<PAGE>
Registration No. 33-12000
As filed with the Securities and Exchange Commission on February 27, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 11(x)
Registration Statement Under the Investment
Company Act of 1940
Amendment No. 12(x)
-----------------------------------
United Investors Annuity Variable Account
(Exact Name of Registrant)
United Investors Life Insurance Company
(Name of Depositor)
2001 Third Avenue South
Birmingham, Alabama 35233
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (205) 325-4300
James L. Sedgwick, Esquire
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
(Name and Address of Agent for Service)
Copy to:
Frederick R. Bellamy, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D. C. 20004
--------------------------------------------
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, an indefinite
number or amount of securities has been registered under the Securities Act of
1933. The Rule 24f-2 Notice for the year ended December 31, 1995, was filed on
February 7, 1996.
-------------------------------------------
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on May 1, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (i)
[X] on May 1, 1996 pursuant to paragraph (a) (i)
[ ] 75 days after filing pursuant to paragraph (a) (ii)
[ ] on _________ pursuant to paragraph (a) (ii) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
<PAGE>
Cross Reference Sheet
Pursuant to Rule 481
Showing Location in Part A (Prospectus) and Part B
(Statement of Additional Information) of Registration
Statement of Information Required by Form N-4
___________________________________________________________________________
Part A
------
Item of Form N-4 Prospectus Caption
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1. Cover Page........................... Cover page
2. Definition........................... Definitions
3. Synopsis............................. Summary
4. Condensed Financial Information ..... N/A
5. General
(a) Depositor......................... United Investors Life Insurance
Company
(b) Registrant....................... United Investors Annuity Variable
Account
(c) Portfolio Company................ Charges and Deductions
(d) Fund Prospectus.................. TMK/United Funds, Inc.
(e) Voting Rights.................... Voting Rights
(f) Administrators................... Summary
6. Deductions and Expense............... Charges and Deductions
(a) General.......................... Charges and Deductions
(b) Sales Load Percentage............ Charges and Deductions; Annual
Deduction
(c) Special Purchase Plan............ Charges and Deductions
(d) Commissions...................... Distributor of the Policies
(e) Expenses - Registrant............ Federal Taxes
(f) Fund Expenses.................... TMK/United Funds, Inc.
(g) Organizational Expenses.......... N/A
7. Contracts
(a) Persons with Rights.............. The Policy; Annuity Payments;
Voting Rights
(b) (i) Allocation of Premium
Payments.................. Allocation of Purchase Payments
(ii) Transfers................. Transfers
(iii) Exchanges................. N/A
(c) Changes.......................... Additions, Deletions or
Substitutions of Investments
(d) Inquiries........................ Summary
8. Annuity Period....................... Annuity Payments
9. Death Benefit........................ Death Benefits
10. Purchases and Contract Value
(a) Purchases........................ Purchase Payments and Allocation
of Purchase Payments
(b) Valuation........................ Policy Value
(c) Daily Calculation................ Policy Value
(d) Underwriter...................... Distributor of the Policies
<PAGE>
Item of Form N-4 Prospectus Caption
- ---------------- ------------------
11. Redemptions
(a) - By Owners..................... Surrender and Partial Withdrawals
- By Annuitant.................. N/A
(b) Texas ORP....................... Surrender and Partial Withdrawals
(c) Check Delay..................... Surrender and Partial Withdrawals
(d) Lapse........................... N/A
(e) Free Look....................... Free Look Period
12. Taxes............................... Federal Tax Matters
13. Legal Proceedings................... Part B: Legal Proceedings
14. Table of Contents for the
Statement of Additional Information. Statement of Additional
Information
Part B
------
Statement of Additional
Item of Form N-4 Information Caption
- ---------------- -------------------
15. Cover Page.......................... Cover Page
16. Table of Contents................... Table of Contents
17. General Information and History..... N/A
18. Services
(a) Fees and Expenses of Registrant. N/A
(b) Management Contracts............ N/A
(c) Custodian....................... N/A
Independent Public Accountant... Experts
(d) Assets of Registrant............ Safekeeping of Variable
Account Assets
(e) Affiliated Persons.............. N/A
(f) Principal Underwriter........... Distribution of the Policy
19. Purchase of Securities Being
Offered............................. Distribution of the Policy
20. Underwriters........................ Distribution of the Policy
21. Calculation of Performance Data..... Performance Data Calculations
22. Annuity Payments.................... The Policy; Determination of
Annuity Payments
23. Financial Statements................ Financial Statements
<PAGE>
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U N I T E D I N V E S T O R S
A D V A N T A G E I I SM
VARIABLE ANNUITY
PROSPECTUS
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This Prospectus describes the Deferred Variable Annuity Policy
("Policy") issued by United Investors Life Insurance Company
("United Investors"). The Policy can be purchased with a single
minimum Purchase Payment of $5,000, (for tax qualified
policies, the minimum Purchase Payment is lower). Additional
Purchase Payments may be made in amounts of $100 or more. No
Policy will be issued if either the Annuitant or the Owner are
over age 80 nearest birthday.
The Owner may choose to allocate Purchase Payments among the
ten Investment Divisions ("Investment Divisions") of the United
Investors Annuity Variable Account ("the Variable Account"), to
the Fixed Account which provides guaranteed interest
accumulation, or to a combination of both. In addition, the
Owner can transfer values among the Investment Divisions and/or
the Fixed Account. (See Transfers for restrictions on
transfers.) Assets of each Investment Division are invested in
corresponding portfolios of TMK/United Funds, Inc. (the
"Fund"), a diversified open-end management investment company.
The Fund consists of ten portfolios: the Money Market
Portfolio, the Bond Portfolio, the High Income Portfolio, the
Growth Portfolio, the Income Portfolio, the International
Portfolio, the Small Cap Portfolio, the Balanced Portfolio, the
Limited-Term Bond Portfolio and the Asset Strategy Portfolio.
The Policy Value will vary in accordance with the investment
performance of the Investment Divisions selected by the Owner.
Therefore, the Owner bears the entire investment risk under the
Policy for all Purchase Payments allocated to the Variable
Account. Purchase Payments allocated to the Fixed Account are
guaranteed by United Investors and will earn interest at a
specified rate of interest declared periodically.
The Owner can surrender the Policy for cash or make a partial
cash withdrawal (collectively, "Withdrawals"), although
Withdrawals may be subject to a withdrawal charge and tax
penalty.
This Prospectus sets forth the basic information that a
prospective investor should know before investing. A "Statement
of Additional Information" containing more detailed information
about the Policy and the Variable Account is available free by
writing United Investors at United Investors Life Insurance
Company, Variable Products Division, P.O. Box 156, Birmingham,
Alabama 35201-0156, or by calling (205) 325-4300. The Statement
of Additional Information, which has the same date as this
Prospectus, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The table
of contents for the Statement of Additional Information is
included at the end of this Prospectus.
This Prospectus Must Be Accompanied or Preceded By A Current
Prospectus For TMK/United Funds, Inc.
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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.
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THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY. AN
INVESTMENT IN THE POLICIES INVOLVES CERTAIN RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
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PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE
REFERENCE.
- -------------------------------------------------------------------------------
The Date of This Prospectus is May 1, 1996.
Issued By
United Investors Life Insurance Company
(a Missouri Stock Company)
2001 Third Avenue South
Birmingham, Alabama 35233
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U-1053 (5-96)
<PAGE>
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TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
Definitions Definitions............................................ i
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Summary Summary................................................ 1
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United Investors Life United Investors Life Insurance Company................ 7
Insurance Company and United Investors Annuity Variable Account.............. 8
United Investors Annuity TMK/United Funds, Inc.................................. 8
Variable Account
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Fixed Account Fixed Account.......................................... 10
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The Policy Issuance of a Policy................................... 10
Purchase Payments...................................... 11
Allocation of Purchase Payments........................ 11
Policy Value........................................... 11
Surrender and Partial Withdrawals...................... 12
Transfers.............................................. 14
Dollar Cost Averaging.................................. 15
Death Benefit.......................................... 15
Required Distributions................................. 15
Free Look Period....................................... 16
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Charges and Deductions Annual Deduction....................................... 16
Withdrawal Charge...................................... 17
Reductions in Charges for Certain Groups............... 18
Mortality and Expense Risk Charge...................... 18
Transaction Charge..................................... 19
Premium Taxes.......................................... 19
Federal Taxes.......................................... 19
Fund Expenses.......................................... 19
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Annuity Payments Election of Payment Option............................. 19
Retirement Date........................................ 19
Available Options...................................... 20
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Distributor of the
Policies Distributor of the Policies............................ 21
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Federal Tax Matters Introduction........................................... 21
Taxation of Annuities in General....................... 22
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Voting Rights Voting Rights.......................................... 24
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Financial Statements Financial Statements................................... 25
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Statement of Additional Statement of Additional Information Table of Contents.. 26
Information
</TABLE>
The Policy is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
<PAGE>
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DEFINITIONS
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Annuitant................means the person on whose life Annuity Payments de-
pend. If the Contract Owner names more than one per-
son as an "Annuitant", the second person shall be re-
ferred to as "Co-Annuitant". All provisions based on
the date of death of the "Annuitant" prior to the Re-
tirement Date will be based on the date of death of
the last to survive of the "Annuitant" or
"Co-Annuitant". The "Annuitant" and "Co-Annuitant"
will be referred to collectively as the "Annuitant".
means an amount paid monthly, starting on the Retire-
Annuity Payment..........ment Date, by United Investors to the Annuitant or
any other payee.
Annuity Payment Option...means any one of the payment options available under
the Policy.
Beneficiary..............means the person or persons to whom this Policy's
Death Benefit is paid when the Annuitant dies.
Death Benefit............means the benefit payable upon death of the Annuitant
or Owner.
Fixed Account....... is a part of the General Account of United Investors
Life Insurance Company. The General Account consists
of all assets of United Investors Life Insurance Com-
pany other than those in any separate account.
Fixed Account Value......means the value of the Fixed Account under the Poli-
cy.
Fixed Annuity............means an annuity with payments which remain fixed in
amount throughout the payment period and do not vary
with the investment experience of the variable In-
vestment Divisions.
Fund.....................means the mutual fund available for investment by the
Variable Account on the Policy Date or as later
changed by us. The Fund available as of the date of
this Prospectus is TMK/United Funds, Inc.
Guaranteed Minimum
Interest Rate.......... means the minimum effective annual rate at which in-
terest will be credited to amounts allocated to the
Fixed Account of the Policy. The Guaranteed Minimum
Interest Rate is 4% per year.
Net Purchase Payment.....means a Purchase Payment less any deduction for pre-
mium taxes incurred at the time the Purchase Payment
was accepted.
Nonqualified Policies....means Policies that do not qualify for special fed-
eral income tax treatment.
Policy Anniversary.......means the same day and month as the Policy Date each
year that the Policy remains in force.
Policy Date..............means the date the Policy becomes effective, and the
date from which Policy Anniversaries and Policy Years
are determined.
Policy Value.............means the Variable Account Value prior to the Retire-
ment Date plus the Fixed Account Value.
Policy Year..............means a year that starts on the Policy Date or on a
Policy Anniversary.
Policyowner or Owner.....means the person named as the owner in the applica-
tion, unless he or she has assigned ownership to
someone else.
Purchase Payment.........means any payment made by the Policyowner under the
Policy.
Qualified Policies.......means Policies used in connection with certain plans
that qualify for special federal income tax treat-
ment.
Retirement Date..........is the date on which the Annuity Payments are to
start.
i
<PAGE>
Valuation Date...........
means a normal business day, Monday through Friday.
However, we will not value the Policy on any custom-
ary U.S. business holiday when the New York Stock Ex-
change is not open for trading. Those holidays cur-
rently are New Year's Day, Presidents' Day, Good Fri-
day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Valuation Period.........means the interval of time commencing at the close of
business of the New York Stock Exchange on each Valu-
ation Date and ending at the close of business of the
New York Stock Exchange on the next Valuation Date.
Variable Account Value...
means the sum of all values of the Investment Divi-
sions of the Variable Account under the Policy.
Variable Annuity.........
means an annuity with payments which vary in amount
with the investment experience of the Variable Ac-
count.
We.......................means United Investors Life Insurance Company. "Us"
and "our" also refer to United Investors.
Written Request or
Written Notice..........means a request or notice in writing signed by the
Policyowner.
You......................
means the Owner of the Policy. "Your" and "yours"
also refer to the Policyowner.
ii
<PAGE>
SUMMARY
The following summary of Prospectus information should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated the description of the Policy contained
in this Prospectus assumes that the Policy is in force.
THE POLICY. The Policy is designed to aid individuals in long-term financial
planning and provides for the accumulation of capital on a tax-deferred basis
for retirement or other long-term purposes. The Policy also provides Annuity
Payments after the Retirement Date. The Owner may select from a number of
Annuity Payment Options, including a life annuity, joint life annuity and life
annuity for a guaranteed period. Annuity Payments may be on a variable basis,
a fixed basis, or a combination thereof. (See Annuity Payments.)
The Policy is issued in consideration of the application and payment of the
initial Purchase Payment. The minimum initial Purchase Payment for non-
qualified policies is $5,000. For qualified plans, the initial Purchase
Payment must be at least $1,200, unless Purchase Payments will be made by
means of a bank draft authorization or a group payment method approved in
advance by us. (See Purchase Payments.) The Policy can be purchased for a
single Purchase Payment. However, additional Purchase Payments may be paid at
the Policyowner's option (within certain limits). (See Purchase Payments.) The
Policy can be purchased on a non-qualified tax basis or it can be purchased
and used in connection with plans qualifying for favorable federal income tax
treatment.
THE VARIABLE ACCOUNT. The Variable Account currently has ten Investment
Divisions. The Investment Divisions invest solely in shares of a corresponding
portfolio of the Fund, which currently has the following ten separate
investment portfolios: the Money Market Portfolio, the Bond Portfolio, the
High Income Portfolio, the Growth Portfolio, the Income Portfolio, the
International Portfolio, the Small Cap Portfolio, the Balanced Portfolio, the
Limited-Term Bond Portfolio and the Asset Strategy Portfolio (collectively,
the "Portfolios"). Each of these Portfolios have a different investment
objective. (See TMK/United Funds, Inc.)
The Policyowner determines the allocation of Purchase Payments and Policy
Value among the Investment Divisions of the Variable Account. Because the
Policy Value depends on the investment experience of the selected Investment
Divisions, the Owner bears the entire investment risk under the Policy for all
Purchase Payments allocated to, and amounts transferred to the Variable
Account. (See Allocation of Purchase Payments.) Prior to the Retirement Date,
the Policyowner may transfer the Policy Value from one Investment Division to
one or more other Investment Divisions up to twelve times per Policy Year at
no cost. After the Retirement Date, the Annuitant may reallocate the value of
the Annuitant's interest in the Investment Divisions once each Policy Year at
no cost. (See Transfers.)
THE FIXED ACCOUNT. The Fixed Account is a part of the General Account of
United Investors Life Insurance Company. The General Account consists of all
assets of United Investors Life Insurance Company other than those in any
separate account. We guarantee that we will credit interest at a rate of not
less than the Guaranteed Minimum Interest Rate of 4% per year to amounts
allocated to the Fixed Account. We may credit interest at a rate in excess of
the Guaranteed Minimum Interest Rate. ANY EXCESS INTEREST CREDITED WILL BE
DETERMINED IN OUR SOLE DISCRETION. THE OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE GUARANTEED MINIMUM
INTEREST RATE. The Fixed Account may not be available in all states. (See
Fixed Account.)
The Policyowner determines the allocation of Purchase Payments and Policy
Value to the Fixed Account. Prior to the Retirement Date, the Policyowner may
transfer all or part of the values held in the Fixed Account to one or more of
the Investment Divisions of the Variable Account once per policy year. After
the Retirement Date, transfers from the Fixed Account to the Investment
Divisions of the Variable Account are not allowed. After the Retirement Date
values held in the Investment Divisions of the Variable Account may be
transferred to the Fixed Account not more often than once per policy year.
(See Transfers.)
1
<PAGE>
POLICY VALUE. On the Policy Date, the Policy Value equals the amount of the
initial Purchase Payment less any applicable premium taxes plus any accrued
interest from the date of receipt of the initial Purchase Payment to the
Policy Date. Thereafter, the Policy Value will increase or decrease from day
to day depending on the investment experience of the selected Investment
Divisions.
The Policy Value is equal to the Variable Account Value under the Policy
prior to the Retirement Date plus the Fixed Account Value. (See Fixed
Account.) Variable Account Values are not guaranteed. The Policy Value will
reflect the investment performance of the selected Investment Divisions, the
charges imposed in connection with the Policy, and indirectly the expenses of
the Fund. (See Policy Value.) Accordingly, although the Policy offers the
possibility that the Policy Value will increase, there is no assurance that it
will increase, and it may decrease.
SURRENDER AND PARTIAL WITHDRAWALS. You may surrender the Policy at any time
prior to the Retirement Date for the Policy Value less any applicable
Withdrawal Charge and less any premium taxes incurred upon surrender. You may
also make partial withdrawals of the Policy Value at any time after the first
Policy Year and prior to the Retirement Date. However, amounts withdrawn
during the first eight Policy Years following receipt of a Purchase Payment
may be subject to a Withdrawal Charge. (See Surrender and Partial
Withdrawals.) In addition, withdrawals may be taxable and subject to a penalty
tax. For certain Qualified Policies, withdrawals may be severely restricted
and/or penalized. (See Federal Tax Matters.)
DEATH BENEFIT. The Policy provides a Death Benefit if the Annuitant dies
before the Retirement Date. The Death Benefit under the Policy will be paid in
a lump sum or under one of the Annuity Payment Options. (See Death Benefit,
Annuity Payments.) No Death Benefit will be paid if the Annuitant or Owner
dies after the Retirement Date unless provided for in the Annuity Payment
Option then in effect. (See Death Benefit.)
Upon death of the Owner prior to the Retirement Date certain distribution
requirements under federal income tax laws will apply. (See Required
Distributions.) If death of the Annuitant occurs prior to the Retirement Date
and the Annuitant is also the Owner or Joint Owner of the Policy, the rules
governing distribution of death benefit proceeds in the event of the death of
the Owner shall apply.
CHARGES AND DEDUCTIONS. United Investors does not impose any charge or
deduction against a Purchase Payment prior to its allocation to the Variable
Account or Fixed Account, (except for a charge for any premium taxes incurred
at the time the Purchase Payment is accepted). Deductions are made from the
values in the Investment Divisions and the Fixed Account to pay for various
expenses and risks that we incur.
There is a sales charge of a maximum of 8.5% of each Purchase Payment, which
is deducted from the Policy Value in ten equal annual installments of 0.85% of
the Purchase Payment. (See Annual Deduction.)
A sales charge in the form of a withdrawal charge ("Withdrawal Charge") is
assessed against each Purchase Payment withdrawn or applied under an Annuity
Payment Option within eight years after the payment is received. The
Withdrawal Charge is 8% of Purchase Payments less than one year old, and
decreases 1% per year. Purchase Payments 8 years old or older are not subject
to Withdrawal Charges.
The sales charges described herein are applicable to policies issued after
April 30, 1992. The sales charges for policies issued prior to May 1, 1992 (or
later in some states), will be as shown in your policy form. See Policies
Issued before May 1, 1992 (or later in some states).
A $20 transaction charge will apply if more than four withdrawals are made
in a Policy Year. (See Transaction Charge.) Withdrawals may be subject to a
penalty tax. (See Federal Tax Matters.)
An annual deduction of $50 is made on each Policy Anniversary to compensate
United Investors for the cost of administering the Policy. (See Annual
Deduction.)
2
<PAGE>
These sales charges and annual deductions will be made from the Fixed
Account and the variable Investment Divisions in the same proportion that
their values bear to the total Policy Value.
A daily charge, at an effective annual rate of .90% of the daily value of
the Investment Divisions, will be deducted from the Investment Divisions for
United Investors' assumption of certain mortality and expense risks incurred
in connection with the Policy. (See Mortality and Expense Risk Charge.) There
is no Mortality and Expense Risk Charge for amounts in the Fixed Account.
SUMMARY OF FEES AND CHARGES.
The following information summarizes the fees and charges payable by the
Owner of a Policy.
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES.
Deferred sales load (as percentage of each Purchase Payment; deducted
in equal installments of .85% on each of the first ten policy anni-
versaries following the date the payment is received): .............. 8.5%
Surrender fees (for each withdrawal in excess of 4 per Policy Year): . $20.00
Transfer fee (maximum of 12 transfers in a Policy Year): ............. $ 0.00
Annual Deduction: .................................................... $50.00
VARIABLE ACCOUNT ANNUAL EXPENSES.
Mortality and Expense Risk Fees (expressed as a percent of the average
daily net assets of each Investment Division of the Variable Ac-
count): ............................................................. 0.90%
</TABLE>
3
<PAGE>
TMK/UNITED FUNDS' ANNUAL EXPENSES
(Expressed as a Percentage of Net Assets of the Portfolio)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER PORTFOLIO ANNUAL
PORTFOLIO FEE EXPENSES EXPENSES
--------- ---------- -------- ----------------
<S> <C> <C> <C>
Money Market.......................... 0.51% 0.11% 0.62%
Bond.................................. 0.54% 0.06% 0.60%
High Income........................... 0.66% 0.06% 0.72%
Growth................................ 0.71% 0.04% 0.75%
Income................................ 0.72% 0.05% 0.77%
International......................... 0.81% 0.21% 1.02%
Small Cap............................. 0.86% 0.10% 0.96%
Balanced.............................. 0.61% 0.11% 0.72%
Limited-Term Bond..................... 0.56% 0.15% 0.71%
Asset Strategy........................ 0.81% 0.10% 0.91%
</TABLE>
The purpose of the following table is to assist the Owner in understanding
the various costs and expenses that an Owner will bear directly and
indirectly. The Table reflects charges and expenses of both the Variable
Account and the Fund for the year ended December 31, 1995; charges and
expenses for future years may be higher or lower. For more information on the
charges summarized in this Table, see "Charges and Deductions," and the
Prospectus for the Fund.
Example
If you surrender or annuitize your contract at the end of the applicable
time period, you would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets:
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market............................... $85.20 $115.85 $148.25 $257.73
Bond....................................... 85.00 115.25 147.24 255.65
High Income................................ 86.20 118.88 153.33 268.07
Growth..................................... 86.50 119.78 154.85 271.15
Income..................................... 86.70 120.39 155.87 273.20
International.............................. 89.20 127.91 168.45 298.50
Small Cap.................................. 88.60 126.11 165.44 292.48
Balanced................................... 86.20 118.88 153.33 268.07
Limited-Term Bond.......................... 86.10 118.57 152.83 267.04
Asset Strategy............................. 88.10 124.61 162.93 287.44
</TABLE>
If you do not surrender your contract, you would pay the following expenses
on a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market............................... $15.20 $65.85 $118.25 $257.73
Bond....................................... 15.00 65.25 117.24 255.65
High Income................................ 16.20 68.88 123.33 268.07
Growth..................................... 16.50 69.78 124.85 271.15
Income..................................... 16.70 70.39 125.87 273.20
International.............................. 19.20 77.91 138.45 298.50
Small Cap.................................. 18.60 76.11 135.44 292.48
Balanced................................... 16.20 68.88 123.33 268.07
Limited-Term Bond.......................... 16.10 68.57 122.83 267.04
Asset Strategy............................. 18.10 74.61 132.93 287.44
</TABLE>
In addition, United Investors will deduct a charge for premium taxes when
they are incurred.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. THE
$50 ANNUAL DEDUCTION IS REFLECTED IN THESE EXAMPLES AS A CHARGE OF 0.10% OF
THE ASSETS.
4
<PAGE>
"FREE LOOK" PERIOD. You may cancel the Policy by returning it within 10 days
after you receive it. When we receive the Policy we will cancel it and refund
the greater of the Policy Value or the Purchase Payment that was paid. (See
Free Look Period.) During the period, that portion of the Purchase Payment to
be allocated to the Investment Divisions of the Variable Account will be held
in the Money Market Investment Division. During the period, we will credit
interest on that portion of the Purchase Payment to be allocated to the Fixed
Account as if it had been invested in the Money Market Investment Division.
The Free Look Period may be extended where required by state law.
OWNER INQUIRIES. All inquiries regarding the Policy should be addressed or
directed to the sales agent who sold the Policy or to United Investors at the
following address:
United Investors Life Insurance Company
Variable Products Division
P.O. Box 156
Birmingham, Alabama 35201-0156
Phone: (205) 325-4300
All inquiries should include the Policy number and the Annuitant's name and
Owner's name, if different.
* * *
NOTE: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the Prospectus
for TMK/United Funds, Inc., both of which should be referred to for more
detailed information. With respect to Qualified Policies, it should be
noted that the requirements of a particular retirement plan, an
endorsement to the Policy, or limitations or penalties imposed by the
Internal Revenue Code may impose limits or restrictions on Purchase
Payments, surrenders, distributions or benefits, or on other provisions
of the Policies, and this Prospectus does not describe any such
limitations or restrictions. (See Federal Tax Matters.)
CONDENSED FINANCIAL INFORMATION
The following table gives per unit information about the financial history
of each Investment Division of the Variable Account from inception to December
31, 1995. This information should be read in conjunction with the Variable
Account financial statements (including the notes thereto) included in the
Statement of Additional Information.
5
<PAGE>
ACCUMULATION UNIT VALUES
<TABLE>
<CAPTION>
MONEY HIGH
MARKET BOND INCOME GROWTH INCOME INTERNATIONAL SMALL CAP BALANCED
---------- ---------- ---------- ----------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
July 13, 1987(a) 1.000 1.000 1.000 1.000 -- -- -- --
December 31,
1987........... 1.026 1.029 0.991 0.963 -- -- -- --
January 1, 1988. 1.026 1.029 0.991 0.963 -- -- -- --
December 31,
1988........... 1.088 1.097 1.131 1.084 -- -- -- --
January 1, 1989. 1.088 1.097 1.131 1.084 -- -- -- --
December 31,
1989........... 1.174 1.216 1.074 1.371 -- -- -- --
January 1, 1990. 1.174 1.216 1.074 1.371 -- -- -- --
December 31,
1990........... 1.254 1.287 0.987 1.286 -- -- -- --
January 1, 1991. 1.254 1.287 0.987 1.286 -- -- -- --
December 31,
1991........... 1.312 1.482 1.312 1.735 1.072(b) -- -- --
January 1, 1992. 1.312 1.482 1.312 1.735 1.072 -- -- --
December 31,
1992........... 1.342 1.582 1.505 2.078 1.209 -- -- --
January 1, 1993. 1.342 1.582 1.505 2.078 1.209 -- -- --
December 31,
1993........... 1.365 1.762 1.758 2.348 1.406 -- -- --
January 1, 1994. 1.365 1.762 1.758 2.348 1.406 -- -- --
December 31,
1994........... 1.403 1.643 1.698 2.383 1.378 0.997(c) 1.202(c) 0.991(c)
January 1, 1995. 1.403 1.643 1.698 2.383 1.378 0.997 1.202 0.991
December 31,
1995........... 1.468 1.963 1.989 3.272 1.796 1.060 1.577 1.219
<CAPTION>
LIMITED- ASSET
TERM BOND STRATEGY
------------ ------------
<S> <C> <C>
July 13, 1987(a) -- --
December 31,
1987........... -- --
January 1, 1988. -- --
December 31,
1988........... -- --
January 1, 1989. -- --
December 31,
1989........... -- --
January 1, 1990. -- --
December 31,
1990........... -- --
January 1, 1991. -- --
December 31,
1991........... -- --
January 1, 1992. -- --
December 31,
1992........... -- --
January 1, 1993. -- --
December 31,
1993........... -- --
January 1, 1994. -- --
December 31,
1994........... 0.997(c) --
January 1, 1995. 0.997 --
December 31,
1995........... 1.129 1.012(d)
ACCUMULATION UNITS OUTSTANDING
<CAPTION>
MONEY HIGH
MARKET BOND INCOME GROWTH INCOME INTERNATIONAL SMALL CAP BALANCED
---------- ---------- ---------- ----------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31,
1987........... 124,489 196,369 779,976 760,847 -- -- -- --
December 31,
1988........... 5,870,883 3,599,836 8,300,298 10,301,884 -- -- -- --
December 31,
1989........... 7,833,120 7,035,149 11,565,436 17,401,327 -- -- -- --
December 31,
1990........... 10,673,859 10,260,056 11,430,492 25,663,814 -- -- -- --
December 31,
1991........... 13,818,073 17,155,802 15,904,632 36,185,081 13,434,291 -- -- --
December 31,
1992........... 16,837,063 29,787,569 25,935,498 55,229,057 52,063,508 -- -- --
December 31,
1993........... 17,897,447 44,792,360 38,757,852 89,948,476 108,139,963 -- -- --
December 31,
1994........... 20,471,850 43,111,140 40,825,454 111,492,038 154,850,855 25,149,046 12,901,165 8,285,256
December 31,
1995........... 24,201,405 43,067,978 41,566,061 122,901,754 179,416,052 45,528,402 34,060,411 18,645,118
<CAPTION>
LIMITED- ASSET
TERM BOND STRATEGY
------------ ------------
<S> <C> <C>
December 31,
1987........... -- --
December 31,
1988........... -- --
December 31,
1989........... -- --
December 31,
1990........... -- --
December 31,
1991........... -- --
December 31,
1992........... -- --
December 31,
1993........... -- --
December 31,
1994........... 1,129,780 --
December 31,
1995........... 2,002,578 4,228,164
</TABLE>
(a) Commencement of operations.
(b) Commencement of operations on July 16, 1991 at 1.000.
(c) Commencement of operations on May 3, 1994 at 1.000.
(d) Commencement of operations on May 1, 1995 at 1.000.
6
<PAGE>
HISTORICAL PERFORMANCE DATA
We may advertise yields and total returns for the Investment Divisions. In
addition, we may advertise the effective yield of the Money Market Investment
Division. These figures will be based on historical earnings and are not
intended to indicate future performance.
The yield of the Money Market Investment Division refers to the annualized
income generated by an investment in the Investment Division over a specified
seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in the Investment Division is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The total return calculation of an Investment Division other than the Money
Market Investment Division assumes an investment has been held in the
Investment Division for various periods of time including (a) one year; (b)
five years; and (c) a period measured from the date the Investment Division
commenced operations. The total return will represent the average annual
compounded rates of return that would equate an initial investment of $1,000
to the redeemable value of that investment as of the last day of each of the
periods referenced above.
Total return figures in non-standard formats for the Investment Divisions
other than the Money Market Investment Division may also be disclosed from
time to time. The non-standard total return will assume that no surrender
occurs at the end of the applicable period. All non-standard performance data
disclosed will be accompanied by standard performance data for the same
period.
Performance data calculations are discussed in further detail in the
Statement of Additional Information.
PUBLISHED RATINGS
We may publish in advertisements, sales literature, and reports to Policy
Owners, the ratings and other information assigned to us by one or more
independent insurance industry analyst or rating organizations such as A. M.
Best Company, Standard & Poor's Corporation, and Weiss Research, Inc. These
ratings reflect the current opinion of an insurance company's financial
strength and operating performance in comparison to the norms for the
insurance industry; they do not reflect the strength, performance, or safety
(or lack thereof) of the Variable Account. The claims-paying ability rating as
measured by Standard & Poor's is an opinion of an operating insurance
company's financial capacity to meet the obligations of its insurance and
annuity policies in accordance with their terms. These ratings should not be
considered as bearing on the investment performance of the assets held in the
Variable Account or the degree of risk associated with an investment in the
Variable Account.
UNITED INVESTORS LIFE INSURANCE COMPANY AND
UNITED INVESTORS ANNUITY VARIABLE ACCOUNT
UNITED INVESTORS LIFE INSURANCE COMPANY
United Investors Life Insurance Company is a stock life insurance company
that was incorporated in the State of Missouri on August 17, 1981, as the
successor to a company of the same name established in Missouri on September
27, 1961. United Investors is a wholly-owned subsidiary of United Investors
Management Company (formerly TMK/United, Inc.), which in turn is indirectly
owned by Torchmark Corporation. United Investors is principally engaged in
offering life insurance and annuity contracts and is admitted to do business
in the District of Columbia and all states except New York.
7
<PAGE>
UNITED INVESTORS ANNUITY VARIABLE ACCOUNT
United Investors Annuity Variable Account (the "Variable Account") is
currently divided into ten Investment Divisions. Each Investment Division
invests exclusively in shares of a single portfolio of the Fund. Income and
both realized and unrealized gains or losses from the assets of each
Investment Division are credited to or charged against that Investment
Division without regard to income, gains or losses from any other Investment
Division of the Variable Account or arising out of any other business United
Investors may conduct.
Although the assets in the Variable Account are the property of United
Investors, the assets in the Variable Account attributable to the Policies are
not chargeable with liabilities arising out of any other business which United
Investors may conduct. The Variable Account was initially established by
United Investors as a segregated asset account on December 8, 1981 and was
modified on January 5, 1987. The Variable Account will receive and invest the
Purchase Payments allocated to it under the Policies.
The Variable Account has been registered as a unit investment trust under
the Investment Company Act of 1940 and meets the definition of a separate
account under the Federal securities law. Registration with the Securities and
Exchange Commission does not involve supervision of the management or
investment practices or policies of the Variable Account or United Investors
by the Commission.
TMK/UNITED FUNDS, INC.
The Variable Account invests in shares of TMK/United Funds, Inc. (the
"Fund"), a mutual fund of the series type with ten separate investment
portfolios. The Fund currently has a Money Market Portfolio, a Bond Portfolio,
a High Income Portfolio, a Growth Portfolio, an Income Portfolio, an
International Portfolio, a Small Cap Portfolio, a Balanced Portfolio, a
Limited-Term Bond Portfolio, and an Asset Strategy Portfolio. The assets of
each Portfolio of the Fund are held separate from the assets of the other
Portfolios. Thus, each Portfolio operates as a separate investment portfolio,
and the income or losses of one Portfolio have no effect on the investment
performance of any other Portfolio.
The investment objectives and policies of each Portfolio are summarized
below. There is no assurance that any of the Portfolios will achieve their
stated objectives. More detailed information, including a description of
risks, is in the Fund's prospectus, which accompanies this Prospectus and
which should be read carefully in conjunction with this Prospectus and
retained.
The Fund is designed to provide investment vehicles for variable annuity or
variable life insurance contracts of various insurance companies. For more
information about the risks associated with the use of the same funding
vehicle for both variable annuity and variable life insurance contracts of
various insurance companies, see the Fund's prospectus.
The Fund currently offers the following ten Portfolios:
The Money Market Portfolio seeks to maximize current income consistent with
stability of principal. It may invest in money market securities such as bank
obligations and instruments secured by bank obligations, commercial paper and
corporate debt obligations and obligations of the U.S. and Canadian
Governments or their respective agencies and instrumentalities. Investments in
a money market fund are neither insured nor guaranteed by the U.S. Government
and there is no assurance that the portfolio will be able to maintain a stable
per share net asset value.
The Bond Portfolio seeks current income with an emphasis on preservation of
capital. It will invest primarily in debt securities of varying yields,
qualities, and maturities.
The High Income Portfolio primarily seeks high current income. As a
secondary goal it will seek capital growth when consistent with the primary
goal. It will invest primarily in high-yield, high risk fixed-income
securities, but may have up to 20% of its assets in common stocks. High-yield
fixed-income securities may have an increased risk of default and greater
market price volatility than higher rated securities due to various
circumstances. See "Risk Factors of High Yield Investing" in the TMK/United
Funds, Inc. prospectus for a further description of the risk factors.
8
<PAGE>
The Growth Portfolio primarily seeks capital growth. As a secondary goal it
will seek current income. It will invest primarily in common stocks or
securities convertible into common stocks.
The Income Portfolio seeks to maintain current income, subject to market
conditions. It will invest primarily in common stocks or securities
convertible into common stocks.
The International Portfolio primarily seeks long-term appreciation of
capital with a secondary goal of current income by investing primarily in
securities issued by companies or governments of any nation.
The Small Cap Portfolio seeks capital growth through a diversified holding
of securities, primarily in the common stocks of, or securities convertible
into the common stocks of, relatively new or unseasoned companies, companies
which are in their early stages of development or smaller companies positioned
in new and emerging industries where the opportunity for rapid growth is above
average.
The Balanced Portfolio primarily seeks current income with a secondary goal
of long-term appreciation of capital by investing in a variety of securities,
including debt securities, common stocks and preferred stocks.
The Limited-Term Bond Portfolio seeks a high level of current income
consistent with preservation of capital by investing primarily in debt
securities of investment grade, including debt securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities. The Portfolio
will seek to maintain a dollar weighted average maturity of its portfolio of
two to five years.
The Asset Strategy Portfolio seeks high total return with reduced risk over
the long term. It diversifies among stocks, bonds, and short-term instruments,
both in the United States and abroad.
FUND MANAGEMENT AND FEES
Waddell & Reed Investment Management Company (the "Manager") is the manager
of the Fund and provides investment advisory services to the Fund. Waddell &
Reed, Inc. previously served as Manager to the Fund and a number of other
mutual funds. On January 8, 1992, subject to the authority of the Fund's Board
of Directors, Waddell & Reed, Inc. assigned its investment management duties
(and assigned its professional staff for investment management services) to
the Manager. Waddell & Reed, Inc. will continue to act as the Fund's
distributor. Waddell & Reed, Inc. has provided to the Fund certain
undertakings and guarantees in connection with the assignment. The Manager is
a wholly-owned subsidiary of Waddell & Reed, Inc. which is a direct subsidiary
of Waddell & Reed Financial Services, Inc. and an indirect subsidiary of
United Investors Management Company and Torchmark Corporation. The Manager
provides investment advice to and supervises investments of a number of mutual
funds. The Manager maintains a large staff of experienced investment personnel
and a full complement of related support facilities. Each Portfolio pays the
Manager a fee for managing its investments consisting of two elements: (i) a
specific fee computed on each Portfolio's net asset value at the close of
business each day at the following annual rates: Money Market Portfolio--None;
Bond Portfolio--.03 of 1% of net assets; High Income Portfolio--.15 of 1% of
net assets; Growth Portfolio--.20 of 1% of net assets; Income Portfolio--.20
of 1% of net assets; International Portfolio--.30 of 1% of net assets; Small
Cap Portfolio--.35 of 1% of net assets; Balanced Portfolio--.10 of 1% of net
assets; Limited-Term Bond Portfolio--.05 of 1% of net assets; and Asset
Strategy Portfolio--.30 of 1% of net assets; and (ii) a pro rata participation
based on the relative net asset size of each Portfolio in a "Group" fee
computed each day on the combined net asset values of all of the Portfolios at
the following annual rates: Group Net Asset Level from $0 to $750 million--
Annual Group Fee Rate .51 of 1%; from $750 to $1,500 million--.49 of 1%; from
$1,500 to $2,250 million--.47 of 1%; over $2,250 million--.45 of 1%.
9
<PAGE>
FIXED ACCOUNT
THAT PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION.
The Fixed Account is a part of the General Account of United Investors Life
Insurance Company. The General Account consists of all assets of United
Investors Life Insurance Company other than those in any separate account. We
guarantee that we will credit interest at a rate of not less than the
Guaranteed Minimum Interest Rate of 4% per year to amounts allocated to the
Fixed Account. We may credit interest at a rate in excess of the Guaranteed
Minimum Interest Rate. ANY EXCESS INTEREST CREDITED WILL BE DETERMINED IN OUR
SOLE DISCRETION. THE OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED
ACCOUNT ALLOCATIONS MAY NOT EXCEED THE GUARANTEED MINIMUM INTEREST RATE. The
Fixed Account may not be available in all states. (See Fixed Account.)
The Policyowner determines the allocation of Purchase Payments and Policy
Value to the Fixed Account. Prior to the Retirement Date, the Policyowner may
transfer all or part of the values held in the Fixed Account to one or more of
the Investment Divisions of the Variable Account once per policy year. After
the Retirement Date, transfers from the Fixed Account to the Investment
Divisions of the Variable Account are not allowed. After the Retirement Date
values held in the Investment Divisions of the Variable Account may be
transferred to the Fixed Account not more often than once per policy year.
(See Transfers.)
THE POLICY
The Policy is a Deferred Variable Annuity. The rights and benefits of the
Policy are described below and in the Policy. However, United Investors
reserves the right to make any modification to conform the Policy to, or to
give the Owner the benefit of, any federal or state statute or rule or
regulation.
The Policy may be purchased on a non-qualified tax basis ("Nonqualified
Policy"). The Policy may also be purchased and used in connection with plans
qualifying for favorable federal income tax treatment ("Qualified Policy").
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must complete an application and
send it to United Investors' Home Office. Acceptance is subject to United
Investors' rules, and United Investors reserves the right to reject any
application or Purchase Payment. If the application can be accepted in the
form received, the initial Purchase Payment will be applied within two
Valuation Dates after the latter of receipt of the application or receipt of
the initial Purchase Payment. If the initial Purchase Payment cannot be
applied within five Valuation Dates after receipt because the application is
incomplete, the applicant will be contacted and given an explanation for the
delay and the initial Purchase Payment will be returned at that time unless
the applicant consents to United Investors' retaining the initial Purchase
Payment and applying it as soon as the necessary requirements are fulfilled.
No Policy will be issued if either the Annuitant or the Owner are over age 80
nearest birthday. Coverage will only become effective on the Policy Date.
10
<PAGE>
PURCHASE PAYMENTS
The minimum initial Purchase Payment for Nonqualified Policies is $5,000.
For Qualified Policies, the initial Purchase Payment must be at least $1,200
(as an exception for Qualified Policies, if Purchase Payments will be made by
means of a bank draft authorization or a group payment method approved in
advance by us, we will accept installments of $100 per month totalling at
least $1,200 in the first year). Additional Purchase Payments may be made in
amounts of $100 or more.
If you make no Purchase Payments during a 24 month period and your previous
Purchase Payments total less than $2,000, we have the right to pay you the
total value of your annuity in a lump sum, after a 30 day notice, unless
during that time you make an additional payment.
ALLOCATION OF PURCHASE PAYMENTS
The Policyowner determines in the application how the initial Net Purchase
Payment will be allocated among the Investment Divisions of the Variable
Account and the Fixed Account. You may allocate any whole percentage of Net
Purchase Payments, from 0% to 100%.
Between the date that the initial Purchase Payment was received and the
Policy Date, interest will be credited on the Purchase Payment as if it had
been invested in the Money Market Investment Division. Beginning on the Policy
Date and ending on the seventeenth day after the Policy Date or the first
Valuation Date thereafter, the portion of the initial Net Purchase Payment to
be allocated to the Investment Divisions of the Variable Account, plus any
accrued interest, will be allocated to the Money Market Investment Division,
the portion of the initial Net Purchase Payment to be allocated to the Fixed
Account, plus any accrued interest, will be credited with interest as if it
had been invested in the Money Market Investment Division.
If we receive an additional Purchase Payment prior to the seventeenth day
after the Policy Date, on the date we receive the payment the portion of the
additional Net Purchase Payment to be allocated to the Investment Divisions of
the Variable Account will be allocated to the Money Market Investment
Division; the portion of the additional Net Purchase Payment to be allocated
to the Fixed Account will be credited with interest as if it had been invested
in the Money Market Investment Division. Upon the expiration of this period,
the Policy Value will be transferred to the Investment Divisions of the
Variable Account and the Fixed Account in accordance with the allocation
instructions you specify in the application. The seventeen day period is
intended to cover the 10-day Free Look Period (See Free Look Period), plus 7
days for processing and policy delivery.
If we receive an additional purchase payment on or after the seventeenth day
after the Policy Date, the Net Purchase Payment will be allocated to the
Investment Divisions and the Fixed Account according to the allocation
percentage specified in your application, unless subsequently changed.
The Policy Value will vary with the investment performance of the Investment
Divisions you select, and you bear the entire risk for amounts allocated to
the Variable Account. You should periodically review your allocations of
Policy Value in light of all relevant factors, including market conditions and
your overall financial planning requirements.
POLICY VALUE
The Policy Value prior to the Retirement Date is equal to the Variable
Account Value plus the Fixed Account Value. Variable Account Values are not
guaranteed. The Variable Account Value is equal to the sum of the values of
the Investment Divisions of the Variable Account under the Policy. The value
of each Investment Division is calculated first on the Policy Date and
thereafter on each Valuation Date (a normal business day).
11
<PAGE>
VARIABLE ACCOUNT VALUE
On the Policy Date, the value of the Investment Divisions is equal to the
amount of the initial Net Purchase Payment allocated to the Investment
Divisions of the Variable Account plus any accrued interest from the date of
the receipt of the initial Purchase Payment to the Policy Date. On any
Valuation Date thereafter, the value of each Investment Division equals:
(1) the value of the Investment Division on the previous Valuation Date, as
increased or decreased by the investment experience and daily charge for
the Investment Division during the current Valuation Period; plus
(2) the amount of any Net Purchase Payments allocated to the Investment
Division during the current Valuation Period; plus
(3) the amount of any transfers from other Investment Divisions or from the
Fixed Account to the Investment Division during the current Valuation
Period; minus
(4) the amount of any withdrawals (including any Withdrawal Charge or
transaction charge) from the Investment Division during the current
Valuation Period; minus
(5) the amount of any transfers from the Investment Division to other
Investment Divisions or to the Fixed Account during the current
Valuation Period; minus
(6) the portion of any annual deduction allocated to the Investment Division
if the current Valuation Period includes a Policy Anniversary; minus
(7) the portion of any deduction for premium taxes during the current
Valuation Period allocated to the Investment Division.
Deductions will be made from the Investment Divisions in the same proportion
that the value of the Investment Division bears to the entire Policy Value.
Variable Account Values are not guaranteed.
FIXED ACCOUNT VALUE
At the end of any Valuation Period, the Fixed Account Value is equal to:
(a) the sum of all Net Purchase Payments allocated to the Fixed Account;
plus
(b) any amounts transferred from the Variable Account to the Fixed Account;
plus
(c) total interest credited to the Fixed Account; less
(d) any amounts transferred from the Fixed Account to the Variable Account;
less
(e) the portion of any withdrawals, withdrawal charges, and transaction
charges allocated to the Fixed Account; less
(f) the portion of the annual deduction and premium taxes which is
allocated to the Fixed Account.
SURRENDER AND PARTIAL WITHDRAWALS
Withdrawals. You may make a partial withdrawal from the Policy Value, after
the first Policy Year and prior to the Retirement Date, by sending a Written
Request to United Investors at its Home Office. A partial withdrawal must be
for at least $250, and the Policy Value must be at least $2,000 after a
partial withdrawal. If the Policy Value would be less than $2,000, we will
treat the request for a partial withdrawal as a request for total surrender. A
Withdrawal will ordinarily be paid within seven days of receipt of the Written
Request (unless the check for your Purchase Payment has not yet cleared your
bank). The Company may defer payment of any amounts from the Fixed Account for
up to six months
12
<PAGE>
from the date of the request to surrender. If the Company defers payment for
more than 30 days, the Company will pay interest on the amount deferred at a
rate not less than the Guaranteed Minimum Interest Rate.
If you do not specify that the partial withdrawal is to be made from
particular Investment Divisions or the Fixed Account, the partial withdrawal
will be made from the Fixed Account and the Variable Investment Divisions in
the same proportion that their values bear to the total Policy Value.
You may request up to four Withdrawals per Policy Year without a charge. If
more than four Withdrawals are requested during a Policy Year, there will be a
$20 transaction charge for each Withdrawal in addition to the four
Withdrawals. Also, Withdrawal Charges may apply to total Withdrawals in a
Policy Year in excess of 10% of the cumulative Purchase Payments. (See
Withdrawal Charge, and Transaction Charge.) Any transaction charge or
Withdrawal Charge applicable to a Withdrawal will be deducted from the
remaining Policy Value, or from the amount paid if the remaining value is
insufficient. No Withdrawals may be made after the Retirement Date.
Partial withdrawals may be subject to the 10% Federal Tax Penalty on early
withdrawals and to income tax. (See Federal Tax Matters.)
Automatic Partial Withdrawals. You may also establish automatic partial
withdrawals after the first Policy Year and prior to the Retirement Date, by
submitting a one-time Written Request. Withdrawals may be in fixed dollar
amounts on a quarterly, semi-annual or annual basis. The minimum amount you
can withdraw is $250. The maximum amount of automatic partial withdrawals in
any one policy year is 10% of the cumulative Purchase Payments made.
Automatic partial withdrawals are subject to all the other contract
provisions and terms. If an additional withdrawal is made from a contract
participating in automatic partial withdrawals, the automatic partial
withdrawals will terminate automatically and may be resumed only on or after
the next policy anniversary.
Automatic partial withdrawals may be subject to the 10% Federal Tax Penalty
on early withdrawals and to income tax. (See Federal Tax Matters.)
Surrender. You may surrender the Policy for its Policy Value less any
Withdrawal Charge and premium taxes by sending a Written Request to United
Investors at its Home Office. (The Withdrawal Charge, described below, is only
applicable if a surrender or annuitization occurs in the first eight Policy
Years following receipt of a Purchase Payment.) A surrender will ordinarily be
paid within seven days of receipt of the Written Request (unless the check for
your Purchase Payment has not yet cleared your bank). The Policy will
terminate as of the date of receipt of Written Request for surrender.
Surrenders are generally taxable transactions, and may be subject to a penalty
tax. (See Federal Tax Matters.) No surrender may be made after the Retirement
Date.
Restrictions Under the Texas Optional Retirement Program and Section 403(b)
Plans. The Texas Educational Code permits participants in the Texas Optional
Retirement Program ("ORP") to withdraw or surrender their interest in a
variable annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2)
retirement, or (3) death. Accordingly, a participant in the ORP (or the
participant's estate if the participant has died) will be required to obtain a
certificate of termination from the employer or a certificate of death before
the account can be redeemed.
Similar restrictions apply to variable annuity contracts used as funding
vehicles for Internal Revenue Code Section 403(b) retirement plans. Section
403(b) of the Internal Revenue Code provides
13
<PAGE>
for tax-deferred retirement savings plans for employees of certain non-profit
and educational organizations. In accordance with the requirements of Section
403(b), any Policy used for a Section 403(b) plan will prohibit distributions
of (i) elective contributions made in years beginning after December 31, 1988,
and (ii) earnings on those contributions and (iii) earnings on amounts
attributable to elective contributions held as of the end of the last year
beginning before January 1, 1989. However, distributions of such amounts will
be allowed upon death of the employee, attainment of age 59 1/2, separation
from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
Restrictions Under Other Qualified Policies. Other restrictions on
surrenders or with respect to the election, commencement, or distributions of
benefits may apply under Qualified Policies or under the terms of the plans in
respect of which Qualified Policies are issued.
TRANSFERS
You may transfer all or part of the value of an Investment Division to one
or more of the other Investment Divisions at any time prior to the Retirement
Date. You may transfer all or a part of the values held in the Fixed Account
to one or more of the variable Investment Divisions once per policy year prior
to the Retirement Date. The amount transferred from the Fixed Account to a
variable Investment Division may not exceed the greater of: (a) 25% of the
prior Policy Anniversary's Fixed Account Value; or (b) the amount of the Prior
policy year's transfer. You may transfer all or a part of the values held in
the variable Investment Divisions to the Fixed Account up to twelve times in a
policy year prior to the Retirement Date. However, if a transfer is made from
the Fixed Account to a variable Investment Division, no transfer from any
variable Investment Division to the Fixed Account may be made for six months
from the transfer date. The amount transferred from a variable Investment
Division to the Fixed Account, or from the Fixed Account to a variable
Investment Division must be at least: (a) $500; or (b) the total value of the
variable Investment Division or Fixed Account, if less.
Transfers may be made by a Written Request or by calling United Investors if
a written authorization for telephone transfers is on file. United Investors
has the authority to honor any telephone transfer request believed to be
authentic. We employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. A personal identification number is
required in order to initiate a transfer. United Investors will not be liable
for the consequences of a fraudulent telephone transfer request we believe to
be authentic when we have followed those procedures. And as a result, you bear
the risk of loss arising from such a fraudulent request if you authorize
telephone transfers.
Each transfer will be made, without the imposition of any fee or charge, at
the end of the Valuation Period during which United Investors receives a
valid, complete transfer request. United Investors may suspend or modify this
transfer privilege at any time.
Transferring the value of one Investment Division into two or more
Investment Divisions counts as one transfer request. However, transferring the
values of two Investment Divisions into one Investment Division counts as two
transfer requests. Transfers of Fixed Account values will be counted in the
same manner.
Transfers from the Fixed Account to the variable Investment Divisions are
not allowed after the Retirement Date. The Annuitant may transfer values held
in the variable Investment Divisions to the Fixed Account once per policy year
after the Retirement Date. (See Available Options.)
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DOLLAR COST AVERAGING
Prior to the Retirement Date you may authorize automatic transfers of a
fixed dollar amount from the Money Market Investment Division to up to four of
the other Investment Divisions of the Variable Account. Automatic transfers
will be made on a monthly basis on the day of the month selected in your
application. If the day of the month selected does not fall on a Valuation
Date, transfers will be made on the next following Valuation Date. Transfers
will be made at the unit values determined on the date of each transfer.
The minimum automatic transfer amount from the Money Market Investment
Division is $100. If the transfer is to be made to more than one Investment
Division, a minimum of $25 must be transferred to each Investment Division
selected.
Participation in the automatic transfer program does not guarantee a greater
profit nor does it protect against loss in declining markets. Automatic
transfers will not be counted as a transfer for purposes of the twelve
transfer limit specified in Transfers above.
DEATH BENEFIT
The Policy pays a Death Benefit to the named Beneficiary if the Annuitant
dies prior to the Retirement Date while the Policy is in force. The Death
Benefit is the greater of: (1) the total Purchase Payments made, less any
amounts withdrawn and any Withdrawal Charges on the amounts withdrawn, and
less any transaction charges; or (2) the Policy Value. In addition, where
permitted under state law, we may provide an additional Death Benefit if death
of the Annuitant occurs before the Annuitant's attained age 75. The Death
Benefit will be the greater of (1) and (2) described above or (3) the Policy
Value on the eighth Policy Anniversary, adjusted for any subsequent Purchase
Payments, any amounts withdrawn and any Withdrawal Charges on the amounts
withdrawn, and any transaction charges since that anniversary.
We will compute the amount of the Death Benefit as of the date the Death
Benefit is paid or applied under one of the Annuity Payment Options. We will
pay the Death Benefit proceeds to the Beneficiary upon receiving due proof of
death. The Death Benefit under the Policy will be paid in a lump sum or under
one of the Annuity Payment Options. (See Annuity Payments.) If the Annuitant
or Owner dies after the Retirement Date, the amount payable, if any, will be
as provided in the Annuity Payment Option then in effect.
If death of the Annuitant occurs prior to the Retirement Date and the
Annuitant is also the Owner or Joint Owner of the Policy, the rules governing
distribution of death benefit proceeds in the event of the death of Owner
shall apply. (See Required Distributions.) If there is a surviving Joint Owner
at the Annuitant's death, and the surviving Joint Owner continues the policy
in accordance with the Required Distributions rules, the named Beneficiary
does not have a right to receive the death benefit proceeds. If upon death of
the Owner, the Owner's Designated Beneficiary elects to continue the Policy in
accordance with the Required Distributions rules, the named Beneficiary does
not have a right to receive the death benefit proceeds.
As far as permitted by law, the proceeds under the Policy will not be
subject to any claim of the Beneficiary's creditors.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for Federal Income Tax
purposes, Section 72(s) of the Code requires any Nonqualified Policy to
provide that (a) if any Owner dies on or after the annuity starting date but
prior to the time the entire interest in the Policy has been distributed, the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution being
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used as of the date of that Owner's death; and (b) if any Owner dies prior to
the annuity starting date, the entire interest in the Policy will be
distributed within five years after the date of that Owner's death.
These requirements will be considered satisfied as to any portion of the
Owner's interest that is payable as annuity payments which will begin within
one year of that Owner's death and which will be made over the life of the
Owner's Designated Beneficiary or over a period not extending beyond his life
expectancy.
The Owner's Designated Beneficiary is the person to whom ownership of the
Policy passes by reason of the death of any policyowner. If the Policy has
Joint Owners and one Owner dies, the Owner's Designated Beneficiary is the
Joint Owner. If there is no Joint Owner, upon death of the Owner, the Owner's
Designated Beneficiary is the Beneficiary named in the policy.
If the Owner's Designated Beneficiary is the surviving spouse of the Owner,
the Policy may be continued with the surviving spouse as the new Owner and no
distributions will be required.
If the Annuitant is an Owner or Joint Owner and dies prior to the Retirement
Date, and if the Owner's Designated Beneficiary does not elect to receive the
Death Benefit in a lump sum at that time, then United Investors will increase
the Policy Value so that it equals the Death Benefit amount, if that is higher
than the Policy Value. This would occur if the Owner's Designated Beneficiary
elects to delay receipt of the proceeds for up to five years, or is the
deceased Owner's spouse and elects to continue the policy, or elects to
receive the proceeds as annuity payments as described above. Any such increase
in the Policy Value would be paid by United Investors, and allocated to the
Investment Divisions in proportion to the pre-existing Policy Value unless
instructed otherwise.
Other rules may apply to Qualified Policies.
FREE LOOK PERIOD
If for any reason you are not satisfied with the Policy, you may return it
to us within 10 days after you receive the Policy. If you cancel the Policy
within this 10-day "Free Look" period, we will refund the greater of the
Policy Value or the Purchase Payment that was paid, and the Policy will be
void from the Policy Date. To cancel the Policy, you must mail or deliver it
to either United Investors' Home Office or the registered agent who sold it
within 10 days after you received it. (See Allocation of Purchase Payments.)
The "Free Look" period may be extended where required by state law.
CHARGES AND DEDUCTIONS
United Investors does not impose any charge or deduction against a Purchase
Payment prior to its allocation to the Variable Account or the Fixed Account
(except for a charge for any premium taxes incurred when the Purchase Payment
is accepted). However, there is a sales charge of a maximum of 8.5% of each
Purchase Payment, deducted in 10 equal installments from the Policy Value over
the first ten Policy Anniversaries following the date the Purchase Payment is
received (See below). Thereafter, certain charges (explained below) will be
deducted in connection with the Policy to compensate United Investors for
providing the insurance benefits set forth in the Policy, for administering
and distributing the Policy, for any applicable taxes, and for assuming
certain risks in connection with the Policy.
ANNUAL DEDUCTION
On each Policy Anniversary, a deduction will be made from the values of the
Investment Divisions and the Fixed Account to compensate United Investors for
certain costs and expenses, as described below. These deductions will be made
from the Fixed Account and the variable Investment Divisions in the same
proportion that their values bear to the total Policy Value.
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Sales Charge--There is a deduction of 0.85% of each Purchase Payment on each
of the first ten Policy Anniversaries following the receipt of the Purchase
Payment. (As noted above, this would result in a maximum sales charge
attributable to a Purchase Payment of 8.5%). The 0.85% charge partially
compensates United Investors for certain sales and other distribution expenses
incurred, including agent sales commissions, the cost of printing prospectuses
and sales literature, advertising and other marketing and sales promotional
activities.
Deduction on Each Policy Anniversary for Administrative Expenses--United
Investors deducts an annual charge of $50, which meets the "at cost" standards
of Rule 26a-1 under the Investment Company Act of 1940, to compensate it for
expenses incurred in administering the Policy. These expenses include costs of
maintaining records, processing Death Benefit claims, surrenders, transfers
and Policy changes, providing reports to Policyowners, and overhead costs.
This charge is guaranteed not to increase during the life of the Policy. Prior
to the Retirement Date, this charge is deducted on each Policy Anniversary.
After the Retirement Date, this charge is deducted pro rata from each Annuity
Payment.
WITHDRAWAL CHARGE
If you make partial withdrawals under the Policy, surrender the Policy, or
annuitize the Policy, then a Withdrawal Charge may be made, measured as a
percent of the Purchase Payments included in the withdrawal (in the case of a
partial withdrawal) or the amount of the total Purchase Payments (in the case
of a surrender or annuitizing) as specified in the following table of
Withdrawal Charges:
<TABLE>
<CAPTION>
NUMBER OF POLICY ANNIVERSARIES
SINCE RECEIPT OF PURCHASE PAYMENT: 0 1 2 3 4 5 6 7 8 OR MORE
- ---------------------------------- --- --- --- --- --- --- --- --- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Withdrawal Charge.................... 8% 7% 6% 5% 4% 3% 2% 1% none
</TABLE>
Each Policy Year, after the first, you may withdraw up to 10% of cumulative
Purchase Payments without incurring a Withdrawal Charge. This 10% portion is
called the Free Withdrawal Amount. Amounts withdrawn in addition to the Free
Withdrawal Amount may be subject to a Withdrawal Charge. The Withdrawal Charge
is determined by multiplying each Purchase Payment included in the withdrawal
by the withdrawal charge rate applicable to the year in which the Purchase
Payment was received.
For purposes of calculating the Withdrawal Charge, (1) the oldest Purchase
Payments will be treated as the first withdrawn, newer Purchase Payments next,
and appreciation last; (2) amounts withdrawn up to the Free Withdrawal Amount
will not be considered a withdrawal of Purchase Payments; and (3) if the
surrender value is withdrawn or applied under an annuity option, the
Withdrawal Charge will apply to all Purchase Payments not previously assessed
with a Withdrawal Charge.
As shown above, the Withdrawal Charge percentage varies, depending on the
"age" of the Purchase Payments included in the withdrawal--that is, the Policy
Year in which the Purchase Payment was made. A Withdrawal Charge of 8% applies
to Purchase Payments withdrawn that are less than 1 year old. Thereafter the
Withdrawal Charge decreases by 1% per year. Amounts representing Purchase
Payments 8 years old or older may be withdrawn without charge.
The Withdrawal Charge will be deducted from the remaining Policy Value, or
from the amount paid if the remaining value is insufficient. The Withdrawal
Charge partially compensates United Investors for sales expenses with regard
to the Policy, including agent sales commissions, the cost of printing
prospectuses and sales literature, advertising, and other marketing and sales
promotional activities.
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The amounts received by United Investors from the Withdrawal Charge, along
with the deduction for sales expenses, may not be sufficient to cover
distribution expenses. United Investors expects to recover any deficiency from
United Investors' general assets (which include amounts derived from the
mortality and expense risk charge). United Investors believes that this
distribution financing arrangement will benefit the Variable Account and
Policyowners.
WAIVER OF WITHDRAWAL CHARGES RIDER
If the Waiver of Withdrawal Charges Rider ("Rider") is attached to your
Policy, we may waive the withdrawal charges described above provided that the
conditions described in the Rider are met including (a) an Annuitant is
confined to a "Qualified Nursing Home" or "Qualified Hospital" (as defined in
the Rider) for at least 60 days; (b) the Annuitant was age 75 or younger on
the Policy Date; (c) the Policy was in force at least one year at the time
confinement began; (d) written notice and satisfactory proof of confinement
are received no later than 90 days after confinement ends; and (e) confinement
was recommended by a "Physician" (as defined in the Rider) due to injury,
sickness or disease. We will waive only the withdrawal charges which are
applicable to Purchase Payments received prior to the date the first
confinement began. Waiver of withdrawal charges is subject to all of the
conditions and provisions of the Rider (See your Policy.). The Rider is not
available in all states.
REDUCTION IN CHARGES FOR CERTAIN GROUPS
United Investors may reduce or eliminate the sales, administrative, or
Withdrawal Charges on policies that have been sold to (1) employees and sales
representatives of United Investors or its affiliates; (2) customers of United
Investors or distributors of the Policies who are transferring existing policy
values to a Policy; (3) individuals or groups of individuals when sales of the
contract result in savings of sales or administrative expenses; or (4)
individuals or groups of individuals where Purchase Payments are to be made
through an approved group payment method and where the size and type of the
group results in savings of administrative expenses.
In no event will reduction or elimination of the sales, administrative, or
Withdrawal Charges be permitted where such reduction or elimination will be
unfairly discriminatory to any person.
MORTALITY AND EXPENSE RISK CHARGE
United Investors deducts a daily charge from the Investment Divisions of the
Variable Account at an effective annual rate of .90% of the average daily net
assets of each Investment Division to compensate us for assuming certain
mortality and expense risks under the Policy. There is no Mortality and
Expense Risk Charge for amounts in the Fixed Account. United Investors may
realize a profit from this charge. However, the level of this charge is
guaranteed for the life of the Policy and may not be increased. United
Investors will continue to deduct this charge after the Retirement Date.
The mortality risk borne by United Investors arises in part from its
obligation to make monthly Annuity Payments (determined in accordance with the
annuity tables and other provisions contained in the Policy) regardless of how
long all Annuitants or any individual may live. This undertaking assures that
neither an Annuitant's own longevity, nor an improvement in general life
expectancy greater than expected, will have any adverse effect on the monthly
Annuity Payments the Annuitant will receive under the Policy. It therefore
relieves the Annuitant from the risk that he will outlive the funds
accumulated for retirement. The mortality risk also arises in part because of
the risk that the Death Benefit may be greater than the Policy Value. United
Investors also assumes the risk that other expense charges may be insufficient
to cover the actual expenses incurred in connection with the Policy.
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TRANSACTION CHARGE
You may request up to four withdrawals per Policy Year without a transaction
charge. After the fourth withdrawal in a Policy Year, a $20 transaction charge
will apply to each additional withdrawal. This charge will be deducted from
the remaining Policy Value, or from the amount paid if the remaining value is
insufficient.
PREMIUM TAXES
United Investors will deduct a charge for any premium taxes incurred.
Depending on state and local law, premium taxes can be incurred when a
Purchase Payment is accepted, when Policy Value is withdrawn or surrendered,
or when Annuity Payments start.
FEDERAL TAXES
Currently no charge is made to the Variable Account for federal income taxes
that may be attributable to the Variable Account. United Investors may,
however, make such a charge in the future. Charges for other taxes, if any,
attributable to the Variable Account may also be made. (See Federal Tax
Matters.)
FUND EXPENSES
The value of the assets of the Variable Account will reflect the investment
management fee and other expenses incurred by the Fund.
POLICIES ISSUED BEFORE MAY 1, 1992 (OR LATER IN SOME STATES)
For policies issued before May 1, 1992 (or later in some states), a sales
charge of 6% is deducted from any Purchase Payment after the initial Purchase
Payment. However, for such additional Purchase Payments, the 8.5% sales charge
otherwise deducted in 10 annual installments is not deducted and there is no
Withdrawal Charge for such payments. Certain of these older policies may be
amended to eliminate the 6% sales charge deducted from additional Purchase
Payments, replacing it with a sales charge of 8.5% spread over ten annual
installments. These amendments might be implemented by restating the entire
policy with the original Policy Date and other data. See your policy form.
ANNUITY PAYMENTS
ELECTION OF PAYMENT OPTION
The Policyowner has the sole right to elect or change an Annuity Payment
Option during the lifetime of the Annuitant and prior to the Retirement Date,
either in the application or by Written Request any time at least 30 days
before the Retirement Date. We may require the exchange of the Policy for a
contract covering the option selected.
RETIREMENT DATE
The first Annuity Payment will be made as of the Retirement Date. You select
the Retirement Date in the application for the Policy. You may change the
Retirement Date at any time by giving us Written Notice, provided that you
give us Written Notice at least 30 days prior to the new Retirement Date. A
Retirement Date may be the first day of any calendar month commencing 30 days
after the Policy Date, regardless of the Annuitant's age. If the Retirement
Date occurs during the first eight Policy Years after receipt of a Purchase
Payment, a Withdrawal Charge will apply. (See Withdrawal Charge.) If the net
amount to be applied to an option is less than $3,000, we have the right to
pay such amount in one sum. Also, if any payment would be less than $50, we
have the right to change the frequency of payment to an interval that will
result in payments of at least $50.
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AVAILABLE OPTIONS
On the Retirement Date the Policy Value as of 14 days prior to the
Retirement Date, less any premium taxes and less any withdrawal charges, may
be applied to make Fixed Annuity Payments, Variable Annuity Payments, or a
combination thereof. Fixed Annuity Payments provide guaranteed annuity
payments which remain fixed in amount throughout the payment period. Fixed
Annuity Payments do not vary with the investment experience of the Investment
Divisions. The dollar amount of Variable Annuity Payments after the first is
not fixed.
The Annuity Payment Options currently available are:
Option 1: Life Annuity With No Guaranteed Period--This option
provides monthly Annuity Payments during the lifetime of
the Annuitant. No payment will be made after the death of
the Annuitant. It is possible that only one payment will
be made under this option if the Annuitant dies before the
second payment is due; only two payments will be made if
the Annuitant dies before the third payment is due, and so
forth.
Option 2: Joint Life Annuity Continuing To The Survivor--This option
provides monthly Annuity Payments during the lifetime of
the Annuitant and a joint Annuitant. Payments will
continue to the survivor during the survivor's remaining
lifetime. If the joint Annuitant does not survive the
Annuitant, payments will end with the payment due just
before the death of the Annuitant. It is possible that
only one payment or very few payments will be made under
this option if the Annuitant and joint Annuitant both die
before or shortly after payments begin.
Option 3: Life Annuity With 120 or 240 Monthly Payments Guaranteed--
This option provides monthly Annuity Payments during the
lifetime of the Annuitant. A guaranteed period of 120 or
240 months may be chosen. If the Annuitant dies prior to
the end of this guaranteed period monthly Annuity Payments
will be made to the Beneficiary until the end of the
guaranteed period.
United Investors may make other payment options available in the future and
other payment options can be arranged with our written consent.
The amount of each Annuity Payment under the options described above will
depend on the sex and age of the Annuitant (or Annuitants) at the time the
first payment is due. The Annuity Payments may be more or less than the total
Purchase Payments made because (a) Variable Annuity Payments vary with the
investment experience of the underlying Portfolios and the Owner therefore
bears the investment risk and or Variable Annuity Payments and (b) Annuitants
may die before the actuarially predicted date of death. As such, the amount of
Annuity Payments cannot be predicted. The method of computing the Annuity
Payments is described in more detail in the Statement of Additional
Information.
The duration of the Annuity Payment Option may affect the dollar amount of
each Annuity Payment. For example, if an Annuity Payment Option guaranteed for
life is chosen, the Annuity Payments may be greater or less than the Annuity
Payments for an annuity for a guaranteed period, depending on the life
expectancy of the Annuitant.
If the actual net investment experience of the Investment Divisions after
the Retirement Date is less than the assumed investment rate, then the dollar
amount of the Variable Annuity Payments will decrease. The dollar amount of
the Variable Annuity Payments will stay level if the net investment experience
equals the assumed investment rate, and the dollar amount of the Variable
Annuity Payments will increase if the net investment experience exceeds the
assumed investment rate. For purposes of the Annuity Payments, the assumed
investment rate is 4.0%. Fixed Annuity Payment amounts will be based on our
Fixed Annuity Payment rates in effect on the settlement date. These
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<PAGE>
rates are guaranteed not to be less than payments based on the 1971 Individual
Annuity Mortality Table (set back two years) with interest at 4.0%. The two
year setback results in lower rates than if no setback is used.
After the Retirement Date, Policy Value may not be withdrawn, nor may the
Policy be surrendered. The Annuitant (if other than the Owner) will be
entitled to exercise any voting rights and to reallocate the value of the
Annuitant's interest in the Investment Divisions. (See Voting Rights, and
Transfers.)
The Policies offered by this Prospectus contain life annuity tables that
provide for different benefit payments to men and women of the same age
although they provide for unisex tables where requested and required by law.
Nevertheless, in accordance with the U.S. Supreme Court's decision in Arizona
Governing Committee v. Norris, in certain employment related situations,
annuity tables that do not vary on the basis of sex must be used. Accordingly,
if the Policy is to be used in connection with an employment related
retirement or benefit plan, consideration should be given, in consultation
with your legal counsel, to the impact of Norris on any such plan before
making any contributions under these Policies.
DISTRIBUTOR OF THE POLICIES
Waddell & Reed, Inc., 6300 Lamar, Overland Park, Kansas, is the principal
underwriter and the distributor of the Policies. Waddell & Reed, Inc. is an
affiliate of United Investors. Waddell & Reed, Inc. may enter into written
sales agreements with various broker-dealers to aid in the distribution of the
Policies. A commission of up to 5% of Purchase Payments plus bonus
compensation may be paid to broker-dealers or agents in connection with sales
of the Policies. Bonus compensation will be based on Purchase Payments
received (both initial and additional).
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
INTRODUCTION
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive
a distribution under a Policy. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon United Investors' understanding of
the present federal income tax laws as they are currently interpreted by the
Internal Revenue Service. No representation is made as to the likelihood of
the continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Policy may be purchased on a non-qualified tax basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Policy"). The Qualified Policies were
designed for use by individuals whose Purchase Payments are comprised solely
of proceeds from and/or contributions under retirement plans which are
intended to qualify as plans entitled to special income tax treatment under
Sections 401(a), 403(b), 408, or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"). The ultimate effect of federal income taxes on the
Policy Value, on Annuity Payments and on the economic benefit to an Owner, the
Annuitant or the Beneficiary depends on the type of retirement plan, on the
tax and employment status of the individual concerned and on United Investors'
tax status. In addition, certain requirements must be satisfied in purchasing
a Qualified Policy with proceeds from a tax qualified plan in order to
continue receiving favorable tax treatment. Therefore, purchasers of Qualified
Policies should seek competent legal and tax advice regarding the suitability
of the Policy for their situation, the applicable requirements and the
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<PAGE>
tax treatment of the rights and benefits of a Policy. The following discussion
assumes that Qualified Policies are purchased with proceeds from and/or
contributions under retirement plans that qualify for the intended special
federal income tax treatment.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the Policy will qualify as an annuity
contract for federal income tax purposes. The Statement of Additional
Information describes such qualifications.
Section 72 of the Code governs taxation of annuities in general. United
Investors believes that an annuity owner who is a natural person generally is
not taxed on increases in the value of a Policy until distribution occurs
either in the form of a lump sum received by withdrawing all or part of the
cash value (i.e., withdrawals) or as Annuity Payments under the Annuity
Payment Option elected. For this purpose, the assignment, pledge, or agreement
to assign or pledge any portion of the Policy Value generally will be treated
as a distribution. The taxed portion of a distribution (in the form of a lump
sum payment or an annuity) is taxed as ordinary income.
An owner of any deferred annuity contract who is not a natural person
generally must include in income any increase in the excess of the owner's
cash value over the owner's investment in the contract during the taxable
year. However, there are some exceptions to this rule and you may wish to
discuss these with your tax adviser.
In recent years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of nonqualified annuities that
did not have "substantial life contingencies" by taxing income as it is
credited to the annuity. Although as of the date of this Prospectus Congress
is not considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, and
judicial decisions). Moreover, it is also possible that any legislative change
could be retroactive (that is, effective prior to the date of such change).
The following discussion applies to Policies owned by natural persons.
In the case of a withdrawal under a Qualified Policy, a ratable portion of
the amount received is taxable, generally based on the ratio of the
"investment in the contract" to the total Policy Value. The "investment in the
contract" equals the portion, if any, of any Purchase Payments paid by or on
behalf of an individual under a Policy which was not excluded from the
individual's gross income. For Policies issued in connection with qualified
plans, the "investment in the contract" can be zero. Special rules may apply
to a withdrawal from a Qualified Policy with respect to "investment in the
contract" as of December 31, 1986, and in other circumstances.
Generally, in the case of a withdrawal under a Nonqualified Policy before
the annuity starting date, amounts received are first treated as taxable
income to the extent that the Policy Value immediately before the withdrawal
exceeds the "investment in the contract" at that time. Any additional amount
withdrawn is not taxable.
In the case of a full surrender under a Qualified or Nonqualified Policy,
the amount received generally will be taxable only to the extent it exceeds
the "investment in the contract".
Although the tax consequences may vary depending on the Annuity Payment
Option elected under the Policy, generally only the portion of the Annuity
Payment that represents the amount by which the Policy Value exceeds the
"investment in the contract" will be taxed. For Variable Annuity Payments, in
general the taxable portion of each Annuity Payment (prior to recovery of the
investment
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<PAGE>
in the contract) is determined by a formula which establishes a specific
dollar amount of each Annuity Payment that is not taxed. This dollar amount is
determined by dividing the "investment in the contract" by the total number of
expected Annuity Payments. For Fixed Annuity Payments, in general there is no
tax on the amount of each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value of annuity
payments for the term of the payments; however, the remainder of each payment
is taxable. In all cases, after the "investment in the contract" is recovered,
the full amount of any additional Annuity Payments is taxable.
In the case of a distribution pursuant to a Nonqualified Policy, there may
be imposed a federal penalty tax equal to 10% of the amount treated as taxable
income. In general, however, there is no penalty tax on distributions: (1)
made on or after the taxpayer attains age 59 1/2, (2) made as a result of the
owner's death or is attributable to the taxpayer's disability, or (3) received
in substantially equal periodic payments as a life annuity.
The tax rules applicable to a Qualified Policy vary according to the type of
plan and the terms and conditions of the plan. Special favorable tax treatment
may be available for certain types of contributions and distributions. Adverse
tax consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; aggregate distributions in excess of a specified annual
amount; and in other specified circumstances.
We make no attempt to provide more than general information about the use of
the Policy with the various types of retirement plans. Owners and participants
under retirement plans as well as Annuitants and Beneficiaries are cautioned
that the rights of any person to any benefits under a Qualified Policy may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the Policy issued in connection with such a plan. Some
retirement plans are subject to distribution and other requirements that are
not incorporated into our Policy administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Qualified Policy comply with applicable law. Purchasers of annuity contracts
for use with any qualified retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the annuity contract.
Code Section 401(a) permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the Policies to accumulate
retirement savings under the plans. Adverse tax or other legal consequences to
the plan, to the participant or to both may result if this Policy is assigned
or transferred to any individual as a means to provide benefit payments,
unless the plan complies with all legal requirements applicable to such
benefits prior to transfer of the Policy.
Tax Sheltered Annuity (TSA) Section 403(b) payments made by public school
systems and certain tax exempt organizations are excludable from the gross
income of the employee, subject to certain limitations. However, these
payments may be subject to FICA (Social Security) taxes. Code Section 403(b)
(11) restricts the distribution under Code Section 403(b) annuity contracts
of: (1) elective contributions made in years beginning after December 31,
1988; (2) earnings on those contributions; and (3) earnings in such years on
amounts held as of the last year beginning before January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not
be distributed in the case of hardship.
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of retirement
plans may be placed into an Individual Retirement Annuity on a tax deferred
basis. The Internal Revenue Service has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in the
Policy comports with IRA qualification requirements.
23
<PAGE>
Internal Revenue Code Section 457 provides for certain deferred compensation
plans. These plans may be offered with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. These plans are subject to various restrictions on
contributions and distributions. These plans may permit participants to
specify the form of investments for their deferred compensation account. All
investments under such Plans are owned by the sponsoring employer and are
subject to the claims of general creditors of the employer. Depending on the
terms of the particular plan, the employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan obligations. In
general, all amounts received under a Section 457 plan are taxable and are
subject to federal income tax withholding as wages.
All nonqualified deferred annuities entered into after October 21, 1988 that
are issued by United Investors (or its affiliates) to the same owner during
any calendar year are treated as one annuity contract for purposes of
determining the amount includable in gross income under Section 72(e) of the
Code. In addition, there may be other situations in which the Treasury
Department may (under its authority to issue regulations or otherwise)
conclude that it would be appropriate to aggregate two or more annuity
contracts purchased by the same owner. Accordingly, a Policy Owner should
consult a competent tax advisor before purchasing more than one annuity
contract.
A transfer or assignment of ownership of a Policy, or designation of an
Annuitant or other Beneficiary who is not also the Owner, may result in
certain tax consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, assignment or designation should contact a
competent tax adviser with respect to the potential tax effects of such
transaction.
Amounts may be distributed from a Contract because of the death of an Owner
or an Annuitant. Generally, such amounts are includable in the income of the
recipient as follows: (1) if distributed in a lump sum, they are taxed in the
same manner as a full surrender of the Policy, as described above, or (2) if
distributed under an annuity option, they are taxed in the same manner as
annuity payments, as described above.
As noted above, the foregoing comments about the federal tax consequences
under these Policies are not exhaustive and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Further, the
federal tax consequences discussed herein reflect United Investors'
understanding of current law and the law may change. Federal estate and state
and local estate, inheritance and other tax consequences of ownership or
receipt of distributions under a Policy depend on the individual circumstances
of each owner of the Policy or recipient of the distribution. A competent tax
adviser should be consulted for further information.
VOTING RIGHTS
To the extent deemed to be required by law, United Investors will vote the
Fund's shares held in the Variable Account at regular and special shareholder
meetings of the Fund in accordance with instructions received from persons
having voting interests in the corresponding Investment Divisions of the
Variable Account. If, however, the 1940 Act or any regulation thereunder
should be amended or if the present interpretation thereof should change, or
if United Investors determines that it is allowed to vote the Fund shares in
its own right, United Investors may elect to do so.
The number of votes which are available to an Owner will be calculated
separately for each Investment Division of the Variable Account. That number
will be determined by applying his or her percentage interest, if any, in a
particular Investment Division to the total number of votes attributable to
that Investment Division. Prior to the Retirement Date, the Owner holds a
voting interest in each Investment Division to which the Policy Value is
allocated. After the Retirement Date, the person
24
<PAGE>
receiving Variable Annuity Payments has the voting interest. The number of
votes prior to the Retirement Date will be determined by dividing the value of
the Policy allocated to the Investment Division by the net asset value per
share of the corresponding Portfolio. After the Retirement Date, the votes
attributable to a Policy decrease as the value of the Investment Divisions
decrease with Variable Annuity Payments. In determining the number of votes,
fractional shares will be recognized.
The number of votes of a Portfolio which are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the Fund. Voting
instructions will be solicited by written communication prior to such meeting
in accordance with procedures established by the Fund.
Portfolio shares attributable to the Policies as to which no timely
instructions are received will be voted in proportion to the voting
instructions which are received with respect to all Policies participating in
the Investment Division. Voting instructions to abstain on any item to be
voted upon will be applied on a pro rata basis to reduce the votes eligible to
be cast.
Each person having a voting interest in an Investment Division will receive
proxy material, reports and other materials relating to the appropriate
Portfolio.
FINANCIAL STATEMENTS
The financial statements for United Investors and the Variable Account (as
well as the Auditors' Reports thereon) are in the Statement of Additional
Information.
25
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Policy................................................................. 3
Accumulation Units....................................................... 3
Annuity Units............................................................ 3
Net Investment Factor.................................................... 4
Determination of Annuity Payments........................................ 5
The Contract............................................................. 6
Misstatement of Age or Sex............................................... 6
Annual Report............................................................ 7
Non-Participation........................................................ 7
Delay or Suspension of Payments.......................................... 7
Ownership................................................................ 8
Beneficiary.............................................................. 8
Change of Owner or Beneficiary........................................... 8
Assignment............................................................... 8
Incontestability......................................................... 9
Evidence of Survival..................................................... 9
Fixed Account--Historical Credited Interest Rates.......................... 9
Performance Data Calculations.............................................. 9
Federal Tax Matters........................................................ 13
Taxation of United Investors............................................. 13
Tax Status of the Policies............................................... 13
Withholding.............................................................. 14
Addition, Deletion or Substitution of Investments.......................... 15
Distribution of the Policy................................................. 16
Safekeeping of Variable Account Assets..................................... 17
State Regulation........................................................... 17
Records and Reports........................................................ 17
Legal Proceedings.......................................................... 17
Legal Matters.............................................................. 18
Experts.................................................................... 18
Other Information.......................................................... 18
Financial Statements....................................................... 19
</TABLE>
26
<PAGE>
UNITED INVESTORS ANNUITY VARIABLE ACCOUNT
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
DEFERRED VARIABLE ANNUITY POLICY
Offered by
United Investors Life Insurance Company
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Deferred Variable Annuity Policy ("Policy") offered
by United Investors Life Insurance Company. You may obtain a copy of the
Prospectus dated May 1, 1996, by writing to United Investors Life Insurance
Company, Variable Products Division, P. O. Box 156, Birmingham, Alabama 35201-
0156. Terms used in the current Prospectus for the Policy are incorporated in
this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
Dated May 1, 1996
<PAGE>
TABLE OF CONTENTS
Page Corresponding Prospectus Page
THE POLICY........................... 3 ......................... 10
Accumulation Units................... 3 .........................
Annuity Units........................ 3 .........................
Net Investment Factor................ 4 .........................
Determination of Annuity Payments.... 5 .........................
The Contract......................... 6 .........................
Misstatement of Age or Sex........... 6 .........................
Annual Report........................ 7 .........................
Non-Participation.................... 7 .........................
Delay or Suspension of Payments...... 7 .........................
Ownership............................ 8 .........................
Beneficiary.......................... 8 .........................
Change of Ownership or Beneficiary... 8 .........................
Assignment........................... 8 .........................
Incontestability..................... 9 .........................
Evidence of Survival................. 9 .........................
FIXED ACCOUNT - HISTORICAL
CREDITED INTEREST RATES............ 9 .........................
PERFORMANCE DATA CALCULATIONS........ 9 .........................
FEDERAL TAX MATTERS.................. 13 ......................... 21
Taxation of United Investors....... 13 .........................
Tax Status of the Policies......... 13 .........................
Withholding........................ 14 .........................
ADDITION, DELETION OR SUBSTITUTION
OF INVESTMENTS..................... 15 .........................
DISTRIBUTION OF THE POLICY........... 16 ......................... 21
SAFEKEEPING OF VARIABLE ACCOUNT
ASSETS............................. 17 .........................
STATE REGULATION..................... 17 .........................
RECORDS AND REPORTS.................. 17 .........................
LEGAL PROCEEDINGS.................... 17 .........................
LEGAL MATTERS........................ 18 .........................
EXPERTS.............................. 18 .........................
OTHER INFORMATION.................... 18 .........................
FINANCIAL STATEMENTS................. 19 .........................
2
<PAGE>
THE POLICY
----------
As a supplement to the description in the Prospectus, the following
provides additional information about the Policy.
Accumulation Units
- ------------------
An Accumulation Unit is an accounting unit used prior to the Retirement
Date to calculate the Variable Account Value. The portion of a Net Purchase
Payment that you allocate to an Investment Division of the Variable Account is
credited as Accumulation Units in that Investment Division. Similarly, the value
that you transfer to an Investment Division of the Variable Account is credited
as Accumulation Units in that Investment Division. The number of Accumulation
Units to credit is found by dividing (1) the dollar amount allocated to the
Investment Division by (2) the Investment Division's appropriate Accumulation
Unit Value for the Valuation Period in which we received the Purchase Payment or
transfer request. In the case of the initial Purchase Payment, we will credit
Accumulation Units for that Purchase Payment at the end of the Valuation Period
during which the portion of the Net Purchase Payment to be allocated to the
Investment Divisions of the Variable Account is allocated to the Money Market
Investment Division. In the case of an additional Purchase Payment or transfer,
we will credit Accumulation Units for the portion of the Net Purchase Payment or
transfer to be allocated to the Investment Divisions of the Variable Account at
the end of the Valuation Period during which the Purchase Payment or transfer
request is received.
The value of an Accumulation Unit for each Investment Division was
initially arbitrarily set at $1 when the first investments were bought. The
value for any later Valuation Period is found by multiplying the Accumulation
Unit Value for an Investment Division for the last prior Valuation Period by
such Investment Division's Net Investment Factor for the following Valuation
Period. Like the Policy Value, the value of an Accumulation Unit may increase or
decrease from one Valuation Period to the next.
Annuity Units
- -------------
An Annuity Unit is an accounting unit used after the Retirement Date to
calculate the value of Variable Annuity Payments. The value of an Annuity Unit
3
<PAGE>
in each Investment Division was arbitrarily set at $1 when the first investments
were bought. The value for any later Valuation Period is found by (a)
multiplying the Annuity Unit Value for an Investment Division for the last prior
Valuation Period for such Investment Division's Net Investment Factor for the
following Valuation Period, and then (b) adjusting the result to compensate for
the interest rate assumed in the annuity tables used to determine the amount of
the first Variable Annuity Payment. The value of an Annuity Unit for each
Investment Division changes to reflect the investment performance of the
Portfolio underlying that Investment Division.
Net Investment Factor
- ---------------------
The Net Investment Factor is an index applied to measure the investment
performance of an Investment Division of the Variable Account from one Valuation
Period to the next. The Net Investment Factor may be greater or less than one,
so the value of an Investment Division may increase or decrease.
The Net Investment Factor of an Investment Division for any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the result,
where:
(1) is the result of:
(a) the net asset value per share or value per unit of the investment
held in the Investment Division determined at the end of the
current Valuation Period; plus
(b) the per share amount of any dividend or capital gain
distributions made by the investment held in the Investment
Division, if the "ex-dividend" date occurs during the current
Valuation Period; plus or minus
(c) A charge or credit for any taxes reserved for the current
Valuation Period which we determine to have resulted from the
investment operations of the Investment Division;
4
<PAGE>
(2) is the result of:
(a) the net asset value per share or value per unit of the investment
held in the Investment Division, determined at the end of the
previous Valuation Period; plus or minus
(b) the charge or credit for any taxes reserved for the previous
Valuation Period; and
(3) is a deduction for certain mortality and expense risks that we assume.
Determination of Annuity Payments
- ---------------------------------
At the Retirement Date, the Policy Value as of 14 days prior to the
Retirement Date, less any premium taxes and less any withdrawal charges, may be
applied to make Fixed Annuity Payments, Variable Annuity Payments, or a
combination thereof.
Fixed Annuity Payments
- ----------------------
Fixed Annuity Payments provide guaranteed annuity payments which remain
fixed in amount throughout the payment period. Fixed Annuity Payments do not
vary with the investment experience of the Investment Divisions. The payment
amount will be based on our Fixed Annuity Payment rates in effect on the
settlement date. These rates are guaranteed not to be less than payments based
on the 1971 Individual Annuity Mortality Table (set back two years) with
interest at 4.0%. The two year setback results in lower rates than if no setback
is used. Where requested and required by law unisex tables will be used.
Variable Annuity Payments
- -------------------------
The dollar amount of the first Variable Annuity Payment is determined by
multiplying the net value applied by purchase rates based on the 1971 Individual
Mortality Table (set back two years) with interest at 4.0%. Annuity Mortality
Table (set back two years) with interest at 4.0%. The two year setback results
in lower rates than if no setback is used. Where requested and required by law
unisex tables will be used.
The portion of the first Variable Annuity Payment attributed to each
Investment Division is divided by the Annuity Unit Value for the Investment
5
<PAGE>
Division (as of the same date that the amount of the first Variable Annuity
Payment is determined) to determine the number of Annuity Units upon which later
Variable Annuity Payments will be made. This number of Annuity Units will not
change unless subsequently changed by reallocation. The dollar amount of each
monthly Variable Annuity Payment after the first Annuity Payment will equal the
sum of the number of Annuity Units credited to each Investment Division
multiplied by the Annuity Unit Value for each respective Investment Division for
the Valuation Period as of 14 days prior to the Variable Annuity Payment, less
a pro rata portion of the charge for administrative expenses.
After the Retirement Date, the Annuitant may reallocate the value of the
Annuitant's interest in the Investment Divisions, no more than once each Policy
Year, by sending a Written Request to United Investors. A reallocation will be
effected during the Valuation Period as of 14 days prior to the next Variable
Annuity Payment, by converting Annuity Units for the value transferred from an
Investment Division into Annuity Units in the Investment Division to which the
value is transferred. Reallocations may cause the number of Annuity Units to
change, but will not change the dollar amount of the Variable Annuity Payment as
of the date of reallocation.
United Investors guarantees that the dollar amount of monthly Variable
Annuity Payments after the first payment will not be affected by variations in
expenses or mortality experience.
The Contract
- ------------
The entire contract is made up of the Policy and the written application.
All statements made in the application, in the absence of fraud, are considered
representations and not warranties. Only the statements made in the written
application can be used by us to defend a claim or void the Policy.
Changes to the Policy are not valid unless we make them in writing. They
must be signed by one of our executive officers. No agent has authority to
change the Policy or to waive any of its provisions.
Misstatement of Age or Sex
- --------------------------
If the Annuitant's age or sex is misstated, we will adjust each benefit and
any amount to be paid to reflect the correct age and sex.
6
<PAGE>
Annual Report
- -------------
At least once each Policy Year prior to the Retirement Date we will send
you a report on your Policy. It will show the current Policy Value, the current
Fixed Account Value, the current value of the Investment Divisions of the
Variable Account, the Purchase Payments paid, all charges and partial
withdrawals since the last report, the current Surrender Value and the current
Death Benefit. We will also include in the report any other information required
by state law or regulation. Further, we will send you the reports required by
the Investment Company Act of 1940. You may request additional reports during
the year but we may charge a fee for any additional reports.
Non-Participation
- -----------------
The Policy is non-participating. This means that no dividends will be paid
on your Policy. It will not share in our profits or surplus earnings.
Delay or Suspension of Payments
- -------------------------------
We will normally pay a surrender or any withdrawal within seven days after
we receive your Written Request in our home office. However, payment of any
amount from the Investment Divisions of the Variable Account may be delayed or
suspended whenever:
a) the New York Stock Exchange is closed other than customary weekend and
holiday closing, or trading on the New York Exchange is restricted as
determined by the Securities and Exchange Commission;
b) the Securities and Exchange Commission by order permits postponement
for the protection of Policyholders; or
c) an emergency exists, as determined by the Commission, as a result of
which disposal of the securities held in the Investment Divisions is
not reasonably practicable or it is not reasonably practicable to
determine the value of the Variable Account's net assets.
Payment of any amounts from the Fixed Account may be deferred for up to six
months from the date of the request to surrender. If payment is deferred for
more than 30 days, we will pay interest on the amount deferred at a rate not
less the Guaranteed Minimum Interest Rate.
7
<PAGE>
Payments under the Policy of any amounts derived from Purchase Payments
paid by check may be delayed until such time as the check has cleared your bank.
Ownership
- ---------
The Policy belongs to you, the Policyowner. Unless you provide otherwise,
you may receive all benefits and exercise all rights of the Policy prior to the
Retirement Date. These rights and the rights of any Beneficiary are subject to
the rights of any assignee. If there is more than one Owner at a given time, all
must exercise the rights of ownership by joint action. If you die, the Owner's
Designated Beneficiary will become the Owner; if there is no Owner's Designated
Beneficiary living, the rights of ownership will vest in the executors,
administrators or assigns of the Owner.
Beneficiary
- -----------
The Beneficiary is named in the application. More than one Beneficiary may
be named. The rights of any Beneficiary who dies before the Annuitant will pass
to the surviving Beneficiary or Beneficiaries unless you provide otherwise. If
no Beneficiary is living at the Annuitant's death, we will pay the Death
Benefit, if any, to the Policyowner, if living; otherwise, it will be paid to
the Policyowner's estate.
Change of Ownership or Beneficiary
- ----------------------------------
Unless you provide otherwise in writing to us, you may change the Owner or
the Beneficiary during the lifetime of the Annuitant. Any changes must be made
by Written Request filed with us. The change takes effect on the date the
request was signed, but it will not apply to payments made by us before we
accept your Written Request. We may require you to submit the Policy to us
before making a change. A change of ownership may be a taxable event.
Assignment
- ----------
You may assign the Policy, but we will not be responsible for the validity
of any assignment and no assignment will bind us until it is filed in writing at
our home office. When it is filed, your rights and the rights of any Beneficiary
will be subject to it. An assignment of the Policy may be a taxable event.
8
<PAGE>
Incontestability
- ----------------
United Investors will not contest the Policy.
Evidence of Survival
- --------------------
Where any payments under the Policy depend on the payee being alive, we may
require proof of survival prior to making the payments.
FIXED ACCOUNT - HISTORICAL CREDITED INTEREST RATES
--------------------------------------------------
We guarantee that we will credit interest at a rate of not less than the
Guaranteed Minimum Interest Rate of 4% per year to amounts allocated to the
Fixed Account. We may credit interest at a rate in excess of the Guaranteed
Minimum Interest Rate.
ANY EXCESS INTEREST CREDITED WILL BE DETERMINED AT OUR SOLE DISCRETION. THE
OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY
NOT EXCEED THE GUARANTEED MINIMUM INTEREST RATE.
Fixed Account interest rates have been as follows:
START DATE END DATE DECLARED ANNUAL RATE
-------------- ----------------------- --------------------
July 10, 1995* December 31, 1995 6.0%
*Initial offering date.
PERFORMANCE DATA CALCULATIONS
-----------------------------
We may advertise the yield and effective yield of the Money Market
Investment Division. In addition, we may advertise the total returns for other
Investment Divisions of the Variable Account. All performance data calculations
for the Variable Account will be in accordance with uniformly imposed SEC
regulations.
Money Market Investment Division Yield Calculation
- --------------------------------------------------
In accordance with regulations adopted by the SEC, if we disclose the
current annualized yield of the Money Market Investment Division for a seven-day
period, it is required to be in a manner which does not take into consideration
any realized or unrealized gains or losses of the Money Market Portfolio or on
9
<PAGE>
its portfolio securities. The current annualized yield is computed by deter-
mining the net change (exclusive of realized gains and losses on the sale of
securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the Money Market Investment
Division at the beginning of the seven-day period, dividing the net change in
account value by the value of the account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis. The net change in account value reflects the deduction for the Mortality
and Expense Risk Charge and the Administration Fee as well as reflecting income
and expenses accrued during the period. Because of these deductions, the yield
for the Money Market Investment Division will be lower than the yield for the
Money Market Portfolio of the Fund.
The SEC also permits us to disclose the effective yield of the Money Market
Investment Division for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the annualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result according
to the following formula:
Effective Yield = [(Base period return +1)/\365/7]-1
For the seven-day period ending December 31, 1995, the Money Market
Investment Division annualized yield was 6.56%. For the same period, the
effective yield was 6.77%.
The actual yield of the Money Market Investment Division is affected by:
(l) changes in interest rates on money market securities; (2) the average
portfolio maturity of the Money Market Portfolio; (3) the types and quality of
securities held by the Money Market Portfolio; and (4) its operating expenses.
The yield on amounts held in the Money Market Investment Division normally will
fluctuate on a daily basis. Therefore, the disclosed yields for any given past
period is not an indication or representation of future yields or rates of
return.
10
<PAGE>
Average Annual Total Return Calculations
- ----------------------------------------
For each Investment Division of the Variable Account other than the Money
Market Investment Division an average annual total return may be calculated for
a given period. It is computed by finding the average annual compounded rate of
return over one, five and ten year periods (or, where an Investment Division has
been in existence for a period less than one, five or ten years, for such lesser
period) that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1 + T)/\n = ERV
Where
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years in the period
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or ten
year periods (or fractional portion thereof) at the
end of such period.
All recurring fees that are charged to all Policy Owner accounts are
recognized in the ending redeemable value. The average annual total return
calculation will also reflect the effect of Withdrawal Charges that may be
applicable due to surrender of the Policy at the end of a particular period.
11
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
Investment 1 Year to 5 Years Inception to Inception
Division 12/31/95 to 12/31/95 12/31/95 Date
---------- --------- ----------- ------------ ---------
Bond 11.71% 7.71% 7.70% 7-13-87
High Income 9.36% 14.04% 7.86% 7-13-87
Growth 29.57% 19.59% 14.43% 7-13-87
Income 22.63% NA 12.77% 7-16-91
International - 1.45% NA - 1.43% 5-03-94
Balanced 15.32% NA 7.91% 5-03-94
Limited-Term Bond 5.50% NA 2.68% 5-03-94
Small Cap 23.38% NA 27.12% 5-03-94
Asset Strategy NA NA -10.73% 5-01-95
From time to time we may also disclose average annual total returns
in a non-standard format in conjunction with the standard format described
above. The only difference between the two methods is that the non-standard
format assumes a Withdrawal Charge of 0%.
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
Investment 1 Year 5 Years Inception to Inception
Division to 12/31/95 to 12/31/95 12/31/95 Date
---------- ----------- ----------- ------------ ---------
Bond 18.71% 8.15% 7.70% 7-13-87
High Income 16.36% 14.40% 7.86% 7-13-87
Growth 36.57% 19.88% 14.43% 7-13-87
Income 29.63% NA 13.36% 7-16-91
International 5.55% NA 2.76% 5-03-94
Balanced 22.32% NA 11.86% 5-03-94
Limited-Term Bond 12.50% NA 6.77% 5-03-94
Small Cap 30.38% NA 30.67% 5-03-94
Asset Strategy NA NA 1.05% 5-01-95
12
<PAGE>
The performance information provided above reflects only the performance of
a hypothetical $1,000 payment which is allocated to the stated Investment
Division during the time period on which the calculations are based. Performance
information provided for any given past period is not an indication or
representation of future yields or rates of return.
FEDERAL TAX MATTERS
-------------------
Taxation of United Investors
- ----------------------------
United Investors is taxed as a life insurance company under Part 1 of
Subchapter L of the Internal Revenue Code of 1986 (the "Code"). Since the
Variable Account is not an entity separate from United Investors and its
operations form a part of United Investors, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized net capital gains on the assets of the Variable Account are
reinvested and taken into account in determining the Policy Value. As a result,
such investment income and realized net capital gains are automatically retained
as part of the reserves under the Policy. Under existing federal income tax law,
United Investors believes that Variable Account investment income and realized
net capital gains should not be taxed to the extent that such income and gains
are retained as part of the reserves under the Policy.
Tax Status of the Policies
- --------------------------
Section 817(h) of the Code provides that the investments of the Variable
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the Policies to qualify as annuity contracts under Section 72 of
the Code. The Variable Account, through each Portfolio of the Fund, intends to
comply with the diversification requirements prescribed by the Treasury in
Treas. Reg. Section 1.817-5, which affect how the Portfolios' assets may be
invested. Although United Investors is affiliated with the Fund's Manager and
Advisor, it does not control the Fund or the Portfolios' investments. However,
it has entered into an agreement regarding participation in the Fund, which
requires each Portfolio of the Fund to be operated in compliance with the
diversification requirements prescribed by the Treasury.
13
<PAGE>
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Policyowner), rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, the Policyowner has additional flexibility in allocating premium
payments and Policy Values. These differences could result in a Policyowner
being treated as the owner of a pro rata portion of the assets of the Separate
Account. In addition, the Company does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. The Company therefore reserves the right to modify
the Policy as necessary to attempt to prevent a Policyowner from being
considered the owner of a pro rata share of the assets of the Separate Account.
Withholding
- -----------
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
14
<PAGE>
type of distribution and the recipient's tax status. Generally, the recipient is
given the opportunity to elect not to have tax withheld from distributions.
However, effective January 1, 1993, certain distributions from Section 401(a)
and 403(b) plans are subject to mandatory withholding.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
-------------------------------------------------
United Investors reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for, the shares of
the Fund that are held by the Variable Account (or any Investment Division) or
that the Variable Account (or any Investment Division) may purchase. United
Investors reserves the right to eliminate the shares of any of the Portfolios of
the Fund and to substitute shares of another Portfolio of the Fund or any other
investment vehicle or of another open-end, registered investment company if laws
or regulations are changed, if the shares of the Fund or a Portfolio are no
longer available for investment, or if in our judgment further investment in any
Portfolio should become inappropriate in view of the purposes of the Investment
Division. United Investors will not substitute any shares attributable to a
Policyowner's interest in an Investment Division of the Variable Account without
notice and prior approval of the Securities and Exchange Commission and the
insurance regulator of the state where the Policy was delivered, where required.
Nothing contained herein shall prevent the Variable Account from purchasing
other securities for other series or classes of policies, or from permitting a
conversion between series or classes of policies on the basis of requests made
by Policyowners.
United Investors also reserves the right to establish additional Investment
Divisions of the Variable Account, each of which would invest in a new Portfolio
of the Fund, or in shares of another investment company or suitable investment,
with a specified investment objective. New Investment Divisions may be
established when, in the sole discretion of United Investors, marketing needs or
investment conditions warrant, and any new Investment Divisions will be made
available to existing Policyowners on a basis to be determined by United
Investors. United Investors may also eliminate one or more Investment Divisions
if, in its sole discretion, marketing, tax, or investment conditions warrant.
15
<PAGE>
In the event of any such substitution or change, United Investors may, by
appropriate endorsement, make such changes in the Policies as may be necessary
or appropriate to reflect such substitution or change. If deemed by United
Investors to be in the best interests of persons having voting rights under the
Policies, the Variable Account may be operated as a management company under the
Investment Company Act of 1940, it may be deregistered under that Act in the
event such registration is no longer required, or it may be combined with other
United Investors separate accounts.
DISTRIBUTION OF THE POLICY
--------------------------
The Policies will be sold by individuals who, in addition to being licensed
as life insurance agents for United Investors, are also registered
representatives of Waddell & Reed, Inc. ("W&R"), the principal underwriter of
the Policies, or of broker-dealers who have entered into written sales
agreements with W&R. W&R, an affiliate of United Investors is registered with
the Securities and Exchange Commission under the Securities Exchange Act of 1933
as a broker-dealer and is a member of the National Association of Securities
Dealers. The total commissions paid by United Investors for the sale of the
Policy were $15,060,392 during 1993, $14,158,983 during 1994, and $13,707,504
during 1995. The Policies are offered to the public through brokers licensed
under the federal securities laws and state insurance laws that have entered
into agreements with W&R. The offering of the Policies is continuous, and W&R
does not anticipate discontinuing the offering of the Policies. However, W&R
reserves the right to discontinue the offering of the Policies.
The Policy provides for deduction of a charge(s) for sales expenses. United
Investors may reduce or eliminate the sales charge on policies that have been
sold to (1) employees and sales representatives of United Investors or its
affiliates; (2) customers of United Investors or distributors of the Policies
who are transferring existing policy values to a Policy; or (3) individuals or
groups of individuals when sales of the contract result in savings of sales
expenses.
16
<PAGE>
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
--------------------------------------
United Investors holds the assets of the Variable Account. The assets are
kept physically segregated and held separate and apart from United Investors'
general account. United Investors maintains records of all purchases and
redemptions of Fund shares by each of the Investment Divisions.
STATE REGULATION
----------------
United Investors is subject to regulation by the Missouri Department of
Insurance. An annual statement is filed with the Missouri Department of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of United Investors as of December 31 of
the preceding year. Periodically, the Missouri Department of Insurance or other
authorities examine the liabilities and reserves of United Investors and the
Variable Account, and a full examination of United Investors' operations is
conducted periodically by the National Association of Insurance Commissioners.
In addition, United Investors is subject to the insurance laws and
regulations of other states within which it is licensed or may become licensed
to operate. Generally, the insurance department of any other state applies the
laws of the state of domicile in determining permissible investments. A Policy
is governed by the law of the state in which it is delivered. The values and
benefits of each Policy are at least equal to those required by such state.
RECORDS AND REPORTS
-------------------
All records and accounts relating to the Variable Account will be
maintained by United Investors. As presently required by the Investment Company
Act of 1940 and regulations promulgated thereunder, reports containing such
information as may be required under that Act or by any other applicable law or
regulation will be sent to Owners at their last known address of record.
LEGAL PROCEEDINGS
-----------------
There are no legal proceedings to which the Variable Account is a party to
or to which the assets of the Variable Account are subject. United Investors is
not involved in any litigation that is of material importance in relation to its
total assets or that relates to the Variable Account.
17
<PAGE>
LEGAL MATTERS
-------------
Legal advice regarding certain matters relating to federal securities laws
applicable to the issuance of the Policy described in the Prospectus have been
provided by Sutherland, Asbill & Brennan of Washington, D.C. All matters of
Missouri law pertaining to the Policy, including the validity of the Policy and
United Investors' right to issue the Policy under Missouri Insurance Law and any
other applicable state insurance or securities laws, have been passed upon by
James L. Sedgwick, Esq., President of United Investors.
EXPERTS
-------
The balance sheets of United Investors Life Insurance Company as of
December 31, 1995 and 1994, and the related statements of operations,
shareholder's equity, and cash flows for each of the years in the three-year
period ended December 31, 1995 and the balance sheet of United Investors Annuity
Variable Account as of December 31, 1995 and the related statements of
operations and changes in net assets for each of the years in the two-year
period ended December 31, 1995 have been included herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP on the financial
statements of United Investors Life Insurance Company refers to changes in
accounting principles in 1993 to adopt the provisions of Statement of Financial
Accounting Standards Board's (FASB's) Statement of Financial Accounting
Standards (Statement) No. 106, "Employer's Accounting for Postretirement Benefit
Plans Other than Pensions", FASB Statement No. 109 "Accounting for Income Taxes"
and FASB Statement No. 115 "Accounting for Certain Investments in Debt and
Equity Securities".
OTHER INFORMATION
-----------------
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
18
<PAGE>
Statements contained in this Statement of Additional Information concerning the
content of the Policies and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
--------------------
The financial statements of United Investors, which are included in this
Statement of Additional Information, should be considered only as bearing on the
ability of United Investors to meet its obligations under the Policies. They
should not be considered as bearing on the investment performance of the assets
held in the Variable Account.
19
<PAGE>
PART C
- ------
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Financial Statements to be filed by amendment.
(b) Exhibits
(1) -- Resolution of the Board of Directors of United Investors
Life Insurance Company ("United Investors") authorizing
establishment of the United Investors Annuity Variable
Account.\1\
(2) -- Not Applicable.
(3) (a) -- Principal Underwriting Agreement.\5\
(b) -- Broker-Dealer Sales Agreement.\6\
(c) -- Commission Schedule.\2\
(4) -- Annuity Policy, Form VA92.\5\
(a) -- Death Benefit Endorsement, Form DBEND.\7\
(b) -- Variable Annuity Endorsement, Form ENDVA.\7\
(c) -- Fixed Account Rider, Form FA95.
(5) -- Application.\2\
(6) (a) -- Certificate of Incorporation of United Investors.\3\
(b) -- By-Laws of United Investors.\4\
(7) -- Not Applicable.
(8) (a) -- Participation Agreement for TMK/United Funds,
Inc.\5\
(b) -- Form of Administration Agreement.\2\
(9) (a) -- Opinion of James L. Sedgwick, Esq.\2\
(b) -- Consent of James L. Sedgwick, Esq.\8\
(10) (a) -- Consent of Sutherland, Asbill & Brennan.\8\
(b) -- Consent of KPMG Peat Marwick LLP.\8\
(11) -- Financial statements to be filed by amendment.
(12) -- Not Applicable.
(13) -- Performance Data Calculations.
- ---------------------------------
\1\ Previously filed on February 13, 1987 as an Exhibit to Form N-4
Registration Statement for United Investors Annuity Variable Account.
\2\ Previously filed on May 27, 1987 as an Exhibit to Pre-Effective
Amendment No. 1 to Form N-4 Registration Statement for United
Investors Annuity Variable Account.
\3\ Incorporated by reference to Exhibit 6(a) to the Registration Statement
on Form S-6, File No. 33-11465, filed on behalf of United Investors
Life Variable Account on January 22, 1987.
\4\ Incorporated by reference to Exhibit 6(b) to the Registration Statement
on Form S-6, File No. 33-11465, filed on behalf of United Investors
Life Variable Account on January 22, 1987.
\5\ Previously filed on April 15, 1992 as an Exhibit to Post-Effective
Amendment No. 6 to Form N-4 Registration Statement for United
Investors Annuity Variable Account.
\6\ Previously filed on April 28, 1993 as an Exhibit to Post-Effective
Amendment No. 7 to Form N-4 Registration Statement for United
Investors Annuity Variable Account.
\7\ Previously filed on April 26, 1994 as an Exhibit to Post-Effective
Amendment No. 9 to Form N-4 Registration Statement for United
Investors Annuity Variable Account.
\8\ To be filed by amendment.
C-1
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal Position and Offices
Business Address* with Depositor
------------------ --------------------
Ronald K. Richey Director, Chairman of the Board
and Chief Executive Officer
James L. Sedgwick Director and President
W. Thomas Aycock Vice President and Chief
Actuary, and Director
William C. Barclift, III Director and Assistant
Secretary
Charles T. Clayton, Jr. Vice President
William R. Dean Director
Michael J. Klyce Vice President and Treasurer
John H. Livingston Secretary and Associate Counsel
James L. Mayton, Jr. Vice President and Controller
Carol A. McCoy Director and Assistant
Secretary
Anthony L. McWhorter Director
Ross W. Stagner Vice President and Director
William L. Surber Vice President
Keith A. Tucker Director and Vice Chairman
- ------------------------
*The principal business address of each person listed is United Investors
Life Insurance Company, P. O. Box 10207, Birmingham, Alabama 35202-0207.
C-2
<PAGE>
Item 26. Persons Controlled by or Under Common Control With the Depositor
or Registrant.
The Depositor, United Investors Life Insurance Company, Inc. ("United
Investors"), is wholly owned by United Investors Management Company
(formerly TMK/United, Inc.), which in turn is indirectly owned by Torchmark
Corporation. The following table shows the persons controlled by or under
common control with United Investors, their Parent Company, and the State
or Jurisdiction of Incorporation. All companies are 100% owned by their
Parent Company, unless otherwise indicated, which is indirectly owned by
Torchmark Corporation. The Registrant is a segregated asset account of
United Investors.
<TABLE>
<CAPTION>
Parent State/Jurisdiction
Company Co. Code of Incorporation
- ------- -------- ------------------
<S> <C> <C>
American Income Life Insurance Co. I Indiana
American Life and Accident Insurance Co. D Texas
Blackhawk Oil Co. F Delaware
Brown-Service Funeral Homes Co., Inc. F Alabama
(Services burial insurance policies)
Energy Assets International Corp. G Delaware
Express Acquisition Co. G Delaware
Family Service Life Insurance Co. F Texas
Famlico, Inc. C Texas
Fiduciary Trust Company of New Hampshire L * New Hampshire
First United American Life Insurance Co. J New York
Globe Insurance Agency, Inc. D Arkansas
Globe Life And Accident Insurance Co. I Delaware
Globe Marketing Services Inc. D Oklahoma
Liberty National Auto Club, Inc. F Alabama
Liberty National GroupCare, Inc. F Alabama
Liberty National Life Insurance Co. I Alabama
Living Decisions, Inc. J Texas
Maxwell's Energy Company, Inc. I Alabama
</TABLE>
*Parent company owns 99% of the common stock.
C-3
<PAGE>
<TABLE>
<CAPTION>
Parent State/Jurisdiction
Company Co. Code of Incorporation
- ------- -------- ------------------
<S> <C> <C>
N. E. Financial Inc. G Texas
Panda Resources, Inc. A Oklahoma
Search Drilling Co. H Kansas
Sentinel American Life Insurance Co. C Texas
Torch California Company G California
Torch Energy Advisors Incorporated K Delaware
Torch Energy Finance Co. G Delaware
Torch Energy Marketing, Inc. G Delaware
Torch Inland Company G Delaware
Torch Oil & Gas Co. G Delaware
Torch Operating Co. G Texas
(Oil and gas)
Torch Royalty Company G Delaware
Torchmark Corporation Delaware
(Holding company)
Torchmark Development Corporation I Alabama
Torchmark Distributors, Inc. L Missouri
(Distributor for mutual funds)
Trust Life Insurance Company M Texas
T. I. Financial Inc. G Texas
Unicon Agency, Inc. L New York
United American Insurance Co. I Delaware
United Investors Life Insurance Co. K Missouri
United Investors Management Co. F* Delaware
W & R Insurance Agency, Inc. L Missouri
W & R Insurance Agency of Alabama, Inc. L Alabama
W & R Insurance Agency of Arkansas, Inc. L Arkansas
W & R Insurance Agency of Massachusetts, Inc. L Massachusetts
</TABLE>
*Parent company owns 19%.
C-4
<PAGE>
<TABLE>
<CAPTION>
Parent State/Jurisdiction
Company Co. Code of Incorporation
- ------- -------- ------------------
<S> <C> <C>
W & R Insurance Agency of Montana, Inc. L Montana
W & R Insurance Agency of Nevada, Inc. L Nevada
W & R Insurance Agency of Utah, Inc. L Utah
W & R Insurance Agency of Wyoming, Inc. L Wyoming
Waddell & Reed, Inc. K Delaware
(Insurance sales; investment manager)
Waddell & Reed Asset Management Co. L Missouri
Waddell & Reed Financial Services, Inc. K Missouri
Waddell & Reed Investment Management Co. L Kansas
Waddell & Reed Leasing, Inc. L Missouri
(Equipment leasing partnerships)
Waddell & Reed Services Co. L Missouri
(Shareholder services)
</TABLE>
Parent Company Codes
- --------------------------------
A Torch Energy Marketing, Inc.
B Express Acquisition Co.
C Family Service Life Insurance Co.
D Globe Life And Accident Insurance Co.
E Liberty Management Services, Inc.
F Liberty National Life Insurance Co.
G Torch Energy Advisors Incorporated
H Torch Energy Corp.
I Torchmark Corporation
J United American Insurance Co.
K United Investors Management Co.
L Waddell & Reed, Inc.
M American Income Life Insurance Co.
N Trust Life Insurance Co.
C-5
<PAGE>
Item 27. Number of Policy Owners
As of December 31, 1995, there were 26,598 owners of the Policies.
Item 28. Indemnification
Article XII of United Investors' By-Laws provides as follows:
"Each Director or officer, or former Director or officer, of
this Corporation, and his legal representatives, shall be
indemnified by the Corporation against liabilities, expenses,
counsel fees and costs, reasonably incurred by him or his estate
in connection with, or arising out of, any action, suit,
proceeding or claim in which he is made a party by reason of his
being, or having been, such Director or officer; and any person
who, at the request of this Corporation, serves as Director or
officer of another corporation in which this Corporation owns
corporate stock, and his legal representatives, shall in like
manner be indemnified by this Corporation; provided that, in
either case shall the Corporation indemnify such Director or
officer with respect to any matters as to which he shall be
finally adjudged in any such action, suit or proceeding to have
been liable for misconduct in the performance of his duties as
such Director or officer. The indemnification herein provided
for shall apply also in respect of any amount paid in compromise
of any such action, suit, proceeding or claim asserted against
such Director or officer (including expenses, counsel fees, and
costs reasonably incurred in connection therewith), provided
that the Board of Directors shall have first approved such
proposed compromise settlement and determined that the officer
or Director involved is not guilty of misconduct, but in taking
such action any Director involved shall not be qualified to vote
thereof, and if for this reason a quorum of the Board cannot be
obtained to vote on such matters, it shall be determined by a
committee of three (3) persons appointed by the shareholders at
a duly called special meeting or at a regular meeting. In
determining whether or not a Director or officer is guilty of
misconduct in relation to any such matter, the Board of
Directors or committee appointed by the shareholders, as the
case shall be, may rely conclusively upon an opinion of
independent legal counsel selected by such Board or committee.
The rights to indemnification herein provided shall not be
exclusive of any other rights to which such Director or officer
may be lawfully entitled."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Directors, officers and controlling
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such Director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C-6
<PAGE>
Item 29. Principal Underwriters
Waddell & Reed, Inc. ("W&R") is the principal underwriter of the
Policies as defined in the Investment Company Act of 1940, and is also the
principal underwriter for certain flexible premium variable life insurance
policies issued through United Investors Life Variable Account.
The following table provides certain information with respect to each
Director, officer and partner of each principal underwriter.
Name and Principal Positions and Offices
Business Address* With Underwriter
- ------------------ ---------------------
Keith A. Tucker Chairman and Director
--------
Robert L. Hechler President, Chief Executive Officer,
Principal Financial Officer, Director
--------
and Treasurer
Henry J. Herrmann Director
--------
Sharon K. Pappas Senior Vice President, Secretary and
General Counsel
George L. Wirkkula Executive Vice President, National
Sales Manager and Director
--------
James A. Williams Senior Vice President
Michael D. Strohm Senior Vice President and Controller
Vice Presidents
- ---------------
David R. Burford
Michael G. Gerken
Steve D. Hermes
William D. Howey, Jr.
Terry M. Parker
*The principal business address for the officers and Directors listed is
6300 Lamar Avenue, Overland Park, Kansas 66202-4200.
C-7
<PAGE>
Commissions Received By Principal Underwriter
---------------------------------------------
<TABLE>
<CAPTION>
Net Underwriting
Name of Principal Discounts and Compensation
Underwriter Commissions on Redemption
----------------- ---------------- -------------
<S> <C> <C>
Waddell & Reed, Inc. $13,705,820.00 -0-
Brokerage
Commissions Compensation
----------- ------------
$ 1,683.51 -0-
</TABLE>
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by United Investors at
its administrative office.
Item 31. Management Services
All management contracts are discussed in Part A or Part B.
Item 32. Undertakings
(a) Registrant undertakes that it will file a Post-Effective Amendment
to this Registration Statement as frequently as necessary to ensure that the
audited financial statements in the Registration Statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of
any application to purchase a contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed to
or included in the Prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to United Investors at the
address or phone number listed in the Prospectus.
C-8
<PAGE>
STATEMENT PURSUANT TO RULE 6c-7
-------------------------------
United Investors and the Variable Account rely on 17 C.F.R. Sections
270.6c-7 and represent that the provisions of that Rule have been or will
be complied with. Accordingly, United Investors and the Variable Account
are exempt from the provisions of Sections 22(e), 27(c)(1) and 27(d) of the
Investment Company Act of 1940 with respect to any variable annuity contract
participating in such account to the extent necessary to permit compliance
with the Texas Optional Retirement Program.
SECTION 403(b) REPRESENTATIONS
- ------------------------------
United Investors represents that it is relying on a no-action letter
dated November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment
Company Act of 1940, in connection with redeemability restrictions on
Section 403(b) policies, and that paragraphs numbered (1) through (4) of
that letter will be complied with.
C-9
<PAGE>
SIGNATURES
----------
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, United Investors Annuity Variable Account,
certifies that it meets the requirements of Securities Act Rule 485(a) for
effectiveness of this Post-Effective Amendment No. 11 to the Registration
Statement and has duly caused this Post-Effective Amendment No. 11 to the
Registration Statement to be signed on its behalf in the City of Birmingham
and the State of Alabama on the 27th day of February, 1996.
UNITED INVESTORS ANNUITY VARIABLE
ACCOUNT
(REGISTRANT)
By:
-------------------------------
James L. Sedgwick
UNITED INVESTORS LIFE INSURANCE
COMPANY
(DEPOSITOR)
By:
-------------------------------
James L. Sedgwick
As required by the Securities Act of 1933, this Post-Effective
Amendment No. 11 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, Chairman of --------------------
Ronald K. Richey the Board and Chief
Executive Officer
- --------------------------- Director and President --------------------
James L. Sedgwick
- --------------------------- Vice President and --------------------
W. Thomas Aycock Chief Actuary, and
Director
- --------------------------- Director and Assistant --------------------
William C. Barclift, III Secretary
- --------------------------- Director --------------------
William R. Dean
- -------------------------- Vice President and -------------------
Michael J. Klyce Treasurer
</TABLE>
1
<PAGE>
Signature Title Date
- --------- ----- ----
- --------------------------- Vice President and --------------------
James L. Mayton, Jr. Controller
- --------------------------- Director --------------------
Anthony L. McWhorter
- --------------------------- Director and Assistant --------------------
Carol A. McCoy Secretary
- --------------------------- Vice President ---------------------
Ross W. Stagner and Director
- --------------------------- Director and Vice --------------------
Keith A. Tucker Chairman
2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ------------------------------
<S> <C>
4(c) Fixed Account Rider, Form FA95
13 Performance Data Calculations
</TABLE>
<PAGE>
Exhibit 4(c)
FIXED ACCOUNT RIDER
This rider is made a part of the Policy to which it is attached. This
benefit is subject to all the provisions of this rider and this Policy.
FIXED ACCOUNT
The Owner may choose to allocate all or a portion of his Purchase Payments
to the Fixed Account. The Fixed Account is a part of the General Account
of United Investors Life Insurance Company. The General Account consists
of all assets of United Investors Life Insurance Company other than those
in any separate account.
PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
On the seventeenth day after the Policy Date, the Policy Value will be
allocated to the Fixed Account according to the allocation percentage you
specified in your application. On the date we receive an Additional
Purchase Payment, the net additional purchase payment will be allocated to
the Fixed Account according to your instructions in effect; or if no
instructions are in effect, in the same proportion that the value of the
Fixed Account bears to the entire Policy Value.
INTEREST RATES
The Guaranteed Interest Rate is shown on page 4A of the Policy. This
interest rate is the minimum effective annual rate at which interest will
be credited to amounts allocated to the Fixed Account of your Policy. The
Company may credit interest to the Fixed Account of your Policy at a rate
greater than the Guaranteed Interest Rate. Any interest credited to the
Fixed Account of your Policy in excess of the Guaranteed Interest Rate will
be determined in the sole discretion of the Company.
FIXED ACCOUNT VALUE
At the end of any Valuation Period, the Fixed Account Value is equal to:
(a) the sum of all Net Purchase Payments allocated to the Fixed Account;
plus
(b) any amounts transferred from the Variable Account to the Fixed
Account; plus
(c) total interest credited to the Fixed Account; less
(d) any amounts transferred from the Fixed Account to the Variable
Account; less
(e) the portion of any withdrawals, withdrawal charges, and transaction
charges allocated to the Fixed Account; less
(f) the portion of the annual deduction and premium taxes which is
allocated to the Fixed Account.
POLICY VALUE
The Policy Value of this policy prior to the Retirement Date is equal to
the Variable Account Value plus the Fixed Account Value. Variable Account
Values are not guaranteed.
SURRENDER OF FIXED ACCOUNT VALUES
The Company may defer payment of any amounts from the Fixed Account for up
to six months from the date of the request to surrender. If the Company
<PAGE>
defers payment for more than 30 days, the Company will pay interest on the
amount deferred. Interest will be paid at a rate not less than the
Guaranteed Interest Rate shown on page 4A.
TRANSFERS PRIOR TO THE RETIREMENT DATE
You may transfer all or a part of the values held in the Fixed Account to
one or more of the variable Investment Divisions once per policy year.
The amount transferred from the Fixed Account to a variable Investment
Division may not exceed the greater of: (a) 25% of the prior Policy
Anniversary's Fixed Account Value; or (b) the amount of the prior policy
year's transfer.
You may transfer all or a part of the values held in the variable
Investment Divisions to the Fixed Account up to twelve times in a policy
year. However, if a transfer is made from the Fixed Account to a variable
Investment Division, no transfer from the variable Investment Division to
the Fixed Account may be made for six months from the transfer date.
The amount transferred from a variable Investment Division to the Fixed
Account, or from the Fixed Account to a variable Investment Division must
be at least: (a) $500; or (b) the total value of the variable Investment
Division or Fixed Account, if less.
TRANSFERS AFTER THE RETIREMENT DATE
Transfers from the Fixed Account to the variable Investment Divisions are
not allowed after the Retirement Date. The Annuitant may transfer values
held in the variable Investment Divisions to the Fixed Account once per
policy year. Transfers after the Retirement Date will be subject
to the Reallocations During Annuity Payment Period Provision of the Policy.
WITHDRAWALS
A withdrawal and any withdrawal charges or transaction charges associated
with such withdrawal, will be made from the Fixed Account in the same
proportion that the value of the Fixed Account bears to the entire Policy
Value, unless you instruct otherwise.
ANNUAL DEDUCTIONS AND DEDUCTIONS FOR PREMIUM TAXES
The Annual Deductions and Deductions for Premium Taxes described on page 11
of your Policy will be made from the Fixed Account in the same proportion
that the value of the Fixed Account bears to the total Policy Value.
FIXED ANNUITY
On the Retirement Date the Policy Value as of 14 days prior to the
Retirement Date, less any premium taxes and less any withdrawal charges,
may be applied to make Fixed Annuity payments, Variable Annuity payments,
or a combination thereof.
Fixed Annuity payments provide guaranteed annuity payments which remain
fixed in amount throughout the payment period. Fixed Annuity payments do
not vary with the investment experience of the Investment Divisions. The
amount for each $1,000 of Policy Value applied to make Fixed Annuity
payments will be based on our Fixed Annuity Payment rates in effect on
the settlement date. These rates are guaranteed not to be less than the
Life Annuity Payments per $1,000 Proceeds Applied shown in the Annuity
Tables of your Policy. The Annuity Tables are based on the 1971 Individual
<PAGE>
Annuity Mortality Table (set back two years) with interest at 4.0%. Where
requested and required by law unisex tables will be used.
Variable Annuity payments after the first are not fixed and may change from
month to month. Calculation of Variable Annuity payments is described in
the Annuity Provisions of your Policy.
TERMINATION
This rider will terminate on the earlier of the date the Policy is
surrendered, terminated, exchanged or annuitized.
UNITED INVESTORS LIFE INSURANCE COMPANY
PRESIDENT
John Doe
U000-00-001
- -----------------------------------------------------------------------
POLICY DATA (Continued)
- -----------------------------------------------------------------------
FIXED ACCOUNT - TABLE OF GUARANTEED MINIMUM VALUES
- ----------------------------------------------------------------------
GUARANTEED INTEREST RATE: 4.00%
MINIMUM
END OF ACCOUNT SURRENDER
POLICY YEAR VALUE VALUE
----------- --------- --------
1 10,400 9,600
2 10,676 9,976
3 10,962 10,362
4 11,260 10,760
5 11,570 11,170
6 11,893 11,593
7 12,228 12,028
8 12,577 12,477
9 12,939 12,939
10 13,317 13,317
11 13,709 13,709
12 14,205 14,205
13 14,721 14,721
14 15,258 15,258
15 15,817 15,817
16 16,397 16,397
17 17,001 17,001
18 17,629 17,629
19 18,282 18,282
20 18,962 18,962
VALUES SHOWN ABOVE ARE BASED ON THE ASSUMPTION THAT:
(1) $10,000 purchase payment is received and allocated
100 % to the fixed account. Purchase payments shown
<PAGE>
are net of premium taxes due, if any; and
(2) there are no additional purchase payments made; and
(3) there are no partial withdrawals.
If purchase payments are otherwise paid or allocated or if
there are partial withdrawals, the values will be adjusted
in accordance with the provisions of the policy.
THE POLICY VALUE of this policy prior to the retirement date is equal
to the Variable Account Value plus the Fixed Account Value. Variable
Account Values are not guaranteed.
Page 4A
<PAGE>
EXHIBIT 13
PERFORMANCE DATA CALCULATIONS
TABLE 1
Accumulation Unit Value Table
[CAPTION]
<TABLE>
Money High Interna- Small Ltd Term Asset
Valuation Market Bond Income Growth Income tional Cap Balanced Bond Strategy
Date (A) (A) (A) (A) (B) (C) (C) (C) (C) (D)
- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/13/87 1.0000000 1.0000000 1.0000000 1.0000000 NA NA NA NA NA
09/30/87 1.0106898 0.9882147 0.9807615 1.0925884 NA NA NA NA NA
12/31/87 1.0255160 1.0288587 0.9910931 0.9633068 NA NA NA NA NA
06/30/88 1.0527163 1.0727823 1.0752523 1.0333369 NA NA NA NA NA
09/30/88 1.0690961 1.0888803 1.0020418 1.0526585 NA NA NA NA NA
12/31/88 1.0875369 1.0969734 1.1309477 1.0841278 NA NA NA NA NA
06/30/89 1.1311333 1.1786308 1.1733332 1.2381302 NA NA NA NA NA
09/30/89 1.1524413 1.1876853 1.1278443 1.3452518 NA NA NA NA NA
12/31/89 1.1736238 1.2158725 1.0738854 1.3712035 NA NA NA NA NA
06/30/90 1.2134516 1.2311304 1.0615913 1.3890573 NA NA NA NA NA
09/30/90 1.2333539 1.2341568 1.0066597 1.2258609 NA NA NA NA NA
12/31/90 1.2543382 1.2873317 0.9865523 1.2859877 NA NA NA NA NA
06/30/91 1.2851599 1.3329068 1.1843161 1.4850345 NA NA NA NA NA
07/16/91 1.0000000 NA NA NA NA
09/30/91 1.2989997 1.4059794 1.2466010 1.6377206 1.0148434 NA NA NA NA
12/31/91 1.3115318 1.4824344 1.3121639 1.7347303 1.0723156 NA NA NA NA
06/30/92 1.3288651 1.5189718 1.4325412 1.8552371 1.1178918 NA NA NA NA
09/30/92 1.3355212 1.5896144 1.4895502 1.8762414 1.1141922 NA NA NA NA
12/31/92 1.3417372 1.5818531 1.5045543 2.0776615 1.2092776 NA NA NA NA
06/30/93 1.3527749 1.7139825 1.6587039 2.2204523 1.3102021 NA NA NA NA
09/30/93 1.3584420 1.7767627 1.6787211 2.2999678 1.3320268 NA NA NA NA
12/31/93 1.3647884 1.7615266 1.7582508 2.3478394 1.4059060 NA NA NA NA
05/03/94 1.0000000 1.0000000 1.0000000 1.0000000
06/30/94 1.3791642 1.6499308 1.7176907 2.3074207 1.3603155 0.9752442 1.0020845 1.0008155 0.9965804
09/30/94 1.3888454 1.6534986 1.7225127 2.4071057 1.4064650 1.0284629 1.1076709 1.0218686 1.0004769
12/31/94 1.4033521 1.6427072 1.6981326 2.3825232 1.3775212 0.9969260 1.2023505 0.9906602 0.9967334
03/31/95 1.4194970 1.7217494 1.7825454 2.5216127 1.4783660 0.9684339 1.2894503 1.0393981 1.0347610
05/01/95 1.0000000
06/30/95 1.4357020 1.8379829 1.8629492 2.7881188 1.6686347 1.0653934 1.3850985 1.1024385 1.0808662 1.0058656
09/30/95 1.4514220 1.8756656 1.9168030 3.1279788 1.7757389 1.1258905 1.5361713 1.1814676 1.0945442 1.0148719
12/31/95 1.4682673 1.9627529 1.9891114 3.2721352 1.7963022 1.0599689 1.5769427 1.2194174 1.1290231 1.0121489
</TABLE>
(A) Commencement of operations on 7/13/87 at 1.00
(B) Commencement of operations on 7/16/91 at 1.00
(C) Commencement of operations on 5/03/94 at 1.00
(D) Commencement of operations on 5/01/95 at 1.00
<PAGE>
TABLE 2
Policy Maintenance Charges
Annual Administrative & Sales Expenses Table
[CAPTION]
<TABLE>
Annual Total Annual Qtr
Admini- Annual Annual Total Average Net Expense Expense
strative Sales Policy Net Policy Value Charge Charge
Year Date Expenses Expenses Expenses Assets All Policies Factor Factor
---- -------- --------- --------- --------- ----------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9 12/31/87 0 0 0 8,808,784 4,404,392 0 0
8 12/31/88 15,950 64,858 80,808 28,689,708 18,749,246 0.0043099 0.0043099
7 12/31/89 53,450 180,034 233,484 51,610,401 40,150,055 0.0058152 0.0058152
6 12/31/90 94,308 320,958 415,266 68,469,747 60,040,074 0.0069164 0.0069165
5 12/31/91 130,446 449,848 580,294 137,609,086 103,039,417 0.0056317 0.0056317
4 12/31/92 229,912 824,108 1,054,020 281,976,175 209,792,631 0.0050241 0.0050241
3 12/31/93 440,924 1,795,391 2,236,316 529,671,200 405,823,688 0.0055106 0.0055105
2 12/31/94 781,366 3,453,466 4,234,832 697,735,352 503,127,576 0.0084170 0.0161533
1 12/31/95 1,053,979 4,840,707 5,894,686 1,058,437,242 761,947,931 0.0077363
</TABLE>
The annual maintenance charge calculations are calculated using the
total assets, administrative expenses, and sales expenses for all
subaccounts.
<PAGE>
MONEY MARKET - STANDARD YIELD CALCULATION (SEVEN DAY PERIOD)
ENDING ON 12/31/95
UNIT
DATE VALUE
-------- ----------
A. Value of one accumulation unit on 12/31/95 1.468267
B. Value of one accumulation unit on 12/24/95 1.466421
C. Annual Expense Charges Factor 0.007736
D. Number of units in force on 12/31/95 23,817,423.65
E. Number of units in force on 12/24/95 22,089,041.91
F. Average number of units for period 22,122,188.96
G. Base period return
= Net change in hypothetical account
-----------------------------------
Value at beginning of period
= A - B - (C / F)
---------------------
A 0.1258%
H. Annualized yield
= G x 365/7 6.56%
I. Effective yield
= (1 + G))/\365/7 - 1 6.77%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 1.642707
b = Value of one accumulation unit on 12/31/95 1.962753
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 1,117.09
And
T = 11.71%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,187.09
T = 18.71%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 1.698133
b = Value of one accumulation unit on 12/31/95 1.989111
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 1,093.62
And
T = 9.36%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,163.62
T = 16.36%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 2.382523
b = Value of one accumulation unit on 12/31/95 3.272135
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 1,295.65
And
T = 29.57%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,365.65
T = 36.57%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INCOME SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 1.377521
b = Value of one accumulation unit on 12/31/95 1.796302
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 1,226.27
And
T = 22.63%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,296.27
T = 29.63%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INTERNATIONAL SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 0.996926
b = Value of one accumulation unit on 12/31/95 1.059969
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 985.50
And
T = -1.45%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,055.50
T = 5.55%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
SMALL CAP SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 1.202351
b = Value of one accumulation unit on 12/31/95 1.576943
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 1,233.81
And
T = 23.38%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,303.81
T = 30.38%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BALANCED SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 0.990660
b = Value of one accumulation unit on 12/31/95 1.219417
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 1,153.18
And
T = 15.32%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,223.18
T = 22.32%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
LIMITED-TERM BOND SUBACCOUNT
One Year Period Ending on 12/31/95
-------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/1)-1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 0.996733
b = Value of one accumulation unit on 12/31/95 1.129023
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge % of $1,000 hypothetical 7.00%
payment when surrender occurs at the end of year 1
Therefore:
ERV = 1,054.99
And
T = 5.50%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV = 1,124.99
T = 12.50%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/5)-1
n = Number of years 5
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/90 1.287332
b = Value of one accumulation unit on 12/31/91 1.482434
c = Annual maintenance charge factor: 0.005632
Therefore:
ERV1 = 1,145.92
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/91 1.482434
b = Value of one accumulation unit on 12/31/92 1.581853
c = Annual maintenance charge factor: 0.005024
Therefore:
ERV2 = 1,217.02
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
ERV3 = Ending redeemable value ERV2
= (ERV2 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/92 1.581853
b = Value of one accumulation unit on 12/31/93 1.761527
c = Annual maintenance charge factor: 0.005511
Therefore:
ERV3 = 1,348.55
======================================================================
ERV4 = Ending redeemable value ERV3
= (ERV3 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/93 1.761527
b = Value of one accumulation unit on 12/31/94 1.642707
c = Annual maintenance charge factor: 0.008417
Therefore:
ERV4 = 1,246.23
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
ERV5 = Ending redeemable value ERV4
= (ERV4 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 1.642707
b = Value of one accumulation unit on 12/31/95 1.962753
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 3.00% 30
payment) when surrender occurs at the end of year 5
Therefore:
ERV5 = 1,449.39
And
T = 7.71%
======================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV5 = 1,479.39
And
T = 8.15%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/5)-1
n = Number of years 5
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/90 0.986552
b = Value of one accumulation unit on 12/31/91 1.312164
c = Annual maintenance charge factor: 0.005632
Therefore:
ERV1 = 1,324.42
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/91 1.312164
b = Value of one accumulation unit on 12/31/92 1.504554
c = Annual maintenance charge factor: 0.005024
Therefore:
ERV2 = 1,511.95
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
ERV3 = Ending redeemable value ERV2
= (ERV2 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/92 1.504554
b = Value of one accumulation unit on 12/31/93 1.758251
c = Annual maintenance charge factor: 0.005511
Therefore:
ERV3 = 1,758.56
======================================================================
ERV4 = Ending redeemable value ERV3
= (ERV3 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/93 1.758251
b = Value of one accumulation unit on 12/31/94 1.698133
c = Annual maintenance charge factor: 0.008417
Therefore:
ERV4 = 1,683.63
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
ERV5 = Ending redeemable value ERV4
= (ERV4 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 1.698133
b = Value of one accumulation unit on 12/31/95 1.989111
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 3.00% 30
payment) when surrender occurs at the end of year 5
Therefore:
ERV5 = 1,929.10
And
T = 14.04%
======================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV5 = 1,959.10
And
T = 14.40%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/5)-1
n = Number of years 5
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/90 1.285988
b = Value of one accumulation unit on 12/31/91 1.734730
c = Annual maintenance charge factor: 0.005632
Therefore:
ERV1 = 1,343.32
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/91 1.734730
b = Value of one accumulation unit on 12/31/92 2.077662
c = Annual maintenance charge factor: 0.005024
Therefore:
ERV2 = 1,602.12
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
ERV3 = Ending redeemable value ERV2
= (ERV2 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/92 2.077662
b = Value of one accumulation unit on 12/31/93 2.347839
c = Annual maintenance charge factor: 0.005511
Therefore:
ERV3 = 1,801.63
======================================================================
ERV4 = Ending redeemable value ERV3
= (ERV3 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/93 2.347839
b = Value of one accumulation unit on 12/31/94 2.382523
c = Annual maintenance charge factor: 0.008417
Therefore:
ERV4 = 1,813.08
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
Five Year Period Ending on 12/31/95
--------------------------------------------
ERV5 = Ending redeemable value ERV4
= (ERV4 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 2.382523
b = Value of one accumulation unit on 12/31/95 3.272135
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 3.00% 30
payment) when surrender occurs at the end of year 5
Therefore:
ERV5 = 2,446.04
And
T = 19.59%
======================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV5 = 2,476.04
And
T = 19.88%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/n)-1
n = Number of years 8.474
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit 07/13/87 1.000000
b = Value of one accumulation unit 12/31/87 1.028859
c = Annual maintenance charge factor: 0.000000
Therefore:
ERV1 = 1,028.86
=====================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/87 1.028859
b = Value of one accumulation unit 12/31/88 1.096973
c = Annual maintenance charge factor: 0.004310
Therefore:
ERV2 = 1,092.54
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV3 = Ending redeemable value ERV2
= (ERV2 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/88 1.096973
b = Value of one accumulation unit 12/31/89 1.215873
c = Annual maintenance charge factor: 0.005815
Therefore:
ERV3 = 1,204.60
=====================================================================
ERV4 = Ending redeemable value ERV3
= (ERV3 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/89 1.215873
b = Value of one accumulation unit 12/31/90 1.287332
c = Annual maintenance charge factor: 0.006916
Therefore:
ERV4 = 1,267.07
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV5 = Ending redeemable value ERV4
= (ERV4 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/90 1.287332
b = Value of one accumulation unit 12/31/91 1.482434
c = Annual maintenance charge factor: 0.005632
Therefore:
ERV5 = 1,451.97
=====================================================================
ERV6 = Ending redeemable value ERV5
= (ERV5 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/91 1.482434
b = Value of one accumulation unit 12/31/92 1.581853
c = Annual maintenance charge factor: 0.005024
Therefore:
ERV6 = 1,542.05
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV7 = Ending redeemable value ERV6
= (ERV6 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/92 1.581853
b = Value of one accumulation unit 12/31/93 1.761527
c = Annual maintenance charge factor: 0.005511
Therefore:
ERV7 = 1,708.70
=====================================================================
ERV8 = Ending redeemable value ERV7
= (ERV7 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/93 1.761527
b = Value of one accumulation unit 12/31/94 1.642707
c = Annual maintenance charge factor: 0.008417
Therefore:
ERV8 = 1,579.06
=====================================================================
ERV9 = Ending redeemable value ERV8
= (ERV8 x (b/a) - c) - d
Where:
a = Value of one accumulation unit 12/31/94 1.642707
b = Value of one accumulation unit 12/31/95 1.962753
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 0.00% 0
payment) when surrender occurs during year 9
Therefore:
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BOND SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV9 = 1,874.49
And
T = 7.70%
=====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV8 = 1,874.49
And
T = 7.70%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T) n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P) (1/n)-1
n = Number of years 8.474
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit 07/13/87 1.000000
b = Value of one accumulation unit 12/31/87 0.991093
c = Annual maintenance charge factor: 0.000000
Therefore:
ERV1 = 991.09
=====================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/87 0.991093
b = Value of one accumulation unit 12/31/88 1.130948
c = Annual maintenance charge factor: 0.004310
Therefore:
ERV2 = 1,126.68
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV3 = Ending redeemable value ERV2
= (ERV2 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/88 1.130948
b = Value of one accumulation unit 12/31/89 1.073885
c = Annual maintenance charge factor: 0.005815
Therefore:
ERV3 = 1,063.28
=====================================================================
ERV4 = Ending redeemable value ERV3
= (ERV3 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/89 1.073885
b = Value of one accumulation unit 12/31/90 0.986552
c = Annual maintenance charge factor: 0.006916
Therefore:
ERV4 = 969.45
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV5 = Ending redeemable value ERV4
= (ERV4 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/90 0.986552
b = Value of one accumulation unit 12/31/91 1.312164
c = Annual maintenance charge factor: 0.005632
Therefore:
ERV5 = 1,283.96
=====================================================================
ERV6 = Ending redeemable value ERV5
= (ERV5 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/91 1.312164
b = Value of one accumulation unit 12/31/92 1.504554
c = Annual maintenance charge factor: 0.005024
Therefore:
ERV6 = 1,465.77
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV7 = Ending redeemable value ERV6
= (ERV6 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/92 1.504554
b = Value of one accumulation unit 12/31/93 1.758251
c = Annual maintenance charge factor: 0.005511
Therefore:
ERV7 = 1,704.84
=====================================================================
ERV8 = Ending redeemable value ERV7
= (ERV7 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/93 1.758251
b = Value of one accumulation unit 12/31/94 1.698133
c = Annual maintenance charge factor: 0.008417
Therefore:
ERV8 = 1,632.20
=====================================================================
ERV9 = Ending redeemable value ERV8
= (ERV8 x (b/a) - c) - d
Where:
a = Value of one accumulation unit 12/31/94 1.698133
b = Value of one accumulation unit 12/31/95 1.989111
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 0.00% 0
payment) when surrender occurs during year 9
Therefore:
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
HIGH INCOME SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV9 = 1,899.26
And
T = 7.86%
=====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV8 = 1,899.26
And
T = 7.86%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/n)-1
n = Number of years 8.474
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit 07/13/87 1.000000
b = Value of one accumulation unit 12/31/87 0.963307
c = Annual maintenance charge factor: 0.000000
Therefore:
ERV1 = 963.31
=====================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/87 0.963307
b = Value of one accumulation unit 12/31/88 1.084128
c = Annual maintenance charge factor: 0.004310
Therefore:
ERV2 = 1,079.98
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV3 = Ending redeemable value ERV2
= (ERV2 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/88 1.084128
b = Value of one accumulation unit 12/31/89 1.371203
c = Annual maintenance charge factor: 0.005815
Therefore:
ERV3 = 1,359.67
=====================================================================
ERV4 = Ending redeemable value ERV3
= (ERV3 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/89 1.371203
b = Value of one accumulation unit 12/31/90 1.285988
c = Annual maintenance charge factor: 0.006916
Therefore:
ERV4 = 1,265.77
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV5 = Ending redeemable value ERV4
= (ERV4 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/90 1.285988
b = Value of one accumulation unit 12/31/91 1.734730
c = Annual maintenance charge factor: 0.005632
Therefore:
ERV5 = 1,700.33
=====================================================================
ERV6 = Ending redeemable value ERV5
= (ERV5 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/91 1.734730
b = Value of one accumulation unit 12/31/92 2.077662
c = Annual maintenance charge factor: 0.005024
Therefore:
ERV6 = 2,027.91
=====================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV7 = Ending redeemable value ERV6
= (ERV6 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/92 2.077662
b = Value of one accumulation unit 12/31/93 2.347839
c = Annual maintenance charge factor: 0.005511
Therefore:
ERV7 = 2,280.45
=====================================================================
ERV8 = Ending redeemable value ERV7
= (ERV7 x (b/a) - c)
Where:
a = Value of one accumulation unit 12/31/93 2.347839
b = Value of one accumulation unit 12/31/94 2.382523
c = Annual maintenance charge factor: 0.008417
Therefore:
ERV8 = 2,294.94
=====================================================================
ERV9 = Ending redeemable value ERV8
= (ERV8 x (b/a) - c) - d
Where:
a = Value of one accumulation unit 12/31/94 2.382523
b = Value of one accumulation unit 12/31/95 3.272135
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 0.00% 0
payment) when surrender occurs during year 9
Therefore:
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
GROWTH SUBACCOUNT
8.47 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV9 = 3,134.10
And
T = 14.43%
=====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV8 = 3,134.10
And
T = 14.43%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INCOME SUBACCOUNT
4.46 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/n)-1
n = Number of years 4.463
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 07/16/91 1.000000
b = Value of one accumulation unit on 12/31/91 1.072316
c = Annual maintenance charge factor: 0.002592
Therefore:
ERV1 = 1,069.72
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/91 1.072316
b = Value of one accumulation unit on 12/31/92 1.209278
c = Annual maintenance charge factor: 0.005024
Therefore:
ERV2 = 1,200.98
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INCOME SUBACCOUNT
4.46 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
ERV3 = Ending redeemable value ERV2
= (ERV2 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/92 1.209278
b = Value of one accumulation unit on 12/31/93 1.405906
c = Annual maintenance charge factor: 0.005511
Therefore:
ERV3 = 1,389.64
======================================================================
ERV4 = Ending redeemable value ERV3
= (ERV3 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/93 1.405906
b = Value of one accumulation unit on 12/31/94 1.377521
c = Annual maintenance charge factor: 0.008417
Therefore:
ERV4 = 1,349.89
======================================================================
ERV5 = Ending redeemable value ERV4
= (ERV4 x (b/a) - c) - d
Where:
a = Value of one accumulation unit on 12/31/94 1.377521
b = Value of one accumulation unit on 12/31/95 1.796302
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 4.00% 40
payment) when surrender occurs during year 5
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INCOME SUBACCOUNT
4.46 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
Therefore:
ERV5 = 1,709.83
And
T = 12.77%
======================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV5 = 1,749.83
And
T = 13.36%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INTERNATIONAL SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/n)-1
n = Number of years 1.663
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 05/03/94 1.000000
b = Value of one accumulation unit on 12/31/94 0.996926
c = Annual maintenance charge factor: 0.005581
Therefore:
ERV1 = 991.35
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/94 0.996926
b = Value of one accumulation unit on 12/31/95 1.059969
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 7.00% 70
payment) when surrender occurs during year 2
Therefore:
ERV2 = 976.37
And
T = -1.43%
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INTERNATIONAL SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV2 = 1,046.37
And
T = 2.76%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
SMALL CAP SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/n)-1
n = Number of years 1.663
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 05/03/94 1.000000
b = Value of one accumulation unit on 12/31/94 1.202351
c = Annual maintenance charge factor: 0.005581
Therefore:
ERV1 = 1,196.77
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/94 1.202351
b = Value of one accumulation unit on 12/31/95 1.576943
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 7.00% 70
payment) when surrender occurs during year 2
Therefore:
ERV2 = 1,490.36
And
T = 27.12%
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
SMALL CAP SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV2 = 1,560.36
And
T = 30.67%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BALANCED SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/n)-1
n = Number of years 1.663
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 05/03/94 1.000000
b = Value of one accumulation unit on 12/31/94 0.990660
c = Annual maintenance charge factor: 0.005581
Therefore:
ERV1 = 985.08
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/94 0.990660
b = Value of one accumulation unit on 12/31/95 1.219417
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 7.00% 70
payment) when surrender occurs during year 2
Therefore:
ERV2 = 1,134.93
And
T = 7.91%
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
BALANCED SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV2 = 1,204.93
And
T = 11.86%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
LIMITED-TERM BOND SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T)/\n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P)/\(1/n)-1
n = Number of years 1.663
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 05/03/94 1.000000
b = Value of one accumulation unit on 12/31/94 0.996733
c = Annual maintenance charge factor: 0.005581
Therefore:
ERV1 = 991.15
======================================================================
ERV2 = Ending redeemable value ERV1
= (ERV1 x (b/a) - c)
Where:
a = Value of one accumulation unit on 12/31/94 0.996733
b = Value of one accumulation unit on 12/31/95 1.129023
c = Annual maintenance charge factor: 0.007736
d = Withdrawal charge (% of $1,000 hypothetical 7.00% 70
payment) when surrender occurs during year 2
Therefore:
ERV2 = 1,045.03
And
T = 2.68%
======================================================================
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
LIMITED-TERM BOND SUBACCOUNT
1.66 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV2 = 1,115.03
And
T = 6.77%
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
ASSET STRATEGY SUBACCOUNT
0.67 Year Period (Life of Subaccount) Ending 12/31/95
-------------------------------------------------------
This calculation uses the formula:
P (1+T) n = ERV
Where:
P = A hypothetical initial payment of: $1,000
T = Average annual total return
= (ERV/P) (1/n)-1
n = Number of years 0.668
ERV1 = Ending redeemable value of the hypothetical initial payment
= ($1,000 x (b/a) - c)
Where:
a = Value of one accumulation unit on 05/01/95 1.000000
b = Value of one accumulation unit on 12/31/95 1.012149
c = Annual maintenance charge factor: 0.005172
d = Withdrawal charge (% of $1,000 hypothetical 8.00% 80
payment) when surrender occurs during year 1
Therefore:
ERV1 = 926.98
And
T = -10.73%
====================================================================
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
The non-standard average annual total return is calculated in
the same manner as the standard average annual total return except
that the withdrawal charge percentage will be assumed to be 0%.
ERV1 = 1,006.98
T = 1.05%
