File No. 2-27832
As filed with the Securities and Exchange Commission on May 2, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE
[X] SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 40
and/or
REGISTRATION STATEMENT UNDER THE
[X] INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 40
(Check appropriate box or boxes)
AMERICAN UNITED LIFE POOLED EQUITY FUND B
(Exact Name of Registrant)
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Name of Depositor)
One American Square, Indianapolis, Indiana 46204
(Address of Depositor's Principal Executive Offices)(Zip Code)
Depositor's Telephone Number: (317) 263-1877
Richard A. Wacker, One American Square, Indianapolis, Indiana 46204
(Name and Address of Agent for Service)
Title of Securities Being Registered: Interests in group 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
X on May 1, 1996 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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2
AMERICAN UNITED LIFE POOLED EQUITY FUND B
CROSS REFERENCE SHEET ON FORM N-3
Pursuant to Rule 404(c) and Item 501 of Regulation S-X
Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information Required by Form N-3
Item Number Location Location Location
and Caption in Part A in Part B in Part C
- - ----------- --------- --------- ---------
1. Prospectus Cover Page --- ---
2. Definitions 3-4 --- ---
3. Expense Summary and Synopsis 5-6 --- ---
4. Condensed Financial Information 7 --- ---
5. Description of AUL and Fund B 8-10 --- ---
6. Management of Fund B 10 --- ---
7. Condensed Financial Information 7,11 --- ---
8. Deductions and Expenses; Voting and Other
Rights Under the Variable Annuity
Contracts; Table of Contents for the
Statement of Additional Information 11-14, 25 --- ---
9. Definitions; Annuity Period 3-4, 4-16 --- ---
10. Return of Accumulated Value in the
Event of Death 16 --- ---
11. Purchases and Contract Values 16-18 --- ---
12. Redemptions 18-19 --- ---
13. Federal Tax Status 20-23 --- ---
14. Legal Proceedings 23 --- ---
15. Table of Contents for the Statement of
Additional Information 25 2 ---
16. Statement of Additional Information --- Cover Page ---
17. Table of Contents for the Statement of
Additional Information 25 2 ---
18. Not Applicable --- --- ---
19. Description of AUL and Fund B; Investment
Objectives and Policies --- 3 ---
20. Management of Fund B; Investment Advisory
and Other Services --- 3-4 ---
21. Deductions and Expenses; Investment
Advisory and Other Services --- 4-5 ---
22. Brokerage --- 5 ---
23. Purchases and Contract Values; Purchase
and Pricing of Securities Being Offered 16-18 5 ---
24. Investment Advisory and Other Services;
Underwriters --- 4-6 ---
25. Not Applicable --- --- ---
26. Annuity Period; Annuity Payments and
Other Calculations 14-16 6 ---
27. Financial Statements --- 7-23 ---
28. Financial Statements and Exhibits --- --- 1-2
29. Directors and Officers of American
United Life Insurance Company(R) --- --- 2-6
30. Persons Controlled or Under Common Control of
American United Life Insurance Company(R) --- --- 6
31. Number of Contractowners --- --- 6
32. Indemnification of Directors and Officers --- --- 6-7
33. Business and Other Connections of Officers
and Directors of American United Life
Insurance Company(R) --- --- 7
34. Principal Underwriter and Compensation --- --- 7
35. Location of Accounts and Records --- --- 7
36. Management Services --- --- 7
37. Undertakings --- --- 7
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1
American United Life Pooled Equity Fund B
GROUP VARIABLE ANNUITY CONTRACTS
Sold By
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46204
(317) 263-1877
American United Life Pooled Equity Fund B is primarily a common stock fund.
This Prospectus offers information about American United Life Pooled Equity Fund
B ("Fund B") that a prospective investor should know before investing.
Additional information about Fund B is contained in a Statement of Additional
Information dated May 1, 1996, which has been filed with the Securities and
Exchange Commission ("Commission"). A Statement of Additional Information is
available upon request by mailing the Business Reply Mail card located in the
back of this Prospectus to AUL. A Table of Contents for the Statement of
Additional Information is located on page 25 of this Prospectus.
Group variable contracts described in this Prospectus are offered to (i)
employees of tax exempt or public school organizations with a 403(b) Program
(tax deferred annuities); (ii) employees of employers with 401 Employee Benefit
Plans or 408 Programs (Individual Retirement Annuities); and (iii) employers
that are units of state or local government with 457 deferred compensation
plans.
Participants should read this Prospectus and keep it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dated: May 1, 1996
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Table of Contents
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Page
Definitions................................. 3-4
Expense Summary............................. 5
Synopsis.................................... 5-6
Condensed Financial Information............. 7
Description of AUL and Fund B............... 8-10
American United Life..................... 8
Fund B................................... 8
Investment Objectives and Policies....... 8
Management of Fund B........................ 10
Deductions and Expenses..................... 11-13
Sales and Administrative Services........ 11
Investment Management Services........... 11
Mortality and Expense Risk Charges....... 12
Deductions for Premium Taxes............. 12
Participation............................ 12
Amendments............................... 12
Voting and Other Rights Under
The Variable Annuity Contracts........... 13-14
Annuity Period.............................. 14-16
Variable Retirement Annuity.............. 14
Optional Variable Annuity
Settlements............................ 14
The Annuity Unit......................... 15
Amount of Variable Retirement
Annuity................................ 15
Return of Accumulated Value in the
Event of Death........................... 16
Purchases and Contract Values............... 16-18
Purchase Limits.......................... 16
Accumulation Units....................... 16
Value of Accumulation Unit............... 17
Net Investment Factor.................... 17
Valuation of Assets...................... 17
Redemptions................................. 18-19
Redemption (Withdrawal).................. 18
Constraints on Distributions From
Section 403(b) Annuity
Contracts.............................. 19
Right of Cancellation.................... 19
Texas Optional Retirement
Program................................ 19
Federal Tax Status.......................... 20-23
Introduction............................. 20
Tax Status of the Company and
the Variable Account................... 20
Tax Treatment of Retirement
Programs............................... 20
Employee Benefit Plans................... 21
403(b) Programs.......................... 21
408 Programs............................. 22
457 Programs............................. 22
Tax Penalty.............................. 22
Withholding.............................. 23
Legal Proceedings........................... 23
Historical Record........................... 24
Table of Contents for the Statement
of Additional Information................ 25
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DEFINITIONS
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Various terms commonly used in this Prospectus are defined as follows:
ACCUMULATION PERIOD - The period before annuity payments begin.
ACCUMULATION UNIT - A share of Fund B expressed in dollars used to measure the
value of a Fund B Participant's account before annuity payments commence.
ANNUITANT - The person on whose life annuity payments depend.
ANNUITY - A series of payments during the period specified in the annuity
settlement.
ANNUITY COMMENCEMENT DATE - The first day of any month during which annuity
payments begin, as provided in the Group Contract or Employee Benefit Plan,
provided however that the date shall not be later than the required beginning
date as defined in the applicable section of the Internal Revenue Code and the
Code of Federal Regulations.
ANNUITY UNIT - A share of Fund B expressed in dollars used to measure the
amount of annuity payments.
COMPANION CONTRACT - A fixed dollar annuity Group Contract issued by AUL to a
Contract-holder for the benefit of the same employees covered by the Group
Contract of such Contract-holder.
CONTRACTHOLDER - A party to a Group Contract on behalf of itself as an
employer or on behalf of other employers.
EMPLOYEE BENEFIT PLAN - A pension or profit sharing plan established by an
employer for the benefit of its employees which plan is qualified or designed to
be qualified under Section 401 of the Internal Revenue Code. (See Federal Tax
Status, pages 20-23.)
EMPLOYER - A tax exempt or public school organization or other employer with
respect to which a Group Contract has been entered into for the benefit of its
employees. In some cases, the Custodian of a Trust may act as the
Contract-holder for Participants. In this case, rights usually reserved to the
Employer will be exercised either directly by the Employees or through such
Custodian who will act as the agent of such Employees.
EMPLOYER'S PARTICIPANT ACCOUNT - The sum of Accumulation Units credited to the
employer as a result of Net Payments to Fund B under a Group Contract for use
with an Employee Benefit Plan.
FIXED DOLLAR ANNUITY - An annuity providing for payments fixed in amount and
which do not vary with investment experience.
GROUP CONTRACT - A group variable annuity contract between a Contractholder
and AUL which calls for the deposit of Net Payments in Fund B.
HR-10 PLAN - An Employee Benefit Plan established by a self-employed person in
accordance with the Self-employed Individuals Tax Retirement Act of 1962 and
Section 401 of the Internal Revenue Code, as amended.
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4
NET PAYMENT - The difference between a payment and the deduction of the 6% or
4% (as the case may be) payment to AUL for its sales and administrative
services.
PARTICIPANT - Any natural person and any employer having an interest in Fund
B.
PARTICIPANT'S INDIVIDUAL ACCOUNT - The sum of the Accumulation Units credited
to a Participant as a result of Net Payments made to Fund B by him or on his
behalf under a Group Contract.
PAYMENT - Any payment made by a Participant or by an employer on behalf of a
Participant under a 403(b) Program, a 408 Program, an Employee Benefit Plan, or
by an employer in connection with a 457 deferred compensation plan.
SEGREGATED INVESTMENT ACCOUNT - A separate account (such as Fund B) authorized
by law which is not chargeable with the liabilities arising out of any business
of AUL other than its contracts under which payments are made into and out of
such account.
VALUATION PERIOD - A period beginning immediately after a valuation of Fund B
and ending with the next valuation of Fund B. Valuations will occur as of the
close of trading on the New York Stock Exchange on each day during which the
Exchange is open for trading provided AUL is open for business. Traditionally,
in addition to federal holidays, AUL is not open for business on the the day
after Thanksgiving and either the day before or after Christmas or Independence
Day.
VARIABLE ANNUITY - An annuity providing for payments which vary in amount in
accordance with the investment experience of a Segregated Investment Account.
403(B) PROGRAM - An arrangement by a tax-exempt or public school organization
to permit its employees to take advantage of the federal income tax deferral
benefits provided for in Section 403(b) of the Internal Revenue Code.
408 PROGRAM - A plan established by or on behalf of an individual in
accordance with Section 408 of the Internal Revenue Code.
457 PROGRAM - A plan established by a unit of state or local government under
Section 457 of the Internal Revenue Code. An employer who shall have set up such
a program is referred to as a 457 Employer.
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5
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EXPENSE SUMMARY
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Contract Owner or Participant
Transaction Expenses:
Sales Load Imposed on Purchases 6%*
(as a percentage of purchase payments)
Deferred Sales Load NONE
Surrender Fees NONE
Exchange Fee NONE
Annual Contract Fee: NONE
*This charge is reduced to 4% when a Participant's total contributions exceed
$5,000.
Annual Expenses:
(as a percentage of average net assets)
Management Fees 0.3%
Mortality and Expense Risk Fees 0.9%
Other Expenses NONE
Total Annual Expenses 1.2%
<TABLE>
<CAPTION>
Example: 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Whether or not a contract is annuitized or
surrendered at the end of the applicable time period,
you would pay the following expenses on a $1,000 in-
vestment, assuming a 5% annual return on assets:
$71.50 $95.80 $121.96 $196.43
</TABLE>
The purpose of these tables is to assist a Contract Owner or Participant in
understanding the various costs and expenses that are paid, either directly or
indirectly. These deductions and expenses are further described in the
Prospectus in the section "Deductions and Expenses." Depending on the state of
residence of the Participant, there may be an additional charge for premium
taxes which AUL is required to withhold. The examples above should not be
considered representations of past or future expenses or returns and actual
expenses may be greater or less than those shown.
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SYNOPSIS
- - --------------------------------------------------------------------------------
Group variable contracts described in this Prospectus are offered to (i)
employees of tax exempt or public school organizations with a 403(b) Program
("tax deferred annuities"); (ii) employees of employers with 401 Employee
Benefit Plans or 408 Programs ("Individual Retirement Annuities"); and (iii)
employers that are units of state or local government with 457 deferred
compensation plans. In order to fund such plans, the employer has entered into a
group variable annuity contract ("Group Contract") with American United Life
Insurance Company(R) ("AUL"). Pursuant to a properly completed application, a
variable annuity may be purchased through employer payments ($120 or $300 per
year minimum depending on the type of contract selected) under a 403(b), 408 or
457 Program or by means of employee and employer payments under a 401 Employee
Benefit Plan or 408 Program.
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6
Variable annuities such as those described in this Prospectus are designed
to provide Participants with annuity payments that, unlike fixed dollar annuity
payments, vary with the investment performance of the assets of Fund B. Since
the assets are invested, for the most part, in common stocks, the value of the
investments of Fund B will fluctuate and are subject to all of the risks of
changing economic and market conditions. The type, identity and timing involved
in the purchase and sale of the securities which make up the Fund B portfolio
will also have a major impact on the overall performance experienced by the
Fund. At the time an annuity is taken, a Participant will be able to choose
among several different options. These are more fully described under "Optional
Variable Annuity Settlements."
American United Life Pooled Equity Fund B ("Fund B") was established by AUL
as a Segregated Investment Account under provisions of the Indiana Insurance
Law. Under that law, Fund B is not chargeable with any liabilities except those
arising under the Group Contracts described in this Prospectus. Other charges
and expenses associated with Fund B, including charges for Sales and
Administrative Services, Investment Management Services, and Mortality and
Expense Risk Charges, are discussed in the section titled "Deductions and
Expenses." No fee or other deduction is charged by AUL upon withdrawal or
transfer of an account or payment of benefits except premium taxes levied by the
state of residence of the Participant, if any.
Under the Investment Company Act of 1940, Fund B is registered as an
open-end, diversified management investment company. Such registration does not
involve supervision of the management or investment practices of Fund B or AUL
by the Securities and Exchange Commission.
The principal investment objective of Fund B is the selection of
investments for long-term growth of capital. A secondary investment objective is
the production of current income. Investments will be made primarily in common
stocks, but may also include preferred stocks and debentures which may or may
not be convertible into common stocks or be accompanied by warrants for the
purchase of common stock. There may be temporary occasions, however, when the
Board of Managers may determine for defensive purposes that other types of
investments are more advantageous because of general economic conditions or for
other reasons, in which event, investments may be made to some extent in bonds,
notes, or other evidences of indebtedness, including United States Government
securities, issued publicly, of a type customarily purchased for investment by
institutional investors. A complete description of the Investment Objectives and
Policies of Fund B may be found on pages 8-10 of the Prospectus.
A contractholder may cancel the contract no later than ten days after
receiving it by returning it along with a written notice of cancellation to AUL
at its Home Office. See page 19 "Right of Cancellation" in this Prospectus for
details.
Certain rights including voting rights may be associated with being a
"Participant." For a discussion of these and other rights, see pages 13 and 14
of the Prospectus.
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7
<TABLE>
<CAPTION>
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CONDENSED FINANCIAL INFORMATION
PER UNIT INCOME AND CAPITAL CHANGES
IN FUND B ACCUMULATION UNIT
(For an accumulation unit outstanding throughout the year)
- - ---------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income $ .236 $ .194 $ .162 $ .180 $ .197 $ .194 $ .192 $ .160 $ .136 $ .120
Expenses .109 .099 .088 .077 .070 .061 .057 .048 .050 .041
Net investment income .127 .095 .074 .103 .127 .133 .135 .112 .086 .079
Net realized and
unrealized gain (loss)
on investments 1.519 0.069 1.239 .473 1.098 (.385) .903 .310 .133 .459
Net increase (decrease) in
Accumulation Unit Value 1.646 0.164 1.313 .576 1.225 (.252) 1.038 .422 .219 .538
Fund B Accumulation Unit
Value at beginning of year $8.263 $8.099 $6.786 $6.210 $4.980 $5.232 $4.194 $3.772 $3.553 $3.015
Fund B Accumulation Unit
Value at end of year $9.909 $8.263 $8.099 $6.786 $6.205 $4.980 $5.232 $4.194 $3.772 $3.553
Ratio of expenses to
average net assets 1.20% 1.20% 1.19% 1.21% 1.20% 1.21% 1.19% 1.19% 1.21% 1.19%
Ratio of net investment
income to avg. net assets 1.39% 1.16% 1.01% 1.64% 2.16% 2.65% 2.85% 3.97% 2.07% 2.31%
Portfolio turnover rate 20.00% 23.26% 25.4% 11.9% 36.7% 24.8% 24.3% 20.4% 27.0% 6.7%
Number of Accumulation Units
outstanding at end of year
(in thousands): 1,264 1,417 1,518 1,635 1,698 1,784 1,860 2,028 2,124 2,127
<FN>
Investment income and expenses are calculated on the basis of average units
outstanding during the year. Net investment income represents investment income
less expenses.
</FN>
</TABLE>
Other financial information consisting of the financial statements for Fund B
and for AUL is located in the Statement of Additional Information, on pages 7
through 23.
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8
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DESCRIPTION OF AUL
AND FUND B
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AMERICAN UNITED LIFE
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 46 states and the District of Columbia. As a mutual company,
it is owned by and operated exclusively for the benefit of its policyowners. AUL
has its principal business office located at One American Square, Indianapolis,
IN 46204.
AUL conducts a conventional life insurance, reinsurance, and annuity
business. At December 31, 1995, AUL had admitted assets of $6,453,558,834 and a
policyowners' surplus of $289,363,821. With respect to the variable annuities
offered hereunder, the assets of AUL should be considered only as bearing upon
the ability of AUL to meet its obligations under the variable annuity contracts,
since the amounts payable to the Participants will depend upon the investment
performance of Fund B and not on the value of the other assets of AUL.
FUND B
American United Life Pooled Equity Fund B ("Fund B") was established by AUL
on November 20, 1967 as a Segregated Investment Account (See Definitions) under
provisions of the Indiana Insurance Law. Under that law, Fund B is not
chargeable with any liabilities except those arising under the Group Contracts
described in this Prospectus which are fundable and computable as to payments or
benefits on the basis of experience factors of Fund B. By law, any surplus or
deficit which may arise in Fund B by virtue of mortality experience contracted
for by AUL shall be adjusted by withdrawals from or additions to Fund B so that
the assets of Fund B shall always be equal to the assets required to satisfy all
liabilities arising under contracts fundable by Fund B. Income, gains, and
losses from assets allocated to Fund B, whether or not realized, are credited to
or charged against Fund B without regard to other income, gains, or losses of
AUL. Under the Investment Company Act of 1940, Fund B is registered as an
open-end, diversified management investment company. Such registration does not
involve supervision of the management or investment practices of Fund B or AUL
by the Securities and Exchange Commission.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies shown below in Items 1 through 11
are fundamental and may not be changed without approval of Fund B Participants
casting a majority of the votes entitled to be cast. (See "Voting and Other
Rights under the Variable Annuity Contracts.") Although the fundamental
investment policy permits investment in restricted securities and in real
estate, none has been made nor is any contemplated at this time.
1. The principal investment objective of Fund B is the selection of investments
for long-term growth of capital. A secondary investment objective is the
production of current income.
2. Investments will be made primarily in common stocks, but may also include
preferred stocks and debentures which may or may not be con-
<PAGE>
9
vertible into common stocks or be accompanied by warrants for the purchase of
common stock. There may be temporary occasions, however, when the Board of
Managers may determine for defensive purposes that other types of investments
are more advantageous because of general economic conditions or for other
reasons, in which event investment may be made to some extent in bonds, notes or
other evidences of indebtedness, including United States Government
securities, issued publicly, of a type customarily purchased for investment by
institutional investors.
3. Income and realized capital gains will be retained.
4. Fund B assets will be kept fully invested except for reasonable amounts held
in cash or United States Government securities to meet normal contract payments
and held for temporary periods pending investment or for defensive purposes.
5. With respect to 75% of the assets, not more than 5% of the value of Fund B
assets will be invested in securities of any one issuer, except obligations of
the United States Government and instrumentalities thereof.
6. Not more than 10% of the voting securities of any one issuer will be
acquired. Fund B does not propose to concentrate its investments in any
particular industries. In no event will investments in any one industry exceed
25% of the value of Fund B assets.
7. Borrowings will not be made except for temporary or emergency purposes in an
amount not in excess of 5% of the value of the assets of Fund B, but not for
investment purposes.
8. Fund B will not act as an underwriter of securities of other issuers, except
that Fund B may invest up to 10% of the value of its assets (at the time of
investment) in portfolio securities which Fund B might not be free to sell to
the public without registration of such securities under the Securities Act of
1933. If through the appreciation of restricted securities or the depreciation
of unrestricted securities, Fund B should be in a position where more than 10%
of the value of its net assets are invested in illiquid assets, including
restricted securities, and a question arises with respect to liquidity, then,
Fund B will consider appropriate steps to provide adequate flexibility.
9. Real estate will not be purchased or sold as a principal activity. However,
Fund B may invest up to 10% of its assets in real properties.
10. No purchase of commodities or commodity contracts will be made.
11. Loans will not be made except through the acquisition of a portion of an
issue of publicly distributed bonds, debentures or other evidences of
indebtedness of a type customarily purchased by institutional investors.
Additional non-fundamental investment objectives and policies are:
12. Investment will not be made in the securities of a company for the purpose
of exercising management or control.
13. Investment in securities of other investment companies will not be made with
the exception of participation in a money market fund to facilitate the
management of Fund B liquidity. Such investments, together with all other
investments for which market disposition is not readily available, will not
exceed 10% of the value of Fund B, which is acceptable under current federal
securities laws.
14. Short sales of securities will not be made.
15. Purchases will not be made on margin except for such short-term credits as
are necessary for the clearance of transactions.
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10
16. The investments of Fund B are subject to the provisions of the Indiana
Insurance Law of 1935, as amended and will conform to the restrictions found
therein.
Variable annuities such as those described in this Prospectus are designed
to provide Participants with annuity payments that, unlike fixed dollar annuity
payments, vary with the investment performance of the assets in Fund B. Since
the assets are invested, for the most part, in common stocks, the value of the
investments of Fund B will fluctuate and are subject to all of the risks of
changing economic and market conditions. Although the value of a diversified
portfolio of common stocks held for an extended period of time has tended to
rise sufficiently to offset inflation, there have been periods during which the
values of securities have declined while the cost of living has risen. Equally
important to the performance of Fund B is the type, identity and timing involved
in the purchase and sale of the securities which make up the Fund B portfolio.
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MANAGEMENT OF FUND B
- - --------------------------------------------------------------------------------
Fund B is managed by a Board of Managers, consisting of five members. Under
a Management Agreement between Fund B and AUL dated December 20, 1971, and most
recently renewed on May 12,1995, AUL is responsible for managing the investment
and reinvestment of Fund B's assets and for administering its other affairs,
subject to the supervision of Fund B's Board of Managers. The Agreement between
AUL and Fund B provides that AUL will invest the assets of Fund B in accordance
with the investment objectives and policies of Fund B. At least quarterly, AUL
reports its investment decisions and recommendations to the Board of Managers to
allow the Board to perform its responsibility to oversee AUL's activity and
conformity to the objectives and policies of Fund B.
Commencing with the first Annual Meeting of Fund B Participants on May 8,
1970, and at each Annual Meeting of Fund B Participants until May 6, 1994,
successors to the members of the Board of Managers whose terms had expired were
elected to serve for terms of three (3) years and until their successors were
duly elected and qualified. At the Annual Meeting of Participants held on May 6,
1994, a proposal to amend the Rules and Regulations of Fund B was approved by
the Participants. Under the proposal, as approved, an Annual Meeting of Fund B
Participants would not be held in any year when only routine matters were being
considered. The re-election of those members of the Board of Managers who had
previously been elected by the Participants would be considered a routine matter
so long as a majority of the Board has previously been elected by Fund B
Participants. However, a Participants' meeting will be held whenever required by
Federal Securities laws. (See "Voting and Other Rights under the Variable
Annuity Contracts.")
AUL, the investment advisor for Fund B, is an Indiana insurance company
with its Home Office located at One American Square, Indianapolis, Indiana
46204. AUL is registered with the Securities and Exchange Commission as an
investment adviser for Fund B.
AUL furnishes to Fund B all necessary office space, facilities and
equipment and pays the compensation of members of the Board of Managers. Due to
the size of Fund B, the Board of Managers has not felt the need to establish an
Audit Committee, Compensation Committee or Nominating Committee.
<PAGE>
11
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DEDUCTIONS AND EXPENSES
- - --------------------------------------------------------------------------------
SALES AND ADMINISTRATIVE SERVICES
Under the Sales and Administrative Services Agreement between AUL and Fund
B, AUL is obligated to act as the principal underwriter for Fund B and to
perform the sales and administrative services relative to the Group Contracts.
Such services include all services of AUL, its employees, agents and brokers and
include the payment by AUL to such persons of all compensation related to the
sale and administration of such Group Contracts and the payment of other
expenses related thereto including, if applicable, rent, postage, telephone,
travel, stationery, office equipment and supplies and legal, actuarial and
auditing fees. In addition, AUL is obligated under such agreement to pay the
fees of the members of the Board of Managers of Fund B (presently $1,500 per
manager per year, plus $50 expense allowance per meeting attended, and any
member's out of state travel expenses incurred to attend meetings of the Board
of Managers), the fee of the auditors for the annual audit of Fund B, the cost
of preparing and mailing the annual and other regular reports of Fund B to the
Fund B Participants, and the cost of registering the Group Contracts and
variable annuities as required under federal and state securities laws.
For such sales and administrative services, AUL will receive 6% (5% for
sales expense and 1% for administrative expense) of each payment (which equals
6.38% of the amount invested in Fund B) made for or by a Participant under all
Group Contracts until payments totaling $5,000 have been made for or by such
Participant and 4% (3% for sales expense and 1% for administrative expense) of
each payment (which equals 4.17% of the amount invested in Fund B) made in
excess of $5,000 for or by such Participant. The balance of any payment will be
invested in Fund B, and such Participant or his employer, as the case may be,
will be credited with that number of Accumulation Units determined by dividing
such balance by the value of one Accumulation Unit at the end of the Valuation
Period in which the payment is received. The deductions for sales and
administrative expense represent AUL's estimate of the minimal cost it will
incur and contain no specific loading for profit. Recently, however, the
distribution expenses have exceeded the sales charges and administrative
expenses. This excess has been paid by AUL from its general account assets which
consist, in part, of amounts derived from mortality and expense risk charges
received from Fund B. The amounts for sales and administrative services payable
to AUL may be reduced by the participation of the Group Contracts in the
divisible surplus of AUL under certain circumstances described in the Section
titled "Participation" on the following page.
INVESTMENT MANAGEMENT SERVICES
Under the Investment Management Services Agreement between AUL and Fund B,
AUL is obligated to provide investment management services relative to such
Group Contracts and to the assets of Fund B, including the management of such
assets, investment analysis, preparation of investment programs for the approval
or rejection of the Board of Managers, the placing of orders for the purchase
and sale of investments and all other matters normally associated with the
investment management activities of such a fund. For such services, as provided
in both the Group Contracts and Investment Management Services Agreement, AUL
will receive from Fund B a daily fee of .00082% of the value of Fund B. This
amounts to 0.3% on an annual basis.
<PAGE>
12
MORTALITY AND EXPENSE RISK CHARGES
Although variable annuity payments will vary with the investment
performance of Fund B, payments will not be affected by adverse mortality
experience or when the actual expenses of AUL exceed the fees charged by AUL
under the Group Contracts. AUL has agreed to assume the risk (except under the
Fixed Period Option described on page 15 where there is no such risk) that
annuitants, as a class, may live longer than had been estimated. In this case,
payments would continue beyond the period estimated and AUL's expenses could
exceed the fees received from Fund B. For assuming these risks, AUL receives
from Fund B a daily fee of .00164% of the value of Fund B for the mortality
risks and a daily fee of .00082% of the value of Fund B for the expense risks.
These two fees amount to approximately 0.9% on an annual basis and continue to
be charged during the annuity payout period under all of the settlement options
described on pages 14 and 15.
DEDUCTION FOR PREMIUM TAXES
When an annuity is effected (or at the time of purchase if required by a
particular state's law), any applicable premium taxes will be deducted from the
amount to be applied to purchase the annuity or from the amount deposited and
paid over immediately to the state. Presently, such taxes range from .0% to
3.5%. In any given state, the rate may also vary depending on the type of
contract purchased. Since premium tax statutes can be enacted, changed or
repealed by a state's legislature at any time, and since the imposition of a
premium tax will usually be at the time the annuity is commenced, the present
tax rates may not be in effect when the actual premium tax charge is imposed.
PARTICIPATION
Because AUL is a mutual life insurance company, its Group Contracts
participate in the divisible surplus of AUL, according to the annual
determination by AUL of the portion, if any, of the divisible surplus which has
resulted from and accrued on such Group Contracts. Any such portion determined
to be payable will be applied to the benefit of the Participants under such
Group Contracts in one of the following ways (as determined by AUL):
(a) a reduction in the sales and administrative service fee payable to AUL in
the next succeeding year, or
(b) a crediting of additional Accumulation or Annuity Units to the
Participant's accounts. (Such additional units shall be credited without
deductions for sales and administrative service charges.)
Although the Group Contracts so provide for participation, there has been no
divisible surplus to date and there can be no assurance that there will be any
available for payment or payable under such Group Contracts.
AMENDMENTS
AUL cannot amend or change any Group Contract to increase the amount of its
charges for its sales and administrative services, investment advisory services
or mortality risk and expense charges or to affect the annuity purchase rates as
such charges and rates apply to existing Accumulation and Annuity Units or to
Accumulation and Annuity Units which may thereafter be purchased for any
existing Participant under a 403(b) or 408 contract except to the extent that
payments for such Participant in any contract year are in excess of the greater
of either (a) $5,000 or (b) twice the average of all payments for such
Participant for the five contract years preceding
<PAGE>
13
the change (or lesser period if the Participant has not completed five contract
years). Insofar as any payments for such a Participant are in excess of such
amount in any contract year following the change, such payments will be affected
by any amendments of the Group Contract by AUL, but subject to the further
limitation that, during the first five years of a Group Contract, no change or
amendment of any kind may be made by AUL in a Group Contract without the consent
of the Contractholder and, in addition, the consent of all Participants if the
change would adversely affect their rights under the contract (except to conform
the contract to any federal or state statute or rule or regulation of the U.S.
Treasury Department). By agreement and at any time, a 457 employer and AUL may,
unless specifically prohibited by state law, amend any contract provision and
such amendments shall thereafter be binding on all affected Participants,
beneficiaries or contingent annuitants.
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VOTING AND OTHER RIGHTS UNDER
THE VARIABLE ANNUITY CONTRACTS
- - --------------------------------------------------------------------------------
Generally, a Participant or the employer of a Participant, depending on the
type of contract involved, has certain rights associated with the contract.
During the accumulation period, these rights consist of the right to vote at any
meeting of Fund B Participants. A meeting of Participants will be held in any
year when any of the following matters are being considered:
(a) any change in the investment adviser;
(b) any change to any of Fund B's fundamental investment objectives or in any
of the fundamental investment restrictions;
(c) filling a vacancy on the Board of Managers when less than 2/3 of the Man-
agers have been elected by the Participants, or electing members to the
Board of Managers when less than a majority of the Managers have been
elected by the Participants;
(d) any other action requiring Participant approval under the Investment Com-
pany Act of 1940, as amended, or by the Rules and Regulations of Fund B.
In addition to these rights, during accumulation, Participants have an ongoing
right to contribute to or withdraw funds from the account, the right to name and
change the beneficiary, the right to select the annuity settlement option from
those described on pages 14 and 15, and the right to select the date that
payments shall commence. However, the section entitled "Federal Tax Status" on
pages 20-23 should be reviewed for the effect and requirements of current law on
this election.
After a Participant's account has been annuitized, annuitants continue to
have the right to vote on any issue which may be voted on by Participants, as
listed above. After the death of an annuitant, the voting rights of a contingent
payee under a Survivorship Annuity (see page 15) are the same as the annuitant
had. Under some annuity options, all rights under the contract may terminate at
the death of the annuitant.
Each Fund B Participant under a Group Contract may cast one vote for each
Accumulation Unit credited to his account or accounts under such contract. (See
Accumulation Units, pages 16-17). Each variable Annuitant who is receiving
variable annuity payments under a Group Contract may cast that number of votes
equal to (i) the dollar amount of the assets established in Fund B to meet the
annuity obligation relating to such Annuitant divided by (ii) the value of one
Accumulation Unit, determined in
<PAGE>
14
each case as of the valuation date next preceding the Fund B Participant record
date. Fractional votes shall be counted. During the annuity period, the number
of votes will generally decrease. This occurs because the Annuitant has voting
interests attributable to the reserves during the pay-out period.
The Board of Managers may fix a Fund B Participant record date, not more
than 90 days before the date set for any meeting of Fund B Participants, for the
purpose of determining the Fund B Participants entitled to notice of and to vote
at such meeting, and the number of votes each Fund B Participant may cast. If
the Board of Managers does not fix a Fund B Participant record date, the record
date shall be the 90th day before the date of the meeting.
For a description of AUL's right to change the provisions of the contracts,
see the Section entitled "Amendments."
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ANNUITY PERIOD
- - --------------------------------------------------------------------------------
VARIABLE RETIREMENT ANNUITY. Each Participant has an Annuity Commencement
Date (see Definitions) and selects a variable annuity settlement except that in
a 457 Program the Employer shall make the election. Group Contracts provide the
five optional variable annuity settlements described hereinafter. Within limits,
other options may be mutually agreed to between the Participant and AUL. For
403(b), 408 and 457 Programs, the automatic option shall be an annuity payable
during the lifetime of the Annuitant with payments certain for 120 months. For
use with an Employee Benefit Plan, the automatic option shall be an annuity
payable during the lifetime of the Annuitant with payments certain for 120
months or, for a married Annuitant, a joint and survivor annuity. Once annuity
payments have commenced, a Participant cannot surrender his annuity and receive
a lump-sum settlement in lieu thereof. If, under any option, monthly payments
are less than $20 each, AUL has the right to make larger payments at quarterly
or semi-annual intervals. AUL will not allow annuitization of a Participant's
account if the total value is less than $2,000. Should this occur, a Participant
may elect either a lump-sum settlement or may choose to receive the account
balance in installments over a period of 36 months. Participants should
carefully review the following settlement options with their financial or tax
advisers since a settlement option cannot be changed after receipt of the first
payment under that option.
The method of determining the amount of the payments under any option
selected is described under "Amount of Variable Retirement Annuity" on pages
15-16.
OPTIONAL VARIABLE ANNUITY SETTLEMENTS.
OPTION 1 - LIFE ANNUITY. An annuity payable monthly during the lifetime of
the Annuitant which ends with the last monthly payment before the death of
the Annuitant. This option offers the maximum level of monthly payments since
there is no guarantee of a minimum number of payments or provision for a
death benefit for beneficiaries. However, under this option it is possible
that the Annuitant would receive only one annuity payment if he died prior to
the due date of the second annuity payment, two if he died prior to the third
annuity payment, and so forth.
OPTION 2 - CERTAIN AND LIFE ANNUITY. An annuity payable monthly during the
lifetime of
<PAGE>
15
the Annuitant with the promise that if, at the death of the Annuitant,
payments have been made for less than a stated period, which may be five,
ten, fifteen, or twenty years as elected, annuity payments will be continued
during the remainder of such period to the beneficiary designated by the
Annuitant.
OPTION 3 - SURVIVORSHIP ANNUITY. An annuity payable monthly during the
lifetime of the Annuitant and after the death of the Annuitant, an amount
equal to 50%, 66 2/3% or 100% (as specified in the election) of such
annuity will be paid to the contingent Annuitant named in the election if and
so long as such contingent Annuitant lives. An election of this option is
automatically cancelled if either the Participant or the contingent Annuitant
dies prior to the Annuity Commencement Date.
OPTION 4 - UNIT REFUND LIFE ANNUITY. An annuity payable monthly during the
lifetime of the Annuitant, terminating with the last payment due prior to the
death of the Annuitant, provided that, at the death of the Annuitant, the
beneficiary designated by the Annuitant will receive an additional payment of
the then dollar value of a number of Annuity Units (described below) equal to
the excess, if any, of (a) over (b) where (a) is the total amount applied
under the option divided by the Annuity Unit value at the date annuity
payments commence and (b) is the number of Annuity Units represented by each
monthly payment multiplied by the number of monthly payments made. An
illustration of this Settlement Option can be found in the Statement of
Additional Information on page 6.
OPTION 5 - FIXED PERIODS. An annuity payable monthly for a fixed period (not
to exceed 30 years) as elected, with the guarantee that if, at the death of
the Annuitant, payments have been made for less than the contracted fixed
period, annuity payments will be continued during the remainder of said
period to the beneficiary designated by the Annuitant.
THE ANNUITY UNIT. The value of an Annuity Unit was established at $1 on
April 3, 1969. The value of the Annuity Unit at the end of any current Valuation
Period is determined by multiplying the value of an Annuity Unit at the end of
the next preceding Valuation Period by the product of (a) the Net Investment
Factor (see page 17) for the current Valuation Period and (b) 0.9999058 for each
calendar day in such current Valuation Period. This daily factor neutralizes the
assumed net investment rate of 3 1/2% per annum built into the annuity tables
contained in the Group Contracts, which assumed rate is not applicable as actual
net investment result is credited instead.
The objective of a variable annuity contract is to provide level payments
during periods when the securities market is relatively stable and to reflect as
increased payments only investment results in excess of the 3 1/2% assumption.
The achievement of this objective will depend in part upon the validity of the 3
1/2% assumption. A higher assumption would mean a higher initial payment but a
more slowly rising series of subsequent payments (or a more rapidly falling
series of subsequent payments in a period when unit values are declining). A
lower assumption would have the opposite effect. If the actual net investment
rate is at the annual rate of 3 1/2%, the annuity payments will be level. There
can be no assurance that the net investment rate will be as high as 3 1/2%.
AMOUNT OF VARIABLE RETIREMENT ANNUITY. Except for certain Employee Benefit
Plans, the Group Contracts contain tables (1951 Group Annuity Table, projected
to 1967 by scale C) indicating the dollar amount of the first monthly pay-
<PAGE>
16
ment under each optional annuity settlement for each $1,000 of value of the
Participant's Individual Account and the vested portion, if any, of the
Employer's Participant Account for such Participant applied under the option,
less any applicable premium taxes not previously deducted.
The first monthly payment varies according to the form of annuity selected
(see the descriptions above) and the adjusted age of the Annuitant. The amount
of the first monthly annuity payment is divided by the value of an Annuity Unit
at the valuation next following the eighteenth day of the month prior to the
Participant's Annuity Commencement Date to determine the number of Annuity Units
on which subsequent payments are based. The amount of each monthly payment after
the first will be equal to the number of Annuity Units multiplied by the value
of an Annuity Unit at the valuation next following the eighteenth day of the
month prior to the month in which the payment is due. An illustration of this
calculation can be found in the Statement of Additional Information on page 6.
- - --------------------------------------------------------------------------------
RETURN OF ACCUMULATED VALUE
IN THE EVENT OF DEATH
- - --------------------------------------------------------------------------------
If the death of a Participant occurs prior to his Annuity Commencement
Date, the value as of the end of the Valuation Period in which due proof of
death is received by AUL will be paid to his designated beneficiary. This amount
will be equal to (i) such Participant's Individual Account under the 403(b)
Program, 408 Program or an HR-10 Plan, or (ii) such Participant's Individual
Account plus the vested portion, if any, of the Employer's Participant Account
for such Participant under an Employee Benefit Plan other than an HR-10 Plan, or
(iii) the sum of (i) and (ii) if both are applicable. Such amount will be paid
to the beneficiary in a single sum or under one of the Optional Variable
Settlements, as directed by the Participant or as elected by the beneficiary.
- - --------------------------------------------------------------------------------
PURCHASES AND CONTRACT VALUES
- - --------------------------------------------------------------------------------
PURCHASE LIMITS. With respect only to Group Contracts for use with 403(b),
408, and 457 Programs, the minimum payment for the purchase of a variable
annuity that may be made by or for the benefit of a Participant is $120 or $300
annually, depending on the type of contract selected. With respect to 408
Programs, the maximum payment is, under current federal law, $2,000 for each
Participant per year (except that for Simplified Employee Pension Plans, the
limit may be the lesser of $22,500 or 15% of earned income.) There is no minimum
with respect to Employee Benefit Plans. The $2,000 maximum payment described
above may be reduced if either the Participant or his spouse is an active
participant in a qualified retirement or tax deferred annuity plan.
ACCUMULATION UNITS. During the Accumulation Period, (the period before
annuity payments begin), the Net Payments for any Participant are credited as of
the end of the Valuation Period in which any such payment is received by AUL for
the account of such Participant, in the case of 403(b) Programs, 408 Programs,
457 Programs and HR-10 Plans, and for the accounts both of the Participant and
the employer in the case of Employee Benefit Plans
<PAGE>
17
other than HR-10 Plans. Such credit is made and the account of such Participant
or employer, as the case may be, is kept on the basis of Accumulation Units. The
number of Accumulation Units credited at any time to an account is determined by
dividing the dollar amount to be credited by the value of an Accumulation Unit
at the end of the Valuation Period in which the amount to be credited is
received by AUL. A payment shall be received by AUL at such time as AUL has
received the payment, and, if applicable, proper instructions from an employer
or other contractholder regarding the allocation of the payments among
Participants. The number of Accumulation Units credited to the account shall not
be changed by any subsequent change in the value of an Accumulation Unit, but
the dollar value of an Accumulation Unit may vary from valuation to valuation
depending upon the investment experience of Fund B.
VALUE OF ACCUMULATION UNIT. The value of an Accumulation Unit was
established at $1 on April 3, 1969. The value of an Accumulation Unit at the end
of a specific Valuation Period is determined by multiplying the value of an
Accumulation Unit at the end of the immediately preceding Valuation Period by
the Net Investment Factor for such specific Valuation Period.
The value of an Accumulation Unit will vary and is directly affected by the
market value and performance of portfolio securities, expenses and the deduction
of the charges described on pages 11 and 12.
NET INVESTMENT FACTOR. At each valuation of Fund B a gross investment rate
for the Valuation Period then ended is determined from the investment
performance of Fund B during the Valuation Period. Such gross rate is (i) the
investment income for the Valuation Period, plus capital gains and minus capital
losses for the period, whether realized or unrealized, less a deduction for any
applicable taxes and less expenses of Fund B which are not the contractual
liabilities of AUL divided by (ii) the value of the assets of Fund B at the
beginning of such Valuation Period. The gross investment rate may be positive or
negative.
The net investment rate for the Valuation Period is then determined by
deducting from the gross investment rate the percentage which reflects the fee
payable to AUL for providing investment management services and for mortality
risk and expense risk charges. The daily fee is .00328% of the value of the
assets of Fund B (approximately 1.2% on an annual basis).
The Net Investment Factor for the Valuation Period is the sum of 1.0000000
plus the net investment rate for the period.
The net investment rate may be negative if the combined capital losses and
deduction for taxes and expenses exceed the investment income and capital gains.
Thus, the Net Investment Factor may be less than 1.0000000, and the value of an
Accumulation Unit at the end of a Valuation Period may be less than the value
for the previous Valuation Period.
An example of valuation of assets and the determination of the Net
Investment Factor can be found in the Statement of Additional Information on
page 6.
VALUATION OF ASSETS. The value of the assets in Fund B at the end of any
Valuation Period shall be the aggregate of the following:
(a) the face amount of cash; plus
(b) when market quotations are readily available with respect to securit-
ies, the total market value of such securities, valued at the closing
prices on that day for securities
<PAGE>
18
traded on national securities exchanges, and at the bid prices quoted
that day for over-the-counter securities or last sale prices for NASDAQ
quoted securities; plus
(c) when market quotations are not readily available, or when restricted
securities or other assets are being valued, the fair value of such
securities or other assets as determined in good faith by the Board of
Managers; and minus
(d) liabilities of Fund B other than contract liabilities.
Valuation of assets will occur once each business day, Monday through
Friday, as of the close of trading on the New York Stock Exchange, usually at or
about 4 p.m., eastern standard time ("EST"). The determination may be made
earlier than 4 p.m. EST if the markets close earlier than 4 p.m. EST and it is
possible to determine the net asset value at that time. Net asset value will not
be determined on days that the New York Stock Exchange is closed, on any federal
holidays or on days when AUL is not 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 the day after Christmas or
Independence Day.
Any change in the method of valuation must be approved by the Board of
Managers.
- - --------------------------------------------------------------------------------
REDEMPTIONS
- - --------------------------------------------------------------------------------
REDEMPTION (WITHDRAWAL). During the Accumulation Period and in accordance
with the applicable provisions of the Employee Benefit Plan or 457 plan
document, if any, a Participant or 457 Employer may elect at any time to
withdraw a portion or all of his individual account, except as described below.
If the amount of any withdrawal by a Participant reduces his individual account
below $500, his entire account must be withdrawn. In such event, AUL shall have
the right to refuse to accept future payments by or for the benefit of such
Participant, unless an account is being maintained for such Participant under
the Companion Contract. The amount received by a Participant upon withdrawal of
his entire account may be more or less than the original cost, depending on the
value of the securities in the portfolio and other assets of Fund B at the time
of the withdrawal. Withdrawal is effected by sending a written application for
withdrawal to American United Life Insurance Company(R), P.O. Box 368,
Indianapolis, IN 46206-0368. The Participant's account will be valued on the
basis of the valuation of Fund B at the end of the Valuation Period during which
the request was received by AUL. AUL will pay in cash the portion so requested
to be withdrawn from the Participant's Individual Account. Payment of the
withdrawal value will be made within seven days after receipt of such request,
except that payment may be postponed whenever (i) the New York Stock Exchange is
closed (other than customary weekend and holiday closings), (ii) the Securities
and Exchange Commission permits postponement and so orders, or (iii) an
emergency exists, or trading on such Exchange is restricted, as defined by the
Securities and Exchange Commission, so that the valuation of assets or disposal
of securities is not reasonably practicable. See Federal Tax Status, pages
20-23, for a discussion of possible tax consequences on withdrawal.
Amounts withdrawn may not be reinvested without payment of a sales and
administrative service charge.
<PAGE>
19
CONSTRAINTS ON DISTRIBUTIONS FROM SECTION 403(B) ANNUITY CONTRACTS. Section
403(b) of the Code requires that distribution from Section 403(b) tax-deferred
annuities that are attributable to employee contributions 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 attributable to such contributions 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 medical expenses, the
purchase of a principal residence, or paying certain tuition expenses.
Therefore, a Participant in an annuity purchased as a tax-deferred 403(b)
annuity contract will not be entitled to exercise the right of withdrawal, as
described in this prospectus, in order to receive the value of his account
attributable to elective contributions credited after December 31, 1988 or that
portion of his account attributable to increases in the value of the December
31, 1988 balance unless one of the above-described conditions has been
satisfied. A Participant's account may be able to be transferred to certain
other investment alternatives meeting the requirements of Section 403(b) that
are available under an employer's 403(b) arrangement. See "Federal Tax Status",
pages 20-23 for a discussion of the tax consequences of such distributions.
RIGHT OF CANCELLATION. A contractholder may cancel the contract no later
than ten days after receiving it by returning it along with a written notice of
cancellation to the Company at its Home Office. AUL will refund contributions
not later than seven days after it receives such contract and such notice at its
Home Office. Unless applicable state law requires a refund of purchase payments,
AUL will refund the purchase payments (contributions) plus any increase or minus
any decrease in the value attributable to the market performance during the time
such funds were invested in Fund B.
TEXAS OPTIONAL RETIREMENT PROGRAM. A contract sold to a Participant of the
Texas Optional Retirement Program may not be redeemed except upon termination of
employment in all Texas public institutions of public education, retirement,
death or total disability of such Participant. However, if the termination
should occur before the commencement of a second year of employment, the
Participant would not receive that portion of his account attributable to
contributions made on his behalf by his employer other than under the terms of a
salary reduction agreement.
The tax consequences of redemptions and withdrawals should be carefully
reviewed by a Participant's tax adviser before such action is taken. The Section
entitled "Federal Tax Status" below should also be reviewed.
However, this does not purport to be a complete treatment of the subject
and is intended only to highlight certain important features of the tax laws.
<PAGE>
20
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FEDERAL TAX STATUS
- - --------------------------------------------------------------------------------
INTRODUCTION
The Contracts described in this Prospectus are designed for use by
Employer, association, and other group retirement plans under the provisions of
Sections 401, 403, 408, and 457 of the Internal Revenue Code ("Code"). The
ultimate effect of Federal income taxes on values under a Contract, the
Participant's Account, on annuity payments, and on the economic benefits to the
Owner, the Participant, 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. 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 particular circumstances of the Plan or individual involved,
any person contemplating the purchase of a Contract, or becoming a Participant
under a Contract, or receiving annuity payments under a Contract should consult
a qualified tax adviser.
AUL DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS, FEDERAL, STATE, OR
LOCAL, OF ANY CONTRACT OR PARTICIPANT'S ACCOUNT OR ANY TRANSACTION INVOLVING THE
CONTRACTS.
TAX STATUS OF THE COMPANY AND THE VARIABLE ACCOUNT
AUL is taxed as a life insurance company under Part I, Subchapter L of the
Code. The operations of Fund B will form a part of, and be taxed with, the
operations of AUL and therefore Fund B is not taxed as a "regulated investment
company" under the Code.
TAX TREATMENT OF RETIREMENT PROGRAMS
The Contracts described in this Prospectus are offered for use with several
types of retirement programs as described above. The tax rules applicable to
Participants in such 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 the use of the
Contracts with the various types of retirement programs. Participants under such
programs, as well as 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 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 payment or annuity payments under an
elected Annuity Option or in the form of cash withdrawals, surrenders, or other
distributions prior to the Annuity Commencement Date.
<PAGE>
21
The amounts that may be contributed to the Plans are subject to limitations
that may vary depending on the type of Plan. In addition, early distributions
from most Plans may be subject to penalty taxes, or in the case of distributions
of amounts contributed under salary reduction agreements, could cause the Plan
to be disqualified. Furthermore, distributions from most Plans are subject to
certain minimum distribution rules. Failure to comply with these rules could
result in disqualification of the plan or subject the Annuitant to penalty
taxes. As a result, the minimum distribution rules could limit the availability
of certain Annuity Options to Participants and their Beneficiaries.
Below are brief descriptions of various types of retirement programs and
the use of the Contracts in connection therewith.
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 a Participant under an Employee Benefit Plan receives a lump-sum
distribution, the portion of the distribution equal to any contribution that was
taxable to the Participant in the year when paid is received tax free. The
balance of the distribution will be treated as ordinary income. Special
five-year forward averaging provisions under Code Section 402 may be utilized on
any amount subject to ordinary income tax treatment, provided that the
Participant 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 partial distribution from a similar plan into an
individual retirement account or annuity. Special ten-year averaging and a
capital-gains election may be available to a Participant 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 contributions 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 Participant made
no contributions that were taxable to the Participant in the year made, there
would be no portion excludable.
403(B) PROGRAMS
Code Section 403(b) permits public school systems and certain types of
charitable, educational, and scientific organizations specified in Code Section
501(c)(3) to purchase annuity contracts on behalf of their employees, and,
subject to certain limitations, allows employees of those organizations to
exclude the amount of contributions from gross income for Federal income tax
purposes.
If a Participant under a 403(b) Program makes a surrender or partial
withdrawal from the Participant's Account, the Participant will realize income
taxable at ordinary tax rates on the full amount received. See "Constraints on
Distributions from Section 403(b) Annuity
<PAGE>
22
Contracts." Since, under a 403(b) Program, contributions are excludable from the
taxable income of the employee, the full amount received will usually be taxable
as ordinary income when annuity payments commence.
408 PROGRAMS
Code Sections 219 and 408 permit eligible individuals to contribute to an
individual retirement program, including Simplified Employee Pension Plans and
Employer/Association Established Individual Retirement Account Trusts, known as
an Individual Retirement Account ("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 IRA's 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 a Participant under a 408 Program makes a surrender or partial
withdrawal from the Participant's Account, the Participant will realize income
taxable at ordinary tax rates on the full amount received. Since under a 408
Program, contributions are deductible from the taxable income of the employee,
the full amount received will usually be taxable as ordinary income when annuity
payments commence.
457 PROGRAMS
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. The employees must be
Participants in an eligible deferred compensation plan.
Although a Participant under a 457 Program may direct or choose methods of
investment, all amounts deferred under the Program, and any income thereon,
remain solely the property of the Employer and subject to the claims of its
general creditors, until paid or made available to the Participant or
Beneficiary under the Program.
If the Employer sponsoring a 457 Program requests and receives a withdrawal
for an eligible employee in connection with a 457 Program, then the amount
received by the employee will be taxed as ordinary income. Since under a 457
Program, contributions are excludable from the taxable income of the employee,
the full amount received will be taxable as ordinary income when annuity
payments commence or other distribution is made.
TAX PENALTY
Any distribution made to 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 Participant has attained age 59 1/2;
(b) the Participant has died; or
(c) the Participant 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 Participant is 55
and has separated from service. Distributions
<PAGE>
23
that are received as a life annuity where payment is made at least annually will
not be subject to an excise tax. Certain amounts paid for medial care also may
not be subject to an excise tax.
Any permitted distribution from a Participant Account under a 403(b)
Program will be subject to a 10% excise tax unless the Participant satisfies one
of the exemptions listed above for Employee Benefit Plans. See "Constraints on
Distributions from Section 403(b) Annuity Contracts."
WITHHOLDING
Distributions from an Employee Benefit Plan under Code Section 401(a) or a
403(b) Program to an employee, surviving spouse, or former spouse who is an
alternate payee under a qualified domestic relations order, in the form of 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 403(b) Program 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
contributions.
All other types of distributions from Employee Benefit Plans and 403(b)
Programs, 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 Services.
- - --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- - --------------------------------------------------------------------------------
There are no legal proceedings pending which would materially affect Fund
B.
<PAGE>
24
- - --------------------------------------------------------------------------------
HISTORICAL RECORD
- - --------------------------------------------------------------------------------
The value of an Accumulation Unit was established at $1.00 with the initial
payment being received on August 8, 1969. The following is a historical record
of quarterly values of an Accumulation Unit to December 31, 1995.
<TABLE>
<S> <C>
Date Value
Aug. 8, 1969 1.000
Sept. 30, 1969 1.032
Dec. 31, 1969 1.086
Mar. 31, 1970 1.075
June 30, 1970 .863
Sept. 30, 1970 1.027
Dec. 31, 1970 1.142
Mar. 31, 1971 1.261
June 30, 1971 1.218
Sept. 30, 1971 1.214
Dec. 31, 1971 1.278
Mar. 31, 1972 1.321
June 30, 1972 1.333
Sept. 30, 1972 1.364
Dec. 31, 1972 1.471
Mar. 31, 1973 1.337
June 30, 1973 1.210
Sept. 30, 1973 1.338
Dec. 31, 1973 1.115
Mar. 31, 1974 1.116
June 30, 1974 1.012
Sept. 30, 1974 .737
Dec. 31, 1974 .815
Mar. 31, 1975 1.015
June 30, 1975 1.167
Sept. 30, 1975 1.000
Dec. 31, 1975 1.102
Mar. 31, 1976 1.244
June 30, 1976 1.280
Sept. 30, 1976 1.333
Dec. 31, 1976 1.353
Mar. 31, 1977 1.230
June 30, 1977 1.262
Sept. 30, 1977 1.250
Dec. 31, 1977 1.248
Mar. 31, 1978 1.168
June 30, 1978 1.298
Sept. 30, 1978 1.396
Dec. 31, 1978 1.313
Mar. 31, 1979 1.366
June 30, 1979 1.397
Sept. 30, 1979 1.488
Dec. 31, 1979 1.450
Mar. 31, 1980 1.356
June 30, 1980 1.521
Sept. 30, 1980 1.558
Dec. 31, 1980 1.663
Mar. 31, 1981 1.667
June 30, 1981 1.636
Sept. 30, 1981 1.438
Dec. 31, 1981 1.550
Mar. 31, 1982 1.519
June 30, 1982 1.513
Sept. 30, 1982 1.679
Dec. 31, 1982 1.943
Mar. 31, 1983 2.079
June 30, 1983 2.242
Sept. 30, 1983 2.241
Dec. 31, 1983 2.270
Mar. 31, 1984 2.214
June 30, 1984 2.149
Sept. 30, 1984 2.278
Dec. 31, 1984 2.336
Mar. 31, 1985 2.514
June 30, 1985 2.720
Sept. 30, 1985 2.624
Dec. 31, 1985 3.015
Mar. 31, 1986 3.505
June 30, 1986 3.581
Sept. 30, 1986 3.384
Dec. 31, 1986 3.553
Mar. 31, 1987 4.240
June 30, 1987 4.432
Sept. 30, 1987 4.735
Dec. 31, 1987 3.772
Mar. 31, 1988 3.904
June 30, 1988 4.173
Sept. 30, 1988 4.125
Dec. 31, 1988 4.194
Mar. 31, 1989 4.403
June 30, 1989 4.720
Sept. 30, 1989 5.086
Dec. 31, 1989 5.232
Mar. 31, 1990 5.144
June 30, 1990 5.341
Sept. 30, 1990 4.596
Dec. 31, 1990 4.980
Mar. 31, 1991 5.816
June 30, 1991 5.969
Sept. 30, 1991 6.034
Dec. 31, 1991 6.205
Mar. 31, 1992 6.388
June 30, 1992 6.435
Sept. 30, 1992 6.389
Dec. 31, 1992 6.786
Mar. 31, 1993 7.232
June 30, 1993 7.252
Sept. 30, 1993 7.570
Dec. 31, 1993 8.099
Mar. 31, 1994 8.095
June 30, 1994 7.927
Sept. 30, 1994 8.363
Dec. 31, 1994 8.263
Mar. 31, 1995 8.537
June 30, 1995 9.235
Sept. 30. 1995 9.765
Dec. 31, 1995 9.914
</TABLE>
<PAGE>
25
- - --------------------------------------------------------------------------------
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
- - --------------------------------------------------------------------------------
Financial statements and other information relating to Fund B and American
United Life Insurance Company(R) may be found in the Statement of Additional
Information. To obtain a copy of the current Statement of Additional
Information, mail the Business Reply Mail card included in this Prospectus to
AUL. Postage has been prepaid for your convenience. This card may also be used
for inquiries regarding AUL or Fund B.
The Table of Contents for the Statement of Additional Information follows.
<TABLE>
<CAPTION>
Location in
Statement of
Additional
Information
<S> <C>
Cover Page.................................................. 1
Table of Contents........................................... 2
General Information and History............................. 3
Investment Objectives and Policies.......................... 3
Management of Fund B........................................ 3
Investment Advisory and Other Services...................... 4
Brokerage................................................... 5
Purchase and Pricing of Securities Being Offered............ 5
Underwriters................................................ 6
Annuity Payments and Other Calculations..................... 6
Financial Statements of Fund B.............................. 7-13
Financial Statements of AUL................................. 14-24
</TABLE>
<PAGE>
25
================================================================================
No dealer, salesman or any other person is authorized by Fund B 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 Fund B, 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.
================================================================================
AMERICAN UNITED LIFE
POOLED EQUITY FUND B
Group Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46204
PROSPECTUS
Dated: May 1, 1996
================================================================================
<PAGE>
1
STATEMENT OF ADDITIONAL INFORMATION
American United Life Pooled Equity Fund B
Group Variable Annuity Contracts
Sold By
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46204
(317) 263-1877
(Fund B Logo)
This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the current Prospectus for American United
Life Pooled Equity Fund B dated May 1, 1996.
A Prospectus is available upon request by mailing the Business Reply Mail
card included in this Statement of Additional Information to AUL. Postage
has been prepaid for your convenience.
The date of this Statement of Additional Information is May 1, 1996.
<PAGE>
(This page left intentionally blank.)
<PAGE>
2
<TABLE>
<CAPTION>
Table of Contents for the
Statement of Additional Information
Location in Cross
Statement of Reference
Additional to Location in
Information Prospectus
<S> <C> <C>
Cover Page.................................................................................... 1 -
Table of Contents............................................................................. 2 25
General Information and History............................................................... 3 8
Investment Objectives and Policies............................................................ 3 8-10
Management of Fund B.......................................................................... 3-4 10
Investment Advisory and Other Services........................................................ 4-5 11
Brokerage..................................................................................... 5 -
Purchase and Pricing of Securities Being Offered.............................................. 5 16-18
Underwriters.................................................................................. 6 -
Annuity Payments and Other Calculations....................................................... 6 14-18
Financial Statements of Fund B................................................................ 7-13 -
Financial Statements of AUL................................................................... 14-24 -
</TABLE>
<PAGE>
(This page left intentionally blank.)
<PAGE>
3
GENERAL INFORMATION AND HISTORY
See page 8 of the Prospectus for a description of the history and
operations of both AUL and Fund B.
INVESTMENT OBJECTIVES AND POLICIES
See the Prospectus for the complete description of the Investment
Objectives and Policies of Fund B.
Fund B has no fixed policy as to timing or amount of sales or purchase of
securities. Fund B does not engage in trading on a short-term basis. However,
occasionally Fund B may sell investments which have been held for only a short
period of time when it is deemed necessary to achieve the long-range objectives
of Fund B. While no specific prediction regarding turnover of securities may be
made, it is not contemplated that annual turnover of securities in the portfolio
under normal circumstances will be in excess of 50%. Portfolio turnover during
the last 10 years is itemized in the Condensed Financial Information in the
Prospectus.
MANAGEMENT OF FUND B
Fund B is managed by a Board of Managers, consisting of five members who
were initially appointed by AUL. The Board has adopted Rules and Regulations for
Fund B. Commencing with the first Annual Meeting of Fund B Participants on May
8, 1970, and at each Annual Meeting of Fund B Participants until May 6, 1994,
successors to the members of the Board of Managers whose terms had expired were
elected to serve for terms of three (3) years and until their successors were
duly elected and qualified. At the Annual Meeting of Participants held on May 6,
1994, a proposal to amend the Rules and Regulations was approved by the
Participants. Under the proposal, as approved, an Annual Meeting of Fund B
Participants would not be held in any year when only routine matters were being
considered. The re-election of those Members of the Board of Managers who had
previously been elected by the Participants would be considered a routine matter
so long as a majority of the Board has previously been elected by Fund B
Participants. However, a Participants' meeting will be held whenever required by
Federal securities laws. The individuals presently serving on the Board of
Managers are:
<TABLE>
<CAPTION>
Position with Present Position and Principal
Name Fund B Occupation During Last Five Years
- - ---- ------ ---------------------------------
<S> <C> <C>
James W. Murphy* Chairman and Senior Vice President, Corporate Finance, AUL
Member
Ronald D. Anderson Member Professor, School of Business, Indiana University,
Indianapolis (8/88 to present)
Leslie Lenkowsky Member President, Hudson Institute
Jerry D. Semler* Vice Chairman Chairman of the Board, President, Chief Executive
and Member Officer and Chairman of the Executive Committee, AUL
James P. Shanahan* Member Senior Vice President, Pension Operations, AUL
- - -----------------------------------------------------------------------------------------------------------------------------------
Richard A. Wacker* Secretary to the Associate General Counsel, AUL, 10/92 to present;
Board Senior Counsel, AUL, 11/87 to 10/92
<FN>
*Classified as an interested person under the Investment Company Act of 1940.
</FN>
</TABLE>
<PAGE>
4
REMUNERATION OF THE BOARD OF MANAGERS
Aggregate remuneration for all members of the Board of Managers and the
Secretary to the Board of Managers of Fund B for the year 1995 was as follows:
<TABLE>
<CAPTION>
Name of Individual or Capacities in Which Remuneration Aggregate
Identity of Group Will be Received Remuneration
----------------- ---------------- ------------
<S> <C> <C>
All members of the Board of Managers and As members of the Board of Managers $3,000*
the Secretary of Fund B, as a group or Secretary of Fund B
</TABLE>
*AUL has agreed to pay $1,500 per year, plus a $50 expense allowance per meeting
attended to each member of the Board of Managers of Fund B who is not also an
active employee of AUL and any member's out of state travel expenses incurred to
attend meetings of the Board of Managers. Active employees of AUL who serve Fund
B will not be additionally compensated by AUL for such services. It is not
estimated that any additional remuneration will be paid by either AUL or Fund B
to the members of the Board of Managers and the Secretary to the Board of
Managers of Fund B other than what AUL has so agreed to pay. It is estimated
that the aggregate remuneration for all members of the Board of Managers and the
Secretary to the Board of Managers of Fund B, as a group, for the current fiscal
year will not exceed $4,000.
INVESTMENT ADVISORY AND OTHER SERVICES
American United Life Insurance Company(R) is a Registered Investment
Adviser and as such provides investment advisory services to Fund B. A general
description of the business and organization of AUL can be found in the
Prospectus. Information regarding the computation of the advisory fee payable by
Fund B to AUL is described in the topic "Investment Management Services" in of
the Prospectus. For its services under the Investment Management Services
Agreement. AUL charged Fund B $36,619 in the year 1995, $36,662 in 1994, and
$34,417 in the year 1993.
The following is a list of the Directors and senior officers of AUL.
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with AUL with Fund B
- - ---- -------- -----------
<S> <C> <C>
John H. Barbre Senior Vice President None
Steven C. Beering M.D. Director None
William R. Brown General Counsel & Secretary,
Secretary, State Life Insurance Company None
Arthur L. Bryant Director None
James M. Cornelius Director None
James E. Dora Director None
Otto N. Frenzel III Director and Chairman of the Audit Committee None
David W. Goodrich Director None
William P. Johnson Director None
Charles D. Lineback Senior Vice President None
James T. Morris Director None
James W. Murphy Senior Vice President Chairman and Member, Board
of Managers
Jerry L. Plummer Senior Vice President None
R. Stephen Radcliffe Director and Executive Vice President None
Jack E. Reich Emeritus Chairman of the Board None
Thomas E. Reilly Jr. Director None
William R. Riggs Director None
G. David Sapp Senior Vice President None
Leonard D Schutt Director and Chairman of the Finance Committee None
Jerry D. Semler Chairman of the Board, President, Chief Executive Officer Vice Chairman and
and Chairman of the Executive Committee, AUL; Chairman of Member, Board of
the Board and Chief Executive Officer, State Life Managers
Insurance Company
Yvonne H. Shaheen Director None
James P. Shanahan Senior Vice President Member, Board of Managers
Frank D. Walker Director None
Gerald T. Walker Senior Vice President None
J. Richard Zapapas Director None
</TABLE>
<PAGE>
5
CUSTODIAL ARRANGEMENTS
Substantially all of the assets of Fund B are held by National City Bank,
Indiana, under a custodial agreement to which AUL, Fund B and such Bank are
parties.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One American Square, Indianapolis, Indiana,
serve as independent accountants for Fund B. Coopers & Lybrand L.L.P. provides
the following audit services for Fund B: audit of Fund B's annual financial
statements; review and consultation regarding filings with the Securities and
Exchange Commission; and consultation regarding financial accounting and
reporting matters. Coopers & Lybrand L.L.P. is not engaged to provide any
non-audit services nor do they have any direct or material indirect interest in
Fund B.
OTHER FEES RECEIVED BY AUL
AUL also receives compensation under the Sales and Administrative Services
Agreement for the services described in of the Prospectus. For these services,
during 1995, AUL charged Fund B $17,995. In the years 1994 and 1993, AUL charged
Fund B $30,045 and $19,493 respectively, under the terms of this Agreement.
AUL also assumes the risks that annuitants as a class will live longer than
estimated and that its expenses will exceed the fees received from Fund B as
described in the Prospectus . Total mortality and expense risk payments to AUL
were $109,858 in 1995, $109,986 in 1994, and $103,251 in 1993.
BROKERAGE
With respect to transactions in portfolio securities, whether through a
broker as agent or with a dealer as a principal, it is the policy of Fund B to
obtain the most favorable prices and execution of orders. AUL, as the investment
advisor, is responsible for the execution of this policy. However, AUL
investment personnel may be allowed to pay a broker a commission in excess of
that which another broker might charge for the same transaction if the executing
broker has provided AUL with statistical and factual information and services.
This type of information is customarily available only in return for brokerage
and under this type of arrangement, AUL customarily receives investment reports,
recommendations and analyses regarding individual companies, industries, and the
economy in general with regard to equity investing. Access to such information
is a commonly recognized way to keep abreast of information circulated generally
among institutional investors by broker-dealers. Research services furnished by
such brokers may be used by AUL in servicing any of its other separate accounts,
however, and not solely by or for the benefit of Fund B.
During 1995, 100% of the Fund B portfolio transactions constituting
brokerage commissions of $9,707 were placed with broker-dealers providing such
information. For the years 1994 and 1993, brokerage commissions were paid to
such broker-dealers in the amounts of $10,670 and $13,144 respectively. While
this information is useful in varying degrees, it is of indeterminable value. No
portion of any commissions payable to a broker-dealer from the purchase or sale
of portfolio securities of Fund B will be surrendered to any other broker-dealer
who was not involved in the execution of such transactions. Brokerage
transactions and portfolio decisions for Fund B are made through the office of
G. David Sapp, AUL Senior Vice President, Investments.
Some securities considered for investment by the Fund's Portfolio may also
be appropriate for other accounts served by the Advisor, including the Adviser's
general account. If a purchase or sale of securities consistent with the
investment policies of the Portfolio and one or more of these accounts served by
the Adviser is considered at or about the same time, it is the policy of AUL not
to favor any one account or Portfolio over another, and any purchase or sale
orders executed contemporaneously are allocated at the average price and as
nearly as practicable on a pro rata basis in proportion to the amounts desired
to be purchased or sold by each account or portfolio. While it is conceivable
that in certain instances this procedure could adversely affect the price or
number of shares involved in a particular portfolio transaction, it is believed
that the procedure generally contributes to better overall execution of the
Fund's portfolio transactions. This allocation method and the results of such
allocations, are subject to periodic review by the Fund's Adviser and the Board
of Managers.
Fund B will use the third and over-the-counter markets whenever the best
prices and executions for securities can be obtained through such use, and it
intends to deal with the principal market makers in such transactions. It is
contemplated that a substantial majority of the transactions will involve
securities traded on national exchanges.
PURCHASE AND PRICING OF SECURITIES BEING OFFERED
Variable annuity contracts are sold by AUL through life insurance salesmen
who have been licensed by the state insurance departments and through certain of
its home office employees. Where state law so requires, such persons are also
licensed or registered as securities salesmen.
Accumulation Units are purchased with Net Payments or Contributions from
Participants as described in the Prospectus. There are no special purchase plans
or exchange privileges.
<PAGE>
6
UNDERWRITERS
The variable annuity contracts described in the Prospectus and in this
Statement of Additional Information are sold and underwritten on a continuous
basis by American United Life Insurance Company(R). Underwriting commissions
received by AUL from Fund B have been listed previously and identified as sales
and administrative services fees under "Other Fees Received by AUL" on page 5.
ANNUITY PAYMENTS AND OTHER CALCULATIONS
1. AMOUNT OF VARIABLE RETIREMENT ANNUITY
Assume a Participant at the date of retirement has credited to his
individual account 23,000 Accumulation Units, and that the value of an
Accumulation Unit at the valuation immediately following the eighteenth day of
the month preceding the Annuity Commencement Date was $2.649321, producing a
total value of his individual account of $60,934.38. Assume also that the
Participant elects an option for which the table in the Group Contract indicates
the first monthly payment is $6.83 per $1,000 of value applied; the
Participant's first monthly payment would thus be 60.93438 multiplied by $6.83
or $416.18.
Assume that the Annuity Unit value at the valuation immediately following
the eighteenth day of the month preceding the Annuity Commencement Date was
$1.324655. When this is divided into the first monthly payment, the number of
Annuity Units represented by that payment is determined to be 314.179919. The
value of this same number of Annuity Units will be paid in each subsequent
month.
To illustrate the calculation of the amount of the payment due in any
subsequent month, assume further that the value of an Annuity Unit at the
valuation immediately following the eighteenth day of the month previous to the
month in which the payment is due is $1.327020. The payment for that month is
then calculated by multiplying the number of Annuity Units (314.179919) by the
Annuity Unit value ($1.327020) which produces a payment of $416.92.
2. VALUATION OF ASSETS AND DETERMINATION OF NET INVESTMENT FACTOR
Assume a Valuation Period of one day's duration at the beginning of which
the value of the assets of Fund B was $10,000,000 and the value of an
Accumulation Unit was $1.276431. Assume further that during the Valuation Period
investment income was $1,850, net realized capital losses were $500, net
unrealized capital gains were $2,500, and there were no applicable taxes or
expenses of Fund B which were not the contractual liability of AUL. The value of
the assets of Fund B at the end of the Valuation Period would thus be
$10,003,850 ($10,000,000 plus $1,850, minus $500 plus $2,500).
The gross investment rate for the Valuation Period would be equal to (a)
$3,850 ($1,850 minus $500, plus $2,500) divided by (b) $10,000,000 which
produces .0003850. The net investment rate for the Valuation Period is
determined by deducting .0000328 for one day from the gross investment rate,
which results in a net investment rate of .0003522. The Net Investment Factor
for the Valuation Period would be determined as the net investment rate plus
1.0000000, or 1.0003522.
The value of the Accumulation Unit at the end of such Valuation Period
would equal the value at the beginning of the period ($1.276431) multiplied by
the Net Investment Factor for the period (1.0003522), which produces $1.276881.
3. OPTIONAL VARIABLE ANNUITY SETTLEMENT - OPTION 4
If it is assumed that (a) $15,000 were applied to purchase an annuity under
this option, (b) the value of an Annuity Unit was $1.753261 on the Annuity
Commencement Date, (c) the number of Annuity Units represented by each monthly
payment was 53.985117, (d) 23 monthly annuity payments were made prior to the
date of death, and (e) the value of an Annuity Unit on the valuation date
following the Annuitant's death was $1.849375, then the amount paid to the
beneficiary would be $13,526.01.
<PAGE>
7
FINANCIAL STATEMENTS
AMERICAN UNITED LIFE POOLED EQUITY FUND B
The following financial statements relate to the condition and operations of
Fund B.
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Managers and Contract Owners
American United Life Pooled Equity Fund B
Indianapolis, Indiana
We have audited the accompanying statement of net assets of American United Life
Pooled Equity Fund B, including the schedule of investments, as of December 31,
1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the supplementary per unit data and ratios for each of the five years
in the period then ended. These financial statements and per unit data and
ratios are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and per unit data and ratios
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 and per unit data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of December 31, 1995, confirmation by correspondence with
brokers as to securities purchased but not received at that date, or other
auditing procedures where confirmations were not received. 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 financial statements and supplementary per unit data and
ratios referred to above present fairly, in all material respects, the financial
position of American United Life Pooled Equity Fund B as of December 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the supplementary
per unit data and ratios for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
January 27, 1996
<PAGE>
8
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE POOLED EQUITY FUND B
STATEMENT OF NET ASSETS
December 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Assets:
Investments at market value (cost: $10,602,679)
<S> <C>
Common stock $ 11,302,514
Money market mutual funds 602,586
Short-term notes 594,550
-------
12,499,650
Cash 26,344
Dividends and interest receivable 14,712
------
Total assets 12,540,706
Liabilities 14,423
------
Net Assets: $ 12,526,283
============
Units outstanding 1,264,043
=========
Net Asset Value per unit $ 9.91
============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE POOLED EQUITY FUND B
STATEMENT OF OPERATIONS
December 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income:
Income
<S> <C>
Dividends $ 234,559
Interest 82,010
------
316,569
-------
Expense
Investment management services 36,619
Mortality and expense risks charges 109,858
-------
146,477
-------
Net investment income 170,092
-------
Gain on Investments:
Net realized gain 868,191
Net unrealized gain 1,181,274
---------
Net gain 2,049,465
---------
Increase in Net Assets from Operations $ 2,219,557
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
9
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE POOLED EQUITY FUND B
STATEMENT OF CHANGES IN NET ASSETS
December 31, 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
1995 1994
---- ----
Operations:
<S> <C> <C>
Net investment income $ 170,092 $ 141,796
Net realized gain 868,191 1,449,484
Net unrealized gain (loss) 1,181,274 (1,333,232)
--------- ----------
Increase 2,219,557 258,048
--------- -------
Contract Owner Transactions:
Proceeds from units sold 399,714 724,027
Payments for units withdrawn (1,775,379) (1,562,315)
Payments for units redeemed (23,881) (10,179)
------- -------
Decrease (1,399,546) (848,467)
---------- --------
Net increase (decrease) 820,011 (590,419)
Net Assets at beginning year 11,706,272 12,296,691
---------- ----------
Net Assets at end of year $ 12,526,283 $ 11,706,272
============= =============
Units sold 43,713 88,492
Units withdrawn (194,201) (188,809)
Units redeemed (2,212) (1,198)
------ ------
Net decrease (152,700) (101,515)
Units outstanding at beginning of year 1,416,743 1,518,258
--------- ---------
Units outstanding at end of year 1,264,043 1,416,743
========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
10
</TABLE>
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE POOLED EQUITY FUND B
SCHEDULE OF INVESTMENTS
December 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Market
Description Shares Value
- - ------------------------------------------------------------------------------------------------------------------------------------
Common Stock (90.4%)
Banks & Financial (7.7%)
<S> <C> <C>
American Express Company 7,000 $ 289,625
Banc One Corporation 9,200 346,150
Ohio Casualty Corporation 6,000 232,500
Salomon, Inc. 2,800 99,050
------
967,325
Broadcasting & Publishing (10.7%)
Chris-Craft Industries, Inc.* 6,769 292,760
Deluxe Corporation 8,200 237,800
Gibson Greetings, Inc. 15,400 246,400
Harland (John H.) Company 7,700 160,737
Meredith Corporation 4,900 205,188
Moore Corporation, Ltd. 10,300 191,837
-------
1,334,722
---------
Chemicals (1.6%)
Carlisle Companies, Inc. 1,700 68,637
Quaker Chemical Corporation 9,900 133,650
-------
202,287
-------
Electrical Equipment & Electronics (5.5%)
Baldor Electric Company 11,130 223,991
Dynatech Corporation* 18,600 316,200
General Electric Company 2,100 151,200
-------
691,391
-------
Entertainment & Leisure (4.7%)
CPI Corporation 18,200 291,200
Huffy Corporation 5,800 58,725
Fleetwood Enterprises, Inc. 9,000 231,750
-------
581,675
-------
Furniture & Apparel (12.4%)
Blair Corporation 2,800 88,550
Kellwood Corporation 9,700 197,638
La Z Boy Chair Company 7,500 231,562
Liz Claiborne, Inc. 14,500 398,750
Oshkosh B'Gosh, Inc. Class A 11,800 206,500
Hillenbrand Industries, Inc. 8,400 284,550
Reebok International 5,000 141,250
-------
1,548,800
---------
Health Care (5.8%)
Acuson Corporation 9,900 122,513
Community Psychiatric Centers, Inc. 3,300 40,425
Lilly (Eli) and Company 3,186 179,212
Guidant Corp. 2,816 118,976
Merck & Company, Inc. 4,000 262,500
-------
723,626
-------
*does not pay cash dividends (Continued on next page)
The accompanying notes are an integral part of the financial statements.
<PAGE>
11
AMERICAN UNITED LIFE POOLED EQUITY FUND B
SCHEDULE OF INVESTMENTS (continued)
December 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Market
Description Shares Value
- - ------------------------------------------------------------------------------------------------------------------------------------
Common Stock (90.4%), continued
Information Processing & Telecommunications (9.8%)
Apple Computer, Inc. 7,500 $ 239,063
Cray Research, Inc.* 3,000 73,875
Hunt Manufacturing Company 3,300 57,338
International Business Machines Corporation 2,500 228,437
Software Publishing Corporation* 13,400 44,387
Sun Microsystems, Inc.* 10,400 474,500
Telxon Corporation 5,100 115,388
-------
1,232,988
---------
Machinery (2.6%)
Lawson Products, Inc. 8,000 196,000
Precision Castparts Corporation 3,500 139,125
-------
335,125
-------
Merchandising (5.8%)
Longs Drug Stores Corporation 7,000 335,125
Mac Frugal's Bargains Close-outs, Inc. 13,800 193,200
Mercantile Stores Co. 4,200 194,250
-------
722,575
-------
Metals & Mining (2.5%)
Aluminum Company of America 3,000 158,625
Oregon Steel Mills, Inc. 11,200 155,400
-------
314,025
-------
Oil & Oil Services (3.6%)
Royal Dutch Petroleum Company 1,300 183,463
Valero Energy Corporation 10,700 262,150
-------
445,613
-------
Paper Products & Containers (2.1%)
Sealright, Inc. 14,000 155,750
Zero Corporation 5,800 102,950
-------
258,700
-------
Transportation (3.3%)
Alexander & Baldwin, Inc. 10,500 241,500
Norfolk Southern Corporation 2,100 166,687
-------
408,187
-------
Miscellaneous (12.3%)
Boeing Company 3,100 242,963
Cross (A.T.) Company Class A 8,000 121,000
Groundwater Technology, Inc.* 16,000 224,000
Michael Foods, Inc. 16,800 195,300
Seagram Company, Ltd. 2,200 76,175
Ford Motor Co. 8,500 245,437
Kelly Services 8,800 244,200
Stanhome, Inc. 6,400 186,400
1,535,475
---------
Total common stock (cost: $9,405,543) 11,302,514
----------
*does not pay cash dividends (Continued on next page)
The accompanying notes are an integral part of the financial statements.
<PAGE>
12
AMERICAN UNITED LIFE POOLED EQUITY FUND B
SCHEDULE OF INVESTMENTS (continued)
December 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Market
Description Shares Value
- - ------------------------------------------------------------------------------------------------------------------------------------
Money Market Mutual Funds (4.8%)
Dreyfus Cash Management............................................... 280,921 $ 280,921
Merrill Lynch Institutional Fund...................................... 321,665 321,665
-------
Total money market mutual funds (cost: $602,586) 602,586
-------
</TABLE>
<TABLE>
<CAPTION>
Interest Maturity Principal
Rate Date Amount
---- ---- ------
<S> <C> <C> <C> <C>
Short-term Notes (4.8%)
Associates Corporation of North America 5.45% 2/26/96 600,000 594,550
-------
(cost: $594,550)
Total Investments (cost: $10,602,679) $ 12,499,650
=========== ==============
</TABLE>
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
13
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
American United Life Pooled Equity Fund B (Fund B) is registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company. Fund B was established and is managed by American United Life Insurance
Company(R) (AUL) for the purpose of issuing group and individual variable
annuities.
Investments are valued at closing prices for those securities traded on
organized exchanges and at bid prices for securities traded over-the-counter.
Gains and losses on the sale of investments are determined on a first-in,
first-out (FIFO) basis.
Dividends are included in income as of the ex-dividend date. Interest income is
accrued daily.
No provision for federal income taxes is considered necessary because generally
no tax is applicable to increases in net assets representing reserves for
qualified pension plans. Operations of Fund B form a part of and are taxed with
those of AUL, which is taxed as a life insurance company under the Internal
Revenue Code.
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
2. Investments
Net realized and unrealized gain on investments is summarized below.
<TABLE>
<CAPTION>
Common Short-Term
Stock Notes
----- -----
Net Realized Gain:
<S> <C> <C>
Proceeds from securities sold $ 3,236,486 $ 999,074
Cost of securities sold 2,368,307 999,062
--------- -------
$ 868,179 $ 12
---------- ----------
Net change in Unrealized Gain (Loss):
Market value at end of period $ 11,302,514
Less: investments purchased (2,149,743)
Add: investments sold at cost 2,368,307
Less: market value at beginning of year (10,339,804)
$ 1,181,274
</TABLE>
3. Transactions With AUL
AUL receives an annual fee of 1.2% of its average daily net assets for providing
investment management services and for mortality and expense risks charges. The
expense incurred during the years ended December 31, 1995 and 1994 was $146,477
and $146,648, respectively.
AUL withholds a portion of the proceeds obtained from contract owners to pay
commissions and certain expenses under a sales and administrative services
agreement with Fund B. The amount AUL retained during the years ended December
31, 1995 and 1994 was $17,995 and $30,045, respectively.
4. Net Assets Applicable to Contract Owners
<TABLE>
<CAPTION>
<S> <C>
Proceeds from units sold less payments $ (4,054,737)
for units withdrawn and redeemed
Net investment income 3,821,106
Net realized gains 10,862,943
Unrealized gain 1,896,971
$ 12,526,283
The unrealized gain of $1,896,971 consists of common stock appreciation and
depreciation of $2,671,503 and $774,532, respectively.
</TABLE>
<PAGE>
14
FINANCIAL STATEMENTS - AUL
The following statements relate solely to the condition and operations of AUL.
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
American United Life Insurance Company(R)
Indianapolis, Indiana
We have audited the accompanying balance sheet of American United Life Insurance
Company(R) as of December 31, 1995 and 1994, and the related statements of
operations, policyowners' 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 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 financial statements referred to above present fairly, in
all material respects, the financial position of American United Life Insurance
Company(R) as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 19, 1996
<PAGE>
15
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
BALANCE SHEET
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
ASSETS
BONDS, at amortized cost...................................... $ 4,262,508,169 $ 4,082,347,294
STOCKS:
Preferred, at cost.......................................... 4,324,024 3,390,328
Common, at market........................................... 14,728,108 26,762,298
---------- ----------
19,052,132 30,152,626
MORTGAGE LOANS ............................................... 1,090,969,184 1,051,896,715
SHORT-TERM INVESTMENTS, at cost.............................. 65,040,000 69,482,580
OTHER INVESTED ASSETS......................................... 23,855,487 3,841,848
REAL ESTATE:
Investment properties, net.................................. 51,254,647 52,938,109
Home office, net............................................ 28,503,705 27,347,204
---------- ----------
79,758,352 80,285,313
OTHER:
Policy loans................................................ 120,283,198 117,708,964
Cash and cash equivalents................................... 7,169,522 8,816,165
Premiums deferred and uncollected........................... 46,789,680 38,751,657
Accrued investment income................................... 81,783,739 80,065,880
Other assets................................................ 52,451,849 41,025,151
Separate Account assets..................................... 603,897,522 351,336,512
----------- -----------
912,375,510 637,704,329
$ 6,453,558,834 $ 5,955,710,705
================= ==================
</TABLE>
<PAGE>
16
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
BALANCE SHEET
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
LIABILITIES AND POLICYOWNERS' SURPLUS
POLICY RESERVES
Deposit administration and supplementary contracts.......... $ 3,758,646,460 $ 3,672,096,982
Life and annuities......................................... 1,350,657,146 1,237,321,589
Accident and health......................................... 70,844,333 85,463,733
---------- ----------
5,180,147,939 4,994,882,304
POLICY AND CONTRACT LIABILITIES
Policy claims in process of settlement...................... 88,830,660 74,603,465
Policy dividends on deposit at interest..................... 59,460,245 59,504,981
Policy dividends payable in following year.................. 21,457,630 20,543,858
Other policy and contract liabilities....................... 40,590,059 37,262,603
---------- ----------
210,338,594 191,914,907
GENERAL LIABILITIES AND OTHER RESERVES
Accrued commissions and general expenses.................... 4,235,635 4,492,396
Taxes, including federal income taxes....................... 27,123,089 17,900,917
Unearned interest and rents................................. 2,829,903 2,860,495
Other liabilities........................................... 37,288,056 46,869,894
Asset valuation reserve..................................... 71,760,102 70,496,028
Interest maintenance reserve................................ 26,220,419 23,820,990
Contingent liability for reinsurance........................ 353,754 841,508
Separate Account liabilities................................ 603,897,522 351,336,512
----------- -----------
773,708,480 518,618,740
TOTAL LIABILITIES 6,164,195,013 5,705,415,951
POLICYOWNERS' SURPLUS 289,363,821 250,294,754
----------- -----------
$ 6,453,558,834 $ 5,955,710,705
================= ==================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
17
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
STATEMENT OF OPERATIONS
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
PREMIUM AND OTHER INCOME
Life and annuities.......................................... $ 340,990,486 $ 306,862,818
Accident and health......................................... 105,010,525 101,189,449
Deposit administration and supplementary contracts.......... 402,954,222 351,114,943
Net investment income....................................... 462,475,312 434,202,321
----------- -----------
1,311,430,545 1,193,369,531
BENEFITS AND EXPENSES
Death benefits.............................................. 124,196,772 109,503,889
Accident and health and disability benefits................. 76,726,189 75,377,072
Annuity benefits............................................ 95,615,467 88,718,053
Surrender benefits and other fund withdrawals............... 381,395,809 288,847,121
Supplementary contracts and endowments...................... 1,827,156 1,699,279
Other benefits.............................................. 8,060,901 7,863,187
Increase in policy reserves:
Deposit administration and supplementary contracts......... 96,222,658 166,030,251
Life and annuities......................................... 101,804,514 104,415,453
Accident and health........................................ (14,619,400) 9,139,619
Separate accounts.......................................... 160,395,977 150,228,191
General expenses............................................ 84,398,348 76,019,074
Commissions and service fees................................ 80,923,848 75,300,197
Taxes, licenses and fees.................................... 9,447,928 11,074,820
Dividends to policyowners................................... 22,715,891 21,039,163
Reserve adjustment on reinsurance assumed................... 26,064,924 (39,550,876)
Other....................................................... (10,187,186) (7,867,686)
----------- ----------
1,244,989,796 1,137,836,807
Net gain from operations before federal income taxes..... 66,440,749 55,532,724
Federal income taxes........................................ 21,726,053 27,058,888
---------- ----------
Net gain from operations before net realized
capital losses.......................................... 44,714,696 28,473,836
Net realized capital losses net of taxes.................... (2,799,506) (477,559)
NET INCOME.............................................. $ 41,915,190 $ 27,996,277
=============== ====================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
STATEMENT OF POLICYOWNERS' SURPLUS
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
Policyowners' surplus, beginning of year...................... $ 50,294,754 $ 228,730,815
Add (deduct):
Net income.................................................. 41,915,190 27,996,277
Change in statement value of investments.................... 1,938,555 (3,504,915)
Change in contingent liability for reinsurance.............. 487,753 1,966,134
Change in asset valuation reserve........................... (1,264,074) (1,131,669)
Other....................................................... (4,008,357) (3,761,888)
---------- ----------
Policyowners' surplus, end of year............................ $ 289,363,821 $ 250,294,754
=============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
18
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
STATEMENT OF CASH FLOWS
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
CASH FROM OPERATIONS:
Premiums and other policy considerations.................... $ 840,800,579 $ 755,594,547
Investment income........................................... 451,918,023 425,976,111
----------- -----------
1,292,718,602 1,181,570,658
Benefits.................................................... 859,631,292 702,526,336
Commissions and general expenses............................ 176,222,502 122,334,264
Federal income taxes........................................ 13,786,561 23,674,736
Increase (decrease) in policy loans......................... 2,574,234 5,733,167
Dividends to policyowners................................... 21,802,118 18,715,837
---------- ----------
1,074,016,707 872,984,340
NET CASH FROM OPERATIONS 218,701,895 308,586,318
Proceeds from investments sold, redeemed or matured:
Bonds....................................................... 409,344,079 525,799,172
Stocks...................................................... 14,694,984 4,073,265
Mortgage loans.............................................. 112,116,067 131,105,341
Real estate................................................. 3,433,133 605,533
Other invested assets....................................... 66,355 79,704
Tax on capital gains, including amounts in asset
and interest maintenance reserves.......................... (3,833,936) (4,551,265)
Other sources............................................... 7,384,150 26,156,329
--------- ----------
TOTAL CASH PROVIDED 761,906,727 991,854,397
Cost of investments acquired:
Bonds....................................................... 572,352,611 801,182,111
Stocks...................................................... 972,093 759,415
Mortgage loans.............................................. 155,180,674 111,872,905
Real estate................................................. 4,597,372 2,391,763
Other uses.................................................... 34,893,200 28,856,549
---------- ----------
TOTAL CASH APPLIED 767,995,950 945,062,743
----------- -----------
Net change in cash and short-term investments................. (6,089,223) 46,791,654
Cash and short-term investments, beginning of year............ 78,298,745 31,507,091
---------- ----------
Cash and short-term investments, end of year.................. $ 72,209,522 $ 78,298,745
=============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
19
NOTES TO FINANCIAL STATEMENTS
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
================================================================================
1. NATURE OF OPERATIONS:
American United Life Insurance Company(R) (AUL) is an Indiana-domiciled
mutual life insurance company founded in 1877 with headquarters in Indianapolis.
It is currently licensed to sell business in 46 states and the District of
Columbia. AUL offers individual life insurance and annuities, group life and
disability insurance, pension products, and reinsurance services.
2. ACCOUNTING POLICIES:
a. BASIS OF PRESENTATION: The financial statements have been prepared on
the basis of accounting practices prescribed or permitted by the Insurance
Department of the State of Indiana, which practices are regarded as generally
accepted accounting principles (GAAP) for mutual life insurance companies.
In January 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 120, Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts. This Statement, effective for
fiscal years beginning after December 15, 1995, extends the requirements of SFAS
Nos. 60, 97, and 113 to mutual life insurance companies. It also defers the
effective date of Interpretation 40, previously issued by the FASB in 1993, for
fiscal years beginning after December 15, 1995. Interpretation 40 indicated that
financial statements of mutual life insurance companies prepared on a statutory
basis will no longer be considered in conformity with GAAP. In addition, the
American Institute of Certified Public Accountants has issued Statement of
Position (SOP) 95-1, Accounting for Certain Insurance Activities of Mutual Life
Insurance Enterprises, which is also effective for fiscal years beginning after
December 15, 1995. This SOP establishes accounting for certain participating
life insurance contracts.
The effect of initially applying, SFAS No. 120, Interpretation 40, and SOP
95-1, is to be reported through restatement of all previously issued annual
financial statements presented for comparative purposes for fiscal years
beginning after December 15, 1992. Management has determined it will initiate
the accounting changes; the effect of which has not yet been determined.
However, management expects an increase in policyowners' surplus upon adoption
of these statements.
b. INVESTMENTS: Bonds, mortgage loans, and other invested assets are
reported principally at amortized cost; preferred stocks are reported at cost
(market value was $4,224,000 and $3,251,000 at December 31, 1995 and 1994,
respectively); common stocks are reported at market (cost was $12,041,000 and
$25,269,000 at December 31, 1995 and 1994, respectively); short-term investments
include investments with maturities of one year or less and are reported at
cost, which approximates market; policy loans are reported at unpaid balances
and real estate is reported at cost less allowances for depreciation.
Depreciation is provided over the estimated useful lives of the related assets
using the straight-line method.
Market values of bonds, common stocks, and preferred stocks, that are
publicly traded, are determined based on published market values. For bonds not
publicly traded, the market value is based on discounted cash flows using
current yields of comparable publicly traded securities.
Realized gains and losses on sale or maturity of investments are determined
on the basis of specific identification. Unrealized gains and losses are
reported as a component of surplus without recognizing the effect of related
income taxes. Realized gains, including those deferred in the interest
maintenance reserve, were reduced by federal taxes of approximately $3,834,000
and $4,551,000 in 1995 and 1994, respectively.
c. ASSET VALUATION AND INTEREST MAINTENANCE RESERVE: The asset valuation
reserve is provided from policyowners' surplus in accordance with statutory
accounting requirements. The interest maintenance reserve, reduced by federal
income taxes, defers the recognition of net gains realized on the sale of fixed
maturity investments, resulting from changes in interest rates. Such gains are
amortized to income over the remaining lives of the assets sold.
d. SEPARATE ACCOUNTS: The assets of the Separate Accounts shown in the
balance sheet are based on market value and represent funds which are segregated
primarily for variable annuity contracts and equity-based pension and profit
sharing plans. Separate Account income is offset by payments and provisions for
benefits and services, thus having no effect on net income or policyowners'
surplus.
e. POLICY RESERVES: Policy Reserves are based on mortality, morbidity and
interest assumptions prescribed by regulatory authorities.
Claim liabilities include provisions for reported claims and estimates
based on historical experience, for claims incurred but not reported. Claim
liabilities have been reduced at December 31, 1995 and 1994 by approximately
$40,072,000 and $32,055,000, respectively, for reinsurance ceded.
The Company received written approval from the Insurance Department of the
State of Indiana to record a "Separate Account Transfer Credit" for the
difference between reserves maintained in the General Account and reserves
maintained in the Separate Account after the transfer of funds. As of December
31, 1995 and 1994, that permitted transaction increased statutory surplus by
approximately $22,500,000 and $14,000,000, respectively.
f. FEDERAL INCOME TAXES: Generally, no provision is made for deferred
income taxes due to timing differences that may exist between financial
reporting and taxable income.
<PAGE>
20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. ACCOUNTING POLICIES (Continued)
g. REVENUES AND EXPENSES: Premium income is recognized over the premium
paying period. Costs of acquiring new business are expensed when incurred and
credit is not taken, other than by statutory reserve modification methods
applicable to some policies, for the expectation that such costs will be
recovered from future premium income. Policyowner dividends are determined by
crediting each participating policy with its share of the surplus as apportioned
by the Company.
h. RETIREMENT PLANS: Annual provisions for employees' and agents'
retirement plans are computed actuarially and include amortization of past
service cost over approximately 20 years.
i. ESTIMATES: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
j. RECLASSIFICATIONS: Certain amounts in the 1994 financial statements have
been reclassified to conform to the 1995 presentation.
3. INVESTMENTS:
The admitted values (principally amortized cost) and estimated market
values of investments in bonds and short-term investments at December 31,
1995 and 1994 are as follows:
<TABLE>
December 31, 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Gross Estimated
Admitted Unrealized Unrealized Market
Value Gains Losses Value
----- ----- ------ -----
U.S. Treasury securities and obligations
of U.S. government agencies
and corporations $ 41,793,493 $ 4,247,221 $ 50,398 $ 45,990,316
Obligations of states and
political subdivisions 49,232,212 2,627,925 108,799 51,751,338
Debt securities issued by
foreign governments 60,007,780 4,141,435 162,798 63,986,417
Corporate securities 2,680,567,616 226,636,579 3,370,216 2,903,833,979
Mortgage-backed securities 1,495,947,068 130,038,900 368,652 1,625,617,316
------------- ----------- ------- -------------
$ 4,327,548,169 $ 367,692,060 $ 4,060,863 $ 4,691,179,366
=============== ============== =============== ===============
December 31, 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Gross Estimated
Admitted Unrealized Unrealized Market
Value Gains Losses Value
----- ----- ------ -----
U.S. Treasury securities and obligations
of U.S. government agencies
and corporations $ 52,764,874 $ 19,491 $ 1,833,537 $ 50,950,828
Obligations of states and
political subdivisions 101,141,851 500,600 2,496,531 99,145,919
Debt securities issued by
foreign governments 87,740,434 931,396 5,796,978 82,874,852
Corporate securities 2,537,870,822 44,908,139 112,059,750 2,470,719,212
Mortgage-backed securities 1,372,311,893 20,531,761 64,300,906 1,328,542,748
------------- ---------- ---------- -------------
$ 4,151,829,874 $ 66,891,387 $ 186,487,702 $ 4,032,233,559
=============== ============== =============== ===============
Issues of various public utilities account for approximately 19% of the admitted value of the Company's corporate securities.
</TABLE>
<PAGE>
21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
3. INVESTMENTS (CONTINUED):
The admitted value and estimated market value of bonds and short-term
investments at December 31, 1995, by contractual average maturity, are
shown below. Actual 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>
Estimated
Admitted Market
Value Value
----- -----
Due in one year or less $ 111,679,502 $ 111,912,745
Due after one year through five years 918,343,831 958,694,535
Due after five years through ten years 1,183,641,359 1,285,402,290
Due after ten years 617,936,409 709,552,480
----------- -----------
2,831,601,101 3,065,562,050
Mortgage-backed securities 1,495,947,068 1,625,617,316
------------- -------------
$ 4,327,548,169 $ 4,691,179,366
================= ==================
</TABLE>
Proceeds from sales, maturities, or calls of investments in bonds during
1995 were approximately $409,344,000. Gross gains of $8,849,000 and gross losses
of $2,554,0000 were realized. Capital gains of approximately $6,282,000 were
transferred to the Interest Maintenance Reserve (IMR).
Proceeds from sales, maturities, or calls of investments in bonds during
1994 were approximately $525,799,000. Gross gains of $10,353,000 and gross
losses of $3,025,000 were realized. Capital gains of approximately $7,538,000
were transferred to IMR.
Net investment income consists of the following:
<TABLE>
<S> <C> <C>
1995 1994
Interest $ 462,588,923 $ 434,173,570
Dividends 2,604,911 1,831,811
Rents 13,408,632 13,431,856
Other 4,487,817 4,275,265
--------- ---------
483,090,283 453,712,502
Less investment expenses 20,614,971 19,510,181
---------- ----------
Net investment income $ 462,475,312 $ 434,202,321
================= ================
</TABLE>
At December 31, 1995, the preferred stock unrealized depreciation of
approximately $100,000 has not been reflected in the financial statements. The
change in the unrealized depreciation of preferred stocks amounted to
approximately $39,000 of appreciation and $24,000 of depreciation in 1995 and
1994, respectively. At December 31, 1995, the common stock unrealized
appreciation of approximately $2,629,000 is comprised of $2,633,000 of
unrealized gains and $4,000 of unrealized losses and has been reflected directly
in policyowners' surplus. The change in the unrealized appreciation of common
stocks amounted to approximately $1,136,000 and $1,512,000 of depreciation in
1995 and 1994, 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. Mortgage loans on various properties in nine states
(California, Florida, North Carolina, Indiana, Texas, Illinois, Georgia,
Kentucky and Ohio) account for approximately 62% of the total amortized cost of
the Company's mortgage loans. The remaining mortgage loans relate to properties
located throughout the United States. A total of approximately $158,306,000 of
mortgage loans have been issued on approximately 100 geographically diversified
properties of eight large retailers. The fair value of the aggregate mortgage
loan portfolio approximates $1,184,000,000 and 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 Company has outstanding mortgage loan commitments at December 31, 1995
of approximately $90,731,000. The Company has made no financial guarantees other
than those described in Note 10.
4. REAL ESTATE:
The Company owns its home office and occupies approximately 36% of the
complex; the remaining space is available for lease to third parties. Real
estate is recorded net of accumulated depreciation of $26,923,113 and
$24,474,746 for investment properties and $11,855,147 and $10,633,240 for home
office at December 31, 1995 and 1994, respectively. Depreciation expense on real
estate amounted to $3,606,104 and $4,488,377 in 1995 and 1994, respectively.
<PAGE>
22
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. POLICY RESERVES
Reserves for life policies are computed principally by the net level and
modified preliminary term methods on the basis of interest rates (21 1/42% to
6%) and mortality assumptions (1941, 1958 and 1980 CSO Tables) prescribed by
state regulatory authorities. Reserves for annuities and deposit administration
contacts are computed on the basis of interest rates ranging from 21 1/42% to
10%. At December 31, 1995 and 1994 these reserves consisted of the following:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Individual, group and credit life policies $ 763,291,221 $ 719,787,943
Annuities and deposit administration funds 4,352,392,299 4,199,320,853
Accident and health and other reserves 190,271,181 166,873,578
Less reinsurance ceded (125,806,762) (91,100,070)
------------ -----------
$ 5,180,147,939 $ 4,994,882,304
================ ================
</TABLE>
The statement values of the reserves for annuities and deposit
administration funds approximate the estimated fair values at December 31, 1995.
The estimated fair values of the reserves approximate the statement values
because interest rates credited to account balances approximate current rates
paid on similar investments 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 of liabilities for all insurance liabilities
are taken into consideration in the Company's overall management of interest
rate risk.
6. 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. Such amounts are expensed as contributed.
Contributions made to the plan were $2,230,000 in 1995 and $2,215,000 in 1994.
The following benefit information for the employees' defined benefit plan was
determined by outside actuaries as of January 1, 1995 and 1994, respectively,
the most recent actuarial valuation dates:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Actuarial present value of
accumulated benefits for the
employees' defined benefit plan:
Vested................................... $ 18,186,000 $ 17,138,000
Nonvested................................. 1,747,000 291,000
--------- -------
$ 19,933,000 $ 17,429,000
================ =============
Related net assets available for
plan benefits $ 25,111,000 $ 23,595,000
================ =============
</TABLE>
The Company has a defined contribution 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 1995 and 1994 were $1,165,000 and $1,265,000,
respectively.
The Company has entered into deferred compensation agreements with several
directors, key management employees, agents and general agents. These deferred
amounts are payable according to the terms and subject to the conditions of said
agreements.
The Company also 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 1995 and 1994 are as follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Agents' pension plan $ 334,000 $ 349,000
Agents' 401(k) plan 272,000 262,000
------- -------
$ 606,000 $ 611,000
============== ===========
</TABLE>
The funds for all plans are held by the Company under deposit
administration and group annuity contracts.
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits (postretirement benefits) for retired
employees and certain agents (retirees). Substantially all employees and agents
may become eligible for such benefits if they reach retirement age while working
for the Company.
<PAGE>
23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
6. EMPLOYEES' AND AGENTS' BENEFIT PLANS (CONTINUED):
Net periodic postretirement benefit costs for the year ended December 31,
1995 and 1994 were as follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Service cost $ 253,000 $ 252,000
Interest cost 688,000 594,000
Amortization of unrecognized loss 45,000 42,000
------ ------
Net postretirement benefit cost $ 986,000 $ 888,000
=========== ===========
</TABLE>
Company-paid premiums in 1995 were $788,000. Claims incurred in 1995 for
benefits was not significantly different than the above provision. Accrued
postretirement benefits as of December 31, 1995 were as follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Accumulated postretirement benefit obligation (APBO):
Retirees and their dependents $ 5,606,000 $ 5,620,000
Active employees fully eligible to retire and
receive benefits 2,439,000 2,523,000
Active employees not fully eligible 1,288,000 843,000
Unrecognized loss (1,523,000) (1,374,000)
---------- ----------
Total APBO $ 7,810,000 $ 7,612,000
=========== ===========
</TABLE>
The assumed discount rate used in determining the accumulated
postretirement benefit was 7.25% and the assumed health care cost trend rate was
10% graded to 6% over 50 years. Compensation rates were assumed to increase 6%
at each year end. The health coverage for retirees age 65 and over is capped in
the year 2000.
The health care cost trend rate assumption has a significant effect on the
amounts reported. An increase in the assumed health care cost trend rates by one
percentage point would increase the accumulated postretirement benefit
obligation as of December 31, 1995 by $296,000 and increase the net periodic
postretirement benefit cost for 1995 by $77,000.
7. FEDERAL INCOME TAXES:
Following is a reconciliation between the amount of tax computed at the
federal statutory rate of 35% in 1995 and 1994, respectively, and the federal
income tax provision reflected in the statement of operations:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Income tax computed at statutory rate........... $ 23,254,262 $ 19,436,453
Increases (decreases) in taxes resulting from:
Bond discount accrual......................... (1,789,195) (917,099)
Reserve adjustments........................... 278,993 476,495
Tax-exempt income............................. (1,963,294) (1,990,012)
Accelerated depreciation...................... (960,499) (822,622)
Policyowner dividends......................... 356,271 1,006,132
Deferred acquisition costs.................... 66,703 4,160,043
Change in mortality and morbidity fluctuation
reserve..................................... (2,065,764) 518,468
Change in discounting of accident and health
reserves.................................... 43,030 (131,267)
Change in interest maintenance reserve........ (757,607) (897,837)
Mutual company differential earnings amount,
Current year................................ 3,163,669 10,295,733
Changes in prior period estimates............. 114,143 (4,263,100)
Other......................................... 1,985,341 187,501
--------- -------
Federal income taxes............................ $ 21,726,053 $ 27,058,888
============ =============
</TABLE>
<PAGE>
24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
8. 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, 1995 and 1994, life reinsurance
assumed was approximately 65% and 62%, respectively, of life insurance in force.
Premiums on life reinsurance assumed were approximately 44% and 43% of life
insurance premium income in 1995 and 1994, respectively. Premiums on accident
and health reinsurance assumed were approximately 57% and 53% of accident and
health premium income in 1995 and 1994, respectively.
The Company cedes that portion of the total risk on an individual life in
excess of $1,000,000. For accident and health and disability policies, the
Company has established various limits of coverage it will retain on any one
policyowner and cedes the remainder of such coverage. Certain statistical data
with respect to reinsurance ceded follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Reinsurance ceded on ordinary life in force..... $ 8,615,497,000 $ 6,248,499,000
Reinsurance ceded on group and credit
life in force................................. 1,457,917,000 1,631,068,000
Life reinsurance premiums ceded................. 29,776,000 26,562,000
Accident and health reinsurance premiums ceded.. 69,468,000 71,318,000
</TABLE>
The Company accounts for all reinsurance agreements as transfers of risk.
Premiums for policies reinsured with other companies have been reported as a
reduction of premium income and amounts applicable to reinsurance ceded for
policy reserves and claim liabilities have been reported as reductions of these
items. If companies to which reinsurance has been ceded are unable to meet
obligations under the reinsurance agreements, the Company would remain liable.
Changes in such contingent liabilities are reflected directly to policyowners'
surplus.
Six reinsurers account for approximately 71% of the Company's December 31,
1995 ceded reserves for life and accident and health insurance. The remainder of
such ceded reserves is spread among numerous reinsurers.
9. CONTINGENCY:
Various lawsuits have arisen in the ordinary course of the Company's
business. In each of the matters, the Company believes its defenses are
meritorious and that the eventual outcome will not have a material effect on the
Company's financial position.
10. STRATEGIC ALLIANCE:
In September 1994, the Company and State Life Insurance Company (State
Life) entered into a strategic alliance (the alliance). The Company and State
Life will remain separate entities, in that each will retain its own assets,
liabilities, surplus, policies, and policyowners. There will also be separate
but common boards of directors.
In accordance with the alliance, the Company has guaranteed the insurance
liabilities of State Life to its policyholders, including present policyholders
and those acquired during the period of the alliance (initially ten years), in
the event State Life becomes unable to honor such insurance liabilities. As of
December 31, 1995, the Company has not recorded any liabilities relating to this
guarantee.
11. SUBSEQUENT EVENT:
On February 16, 1996, the Company issued $75 million of 7.75% Surplus
Notes, due March 30, 2026.
<PAGE>
25
================================================================================
No dealer, salesman or any other person is authorized by the AUL American
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 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.
================================================================================
AMERICAN UNITED LIFE
POOLED EQUITY FUND B
Group Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46204
STATEMENT OF ADDITIONAL INFORMATION
Dated: May 1, 1996
================================================================================
<PAGE>
1
Part C: Other Information
ITEM 28(A): FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements
Included in Prospectus (Part A):
Expense Summary
Condensed Financial Information - Per Unit Income and Capital
Changes in a Fund B
Accumulation Unit
Included in Statement of Additional Information (Part B):
Financial Statements of American United Life Pooled Equity Fund B:
Report of Independent Accountants
Statement of Net Assets - December 31, 1995
Statement of Operations - December 31, 1995
Statement of Changes in Net Assets - December 31,
1995 and 1994
Schedule of Investments - December 31, 1995
Notes to Financial Statements
Financial Statements of American United Life Insurance Company(R)
Report of Independent Accountants
Balance Sheet - Assets, Liabilities and Policyowners'
Surplus - December 31, 1995 and 1994
Statement of Operations - December 31, 1995 and 1994
Statement of Policyowners' Surplus - December 31,
1995 and 1994
Statement of Cash Flows - December 31, 1995 and 1994
Notes to Financial Statements
Schedules for which provision is made under the applicable articles of
Regulation S-X have been omitted because the items are not present in
the financial statements, or if present, are adequately explained in
the financial statements or are not considered to be material to the
purpose for which the financial statements are included in the
Prospectus.
ITEM 28(B): EXHIBITS.
Copies of all Exhibits required by Form N-3.
(1) Resolution of American United Life Insurance
Company(R)("AUL") Board of Directors establishing
American United Life Pooled Equity Fund B
("Fund B")....................(1)
(2) Rules and Regulations of Fund B..... ..........(2)(5)
(3) Form of Custodial Agreement between AUL, Fund B,
and Merchants National Bank and Trust
Company.......................................(3)(5)
(4) Form of Agreement between AUL and Fund B re
Investment Management Services...................(1)
(5) Form of Agreement between AUL and Fund B re Sales and
Administrative Services..........................(1)
(6) Form of Variable Annuity Contracts and Certificates
(i) Group variable annuity contract, Form Number
TA-VA-TP [for 403(b) Program].................(4)
(ii)Individual Participant's certificate, Form Number
TA-VA-C [for 403(b) Program]..................(4)
(iii)Group variable annuity contract for use with
Employee Pension Plans, Form Number
TA-VAQ-TP....................................(4)
(iv)Individual Participant's certificate for use with
Employee Pension Plans, Form Number
TA-VAQ-C......................................(4)
(v) Group variable annuity contract, Form Number
TA-VAH-TP (for HR-10 Plans)...................(4)
(vi)Individual Participants certificate, Form Number
TA-VAH-C (for HR-10 Plans)....................(4)
(vii) Group variable annuity contract, Form Number
TA-VA-9894 [for 408(b) Plans]...............(4)
(viii) Individual Participant's certificate, Form
Number VA-9896 [for 408(b) Plans]..........(4)
(ix)Group variable annuity contract, Form Number
VA-10515 (for 457 Programs)...................(4)
(1) Filed in Registrant's Form No. N-8B-1, File Number 811-1571, and in-
corporated by reference herein.
(2) Filed in Registrant's Post-Effective Amendment No. 3 on Form S-5, Reg-
istrant's No. 2-27832, and incorporated by reference herein.
(3) Filed in Registrant's Post-Effective Amendment No. 25 on Form S-5, Reg-
istrant's No. 2-27832, and incorporated by reference herein.
(4) Filed in Post-Effective Amendment No. 1, Form S-5; in Post-Effective
Amendment No. 3, Form S-5; in Post-Effective Amendment No. 11, Form
S-5; and in Post-Effective Amendment No. 20, Form N-1; Registrant's
No. 2-27832, all of which are incorporated by reference thereto.
(5) Filed in Registrant's Post-Effective Amendment No. 38, Form N-3, File
Number 811-1571, Registration Number 2-27832, and incorporated by
reference herein.
<PAGE>
2
ITEM 28(B): EXHIBITS (CONTINUED).
(7) Application for use in contracts listed above.....(7)
(8) Certificate of Incorporation and By-laws of AUL...(7)
(9) Exhibit 9 to Form N-3..................Not Applicable
(10) Exhibit 10 to Form N-3.................Not Applicable
(11) Exhibit 11 to Form N-3.................Not Applicable
(12) Exhibit 12 to Form N-3 - Opinion of Mssrs. Ice Miller
Donadio & Ryan...................................(6)
(13) Powers of Attorney and Consent of Independent
Accountant........................(8)(9)(10)(11)(12)(13)
(14) Exhibit 14: No financial statements are omitted from
Item 27...................................Not Applicable
(15) Exhibit 15 to Form N-3......................Not Applicable
(16) Exhibit 16 to Form N-3......................Not Applicable
(17) Electronic Filers - Financial Data Schedule...........(13)
(6) Incorporated by reference in Registrant's Form No. N-8B-1, File Number
811-1571.
(7) Incorporated by reference in Registrant's Post-Effective Amendment No. 31
on Form N-3, Registrant's No. 2-27832.
(8) Incorporated by reference in Registrant's Post-Effective Amendment No. 35,
Form N-3, File Number 811-1571, Registration Number 2-27832.
(9) Incorporated by reference in Registrant's Post-Effective Amendment No. 36,
Form N-3, File Number 811-1571, Registration Number 2-27832.
(10) Incorporated by reference in a December 3, 1993 filing of Post Effective
Amendment number 7 to the Registration Statement filed by AUL American
Unit Trust, File No. 33-31375.
(11) Incorporated by reference in Registrant's Post-Effective Amendment No. 38,
Form N-3, File Number 811-1571, Registration Number 2-27832.
(12) Incorporated by reference in Registrant's Post-Effective Amendment No. 39,
Form N-3, File Number 811-1571, Registration Number 2-27832.
(13) Incorporated by reference in Registrant's Post-Effective Amendment No. 40,
Form N-3, File Number 811-1571, Registration Number 2-27832.
ITEM 29: DIRECTORS AND SENIOR OFFICERS OF AMERICAN UNITED LIFE INSURANCE
COMPANY(R)
<TABLE>
<CAPTION>
Association with Other
Principal Officers Positions and Company and Nature of
and Directors of AUL Positions and Offices Offices with Such Association Within
and Business Address with AUL Registrant the Past 2 Years
- - -------------------- --------------------- -------------- --------------------
<S> <C> <C> <C>
John H. Barbre* Senior Vice President; None None
Director, AUL Equity Sales
Corp.
Steven C. Beering M.D. Director None President, Purdue
Purdue University University; Director
West Lafayette, Indiana Lilly (Eli) and Company;
Arvin Industries;
NIPSCO Industries, Inc.;
Guidant Corporation
William R. Brown* General Counsel and None Secretary, State Life
Secretary Insurance Company
*One American Square
Indianapolis, Indiana
<PAGE>
3
<CAPTION>
ITEM 29: (CONTINUED)
Principal Officers Positions and Company and Nature of
and Directors of AUL Positions and Offices Offices with Such Association Within
and Business Address with AUL Registrant the Past 2 Years
- - -------------------- --------------------- -------------- --------------------
<S> <C> <C> <C>
Arthur L. Bryant Director None Chairman of the Board &
141 E. Washington St. President: The State Life
Indianapolis, Indiana Insurance Company
James E. Cornelius Director None Chairman of the Board,
P.O. Box 44906 Guidant Corporation
Indianapolis, Indiana
James E. Dora Director None Chairman of the Board &
P.O. Box 42908 Chief Executive Officer,
Indianapolis, Indiana General Hotels
Corporation; Director,
NBD Bank, N.A.
Otto N. Frenzel III Director and Chairman None Chairman of the Board,
101 W. Washington St., Suite 400E of the Audit Committee National City Bank;
Indianapolis, Indiana Director: Indiana Gas
Company, Indianapolis
Power & Light Co.;
Baldwin & Lyons, Inc.;
IPALCO Enterprises, Inc.;
IWC Resources Corp.;
Indiana Energy, Inc.;
National City Corp.
David W. Goodrich Director None Executive Vice President
One American Square F. C. Tucker Company;
Suite 2500 Chairman, Methodist Hospital of
Indianapolis, Indiana Indiana; Director: State Life
State Life Ins. Co.; Irwin Financial;
Citizens Gas & Coke Utility
William P. Johnson Director None Chairman of the Board &
1525 S. 10th St. Chief Executive Officer, Dir.:
Goshen, Indiana Goshen Rubber Co., Inc.;
Dayton Polymrics; GNC Corporation; GSH
Corporation; GR Plastics; GRN Corp.;
Goshen Rubber of Canada, Ltd.;
Palmer Plastics; Syracuse
Rubber Co.; Bond-Flex Rubber Co.;
ETI Inc; GKI Inc.; Prolon, Inc.;
Yeasel, Inc.; Bower Manufacturing Co.;
Director & Member of Advisory
*One American Square,
Indianapolis, Indiana
<PAGE>
4
ITEM 29: (CONTINUED)
Association with Other
Principal Officers Positions and Company and Nature of
and Directors of AUL Positions and Offices Offices with Such Association Within
and Business Address with AUL Registrant the Past 2 Years
- - -------------------- --------------------- -------------- --------------------
Committee, Society Bank
Indiana, Eastern District;
Director of: Coachman
Industries, Inc.; Petro
Go, Inc.; Flair Inc.;
Lightfoot Enterprises;
Charles D. Lineback* Senior Vice President None None
James T. Morris Director None Chairman of the Board,
1220 Water Boulevard Chief Executive Officer
Indianapolis, Indiana & President, IWC
Resources Corp.;
Chairman of the Board &
Chief Executive Officer,
Indianapolis Water Co.;
Director: MSA Realty
Corp.; National City
Bank, Indiana.
Adviser, Logo 7, Inc.
James W. Murphy* Senior Vice President; Chairman & Chairman of the Board &
Director & Treasurer, Member of the President, AUL
AUL Equity Sales Corp. Board of American Series Fund,
Managers Inc.
Jerry L. Plummer* Senior Vice President None None
R. Stephen Radcliffe* Director & Executive None None
Vice President
Jack E. Reich* Emeritus Chairman of the None Director and Member of
Board the Executive Committee:
Indianapolis, Water Co.;
Bank One, Indianapolis
Thomas E. Reilly Jr. Director None Chairman of the Board,
151 N. Delaware St. Reilly Industries, Inc.;
Indianapolis, Indiana Director: Lilly Industrial
Coatings Co., Inc.; NBD
Bank, N.A.; First Chicago NBD, Corp.
Herff Jones Corporation
William R. Riggs* Director None Partner, Ice Miller Donadio & Ryan
*One American Square
Indianapolis, Indiana
<PAGE>
5
Item 29: (continued)
Association with Other
Principal Officers Positions and Company and Nature of
and Directors of AUL Positions and Offices Offices with Such Association Within
and Business Address with AUL Registrant the Past 2 Years
- - -------------------- --------------------- -------------- --------------------
Donadio & Ryan
G. David Sapp* Senior Vice President; None None
Director, AUL Equity
Sales Corp.
Leonard D Schutt Director & Chairman None Director, AUL American
5853 Wycombe Ln. of the Finance Committee Series Fund,Inc.
Indianapolis, Indiana
Jerry D. Semler* Chairman of the Board, Vice Chairman Director, Jenn
President, Chief Executive and member of Foundation Board
and Chairman of the Board of
Executive Committee; Managers
Chairman of the Board
and Vice President, AUL
Equity Sales Corp.
Yvonne H. Shaheen Director None President and Chief
1310 S. Franklin Rd. Executive Officer:
Indianapolis, Indiana Bright Sheet Metal Co.;
Long Electric Co.;
Director: Corporate
Community Council;
Community Hopsital
Foundation; Junior
Achievement; National
Electrical Contractors,
Assoc.; Indpls Chamber
of Commerce; Greater
Indpls. Progress
Committee; Boy Scouts
of America Council
James P. Shanahan* Senior Vice President Member, Director, Vice President,
Board of and Treasurer, AUL
Managers American Series Fund,
Inc.
Frank D. Walker Director None Chairman of the Board &
P.O. Box 80432 Chief Executive Officer:
Indianapolis, Indiana Walker Group; Managing Partner:
W. R. Properties
*One American Square,
Indianapolis, Indiana
<PAGE>
6
ITEM 29: (CONTINUED)
Association with Other
Principal Officers Positions and Company and Nature of
and Directors of AUL Positions and Offices Offices with Such Association Within
and Business Address with AUL Registrant the Past 2 Years
- - -------------------- --------------------- -------------- --------------------
Gerald T. Walker* Senior Vice President None None
James R. Zapapas Director None None
5025 Plantation Dr.
Indianapolis, Indiana
*One American Square
Indianapolis, Indiana
</TABLE>
ITEM 30: PERSONS CONTROLLED OR UNDER COMMON CONTROL OF AMERICAN UNITED LIFE
INSURANCE COMPANY(R).
American United Life Insurance Company(R) (AUL) is a mutual insurance company
organized under the laws of the State of Indiana. As a mutual company, AUL has
no shareholders and therefore no one individual controls as much as 10% of AUL.
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 Equity Sales Corp. is a wholly-owned subsidiary of American United Life
Insurance Company(R) organized under the laws of the State of Indiana in 1969
for the purpose of the sale of mutual funds on an application-way basis only.
AUL American Individual Unit Trust and AUL American Unit Trust are separate
accounts of AUL, organized for the purpose of the sale of individual and group
variable annuity contracts, respectively.
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. As a result of providing the initial capital for the Portfolios, on
December 31, 1995, AUL owned 12.5% of the outstanding shares of the Fund's
Equity portfolio, 25.2% of the Fund's Bond Portfolio, 6.1% of the Fund's Managed
Portfolio, 0.0% of the Fund's Money Market Portfolio, and 45.8% of the Fund's
Tactical Asset Allocation Portfolio. Therefore, AUL may be able to control the
outcome of any issue submitted generally to the vote of Fund shareholders and
would be able to control the outcome of any issue submitted to the vote of
shareholders of the Tactical Asset Allocation Portfolio.
Registrant is a separate account of AUL organized for the purpose of the sale
of group variable annuity contract.
ITEM 31: NUMBER OF CONTRACTOWNERS
The number of contractowners/participants for all variable annuity contracts
offered by American United Life Insurance Company(R) and Fund B was 721 as of
December 31, 1995.
ITEM 32: INDEMNIFICATION OF DIRECTORS AND OFFICERS
On March 5, 1969, American United Life Insurance Company(R), sponsor of the
Registrant, agreed to indemnify the members of the Board of Managers of the
Registrant against expenses incurred by any member in defense of an
<PAGE>
7
action brought by reason of his being a member of the Board of Managers, except
when in such action, the member is adjudged to have been liable for negligence
or misconduct. American United Life Insurance Company(R) has also agreed to pay
costs of settlement if it is determined by American United Life Insurance
Company(R) that settlement should be made and that the member was not guilty of
negligence or misconduct.
ITEM 33: BUSINESS AND OTHER CONNECTIONS OF OFFICERS AND DIRECTORS OF
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
See Response to Item 29.
ITEM 34: PRINCIPAL UNDERWRITER AND COMPENSATION
(a) American United Life Insurance Company(R) is principal underwriter only for
the Registrant.
<TABLE>
<CAPTION>
(b) Net Underwriting Discounts
and Commissions Deducted Compensation Gross
Name of Principal From Offering Price at or Profit on Brokerage Other
Underwriter Time of Sale Redemptions and Purchases Commissions Compensation
- - ----------- ------------ ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
American United Life $17,995 $---- $---- $----(A)
Insurance Company(R)
Note A-American United Life Insurance Company(R) performs the duties of
principal underwriter under the Sales and Administrative Services Agreement.
The other compensation paid is the fee for providing investment management
services ($36,619), and for mortality risk and expense charges ($109,858) as
explained elsewhere.
</TABLE>
ITEM 35: LOCATION OF ACCOUNTS AND RECORDS
All accounts, records and other pertinent documents of the Registrant are
under the control of Richard A. Wacker, Secretary to the Board of Managers and
are physically located at One American Square, Indianapolis, IN 46204.
ITEM 36: MANAGEMENT SERVICES
The terms of the Investment Management Services Agreement are fully described
on page 11 of the Prospectus.
ITEM 37: UNDERTAKINGS
Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
Registrant undertakes 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.
Registrant undertakes 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.
The Registrant and its Depositor are relying upon Rule 6c-7 under the
Investment Company Act of 1940 (17 CRF 270.6c-7), Exemptions from Certain
Provisions of Section 22(e) and 27 for Registered Separate Accounts Offering
Variable Annuity Contracts to Participants in the Texas Optional Retirement
Program, and the provisions of paragraphs (a) through (d) of this Rule have been
complied with.
The Registrant and its Depositor, American United Life Insurance Company(R),
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 contracts 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.
<PAGE>
8
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-3) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis and the State of Indiana on this
1st day of May, 1996.
AMERICAN UNITED LIFE POOLED EQUITY FUND B
By: American United Life Insurance Company(R)
------------------------------------------
By: James W. Murphy*, Chairman of
the Board of Managers
/s/ Richard A. Wacker
*By: Richard A. Wacker as Attorney-in-fact
Date: May 1, 1996
Pursuant to the requirements of the Securities Act of 1933, this Post Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- - --------- ----- ----
__________________________________________ Member, Board of Managers May 1, 1996
Ronald D. Anderson*
__________________________________________ Member, Board of Managers May 1, 1996
Leslie Lenkowsky*
__________________________________________ Vice Chairman of the Board and May 1, 1996
Jerry D. Semler* Member of the Board of Managers
__________________________________________ Member, Board of Managers May 1, 1996
James P. Shanahan*
/s/ Richard A. Wacker
*By: Richard A. Wacker as Attorney-in-fact
Date: May 1, 1996
</TABLE>
<PAGE>
9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, American United Life Insurance Company(R) 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 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis and the State of Indiana on this
1st day of May, 1996.
American United Life Insurance Company(R)
------------------------------------------
By: Jerry D. Semler*, Chairman of the Board,
President, and Chief Executive Officer
/s/ Richard A. Wacker
*By: Richard A. Wacker as Attorney-in-fact
Date: May 1, 1996
Pursuant to the requirements of the Securities Act of 1933, this Post Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
_______________________________________________ Director May 1, 1996
Steven C. Beering M.D.*
_______________________________________________ Director May 1, 1996
Arthur L. Bryant*
_______________________________________________ Director May 1, 1996
James E. Cornelius*
_______________________________________________ Director May 1, 1996
James E. Dora*
_______________________________________________ Director May 1, 1996
Otto N. Frenzel III*
_______________________________________________ Director May 1, 1996
David W. Goodrich*
<PAGE>
10
SIGNATURES (Continued)
Signature Title Date
- - --------- ----- ----
_______________________________________________ Director May 1, 1996
William P. Johnson*
_______________________________________________ Director May 1, 1996
James T. Morris*
_______________________________________________ Principal Financial May 1, 1996
James W. Murphy* and Accounting Officer
_______________________________________________ Director May 1, 1996
R. Stephen Radcliffe*
_______________________________________________ Emeritus Chairman May 1, 1996
Jack E. Reich* of the Board
_______________________________________________ Director May 1, 1996
Thomas E. Reilly Jr*
_______________________________________________ Director May 1, 1996
William R. Riggs*
_______________________________________________ Director May 1, 1996
Leonard D Schutt*
_______________________________________________ Director May 1, 1996
Yvonne H. Shaheen*
_______________________________________________ Director May 1, 1996
Frank D. Walker*
_______________________________________________ Director May 1, 1996
James R. Zapapas*
</TABLE>
/s/ Richard A. Wacker
*By: Richard A. Wacker as Attorney-in-fact
Date: May 1, 1996
* Powers of Attorney filed with AUL American Unit Trust's Registration Statement
(File No. 33-31375) and Post-Effective Amendment Nos. 1, 2, 3, 7, 10, and 13 and
incorporated by reference thereto.
<PAGE>
11
EXHIBIT LIST
Exhibit 13: Power of Attorney and Consent of Independent
Accountant
Exhibit 17: Financial Data Schedule
<PAGE>
Consent of Independent Accountants
Board of Directors
American United Life Insurance Company(R)
Indianapolis, Indiana
We consent to the inclusion in this Registration Statement on Form N-3 of our
report dated January 27, 1996 on our audits of the financial statements and
supplementary per unit data and ratios of American United Life Pooled Equity
Fund B and our report dated February 19, 1996 on our audits of the financial
statements of American United Life Insurance Company(R).
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
April 30, 1996
<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 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: February 13, 1996
/s/ Leslie Lenkowsky
- - -----------------------
Printed: Leslie Lenkowsky
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000005966
<NAME> AUL POOLED EQUITY FUND B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 10,602,679
<INVESTMENTS-AT-VALUE> 12,499,650
<RECEIVABLES> 14,712
<ASSETS-OTHER> 26,344
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,540,706
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,423
<TOTAL-LIABILITIES> 14,423
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,264,043
<SHARES-COMMON-PRIOR> 1,416,743
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 868,191
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,896,971
<NET-ASSETS> 12,526,283
<DIVIDEND-INCOME> 234,559
<INTEREST-INCOME> 82,010
<OTHER-INCOME> 0
<EXPENSES-NET> 146,477
<NET-INVESTMENT-INCOME> 170,092
<REALIZED-GAINS-CURRENT> 868,191
<APPREC-INCREASE-CURRENT> 1,181,274
<NET-CHANGE-FROM-OPS> 2,219,557
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,713
<NUMBER-OF-SHARES-REDEEMED> 196,413
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 820,012
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 36,619
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 146,477
<AVERAGE-NET-ASSETS> 12,204,063
<PER-SHARE-NAV-BEGIN> 8.26
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 1.52
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.91
<EXPENSE-RATIO> .012
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
