, by disinterested parties employed by the American Central Committee with
the approval of the Surviving Corporation. In that accounting, the values so
fixed shall be used in determining the Conversion Proceeds payable to the
Participation Certificate owners, and the remainder of the Fluctuation Fund, if
any, shall be distributed as a part of the final accounting and payment. Any
part of the Fluctuation Fund which shall be distributed in accordance with this
agreement shall not be subject to the deduction provided for in Section 7 of
this agreement. Immediately thereupon the Participation Certificates shall be
surrendered for cancellation.
7. Allocation of Conversion Proceeds to Surviving Corporation:
In the accounting for each of the years 1937 and 1938 there shall be
deducted and credited to the surplus of the Surviving Corporation an amount
equal to ten per centum (10%) of the Conversion Proceeds as determined from the
operations during said year. For each of the years 1939 and thereafter such
deduction and credit shall be fifteen per centum (15%).
7
<PAGE>
8. Effective Date of Merger:
The "effective date" of the merger shall be the date of the issuance of the
Certificate of Merger by the Secretary of State, as provided by Chap. III, Art.
V, Sec. 118 of the Indiana Insurance Law.
9. Surviving Corporation Vested with Property and Responsible for Liabilities:
When such merger has been effected, as provided by Chap. III, Art. V, Sec.
125 of the Indiana Insurance Law, the Surviving Corporation shall thereupon and
thereafter possess and be vested with all the rights, privileges, immunities,
powers, and franchises of a public, as well as of a private nature of each of
the corporations, parties hereto; and all property, real, personal, and mixed,
and all debts due on whatever account and all choses in action and all and every
other interest, of or belonging to or due to each of them shall be deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the title to any real estate, or any interest therein, under the laws
of this State vested in either of the corporations, parties hereto, shall not
revert or be in any way impaired by reason of the merger, and the Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of each of the corporations, parties hereto, in the same manner
and to the same extent as if the Surviving Corporation had itself incurred the
same or contracted therefor. The American Central, its directors, officers and
agents shall make all conveyances, assignments, and do or refrain from all other
acts and deeds deemed necessary, expedient or proper to effectuate the merger,
and to vest in the Surviving Corporation all of the American Central's right,
title and interest in and to said property, and to carry out the full intents
and purposes of the merger, and the Surviving Corporation shall have all rights
of action, legal and equitable possessed by each of the corporations, parties
hereto.
10. Taxes Paid by Owners of Participation Certificates:
The Participation Certificate owners shall pay all state and federal taxes
which may be imposed against said owners upon the portion of the Conversion
Proceeds paid to them; provided that should any state or federal law require
that the said taxes be paid by the Surviving Corporation prior to payment to the
Participation Certificate owners, the Surviving Corporation shall pay the same
and withhold and deduct in the annual accounting the proper prorated amounts
thereof from the amounts payable to the various Participation Certificate
owners.
11. Disbursements and Income - Allocation and Pro-Rata Division:
Whenever, in this Joint Agreement of Merger, reference is made to a
pro-rata division of profits or losses on the undivided
8
<PAGE>
assets of the Surviving Corporation or income from those assets or disbursements
on their account or a division of the general income, expenses or disbursements
of the Surviving Corporation, the following principles shall govern:
A. The items which are derived from the undivided assets, if any, shall be
divided in proportion to the contributions on the one part of the American
Central and on the other part of the United Mutual and the Surviving Corporation
to such undivided assets of the Surviving Corporation.
B-1. The following disbursements of the Surviving Corporation as listed in
the annual statement are considered as specifically chargeable to the American
Central Fund and as such shall be charged as disbursements to that Fund, as
provided for in Section 4, Paragraph B(a) of this Agreement of Merger:
a. All payments of any kind to or for any policyholder, or his or her
beneficiary, on contracts of life insurance or on annuities written or
assumed by the American Central.
b. Amounts paid for claims on supplementary contracts issued or assumed
by the American Central.
c. Expenses of investigation and settlement of American Central policy
and contract claims, including legal expenses.
d. Renewal commissions and first year commissions to agents on life
insurance policies and annuity contracts written by them for the
American Central.
e. All taxes, licenses, and fees laid by any State or the Federal
Government and all other taxes on assets belonging to the American
Central Fund or paid to protect same, and taxes on annuity
considerations or insurance premiums on contracts or policies written
or assumed by the American Central.
f. All bills and accounts and similar obligations incurred by the
American Central prior to date of this merger.
g. Bank exchange on American Central items.
h. American Central agents' balances charged off.
i. Gross loss on sale or maturity of ledger assets of the American
Central Fund.
j. Gross decrease by adjustment in book value of ledger assets of the
American Central Fund.
k. Any other general disbursements clearly allocable to the business and
assets of the American Central Fund.
B-2. The following listed disbursements of the Surviving Corporation are to
be divided between the American Central Fund and the Surviving Corporation in
proportion to the amount of insurance
9
<PAGE>
remaining in force as of December 31st of the preceding year, originally written
or assumed on the one part by the American Central and on the other part by the
United Mutual and the Surviving Corporation:
a. The rent of the two home office buildings, (941 North Meridian Street
and 30 West Fall Creek Parkway). It is understood and agreed that the
building at 941 North Meridian Street will be disposed of by sale or
lease as soon as possible, and at that time the rent on this building
will be dropped from the disbursements.
b. Bureau and association dues and assessments, with the exception of
those of the National Fraternal Congress, M. I. B., Life Insurance
Sales Research Bureau, Association of Life Agency Officers and any
other association of which neither the American Central nor the United
Mutual is now a member, or in which membership would be clearly for
the benefit of the Surviving Corporation. Such excepted membership
costs shall be charged to the Surviving Corporation.
c. Books, newspapers and periodicals not clearly allocable.
d. Postage, express, telegraph, and telephone not clearly allocable.
e. General Office maintenance and expenses not clearly allocable.
f. Legislative expense not clearly allocable.
B-3. The following listed disbursements of the Surviving Corporation are to
be divided in proportion to the actual time devoted, use made, and expense
incurred in carrying out the business of the American Central Fund and the
Surviving Corporation respectively:
a. Salaries and all other compensation of officers, directors, trustees,
and home office employees.
b. Home office travel.
c. Legal expenses not incurred in connection with settlement of policy or
annuity claims.
d. Furniture and fixtures.
e. Printing and stationery.
f. Insurance except on real estate.
g. Investment expense.
h. Miscellaneous expense.
B-4. The division of any general disbursements of the Surviving
Corporation, other than those enumerated in this Section or which are not
clearly allocable to the business and assets of the American Central Fund or of
the Surviving Corporation, shall be made by the
10
<PAGE>
American Central Committee, hereinafter mentioned, in accordance with a survey
of the items of expense.
B-6. Payments to inactive employees, retired prior to the effective date of
or as a result of this merger shall be charged to the American Central Fund if
paid to former employees of the American Central or charged entirely to the
Surviving Corporation if paid to former employees of the United Mutual.
12. American Central Committee:
The by-laws of the Surviving Corporation shall create a Committee to be
known as the "American Central Committee," which shall consist of four (4)
members of the Board of Directors of the Surviving Corporation of whom two (2)
shall be named by the Trustees for the Participation Certificate owners and two
(2) shall be named by the Board of Directors of the Surviving Corporation; the
duties of such Committee shall be:
a. To operate, manage, control, direct, lease, sell, convert, and collect the
assets of the American Central Fund and to reinvest the proceeds thereof
available for reinvestment in such securities as will comply with the
Indiana Insurance Law.
b. To formulate and apply a just and accurate rule or formula for the
distribution of the income and disbursements and the profits and losses of
the American Central Fund where situations and conditions arise not covered
by the terms of this Agreement.
c. To supervise, manage, and control the insurance and reinsurance business of
the American Central Fund as the same exists at the date of the merger and
as the same continues thereafter until the expiration of the term provided
in this Agreement, provided that with respect to the agency field force of
the American Central, it is understood that in the acquisition of new
business the same shall be under the complete supervision, management and
control of the Surviving Corporation, except:
That such agency field force may have the privilege of writing new business
for the Surviving Corporation under the contracts with the American Central
in force on the effective date of the merger and that none of the members
of such agency field force shall be subject to dismissal, nor shall their
contracts be terminated by the Surviving Corporation, unless for willful
violation of the terms of the contract of employment or the rules and
regulations of the Surviving Corporation, or if it be found upon experience
that the acquisition
11
<PAGE>
cost of new business through them is unduly excessive and that proper
measures in accordance with the spirit of their contracts to reduce such
cost to a proper figure are not effective, unless with the approval of the
American Central Committee.
d. Each Committee Member shall have power to designate a suitable person to
act as substitute, provided, however, that not more than two (2)
substitutes shall be permitted at any one time; no action of the Committee
shall be valid unless it is by the unanimous act of all members or
substitutes therefor.
e. The Committee shall choose from its members its own Chairman and Secretary
who shall serve without compensation and neither of whom shall lose his
vote in Committee matters; upon request of the Committee the Secretary of
the Surviving Corporation may, however, act as secretary; Committee
meetings shall be held at the Home Office as frequently as practicable on
call of any two members; full and complete minutes of all Committee
meetings shall be kept, preserved, and reported to the Board of Directors
at each regular meeting thereof; full and complete records and books of
account reflecting truly and accurately all business transactions and the
state and condition of the American Central Fund shall be kept and
maintained and the minutes of the Committee and such books and records
shall be kept in the office of the Secretary of the Surviving Corporation
and shall be open at all times to inspection by the executive officers and
directors of the Surviving Corporation.
f. The Committee shall have no power or authority to waive, alter, change or
amend the provisions, terms and requirements of this Agreement, but all of
the provisions, terms, and requirements hereof shall be binding upon and
controlling over such Committee in all of its actions. If the Committee
cannot agree unanimously with respect to any matter in this Paragraph
hereafter enumerated no further action shall be taken with respect thereto
until the same shall, upon the request of any member thereof, be referred
to and acted upon by the Board of Directors or by the Executive Committee,
which shall promptly review the subject so to it referred and determine the
proper action to be taken with respect thereto, of which action immediate
notice shall be given to the Committee. If such failure to agree shall
occur within fifteen (15) days prior to a regular Board meeting, such
matter shall be referred to the Board; if at any other
12
<PAGE>
time, then such matter shall be referred to the Executive Committee; if
referred to the Executive Committee, the chief executive officer, if he so
desires, may have a period of fifteen (15) days within which to call a
special meeting of the Board to consider such matter. The matters which may
be thus referred to the Board are:
(1) Those matters defined in Paragraph (a) of this Section.
(2) Those matters defined in Paragraph (b) of this Section, so far as they
do not violate the terms of this Agreement.
(3) The administration and handling of the reinsurance in force on the
effective date of the merger and contracts and treaties therefor.
(4) Dealings and relations with the agency field force of the American
Central under contracts in force at the effective date of the merger.
g. Any such by-laws relating to the foregoing subject matter shall be
irrevocable while any Participation Certificates are outstanding.
13. Participation Certificates Form:
The Participation Certificates to be issued to stockholders of the American
Central shall be in the form following:
PARTICIPATION CERTIFICATE
No. _______________ ____Units
AMERICAN UNITED LIFE INSURANCE COMPANY
Indianapolis, Indiana
This certifies that _____________________________________ is the owner of
________________________________ Beneficial Units entitling him to participate
in any and all distributions from certain assets and proceeds therefrom,
designated as the American Central Fund in Articles of Merger executed by
American Central Life Insurance Company and United Mutual Life Insurance
Company, both of Indianapolis, Indiana, by which said corporations were merged
into American United Life Insurance Company, the issuer hereof. Said Articles of
Merger were filed in the office of the
Secretary of State of Indiana on the ____________ day of __________________,
1936, and were recorded in the office of the Recorder of Marion County,
Indiana, in Miscellaneous Record ____________________, page _______ By the
provisions of said Articles of Merger, all holders of shares of capital stock in
American Central Life Insurance Company are entitled to surrender for
cancellation the certificates evidencing said shares and to receive in lieu
thereof a Certificate or Certificates in the form hereof for such the American
Central Fund and the Surviving Corporation in proportion to the amount of
insurance
13
<PAGE>
outstanding 2,740 shares of said stock and the rights of the holder of this
certificate participate shall be in the proportion that the number of units
represented by this certificate bears to the total number (not in excess of
2,740) of shares for which certificates shall be issued.
For the sole protection and the enforcement of the rights of holders of
certificates, of which this Certificate is a part, there has been executed by
American United Life Insurance Company and by Herbert M. Woollen and Harry R.
Wilson, formerly President and Vice President, respectively, of American Central
Life Insurance Company, a written Trust Indenture dated the ____________ day of
_______________________, 1936. The aforesaid Articles of Merger and said Trust
Indenture are made parts of this Participation Certificate, and any holder
hereof is bound by all the terms and conditions of said documents and by the
provisions of the Indiana Insurance Law.
On the effective day of the said Articles of Merger, American United Life
Insurance Company became vested with all of the property and assets of American
Central Life Insurance Company and assumed liability to perform all of its
obligations. As a part of that merger said American United Life Insurance
Company agreed to issue said Participation Certificates in consideration of and
proportionately to the extent of the surrender to it of the shares of capital
stock above described.
The American Central Fund consists of all the assets and liabilities and
business delivered by American Central Life Insurance Company to American United
Life Insurance Company pursuant to said merger as shown by the books and records
of said former company at the close of business on December 31, 1936, with all
subsequent accretions thereto and depletions therefrom until and including the
year 1956.
Before March 31st of each year beginning with 1938 until all Participation
Certificates are retired there shall be determined the gain or loss, which
amount so determined shall constitute what is described in the Articles of
Merger as the Conversion Proceeds.
If necessary to equalize the surplus of the American Central Life Insurance
Company to the amount thereof as of December 31, 1935, an amount not in excess
of ten per centum (10%) of the Conversion Proceeds created by operations of each
respective preceding year shall, in 1938 and each year thereafter, be retained
in the American Central Fund.
Beginning with the accounting for December 31, 1939, and in each year thereafter
until December 31, 1956, there shall be deducted twenty per centum (20%) of the
amount remaining in the Conversion Proceeds after said deduction, which amount
so deducted shall remain in the American Central Fund and shall be known as the
"Fluctuation Fund," which shall serve to provide for fluctuations in the value
of investments and other losses and against which losses in excess of gains from
other sources may be charged, provided that the maximum amount in this
Fluctuation Fund shall at no time exceed ten per centum (10%) of the book value
of the assets in the American Central Fund. Such deductions for the Fluctuation
Fund shall continue so long only as may be reasonably necessary.
In each of the years 1938 and 1939, there shall be deducted and credited to the
surplus of American United Life Insurance Company ten per centum (10%) of the
Conversion Proceeds for distribution in that year; in the year 1940 and in each
year thereafter such deduction shall be fifteen per centum (15%).
The remainder of the Conversion Proceeds after the foregoing deductions and any
expense incurred in accordance with the Trust Agreement shall be distributed
annually at the times and in the manner provided in the Articles of Merger
pro-rata to holders of Participation Certificates.
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<PAGE>
On or before March 31st, 1957, by methods provided in the Articles of Merger,
there shall be determined the net amount, if any, to be distributed from the
American Central Fund as at the close of business on December 31, 1956, and the
same shall then be distributed pro-rata to Participation Certificate holders,
whereupon all further rights and claims of the owner of this certificate against
any property or assets of American United Life Insurance Company shall cease and
this Certificate and all other certificates shall be deemed fully satisfied and
shall be surrendered for cancellation.
The owner hereof shall have no claim against any of the property or assets of
American United Life Insurance Company except as is described in this
Certificate and in the Articles of Merger, nor is any liability created hereby
except as, and when funds are available as provided in said Articles of Merger
for distribution to the owners of Participation Certificates.
For a more complete description of the American Central Fund, methods of
creating such Fund, principles of debiting and crediting the same in the
determination of the Conversion Proceeds, and of the participation rights of the
holders of these Certificates, there should be examined the aforesaid Articles
of Merger and the Trust Indenture.
All distributions hereunder may be delivered to the person or persons registered
as the owner or owners hereof by valid remittance transmitted by United States
mail addressed to the owner or owners all as is shown by the registration books
of the Company. Or, before making any remittance, the Company may in its
discretion demand production and exhibit of this certificate and, on final
distribution, the surrender hereof.
IN WITNESS WHEREOF, American United Life Insurance Company by its authorized
officers, has hereunto affixed its signature attested by its corporate seal this
____________ day of ____________, 1936.
AMERICAN UNITED LIFE INSURANCE COMPANY
By___________________________
President
ATTEST:
_____________________________
Secretary
(Corporate Seal)
14. American Central Policyholders:
The policyholders of the American Central on the effective date of the merger
shall not participate in the profits of the Surviving Corporation or otherwise,
but their respective policies shall continue to remain non-participating,
provided that any policy issued by the American Central on the participating
basis shall continue to participate in the manner and to the extent provided in
the policy. The rights and obligations between the American Central
policyholders and the Surviving Corporation shall continue unchanged from those
existing between the American Central and said policy. holders prior to the
merger, without change, diminution, or enlargement.
15
<PAGE>
15. Restatement of Articles of Incorporation:
In order to give effect to the merger described herein, it is deemed necessary
and advisable to restate certain of the Articles of Incorporation of the
Surviving Corporation: Such Articles as are so restated and the restatements
thereof are as follows:
ARTICLE I
Sec. 1. NAME AND SEAL: The name of the Corporation shall be American United
Life Insurance Company.
The seal shall be a circular disk around the edge of which shall appear the
words, "American United Life Insurance Company," and in the center of which
shall appear the words "Seal" and "A Mutual Corporation."
ARTICLE II
Sec. 1. TERM OF CORPORATE EXISTENCE: The existence of the Surviving
Corporation shall be perpetual.
ARTICLE III
Sec. 1. MEMBERSHIP - CLASSES OF MEMBERS AND POLICYHOLDERS: The members and
policyholders of the American United Life Insurance Company shall consist of
voting members and non-voting policyholders.
a. VOTING MEMBERS: The voting members shall consist of the present members
of the United Mutual Life Insurance Company and those becoming members of the
American United Life Insurance Company subsequent to the effective date of the
merger.
b. NON-VOTING POLICYHOLDERS: The non-voting policyholders shall consist of
all policyholders of the American Central Life Insurance Company on the
effective date of the merger.
ARTICLE: IV
Sec. 1. BOARD OF DIRECTORS - NUMBER: The number of directors of the
American United Life Insurance Company shall be sixteen (16) and until the first
annual meeting and their successors are elected and qualified and vacancies
filled they shall consist of the following present directors of the United
Mutual Life Insurance Company and the following present directors of the
American Central Life Insurance Company, namely:
Go. A. Bangs Alva M. Lumpkin
Earl B. Barnes William R. O'Neal
Harry C. Byers Gwynn F. Patterson
Russell T. Byers James E. Watson
John W. Craig Harry R. Wilson
Leslie E. Crouch Richard S. Witte
Edward A. Horton Herbert M. Woollen
16
<PAGE>
IN WITNESS WHEREOF, Said parties, respectively, in accordance with resolutions
of their respective Board of Directors, have caused these presents to be signed
in their names by their presidents and have affixed hereto their corporate seals
attested by their secretaries at the City of Indianapolis, Indiana, the day and
year first above written.
AMERICAN LIFE INSURANCE COMPANY
By /s/ Herbert M. Woollen
--------------------------------
President
ATTEST:
/s/ H. W. Buttolph
- --------------------
Secretary
(CORPORATE SEAL)
UNITED MUTUAL LIFE INSURANCE COMPANY
By /s/ Geo. A. Bangs
-------------------------------------
President
ATTEST:
/s/ W.A. Jenkins
- ----------------------
Secretary
(CORPORATE SEAL)
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17 th day of December, 1936, before me appeared Geo. A. Bangs and W. A.
Jenkins, to me personally known, who, being by me duly sworn, did say that they
are the President and the Secretary, respectively, of the United Mutual Life
Insurance Company and that the seal affixed to said instrument is the corporate
seal of said corporation, and that said instrument was signed and sealed in
behalf of said corporation by authority of its Board of Directors, and said Go.
A. Bangs and W. A. Jenkins acknowledged said instrument to be the free act and
deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Alma H. Irwin
- ----------------------------
Notary Public
My commission expires Jan. 15, 1939
- ---------------------------------------
17
<PAGE>
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17th day of December,1936, before me appeared Herbert M. Woollen and H.
W. Buttolph, to me personally known, who, being by me duly sworn, did say that
they are the President and the Secretary, respectively, of the American Central
Life Insurance Company and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
said Herbert M. Woollen and H. W. Buttolph acknowledged said instrument to be
the free act and deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Helen L. Clark
- -------------------------
Notary Public
My commission expires: Feb. 23 1938
- -----------------------------------------
IT IS FURTHER CERTIFIED that the signatures appended to the foregoing Joint
Agreement of Merger are the respective signatures of the corporations, parties
thereto, and that the manner of adoption of said Joint Agreement of Merger and
the vote by which adopted by each of said corporations is as follows:
(1) That at a duly called regular meeting of the Board of Directors of the
United Mutual Life Insurance Company, held at its home office on the 15th day of
August, 1936, at which a quorum was present, said Board did unanimously adopt a
resolution approving the Joint Agreement of Merger above set forth; that said
resolution directed that said agreement be submitted to a vote of all of the
members of said corporation entitled to vote in respect thereof at a special
meeting of said members, which was by said resolution called to be held at the
home office of said corporation at 941 N. Meridian Street, Indianapolis,
Indiana, on the 6th day of October, 1936, at the hour of 10:00 o'clock A. M.,
and did further direct that notice of said special meeting be given by the
secretary of the corporation to all members of record in the manner provided by
law; that in compliance with said resolution said secretary did, on the 5th day
of September, 1936, mail a printed notice of the place, day, hour and purposes
of said special meeting to each mem-
18
<PAGE>
ber entitled to vote, at his address as it appeared upon the records of the
corporation; that said special members' meeting was duly held at the place, day
and hour in said notice stated and that there were present and entitled to vote
13 members in person and 27,289 members represented by proxy; that said members
so present in person and represented by proxy constituted a quorum for the
transaction of business under the by-laws of the corporation; that a resolution
approving said Joint Agreement of Merger was duly adopted by said members, and
that the affirmative vote by which said resolution was so adopted was 27,302
votes in favor of and none against its adoption, whereupon said Joint Agreement
of Merger was duly adopted by the corporation; that on the 7th day of October,
1936, and within five days after the adoption of the said Joint Agreement of
Merger as above stated, the secretary of the corporation did mail a printed
notice of the adoption of said Joint Agreement of Merger to each member of
record of the corporation who was not present in person or represented by proxy
at said special meeting of members, and the corporation did on the 8th day of
October, 1936, file with the Indiana Insurance Department an affidavit, signed
by the President and the Secretary, that such notice was given; that no member
or members have, in the manner provided by law or otherwise, objected to the
adoption of said Joint Agreement of Merger or filed a petition with the Indiana
Insurance Department for a hearing thereon; that at a duly called adjourned
regular meeting of the Board of Directors held at the corporation's home office
on the 11th day of December, 1936, at which a quorum was present, said Board did
again consider and by a unanimous vote adopted a resolution reapproving said
Joint Agreement of Merger in all things and authorizing its execution by the
proper officers of the corporation as provided by law; that said adjourned
regular meeting of the Board of Directors was held as soon as practicable after
the expiration of a period of thirty days after the adoption of said Joint
Agreement of Merger by the American Central Life Insurance Company, which
corporation was the last, in point of time, to adopt it.
(2) That at a duly called special meeting of the Board of Directors of the
American Central Life Insurance Company held at its home office on the 31st day
of August, 1936, at which a quorum was present, said Board did unanimously adopt
a resolution approving the above set forth Joint Agreement of Merger; that said
resolution directed that said agreement be submitted to a vote of all of the
shareholders of said corporation entitled to vote in respect thereof at a
special meeting of said shareholders, which was by said resolution called to be
held at the home office of said corporation at 30 West Fall Creek Parkway,
Indianapolis, Indiana, on the 10th day of November, 1936, at the hour of 10:00
o'clock A. M., and did
19
<PAGE>
further direct that notice of said special meeting be given by the secretary of
the corporation to all shareholders of record in the manner provided by law;
that in compliance with said resolution said secretary did, on the 7th day of
October, 1936, deliver or mail a written notice of the place, day, hour and
purposes of said special meeting to each shareholder entitled to vote, at his
address as it appeared upon the records of the corporation; that the said
special meeting was duly held at the place, day and hour in said notice stated
and that there were present in person or represented by proxy 2,619 1/2 shares
of the total 2,740 outstanding shares of capital stock; that said shareholders
so present in person and by proxy constituted a quorum for the transaction of
business under the by-laws of the corporation and more than two-thirds of all
its outstanding capital stock; that a resolution approving said Joint Agreement
of Merger was duly adopted by said shareholders, and that the affirmative vote
by which said resolution was so adopted was 2,619 1/2 votes in favor of and none
against its adoption, whereupon said Joint Agreement of Merger was duly adopted
by the corporation; that on the 10th day of November, 1936, and being within
five days after the adoption of said Joint Agreement of Merger as above stated,
the secretary of the corporation did mail a written notice of the adoption of
said Joint Agreement of Merger to each shareholder of record of the corporation
who was not present in person or represented by proxy at said special meeting of
shareholders, and the corporation did on the 11th day of November, 1936, file
with the Indiana Insurance Department an affidavit, signed by the President and
the Secretary, that such notice was given; that no shareholder has, in the
manner provided by law or otherwise, objected to the adoption of said Joint
Agreement of Merger or demanded payment of the value of his share or shares of
stock; that at a duly called special meeting of the Board of Directors held at
the corporation's home office on the 11th day of December, 1936, at which a
quorum was present, said Board did again consider and by a unanimous vote
adopted a resolution reapproving said Joint Agreement of Merger in all things
and authorizing its execution by the proper officers of the corporation as
provided by law; that said special meeting of the Board of Directors was held as
soon as practicable after the expiration of a period of thirty day after the
adoption of said Joint Agreement of Merger by the shareholders of and by said
corporation.
(3) That pursuant to authorization by their respective Boards of Directors
as hereinbefore stated, said corporations did on the 17 th day of December,
1936, duly execute said Joint Agreement of Merger.
20
<PAGE>
IN WITNESS WHEREOF, said corporations, respectively, have caused these
presents to be signed in such multiple copies as shall be required in their
names by their presidents and have affixed hereto their corporate seals attested
by their secretaries at the city of Indianapolis, Indiana, this 17th day of
December, 1936.
AMERICAN CENTRAL LIFE INSURANCE COMPANY
By /s/ Herbert M. Woollen
---------------------------------------
President
ATTEST:
/s/ H. W. Buttolph
- ---------------------------
Secretary
(CORPORATE SEAL)
UNITED MUTUAL LIFE INSURANCE COMPANY
By /s/ Geo. A. Bangs
----------------------------------------
President
ATTEST:
/s/ W.A. Jenkins
- ---------------------------
Secretary
(CORPORATE SEAL)
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17 th day of December, 1936, before me appeared Herbert M. Woollen and
H. W. Buttolph, to me personally known, who, being by me duly sworn, did say
that they are the President and the Secretary, respectively, of the American
Central Life Insurance Company and that the seal affixed to said instrument is
the corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
said Herbert M. Woollen and H. W. Buttolph acknowledged said instrument to be
the free act and deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Helen L. Clark
- -----------------------------
Notary Public
My commission expires: Feb. 26, 1938
- --------------------------------------
21
<PAGE>
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17th day of December, 1936, before me appeared Geo. A. Bangs and W.
A. Jenkins, to me personally known, who, being by me duly sworn, did say that
they are the President and the Secretary, respectively, of the United Mutual
Life Insurance Company and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
said Go A. Bangs and W. A. Jenkins acknowledged said instrument to be the free
act and deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Alma H. Irwin
- -----------------------
Notary Public
My commission expires: January 15, 1939
- -----------------------------------------
22
- --------------------------------------------------------------------------------
EXHIBIT 6.2
CERTIFICATION OF THE INDIANA SECRETARY OF STATE
AS TO THE FILING OF THE ARTICLES OF MERGER BETWEEN
AMERICAN CENTRAL LIFE INSURANCE COMPANY
AND UNITED MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
August G. Mueller, Secretary of State
To Whom These Presents Come, Greeting:
WHEREAS, there have been presented to me at this office Articles of Merger in
forty-eight copies whereby AMERICAN CENTRAL LIFE INSURANCE COMPANY,
non-surviving corporation, is merged into the UNITED MUTUAL LIFE INSURANCE
COMPANY, surviving corporation, showing no capital stock, hereinafter designated
as the AMERICAN UNITED LIFE INSURANCE COMPANY.
Said Articles of Merger having been prepared and signed in accordance with "An
Act Concerning Insurance and Declaring an Emergency", approved March 8, 1935.
WHEREAS, upon due examination, I find that they conform to law:
NOW, THEREFORE, I hereby certify that I have this day endorsed my approval upon
the forty-eight copies of Articles so presented, and, having received the fees
required by law, in the sum of $6.50, have filed one copy of the Articles in
this office and returned forty-seven copies bearing the endorsement of my
approval to the surviving corporation. I further certify that said American
Central Life Insurance Company is duly merged into said United Mutual Life
Insurance Company and that the name of the latter is duly changed to AMERICAN
UNITED LIFE INSURANCE COMPANY, and that Section 125 of said Act, approved March
8, 1935, provides that all property, assets and rights of every nature and
wherever situated owned by the non-surviving corporation are transferred and
vested in the surviving corporation.
In Witness Whereof, I have hereunto set my hand and affixed the seal of the
State of Indiana at the City of Indianapolis, this 31st day of December, 1936
[SEAL]
at the hour of 5:00 o'clock P.M.
/s/ August G. Mueller
---------------------
Secretary of State
By: /s/ Joseph O. Hoffman
-------------------------
Deputy
- --------------------------------------------------------------------------------
EXHIBIT 6.3
CODE OF BY-LAWS OF AMERICAN UNITED LIFE INSURANCE COMPANY(R)
- --------------------------------------------------------------------------------
CODE OF BY-LAWS
OF
AMERICAN UNITED LIFE INSURANCE COMPANY (R)
ARTICLE I
CORPORATE SEAL AND PRINCIPAL OFFICE
Section 1. Corporate Seal. The corporate seal shall be circular in form
with the words "American United Life Insurance Company (R) " around the top of
its periphery and the words "Seal" and "A Mutual Corporation" through its
center.
Section 2. Principal Office. The principal office and place of business
shall be at One American Square, City of Indianapolis, County of Marion and
State of Indiana.
ARTICLE II
MEMBERSHIP
Section 1. Classes of Members. As provided in the articles of
incorporation, the members of the corporation shall be divided into two classes:
(a) voting members, and (b) non-voting policyholders. The members of each class
shall have such rights, privileges, duties and liabilities, with respect to the
regulation and management of the affairs of the corporation, as are provided in
these By-laws or in the articles of incorporation.
Section 2. Voting Members. The voting members of the corporation shall
consist of those policyholders
(a) who hold insurance certificates issued by the Insurance Department of the
Supreme Lodge Knights of Pythias and
(b) who hold policies issued or assumed by the former American Life Insurance
Company of Detroit, Michigan, and by the former Mutual Savings Life
Insurance Company of St. Louis, Missouri, which were assumed by this
corporation, and
(c) who hold policies of insurance or annuity contracts issued by the
corporation under its present name or under the name United Mutual Life
Insurance Company.
Each voting member continues to be a member of the corporation so long as any
policy or annuity contract, which entitles him to voting membership, remains in
full force and effect.
Section 3. Non-Voting Policyholders. The non-voting policyholders of the
corporation shall consist of those persons (a) who were policyholders in the
American Central Life Insurance Company when that corporation was merged into
this corporation, or (b) who prior to that merger were policyholders in the
American Central Life Insurance Company and subsequently were reinstated as
policyholders. Nothing contained in this Section 3, however, shall disqualify a
policyholder who qualifies as a voting member according to the provisions of
Section 2 of Article II.
<PAGE>
ARTICLE III
MEETINGS OF MEMBERS
Section 1. Annual Meeting. The regular annual meeting of the members of
this corporation shall be held at its principal place of business on the third
Thursday in February of each year at ten a.m. Elections for directors shall be
held at the annual meeting.
Section 2. Special Meetings. Special meetings of the members of the
corporation may be called by the chief executive officer of the corporation, by
the board of directors or by not less than twenty-five percent of the voting
members.
Section 3. Notice of Meetings. Thirty day written notice stating the place,
day and hour of any meetings of members shall be delivered or mailed by the
secretary of the corporation or by the officer or persons calling the meeting to
each member entitled to vote at such meeting at such address as appears upon the
records of the corporation. In the case of special meetings or when otherwise
required by law, the purpose or purposes for which the meeting is called shall
also be stated. With respect to annual meetings of members, notice need not be
given to any member in whose policy of insurance or annuity contract there is a
statement of the time and place of the meeting.
If less than a quorum of voting members attend in person or by proxy, a
majority of the voting members who are present in person or by proxy may
adjourn, without notice other than by announcement at the meeting, until the
number of members required to form a quorum shall attend. No annual meeting of
members may be adjourned to a date later than five months after the close of the
fiscal year of the corporation. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
original meeting.
Section 4. Waiver of Notice. Notice of any meeting of members may be waived
in writing by any member if the waiver sets forth in reasonable detail the time
and place of the meeting and its purpose. Attendance at any meeting in person or
by proxy shall constitute a waiver of notice of such meeting.
Section 5. Voting Rights. Except as hereinafter provided, each voting
member of the corporation shall have the right to cast one vote on each matter
submitted to a vote of the members, regardless of the number of policies or
amount of insurance standing in his name with the corporation.
<PAGE>
Section 6. Voting by Proxy. A member entitled to vote at a meeting of
members may vote either in person or by proxy executed in writing by the member
or the member's duly authorized attorney-in- fact. No proxy shall be voted at
any meeting of members unless the proxy is filed with the secretary of the
meeting at or before the meeting.
Section 7. Quorum. To constitute a quorum at any meeting of members, there
must be at least ten percent of the voting members represented in person or by
proxy. A majority vote of any such quorum shall be necessary for the transaction
of any business at the meeting unless a greater vote is required by law or the
articles of incorporation.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Duties and Qualifications. The business and affairs of the
corporation shall be managed by a board of directors. Each director shall be a
voting member of the corporation, and the policy of insurance or annuity
contract entitling each director to membership in the corporation shall be free
of liens to secure any debt to the corporation. Each director shall be a citizen
of the U.S. or the Dominion of Canada, and at least one director shall be a
resident of the State of Indiana. No person shall be eligible for election as a
director who has reached, or will reach, his seventieth birthday in the year of
election, and is retired from his business or profession.
Section 2. Number and Terms of Office. The board of directors shall consist
of sixteen members who are elected by the voting members at annual meetings to
serve for terms of three years, and until their successors are elected and
qualified. The board of directors shall be divided into three classes, two of
which consist of five directors and one of which consists of six directors. I he
teens of office of all directors in a particular class shall be identical;
however, the terms of office of each class of directors shall be staggered so
that in every three year period a different class shall be elected at each
succeeding annual meeting of members.
Section 3. Limitation as to Employee or Retired Employee Directors. No more
than five fulltime employees of the corporation or retired employees of the
corporation receiving a pension or other retirement benefits from the
corporation shall be eligible to serve at one time as directors.
Section 4. Vacancies. Any vacancy in the board of directors caused by
death, resignation or disqualification shall be filled by a majority vote of the
remaining members of the board of directors for the unexpired term of the
director whose place is filled. Any vacancy on the board of directors occasioned
by an
<PAGE>
increase in the number of directors shall be filled by a majority vote of the
existing directors for a term ending with the next annual meeting of members of
the corporation.
Section 5. Oath of Office. Each director of the corporation, when elected,
shall take and subscribe to an oath that he will insofar as the duty devolves
upon him, faithfully, honestly and diligently administer the affairs of the
corporation and that he will not knowingly violate or willingly permit violation
of any laws applicable to the corporation.
Section 6. Annual Meetings. Unless otherwise unanimously agreed upon, the
board of directors shall meet each year, immediately following the annual
meeting of members, at the place where the meeting of members was held. This
meeting shall be held for the purpose of organization, election of officers of
the corporation and consideration of any other business which may be brought
before the meeting. No notice shall be necessary for the holding of any annual
meeting of the board of directors.
Section 7. Other Meetings. Meetings of the board of directors, other than
the annual meeting, shall be held regularly once each quarter during the second,
third and fourth quarters of each calendar year, in accordance with a duly
adopted resolution or motion of the board of directors. Special meetings may be
called by the chief executive officer of the corporation, the chairman of the
board or any seven directors, upon five days' notice. The time and general
purposes of any such meeting must be specified and given to each director either
personally or by mail or telegram. No notice shall be necessary for any regular
meeting, and notice of any special meeting may be waived in writing or by
telegram. Attendance at any such meeting shall constitute waiver of notice of
such meeting. All meetings of the board of directors shall be held at the
principal office or at such other place as may be unanimously designated by the
board of directors.
Section 8. Quorum. A majority of the whole board of directors shall be
necessary to constitute a quorum for the transaction of any business except the
filling of vacancies. The act of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the board of directors
unless a greater number is required by law, the articles of incorporation or
these By-laws. If a quorum is not present, a majority of the directors present
may adjourn the meeting from time to time without further notice.
Section 9. Honorary Directors. Any person who has served as the chief
executive officer of the corporation may be elected an honorary member of the
board of directors and shall be privileged to attend all meetings of directors,
but shall have no right to vote.
ARTICLE V
COMMITTEES
Section 1. Standing Committees. The standing committees of the corporation
shall be the following: executive committee, finance committee, and audit
committee. The board of directors may from time to time create other standing
committees as deemed desirable by amending these By-laws.
Section 2. Members of Standing Committees. At its annual meeting, the board
of directors shall designate the members of each standing committee and shall,
except as otherwise provided in these Bylaws, name the chairman thereof. The
members shall serve for a term of one year and until their successors are chosen
and qualified unless sooner removed. The chief executive officer of the
corporation shall be an ex- officio member, with full voting power, of each
standing committee except the Audit Committee. Subject to any limitation imposed
by these By-laws, the board of directors shall have the power at any time to
increase or decrease the number of members of any standing committee, to appoint
or remove members from any standing committee and to fill vacancies on any such
committee.
At any meeting of a standing committee, a designated director may act in the
place of an absent member of such committee with full Voting rights. Each
designated director shall be selected in the following manner: The chief
executive officer shall contact a member or members of the board in alphabetical
order according to the member's last name until he obtains agreement of the
necessary number of directors to attend the standing committee meeting. After
the first selection under this section, contact shall commence with the name
alphabetically following that of the director agreeing to serve.
Section 3. Meetings of Standing Committees. Meetings of each standing
committee may be called by its chairman or by the chief executive officer of the
corporation. Each committee shall hold its meetings in accordance with the rules
of procedure and at locations designated by the majority of the committee
members. Except as otherwise provided by these By-laws, each committee shall
select a secretary, who shall not be required to be a member of the committee,
to record the minutes of all its meetings.
Section 4. Special Committees. Special committees may be designated by a
resolution adopted by a majority of the directors present at any board meeting
at which a quorum is present. Except as otherwise provided in the resolution,
members of each special committee shall be members of the corporation, and the
chief executive officer of the corporation shall appoint the committee members.
Any special committee member may be removed by the person or persons authorized
to appoint such member whenever in their
<PAGE>
judgment the best interests of the corporation shall be served by such removal.
Any special committee shall have only the responsibilities for which it was
created. It shall have no power to act except as specifically conferred upon it
by action of the board of directors. Upon completion of its duties, the special
committee shall be discharged. Each member of a special committee shall serve
the committee until it is discharged unless the member is removed from the
committee or ceases to qualify as a member. Committee vacancies shall be filled
by appointments made in the same manner as provided in the case of the original
appointments.
<PAGE>
ARTICLE VI
COMPOSITION AND DUTIES OF STANDING COMMITTEES
Section 1. Executive Committee. he executive committee shall consist of the
chairman of the board and not less shall three nor more than seven other members
of the board of directors. No member of the committee shall Continue as SUCH
after he ceases to be a member of the board of directors. The chairman of the
board shall be chairman of the committee and a vice-chairman may be designated
by the committee. The committee shall select a secretary from among its members
to keep accurate minutes of all meetings. The minutes shall be presented for
approval to the next regular meeting of the board of directors.
During the intervals between meetings of the board of directors and subject to
such limitations as may be imposed by law. the articles of incorporation or
these By-laws, the executive committee shall have and may exercise all the
authority of the board of directors in the management of the corporation.
However, no action shall be taken which will conflict with the expressed
policies of the board of directors.
Section 2. Finance Committee. The finance committee shall consist of the
chief executive officer, not less than three other members of the board of
directors and not more than two officers of the corporation who are not members
of the board of directors. The secretary of the committee shall keep accurate
minutes of all meetings which shall he presented for approval to the next
regular meeting of the board of directors.
Except as otherwise provided in these By-laws, and subject to law and to the
general control of the board of directors, the finance committee shall
supervise, pass upon and authorize the investment of all funds of the
corporation. It shall have the power to purchase and sell or otherwise acquire
or dispose of real estate, bonds, mortgages, securities or other investments, to
authorize and direct conveyances of real estate and interests therein and
thereunder, including the execution of deeds, leases, releases, discharges and
other related documents, and to direct all other things necessary or incidental
to the authorization, acquisition, supervision, control and disposition of all
the investments of the corporation. I he finance committee shall also perform
such other duties as these By-laws or the board of directors may prescribe.
Section 3. Audit Committee. The audit committee shall consist of three
members of the board of directors. All members of the audit committee shall he
independent directors.
The audit committee shall, prior to the annual meeting, recommend selection of
independent certified public accountants for the fiscal year to the board of
directors. The audit committee shall engage the independent auditors selected by
the voting members, be responsible for establishing the independent audit and
review the results of the independent audit prior to presentation to the board
of directors. The audit committee
<PAGE>
shall also be responsible for establishing the scope of the internal audit
function, reviewing internal controls and following tip on deficiencies noted.
The audit committee will confer with internal auditing, auditors and other
consultants as deemed necessary on significant audit findings and shall report
and make recommendations to the board of directors as necessary.
ARTICLE VII
OFFICERS
Section 1. Number and Qualification. The officers of the corporation shall
consist of a chairman of the board of directors, a president, a chief executive
officer, one or more senior vice presidents and one or more additional vice
presidents, a general counsel, a medical director, a secretary, a treasurer, a
controller, an actuary, and such other officers as the board of directors may
elect in accordance with the provisions of this article. The board of directors
may elect or appoint other assistant or subordinate officers, as it deems
desirable, to have the authority to perform the duties prescribed. The chairman
of the board, the president, and the chief executive officer shall be chosen
from among the directors of the corporation, and if any one of such officers
ceases to he a director he shall cease to hold such office as soon as his
successor is elected and qualified. More shall one office. may be held by the
same person, except the duties of the president and secretary shall not be
performed by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its annual meeting If
tile election of officers is not held at the annual meeting, the election shall
be held as soon thereafter as is convenient. New offices may be created and
filled at any meeting of the board of directors. Each officer shall hold office
until his successor is duly elected and qualified.
Section 3. Vacancies. Whenever any vacancies occur in any of the offices of
the corporation by reason of death, resignation, disqualification, removal or
otherwise, the office may be filled by the board of directors at a regular or
special meeting I he newly elected officer shall hold office until the next
annual meeting of the board of directors and until his successor is duly elected
and qualified.
Section 4. Removal. Any officer of the corporation elected or appointed by
the board of directors may be removed by the hoard of directors whenever, in its
judgment, the best interest of the corporation would be served. Such removal
shall be without prejudice to any contract rights of the officer so removed.
Section 5. Salaries of Officers and Employees. 'I he salaries of the
chairman of the board, the president, the chief executive officer, all vice
presidents (except regional vice presidents), the secretary, the treasurer, the
controller, medical director, general counsel, actuary, anti of all employees
receiving compensation of $75,000 a year or more, shall be approved by the board
of directors.
<PAGE>
ARTICLE VIII
DUTIES OF OFFICERS
Section 1. Chairman of the Board. The chairman of the board of directors
shall preside at all meetings of members and at all meetings of directors. He
shall be entitled to vote upon questions and motions submitted to vote of the
board of directors only when his vote is required to break a tie. He shall
perform such duties as these By-laws or the board of directors prescribe.
Section 2. President. The president shall have power to perform the duties
prescribed by the board of directors, the chairman of the board, or these
By-laws. Section 3. Vice Presidents. The vice presidents shall have the powers
to perform the duties prescribed by the board of directors, the chief executive
officer of the corporation, or these By-laws.
Section 4. General Counsel. The general counsel shall be the chief
consulting officer of the corporation on all legal matters. He shall, subject to
the control of the board of directors and executive committee, have control of
all legal matters pertaining to the business of the corporation and shall
perform such other duties as these By-laws or the board of directors prescribe.
Section 5. Medical Director The medical director shall he the chief
underwriting officer of the corporation on all medical matters. He shall,
subject to the control of the board of directors and executive committee, have
control of all medical matters pertaining to applications for new insurance or
reinstatement of old insurance, appointment and supervision of medical
examiners, and other medical matters pertaining to the corporation's
underwriting operations. He shall perform other duties as these By-laws or the
board of directors prescribe.
Section 6. Secretary. The secretary shall attend all meetings of members
and meetings of the board of directors and shall be responsible for a true anti
complete record of the proceedings of such meetings. He shall serve notice of
all corporate meetings in accordance with these By-laws, have custody of the
books (except books of account), records and corporate seal of the corporation,
affix the corporate seal to all papers and documents requiring a seal, and
perform other duties as these By-laws or the board of directors prescribe.
Section 7. Treasurer. The treasurer shall be the custodian of all funds,
notes, securities, and instruments of title and valuables belonging to and in
the possession of the corporation. He shall deposit, or
<PAGE>
cause to be deposited, all funds of the corporation not required to be on hand
in the operation of the business, in banks or depositories designated by the
board of directors. He shall disburse the funds of the corporation as
authorized, and take proper vouchers for such disbursements. He shall furnish
the board of directors a statement of the financial condition of the corporation
at or before each annual meeting and perform other duties as these By-laws or
the board of directors prescribe.
Section 8. Controller. The controller shall be responsible for keeping
current and complete records of account, showing accurately the financial
condition of the corporation. He shall assemble budget information and keep
budgetary control of disbursements of the corporation, and perform other duties
as these By-laws or the board of directors prescribe.
Section 9. Actuary. I he actuary shall be the chief consulting officer on
all matters relating to the pricing and designing of insurance contracts issued
by the corporation. He shall, subject to the controls of the board of directors
and executive committee, have control of matters pertaining to premium rates,
dividends, policy values, reserve basis, and benefits provided in the insurance
contracts issued by the corporation. He shall perform such other duties as these
By-laws or the board of directors prescribe.
Section 10. Assistant Officers. Assistant officers that the board of
directors may elect or appoint shall have duties specified by the board of
directors. In the absence of such specification, duties shall be specified by
the officer whom the person was appointed to assist.
Section 11. Chief Executive Officer. The chief executive officer of the
corporation shall be the chairman of the board or the president, as determined
by the board of directors Subject to the general control of the corporation by
the board of directors and the executive committee, the chief executive officer
shall supervise, direct anti control the business and affairs of the corporation
and shall discharge all the unusual functions and duties of his office. Except
as otherwise provided in these By-laws he shall appoint, and at his discretion,
remove employees of the corporation, fix and at times change their compensation,
designate their titles and determine their duties. He shall appoint temporary or
permanent committees of officers and employees as he deems necessary for the
control and supervision of the business. He shall have general supervision and
direction of all of the other officers of the corporation and the employees of
all departments. He shall keep the board of directors and executive committee
fully informed as to the activities of the corporation, and shall prepare and
submit to each annual meeting of members a report on the business of the
corporation for the preceding year and a statement of its current financial
condition. He shall perform such other duties as these By-laws or the board of
directors prescribe.
<PAGE>
ARTICLE IX
INDEMNIFICATION
Section 1. Indemnification of Directors and Officers. The corporation shall
indemnify any director or officer or former director or officer against expenses
actually and reasonably incurred by him (and for which he is not covered by
insurance) in connection with the defense of any action, suit or proceeding
(unless such action, suit or proceeding is settled) in which he is made a party
by reason of being or having been such director or officer, except in relation
to matters as to which he shall be adjudged in such action, suit or proceeding,
to be liable for negligence or misconduct in the performance of his duties. The
corporation may also reimburse any director or officer or former director or
officer for the reasonable costs of settlement of any such action, suit or
proceeding, if it shall be found by a majority of the directors not involved in
the matter in controversy (whether or not a quorum) that it was to the interest
of the corporation that such settlement be made and that such director or
officer was not guilty of negligence or misconduct. Such rights of
indemnification and reimbursement shall not be exclusive of any other rights to
which such director or officer may be entitled under any By-law, agreement, vote
of members or otherwise.
ARTICLE X
MISCELLANEOUS
Section 1. Fiscal Year. I he fiscal year of the corporation begins on the
first day of January of each year and ends on the thirty-first day of December
of the same year.
Section 2. Execution of Instruments. Except as may otherwise be provided by
resolution of the board of directors or executive committee, all contracts,
bills of sale, deeds, mortgages, leases, and other similar instruments, as well
as all policies of insurance and annuity contracts of the corporation, shall be
signed by the chairman of the board or by the president. The secretary, or an
assistant secretary, shall affix the corporate seal and attest the same.
Section 3. Checks. All checks, drafts, notes and other instruments calling
for the payment of money by or to the corporation shall be executed or endorsed
by the officers who the board of directors or executive committee shall specify
by resolution.
Section 4. Bonds and Insurance. All officers, employees and other persons
who have control of or access to the moneys, securities or properties of the
company shall be bonded with adequate surety. Fire, casualty and other insurance
shall also be carried for the protection of the company, its personnel and
property.
<PAGE>
The sufficiency of sureties on all bonds, the contingencies insured against in
such bonds and insurance policies and the amount thereof shall be in compliance
with the requirements of law. A report showing the status of such bonds and
hazard insurance shall be submitted to the board of directors at each annual
meeting.
ARTICLE XI
AMENDMENTS
Section 1. Amendments to By-laws. The power to make, alter, amend or repeal
all or any part of these By-laws is vested in the board of directors, and the
affirmative vote of a majority of all the members of the board of directors
shall be necessary to effect any such change in these By-laws.
- --------------------------------------------------------------------------------
EXHIBIT 10.1
CONSENT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Consent of Independent Accountants
December 30, 1998
We consent to the inclusion in this prospectus for the "AUL Flexible Premium
Deferred Variable Annuity" of our report dated Feburary 27, 1998, on our audits
of the financial statements of American United Life Insurance Company. We also
consent to the reference to our firm under the caption "Independent
Accountants."
/s/ PricewaterhouseCoopers LLP
- --------------------------------------------------------------------------------
EXHIBIT 10.3
POWERS OF ATTORNEY
- --------------------------------------------------------------------------------
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
_/s/ Steven C. Beering
Steven C. Beering, M.D.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ Arthur L. Bryant
Arthur L. Bryant
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ James M. Cornelius
James M. Cornelius
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ James E. Dora
James E. Dora
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ Otto N. Frenzel III
Otto N. Frenzel III
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
/s/ David W. Goodrich
David W. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ William P. Johnson
William P. Johnson
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/1/97
/s/ James T. Morris
James T. Morris
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ James W. Murphy
James W. Murphy
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/25/97
/s/ R. Stephen Radcliffe
R. Stephen Radcliffe
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
/s/ Thomas E. Reilly, Jr.
Thomas E. Reilly, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
/s/ William R. Riggs
William R. Riggs
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/25/97
/s/ Jerry D. Semler
Jerry D. Semler
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ Yvonne H. Shaheen
Yvonne H. Shaheen
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
/s/ Frank D. Walker
Frank D. Walker
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EXHIBIT 13
COMPUTATION OF PERFORMANCE QUOTATIONS
- --------------------------------------------------------------------------------
These figures are only intended to demonstrate the method by which
performance is calculated.
Computation of Performance Quotations
1. Current Yield for the Money Market Investment Account:
As stated in the Statement of Additional Information, current yield for the
Money Market Investment Account will be based on the seven day period
ending December 31, 1995, and is computed by determining the net change in
the value of a hypothetical investment (exclusive of capital charges) of a
pre-existing account having a balance of one Accumulation Unit at the
beginning of the period [.00122658], subtracting a hypothetical charge
reflecting deductions from contractowner accounts [.00026033], and dividing
the difference by the value of the account at the beginning of the base
period [$1.188087] to obtain the base period return [.0008132827], and then
multiplying the base period return by (365/7) with the resulting yield
figure carried to at least the nearest hundredth of one percent [.000813 x
365/7] = .04240 or 4.24%.
2. Effective Yield for the Money Market Investment Account is based on the
seven day period ending December 31, 1995, carried to at least the nearest
hundredth of one percent, computed by determining the net change, exclusive
of capital charges, in the value of a hypothetical pre-existing account
having a balance of one Accumulation Unit at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from contractowner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding "1", raising the sum to a
power equal to 365 divided by 7, and subtracting "1" from the result,
pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)365/7] -1
Effective Yield = [(.000813 + 1)365/7] -1
Effective Yield = [(1.000813)365/7] -1
Effective Yield = 1.043301 - 1 = 0.04330 or 4.33%
3. Yield Calculations
(a) For the Equity Investment Account:
For the year ending December 31, 1995, yield is based on a 30 day period
ending December 31, 1995, and is computed by dividing the net investment
income per Accumulation Unit earned during the period by the maximum
offering price per unit on December 31, 1995, according to the following
formula:
Yield = 2[(a-b/cd +1)6 -1]
where "a" = net investment income earned during the period attributable to
shares owned by the Investment Account;
"b" = expenses accrued for the period (net of reimbursements);
"c" = the average daily number of Accumulation Units outstanding during
the period; and
"d" = the maximum offering price per Accumulation Unit on December 31,
1994.
For the Equity Investment Account:
According to the formula stated above, where:
"a" = $1,500.19 "b" = $1,030.97 "c" = 165,948.550 and "d" = $1.7904
Yield = 2[(469.22/297,116.44 + 1)**6 -1]
Yield = 2[(1.001579246)**6 -1]
Yield = 2[.009512966] = 0.019026 or 1.90%
<PAGE>
(b) For the Bond Investment Account:
According to the formula stated in 3(a) above, where:
"a" = $2,370.58 "b" = $497.41 "c" = 80,017.660 and "d" = $1.5995
Yield = 2[(1,873.17/127,988.49)**6 -1]
Yield = 2[(1.014635457)**6 -1]
Yield = 2[.091089081] = 0.182178 or 18.22%
(c) For the Managed Investment Account:
According to the formula stated in 3(a) above, where:
"a" = $1,901.34 "b" = $683.35 "c" = 111,742.950 and "d" = $1.6643
Yield = 2[(1,217.99/185,977.59 + 1)**6 -1]
Yield = 2[(1.006549122)**6 -1]
Yield = 2[.039943745] = 0.079887 or 7.99%
(d) For the Tactical Asset Allocation Investment Account:
According to the formula stated in 3(a) above, where:
"a" = $273.20 "b" = $43.00 "c" = 11,803.110 and "d" = $5.2972
Yield = 2[(230.20/62,523.13 + 1)**6 -1]
Yield = 2[(1.00368184)**6 -1]
Yield = 2[.02229537] = 0.044591 or 4.46%
For the Individual Flexible Premium Deferred Variable Annuity
4. Quotations of average annual total return for an Investment Account will be
expressed in terms of the compounded rate of return of a hypothetical
investment in the Investment Account for periods of one, five, and ten
years, or since the Fund's inception, if less. The average annual total
return for an Investment Account will be calculated pursuant to the
following formula: P (1 + T)n = ERV (where P = a hypothetical initial
payment of $1,000, T = the total return, n = the number of years, and ERV =
the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.) All total return figures reflect the deduction of
a proportional share of Investment Account expenses on an annual basis, and
assume that all dividends and distributions are reinvested when paid.
FOR THE YEAR ENDING DECEMBER 31, 1997
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,150; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1495 or 14.95%
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $957; and n = 1
ERV = $1,000 (1 + T)*1
T = -0.0433 or (4.33%)
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $931; and n = 1
ERV = $1,000(1 + T)**1
T = -0.0693 or (6.93%)
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,073; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0729 or 7.29%
<PAGE>
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,044; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0437 or 4.37%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,095; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0953 or 9.53%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $990; and n = 1
ERV = $1,000 (1 + T)**1
T = -0.0105 or (1.05%)
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,070; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0702 or 7.02%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,177; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1771 or 17.71%
(j) For the American Century VP Capital Appreciation, according to the
formula expressed above, where:
P = $1,000; ERV = $858; and n = 1
ERV = $1,000 (1 + T)**1
T = -0.1418 or (14.18%)
(k) For the American Century VP International, according to the formula
expressed above, where:
P = $1,000; ERV = $1,052; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0524 or 5.24%
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,136; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1363 or 13.63%
(m) For the Fidelity Contra Fund Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,101; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1012 or 10.12%
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,115; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1154 or 11.54%
(o) For the Calvert Social Mid Cap Growth Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,096; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0965 or 9.65%
(p) For the T. Rowe Price Equity Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,142; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1429 or 14.29%
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
FOR THE FIVE YEAR PERIOD ENDING DECEMBER 31, 1997
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,900; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1370 or 13.70%
<PAGE>
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,211; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0393 or 3.91%
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,072; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0140 or 1.40%
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,576; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0953 or 9.53%
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,677; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1089 or 10.89%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,000; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1487 or 14.87%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,692; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1109 or 11.09%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,609; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0998 or 9.98%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, wherer:
P = $1,000; ERV = $2,144; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1648 or 16.48%
(j) For the American Century VP Capital Appreciation Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,156; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0295 or 2.95%
(k) For the American Century VP International Investment Account has not
been in operation for the relevant time period.
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,191; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1698 or 16.98%
(m) The Fidelity Contra Fund Investment Account has not been in operation
for the relevant time period.
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,112; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1613 or 16.13%
(o) For the Calvert Capital Accumulation Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,569; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0943 or 9.43%
(p) The T. Rowe Price Equity Income Investment Account has not been in
operation for the relevant time period.
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
<PAGE>
FOR THE TEN YEAR PERIOD ENDING DECEMBER 31, 1997 OR FROM INCEPTION,
IF LESS
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $2,524; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.1274 or 12.74%
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,610; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.0636 or 6.36%
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,191; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.0229 or 2.29%
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $2,054; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.0977 or 9.77%
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,860; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1108 or 11.08%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $4,185; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1539 or 15.39%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,125; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0783 or 7.83%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,348; and n = 8.3167
ERV = $1,000 (1 + T)**8.3167
T = 0.1081 or 10.81%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,314; and n = 5.3468
ERV = $1,000 (1 + T)**5.3468
T = 0.1699 or 16.99%
(j) For the American Century VP Capital Appreciation Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,973; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0703 or 7.03%
(k) The American Century International Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,274; and n = 3.6640
ERV = $1,000 (1 + T)**3.6640
T = 0.0684 or 6.84%
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $4,021; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1493 or 14.93%
<PAGE>
(m) For the Fidelity Contra Fund Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,911; and n = 2.9973
ERV = $1,000 (1 + T)**2.9973
T = 0.2412 or 24.12%
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $4,158; and n = 8.9785
ERV = $1,000 (1 + T)**8.9785
T = 0.1720 or 17.20%
(o) For the Calvert Social Mid Cap Growth Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,932; and n = 6.4597
ERV = $1,000 (1 + T)**6.4597
T = 0.1073 or 10.73%
(p) For the T. Rowe Price Equity Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,952; and n = 3.7527
ERV = $1,000 (1 + T)**3.7527
T = 0.1962 or 19.62%
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
For the Individual One Year Flexible Premium Deferred Variable Annuity
5. Quotations of average annual total return for an Investment Account will be
expressed in terms of the compounded rate of return of a hypothetical
investment in the Investment Account for periods of one, five, and ten
years, or since the Fund's inception, if less. The average annual total
return for an Investment Account will be calculated pursuant to the
following formula: P (1 + T)n = ERV (where P = a hypothetical initial
payment of $1,000, T = the total return, n = the number of years, and ERV =
the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period.) All total return figures reflect the deduction of
a proportional share of Investment Account expenses on an annual basis, and
assume that all dividends and distributions are reinvested when paid.
FOR THE YEAR ENDING DECEMBER 31, 1997
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,188; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1879 or 18.79%
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $989; and n = 1
ERV = $1,000 (1 + T)*1
T = -0.0115 or (1.15%)
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $962; and n = 1
ERV = $1,000(1 + T)**1
T = -0.0382 or (3.82%)
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,109; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1086 or 10.86%
<PAGE>
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,079; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0785 or 7.85%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,132; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1318 or 13.18%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,023; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0225 or 2.25%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,106; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1059 or 10.59%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,216; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2163 or 21.63%
(j) For the American Century VP Capital Appreciation, according to the
formula expressed above, where:
P = $1,000; ERV = $887; and n = 1
ERV = $1,000 (1 + T)**1
T = -0.1133 or (11.33%)
(k) For the American Century VP International, according to the formula
expressed above, where:
P = $1,000; ERV = $1,087; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0874 or 8.74%
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,174; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1743 or 17.43%
(m) For the Fidelity Contra Fund Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,138; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1378 or 13.78%
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,153; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1526 or 15.26%
(o) For the Calvert Social Mid Cap Growth Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,133; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1330 or 13.30%
(p) For the T. Rowe Price Equity Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,181; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1811 or 18.11%
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
FOR THE FIVE YEAR PERIOD ENDING DECEMBER 31, 1997
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,960; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1441 or 14.41%
<PAGE>
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,250; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0457 or 4.57%
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,106; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0203 or 2.03%
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,627; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1022 or 10.22%
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,730; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1159 or 11.59%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,064; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1560 or 15.60%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,746; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1179 or 11.79%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,661; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1068 or 10.68%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, wherer:
P = $1,000; ERV = $2,213; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1722 or 17.22%
(j) For the American Century VP Capital Appreciation Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,193; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0359 or 3.59%
(k) For the American Century VP International Investment Account has not
been in operation for the relevant time period.
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,261; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1772 or 17.72%
(m) The Fidelity Contra Fund Investment Account has not been in operation
for the relevant time period.
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,179; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1686 or 16.86%
(o) For the Calvert Capital Accumulation Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,619; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1012 or 10.12%
(p) The T. Rowe Price Equity Income Investment Account has not been in
operation for the relevant time period.
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
<PAGE>
FOR THE TEN YEAR PERIOD ENDING DECEMBER 31, 1997 OR FROM INCEPTION,
IF LESS
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $2,602; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.1319 or 13.19%
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,659; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.0678 or 6.78%
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,229; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.0271 or 2.71%
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $2,117; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.1021 or 10.21%
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,888; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1119 or 11.19%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $4,229; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1551 or 15.51%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,191; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0816 or 8.16%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,420; and n = 8.3167
ERV = $1,000 (1 + T)**8.3167
T = 0.1121 or 11.21%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,388; and n = 5.3468
ERV = $1,000 (1 + T)**5.3468
T = 0.1768 or 17.68%
(j) For the American Century VP Capital Appreciation Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,991; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0713 or 7.13%
(k) The American Century International Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,315; and n = 3.6640
ERV = $1,000 (1 + T)**3.6640
T = 0.0777 or 7.77%
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $4,063; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1505 or 15.05%
<PAGE>
(m) For the Fidelity Contra Fund Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,975; and n = 2.9973
ERV = $1,000 (1 + T)**2.9973
T = 0.2550 or 25.50%
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $4,245; and n = 8.9785
ERV = $1,000 (1 + T)**8.9785
T = 0.1747 or 17.47%
(o) For the Calvert Social Mid Cap Growth Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,992; and n = 6.4597
ERV = $1,000 (1 + T)**6.4597
T = 0.1126 or 11.26%
(p) For the T. Rowe Price Equity Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $2,022; and n = 3.7527
ERV = $1,000 (1 + T)**3.7527
T = 0.2064 or 20.64%
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
For both the Individual Flexible Premium Deferred Variable Annuity Contract and
the Individual One Year Flexible Premium Deferred Variable Annuity Contract
6. Quotations of average annual total return for an Investment Accountant will
be expressed in terms of the compounded rate of return of a hypothetical
investment in the Investment Account for periods of one, five, and ten years,
or since the Fund's inception, if less. The average annual total return for
an Investment Account will be calculated pursuant to the following formula:
P (1 +T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the
total return, n = the number of years, and ERV = the ending redeemable value
of a hypothetical $1,000 payment made at the beginning of the period, but not
including the surrender charge, which is a maximum of 10% for the Individual
Flexible Premium Deferred Variable Annuity Contract and 7% for the One Year
Flexible Premium Deferred Variable Annuity Contract). All total return
figures reflect the deduction of a proportional share of Investment Account
expenses on an annual basis, and assume that all dividends and distributions
are reinvested when paid.
FOR THE YEAR ENDING DECEMBER 31, 1997
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,281; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2811 or 28.11%
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,066; and n = 1
ERV = $1,000 (1 + T)*1
T = 0.0661 or 6.61%
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,037; and n = 1
ERV = $1,000(1 + T)**1
T = 0.0373 or 3.73%
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,196; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1956 or 19.56%
<PAGE>
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,163; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1632 or 16.32%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,221; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2207 or 22.07%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,103; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1028 or 10.28%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,193; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1927 or 19.27%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,312; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3118 or 31.18%
(j) For the American Century VP Capital Appreciation, according to the
formula expressed above, where:
P = $1,000; ERV = $956; and n = 1
ERV = $1,000 (1 + T)**1
T = -0.0436 or (4.36%)
(k) For the American Century VP International, according to the formula
expressed above, where:
P = $1,000; ERV = $1,173; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1728 or 17.28%
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,266; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2665 or 26.65%
(m) For the Fidelity Contra Fund Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,227; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2272 or 22.72%
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,243; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2430 or 24.30%
(o) For the Calvert Social Mid Cap Growth Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,222; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2220 or 22.20%
(p) For the T. Rowe Price Equity Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,274; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2738 or 27.38%
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
FOR THE FIVE YEAR PERIOD ENDING DECEMBER 31, 1997
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $2,053; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1547 or 15.47%
<PAGE>
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,309; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0553 or 5.53%
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,158; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0297 or 2.97%
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,702; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1122 or 11.22%
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,811; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1261 or 12.61%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,161; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1666 or 16.66%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,827; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1281 or 12.81%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,738; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1169 or 11.69%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, wherer:
P = $1,000; ERV = $2,341; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1854 or 18.54%
(j) For the American Century VP Capital Appreciation Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,249; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.0454 or 4.54%
(k) For the American Century VP International Investment Account has not
been in operation for the relevant time period.
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,365; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1879 or 18.79%
(m) The Fidelity Contra Fund Investment Account has not been in operation
for the relevant time period.
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,280; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1793 or 17.93%
(o) For the Calvert Capital Accumulation Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,694; and n = 5
ERV = $1,000 (1 + T)**5
T = 0.1112 or 11.12%
(p) The T. Rowe Price Equity Income Investment Account has not been in
operation for the relevant time period.
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
<PAGE>
FOR THE TEN YEAR PERIOD ENDING DECEMBER 31, 1997 OR FROM INCEPTION,
IF LESS
(a) For the Equity Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $2,720; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.1384 or 13.84%
(b) For the Bond Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $1,735; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.0740 or 7.40%
(c) For the Money Market Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,285; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.0330 or 3.30%
(d) For the Managed Investment Account, according to the formula expressed
above, where:
P = $1,000; ERV = $2,215; and n = 7.7194
ERV = $1,000 (1 + T)**7.7194
T = 0.1085 or 10.85%
(e) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,975; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1152 or 11.52%
(f) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $4,358; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1586 or 15.86%
(g) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,234; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0837 or 8.37%
(h) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,487; and n = 8.3167
ERV = $1,000 (1 + T)**8.3167
T = 0.1158 or 11.58%
(i) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,481; and n = 5.3468
ERV = $1,000 (1 + T)**5.3468
T = 0.1852 or 18.52%
(j) For the American Century VP Capital Appreciation Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $2,051; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0745 or 7.45%
(k) The American Century International Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,387; and n = 3.6640
ERV = $1,000 (1 + T)**3.6640
T = 0.0933 or 9.33%
(l) For the Fidelity Equity Income Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $4,188; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1540 or 15.40%
<PAGE>
(m) For the Fidelity Contra Fund Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,102; and n = 2.9973
ERV = $1,000 (1 + T)**2.9973
T = 0.2812 or 28.12%
(n) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $4,360; and n = 8.9785
ERV = $1,000 (1 + T)**8.9785
T = 0.1782 or 17.82%
(o) For the Calvert Social Mid Cap Growth Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $2,056; and n = 6.4597
ERV = $1,000 (1 + T)**6.4597
T = 0.1180 or 11.80%
(p) For the T. Rowe Price Equity Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $2,132; and n = 3.7527
ERV = $1,000 (1 + T)**3.7527
T = 0.2235 or 22.35%
(q) The PBHG Growth Investment Account has not been in operation for the
relevant time period.
(r) The PBHG Technology and Communication Investment Account has not been
in operation for the relevant time period.
