AUL AMERICAN UNIT TRUST
Supplement Dated July 13, 1995
To The Prospectus Dated July 13, 1995
Page 9 of the Prospectus of AUL American Unit Trust is revised by
the insertion of the following information in the Expense Table
for the Tactical Asset Allocation Portfolio:
Management/ Advisory Fee 0.80%(1)
Other Expenses 0.20%
Total Portfolio Annual Expenses 1.00%
(1) AUL has currently agreed to waive its advisory fee if the
ordinary expenses of a Portfolio exceed 1% and, to the extent
necessary, assume any expenses in excess of its advisory fee so
that the expenses of each Portfolio, including the advisory fee
but excluding extraordinary expenses, will not exceed 1% of the
Portfolio's average daily net asset value per year. The Adviser
may terminate the policy of reducing its fee and/or assuming Fund
expenses upon 30 days written notice to the Fund and such policy
will be terminated automatically by the termination of the
Investment Advisory Agreement.
The following examples show expenses that a Contract Owner would
pay at the end of one or three years if at the end of those time
periods, the Contract is (1) surrendered or (2) not surrendered
or annuitized.
(1) If Your Contract is Surrendered
Recurring Contribution Contracts
1 year 99.46
3 years 156.14
Single Contribution Contracts
1 year 81.03
3 years 117.52
(2) If Your Contract is not Surrendered or Annuitized
All Contracts
1 year 25.76
3 years 78.90
<PAGE>
Prospectus
AUL American Unit Trust
GROUP VARIABLE ANNUITY CONTRACTS
Offered By
American United Life Insurance Company
One American Square
Indianapolis, Indiana 46204
(317) 263-1877
Annuity Service Office Mailing Address:
P.O. Box 6148, Indianapolis, Indiana 46206-6148
The date of this Prospectus is July 12, 1995.
This Prospectus describes group annuity contracts (the
"Contracts") offered by American United
Life Insurance Company<U4> ("AUL" or the "Company"). The
Contracts are designed for use in
connection with employer, association, and other group retirement
plans (each a "Plan") that
qualify for favorable tax-deferred treatment as retirement
programs under Sections 401, 403(b),
408, or 457 of the Internal Revenue Code of 1986, as amended. The
Contracts may be entered
into by any employer, association, or other group.
This Prospectus describes several types of Contracts, including
Contracts for which contributions
may vary in amount and frequency, subject to certain limitations
("Recurring Contribution
Contracts") and Contracts for which only a single contribution
may be made ("Single Contribution
Contracts"). As of the date of this Prospectus, Single
Contribution Contracts are available only
for use in connection with retirement plans that meet the
requirements of Sections 403(b) and 408
of the Internal Revenue Code. All of the Contracts provide for
the accumulation of values on
either a variable basis, a fixed basis, or both. The Contracts
also provide several options for fixed
annuity payments to begin on a future date.
Contributions designated to accumulate on a variable basis may be
allocated to one or more of the
Investment Accounts that comprise a separate account of AUL
called AUL American Unit Trust
(the "Variable Account"). Each Investment Account of the Variable
Account invests in shares of
one of the following mutual funds:
Portfolio Mutual Fundv Investment Adviser
AUL American Equity AUL American Series Fund, Inc. American
United Life Insurance
Company
AUL American Bond AUL American Series Fund, Inc. American
United Life Insurance
Company
AUL American Managed AUL American Series Fund, Inc. American
United Life Insurance
Company
AUL American Money Market AUL American Series Fund, Inc.
American United Life
Insurance Company
AUL American Tactical Asset Allocation AUL American Series Fund,
Inc. American United
Life Insurance Company; Dean Investment Associates, Sub-Adviser
Alger American Growth Alger American Fund Fred Alger & Company
Calvert Capital Accumulation Acacia Capital Corporation Calvert
Management Corporation
Fidelity Asset Manager Fidelity Variable Insurance Products Fund
II Fidelity Management &
Research Company
Fidelity Contrafund Fidelity Variable Insurance Products Fund II
Fidelity Management &
Research Company
Fidelity Equity-Income Fidelity Variable Insurance Products Fund
Fidelity Management &
Research Company
Fidelity Growth Fidelity Variable Insurance Products Fund
Fidelity Management & Research
Company
Fidelity High Income Fidelity Variable Insurance Products Fund
Fidelity Management &
Research Company
Fidelity Index 500 Fidelity Variable Insurance Products Fund II
Fidelity Management &
Research Company
Fidelity Overseas Fidelity Variable Insurance Products Fund
Fidelity Management & Research
Company
Invesco Dynamics Invesco Dynamics Fund, Inc. Invesco Funds
Group, Inc.
PBHG Growth PBHG Funds, Inc. Pilgrim Baxter & Associates, Inc.
Select Investors Twentieth Century Investors, Inc. Investors
Research Corporation
TCI Growth TCI Portfolios, Inc. Investors Research Corporation
T. Rowe Price Equity Income T. Rowe Price Equity Series, Inc.
T. Rowe Price Associates, Inc.
Twentieth Century International Equity Twentieth Century World
Investors, Inc. Investors
Research Corporation
Ultra Investors Twentieth Century Investors, Inc. Investors
Research Corporation
Vanguard Explorer Vanguard Explorer Fund, Inc. Wellington
Management Company &
Granahan Investment Management, Inc.
Vanguard Short Term Federal Bond Vanguard Fixed Income
Securities Fund, Inc. Vanguard
Group, Inc.
Contributions may be allocated to one or more Investment Accounts
available under a Contract.
Not all Investment Accounts may be available under a particular
Contract and some of the
Investment Accounts are not available for certain types of
Contracts. Contributions allocated to
an Investment Account of the Variable Account will increase or
decrease in dollar value
depending on the investment performance of the corresponding
mutual fund portfolio in which the
Investment Account invests. These amounts are not guaranteed.
Contributions designated to accumulate on a fixed basis may be
allocated to AUL's Fixed Account
and will earn interest at rates that are paid by AUL as described
in "The Fixed Account."
This Prospectus concisely sets forth information about the
Contracts and the Variable Account
that a prospective investor should know before investing. Certain
additional information is
contained in a "Statement of Additional Information," dated July
12, 1995, which has been filed
with the Securities and Exchange Commission (the "SEC"). The
Statement of Additional
Information is incorporated by reference into this Prospectus. A
copy may be obtained without
charge by calling or writing to AUL at the telephone number or
address indicated above. The
table of contents of the Statement of Additional Information is
located at the end of this
Prospectus.
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.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
THE
MUTUAL FUND OR FUNDS BEING CONSIDERED. EACH OF THESE PROSPECTUSES
SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
TABLE OF CONTENTS
Description Page
DEFINITIONS 4-5
SUMMARY 5-8
Purpose of the Contracts 5
Types of Contracts 6
The Variable Account and the Funds 6
Fixed Account 6
Contributions 6
Transfers 7
Withdrawals 7
The Death Benefit 7
Annuity Options 7
Charges 7
Withdrawal Charge 7
Premium Tax Charge 8
Mortality and Expense Risk Charge 8
Administrative Charge 8
Expenses of the Funds 8
Ten-Day Free Look 8
Termination by the Owner 8
Contacting AUL 8
EXPENSE TABLE 9-12
CONDENSED FINANCIAL INFORMATION 13-14
PERFORMANCE OF THE INVESTMENT ACCOUNTS 14-15
INFORMATION ABOUT AUL, THE VARIABLE ACCOUNT, AND THE FUNDS 15-19
American United Life Insurance Company 15
Variable Account 15
The Funds 16
AUL American Series Fund, Inc. 16
Acacia Capital Corporation 17
Alger American Fund 17
Invesco Dynamics Fund, Inc. 17
PBHG Funds, Inc. 17
TCI Portfolios, Inc 17
T. Rowe Price Equity Series, Inc. 17
Twentieth Century Investors, Inc. 18
Twentieth Century World Investors, Inc. 18
Vanguard Explorer Fund, Inc. 18
Vanguard Fixed Income Securities Fund, Inc. 18
Variable Insurance Products Fund 18
Variable Insurance Products Fund II 19
THE CONTRACTS 19
General 19
CONTRIBUTIONS AND CONTRACT VALUES DURING THE ACCUMULATION PERIOD
19-21
Contributions under the Contracts 19
Ten-Day Free Look 20
Initial and Single Contributions 20
Allocation of Contributions 20
Subsequent Contributions Under Recurring Contribution Contracts
20
Transfers of Account Value 20
Participant's Variable Account Value 21
Accumulation Units 21
Accumulation Unit Value 21
Net Investment Factor 21
CASH WITHDRAWALS AND THE DEATH BENEFIT 21-25
Cash Withdrawals 21
Systematic Withdrawal Service for 403(b) and 408 Programs 22
Description Page
CASH WITHDRAWALS AND THE DEATH BENEFIT (continued)
Constraints on Withdrawals 22
General 22
403(b) Programs 22
Texas Optional Retirement Program 23
The Death Benefit 23
Termination by the Owner 23
Termination by AUL 24
Payments from the Variable Account 25
CHARGES AND DEDUCTIONS 25-27
Premium Tax Charge 25
Withdrawal Charge 25
Mortality and Expense Risk Charge 26
Administrative Charge 26
Other Charges 26
Variations in Charges 26
Guarantee of Certain Charges 26
Expenses of the Funds 27
ANNUITY PERIOD 27-28
General 27
Annuity Options 27
Option 1 -- Life Annuity 27
Option 2 -- Certain and Life Annuity 27
Option 3 -- Survivorship Annuity 27
Option 4 -- Unit Refund Life Annuity 28
Option 5 -- Fixed Periods 28
Selection of an Option 28
THE FIXED ACCOUNT 28-30
Interest 28
Withdrawals and Transfers 29
Contract Charges 29
Payments from the Fixed Account 29
Loans from the Fixed Account 29
MORE ABOUT THE CONTRACTS 30
Designation and Change of Beneficiary 30
Assignability 30
Proof of Age and Survival 30
Misstatements 30
Acceptance of New Participants or Contributions 30
FEDERAL TAX MATTERS 31-34
Introduction 31
Tax Status of the Company and the Variable Account 31
Tax Treatment of Retirement Programs 31
Employee Benefit Plans. 31
403(b) Programs 32
408 Programs 32
457 Programs 32
Tax Penalty 32
Withholding 32
Effect of Tax-Deferred Accumulation 33
OTHER INFORMATION 34-35
Voting of Shares of the Funds 34
Substitution of Investments 34
Changes to Comply with Law and Amendments 35
Reservation of Rights 35
Periodic Reports 35
Legal Proceedings 35
Legal Matters 35
PERFORMANCE INFORMATION 35-36
STATEMENT OF ADDITIONAL INFORMATION 37
DEFINITIONS
Various terms commonly used in this Prospectus are defined as
follows:
Account Date -- The date on which a Participant's initial
contribution is applied to a Participant's
Account and on which AUL begins to determine account values. It
is the date used to determine
Account Years and Account Anniversaries.
Accumulation Period -- The period commencing on a Participant's
Account Date and terminating
when the Participant's Account is closed, either through a
surrender, withdrawal(s), annuitization,
payment of charges, payment of the death benefit, or a
combination thereof.
Accumulation Unit -- A unit of measure used to record amounts of
increases to, decreases from,
and accumulations in the Investment Accounts of the Variable
Account during the Accumulation
Period.
Annuitant -- The person or persons on whose life annuity payments
depend.
Annuity -- A series of payments made by AUL to an Annuitant or
Beneficiary during the period
specified in the Annuity Option.
Annuity Commencement Date -- The first day of any month in which
an annuity begins under a
Contract, which shall not be later than the required beginning
date under applicable federal
requirements.
Annuity Options -- Options under a Contract that prescribe the
provisions under which a series of
annuity payments are made to an Annuitant, contingent Annuitant,
or Beneficiary.
Annuity Period -- The period during which annuity payments are
made.
AUL -- American United Life Insurance Company
Beneficiary -- The person having the right to the death benefit,
if any, payable during the
Accumulation Period, and the person having the right to benefits,
if any, payable upon the death
of an Annuitant during the Annuity Period under any Annuity
Option other than a survivorship
option (i.e., Option 3 -- under which the contingent Annuitant
has the right to benefits payable
upon the death of an Annuitant).
Business Day -- A day on which AUL's Home Office is customarily
open for business.
Traditionally, in addition to federal holidays, AUL is not open
for business on the day after
Thanksgiving and either the day before or after Christmas or
Independence Day.
Certificate -- The document for each Participant that
evidences the coverage of the Participant under a Contract.
Contract Date -- The date shown as the Contract Date in a
Contract. It will not be later than the
date any contribution is accepted under a Contract, and it is the
date used to determine Contract
Months, Contract Years, and Contract Anniversaries.
Contract Year -- A period beginning with one Contract
Anniversary, or, in the case of the first
Contract Year, beginning on the Contract Date, and ending the day
before the next Contract
Anniversary. The first Contract Year may, at the request of the
Owner, be less than 12 months so
that the Contract Year will coincide with the Owner's accounting
year. Thereafter, each Contract
Year will consist of a 12 month period.
Contributions -- Any amount deposited under a Contract by a
Participant or by an Owner or other
duly authorized entity on behalf of a Participant under a 403(b)
Program, a 408 Program, or an
Employee Benefit Plan, or by an Employer in connection with a 457
Program. Depending on the
type of Contract, contributions may be made on a recurring basis
or on a single premium basis. To
allow the consolidation of funds from different sources,
contributions made under single premium
contracts may be made for a period of twelve months, measured
from the date of first deposit.
After this twelve month period, no further single premium
contributions to that specific Account
will be accepted.
Employee Benefit Plan -- A pension or profit sharing plan
established by an Employer for the
benefit of its employees and which is qualified under Section 401
of the Internal Revenue Code.
Employer -- A tax-exempt or public school organization or other
employer with respect to which
a Contract has been entered into for the benefit of its
employees. In some cases, a trustee or
custodian may act as the Owner for Participants. In this case,
rights usually reserved to the
Employer will be exercised either directly by the employees or
through such trustee or custodian,
which will act as the agent of such employees.
Employer Sponsored 403(b) Program -- A 403(b) Program to which an
Employer makes
contributions on behalf of its employees by means other than a
salary reduction arrangement, or
other 403(b) Program that is subject to the requirements of Title
I of the Employee Retirement
Income Security Act of 1974, as amended.
Fixed Account -- An account that is part of AUL's General Account
in which all or a portion of a
Participant's Account Value may be held for accumulation at fixed
rates of interest paid by AUL.
Funds -- AUL American Series Fund, Inc., Acacia Capital
Corporation, Alger American Fund,
Invesco Dynamics Fund, Inc., PBHG Funds, Inc., TCI Portfolios,
Inc., T. Rowe Price
Equity Series, Inc., Twentieth Century Investors, Inc., Twentieth
Century World Investors, Inc.,
Vanguard Explorer Fund, Inc., Vanguard Fixed Income Securities
Fund, Inc., Variable Insurance
Products Fund, and Variable Insurance Products Fund II. Each of
the Funds is a diversified,
open-end management investment company commonly referred to as a
mutual fund.
General Account -- All assets of AUL other than those allocated
to the Variable Account or to
any other separate account of AUL.
Home Office -- The Annuity Service Office at AUL's principal
business office, One American
Square, Indianapolis, Indiana 46204.
HR-10 Plan -- An Employee Benefit Plan established by a
self-employed person in accordance
with Section 401 of the Internal Revenue Code.
Investment Account -- A sub-account of the Variable Account that
invests in shares of a specific
Portfolio of AUL American Series Fund, Inc., Acacia Capital
Corporation, Alger American Fund,
Invesco Dynamics Fund, Inc., PBHG Funds, Inc., TCI Portfolios,
Inc., T. Rowe Price Equity
Series, Inc., Twentieth Century Investors, Inc., Twentieth
Century World Investors, Inc.,
Vanguard Explorer Fund, Inc., Vanguard Fixed Income Securities
Fund, Inc., Variable Insurance
Products Fund, and Variable Insurance Products Fund II.
Owner -- The employer, association, trust, or other entity
entitled to the ownership rights under
the Contract and in whose name or names the Contract is issued. A
trustee or custodian may be
designated to exercise an owner's rights and responsibilities
under a Contract in connection with a
retirement plan that meets the requirements of Sections 401, 408,
or 457 of the Internal Revenue
Code. An administrator, custodian, or other person performing
similar functions may be
designated to exercise an Owner's responsibilities under a
Contract in connection with a 403(b)
Program. The term "Owner," as used in this Prospectus, shall
include, where appropriate, such a
trustee, custodian, or administrator.
Participant -- An eligible employee, member, or other person
named in the Certificate who is
entitled to benefits under the Plan as determined and reported to
AUL by the Owner or other duly
authorized entity.
Participant's Account -- An account established for each
Participant.
Participant's Account Value -- The current value of a
Participant's Account under a Contract,
which is equal to the sum of a Participant's Fixed Account Value
and Variable Account Value.
Initially, it is equal to the initial contribution, and
thereafter will reflect the net result of
contributions, investment experience, charges deducted, loans,
and any partial withdrawals taken.
Participant's Fixed Account Value -- The total value of a
Participant's interest in the Fixed
Account.
Participant's Variable Account Value -- The total value of a
Participant's interest in the Investment
Accounts of the Variable Account.
Participant's Withdrawal Value -- A Participant's Account Value
minus the applicable withdrawal
charge and minus the Participant's outstanding loan balances, if
any, and any expense charges due
thereon.
Plan -- The retirement plan or plans under which the Contract is
issued and any subsequent
amendment to such a plan.
Valuation Date -- Each date on which the Variable Account is
valued, which currently includes
each Business Day that is also a day on which the New York Stock
Exchange is open for trading.
Valuation Period -- A period used in measuring the investment
experience of each Investment
Account of the Variable Account. The Valuation Period begins at
the close of one Valuation Date
and ends at the close of the next succeeding Valuation Date.
Variable Account -- AUL American Unit Trust, which is a separate
account of AUL, and whose
assets and liabilities are maintained separately from those of
AUL's General Account.
403(b) Program -- An arrangement by a public school organization
or a charitable, educational, or
scientific organization that is described in Section 501(c)(3) of
the Internal Revenue Code under
which employees are permitted to take advantage of the Federal
income tax deferral benefits
provided for in Section 403(b) of the Internal Revenue Code.
408 Program -- A plan of individual retirement accounts or
annuities, including a simplified
employee pension plan established by an employer, that meets the
requirements of Section 408 of
the Internal Revenue Code.
457 Program -- A plan established by a unit of a state or local
government or a tax-exempt
organization under Section 457 of the Internal Revenue Code.
SUMMARY
This summary is intended to provide a brief overview of the more
significant aspects of the
Contracts. Further detail is provided in this Prospectus, the
Statement of Additional Information,
and the Contracts. Unless the context indicates otherwise, the
discussion in this summary and the
remainder of the Prospectus relates to the portion of the
Contracts involving the Variable
Account. The Fixed Account is briefly described under "The Fixed
Account" and in the pertinent
Contract.
Purpose of the Contracts
The group variable annuity contracts ("Contracts") described in
this Prospectus are offered for
use in connection with
retirement plans that meet the requirements of Sections 401,
403(b), 408, or 457 of the Internal
Revenue Code (collectively, "Plans"). A Contract presents a
dynamic concept in retirement
planning designed to give employers and employees and other
Participants in Plans flexibility in
attaining investment goals. A Contract provides for the
accumulation of values on a variable basis,
a fixed basis, or both, and provides several options for fixed
annuity payments. During the
Accumulation Period, a Participant can pursue various investment
options by allocating
contributions to the Investment Accounts of the Variable Account
or to the Fixed Account. See
"The Contracts."
Types of Contracts
AUL offers several types of contracts that are described in this
Prospectus. These include
Recurring Contribution Contracts under which contributions may
vary in amount and frequency,
subject to the limitations described below. Recurring
Contribution Contracts are available for use
in connection with retirement plans that meet the requirements of
Sections 401, 403(b), 408, or
457 of the Internal Revenue Code. AUL also offers Single
Contribution Contracts which require a
minimum contribution of at least $100,000. As of the date of this
Prospectus, Single Contribution
Contracts are available only for use in connection with
retirement plans that meet the
requirements of Sections 403(b) and 408 of the Internal Revenue
Code.
The Variable Account and the Funds
Contributions designated to accumulate on a variable basis are
allocated to the Variable Account.
See "Variable Account." The Variable Account is currently divided
into twenty-three Investment
Accounts. Each Investment Account invests exclusively in shares
of a specific mutual fund or in
shares of a specific Portfolio of one of the following mutual
funds: AUL American Series Fund,
Inc., Acacia Capital Corporation, Alger American Fund, Invesco
Dynamics Fund, Inc., PBHG
Funds, Inc., TCI Portfolios, Inc., T. Rowe Price Equity Series,
Inc., Twentieth Century Investors,
Inc., Twentieth Century World Investors, Inc., Vanguard Explorer
Fund, Inc., Vanguard Fixed
Income Securities Fund, Inc., Variable Insurance Products Fund,
and Variable Insurance Products
Fund II (the "Funds"). Each of the mutual funds or Portfolios of
the Funds has a different
investment objective or objectives. AUL American Series Fund,
Inc. offers an Equity, Bond,
Money Market, Managed, and Tactical Asset Allocation Portfolio.
The Alger American Fund
offers the Alger American Growth Portfolio. Acacia Capital
Corporation offers the Calvert
Capital Accumulation Portfolio. Invesco Dynamics Fund, Inc.
offers the Invesco Dynamics Fund.
PBHG Funds, Inc. offers the PBHG Growth Fund. TCI Portfolios,
Inc. offers the TCI Growth
Portfolio. T. Rowe Price Equity Series, Inc. offers the Equity
Income Portfolio. Twentieth
Century Investors, Inc. offers the Select Investors and Ultra
Investors Portfolios. Twentieth
Century World Investors, Inc. offers the Twentieth Century
International <?FB>Equity Portfolio.
Vanguard Explorers Fund, Inc. offers the Vanguard Explorer Fund.
Vanguard Fixed Income
Securities Fund, Inc. offers the Vanguard Short Term Federal Bond
Portfolio. Variable Insurance
Products Fund offers the Equity-Income, Growth, High Income, and
Overseas Portfolios.
Variable Insurance Products Fund II offers the Asset Manager,
Contrafund, and Index 500
Portfolios. Contributions may be allocated to one or more
Investment Accounts available under a
Contract. Not all Investment Accounts may be available under a
particular Contract and some of
the Investment Accounts are not available for certain types of
Contracts. The value of the
Accumulation Units held in an Investment Account will increase or
decrease in dollar value
depending on the investment performance of the corresponding
Portfolio of a Fund in which the
Investment Account invests. A Participant bears the investment
risk for amounts allocated to an
Investment Account of the Variable Account.
Fixed Account
Contributions designated to accumulate on a fixed basis may be
allocated to the Fixed Account,
which is part of AUL's General Account. Amounts allocated to the
Fixed Account earn interest at
rates periodically determined by AUL that are guaranteed to be at
least an effective annual rate of
4%. See "The Fixed Account."
Contributions
For Recurring Contribution Contracts, contributions may vary in
amount and frequency, but
contributions for each Participant under a Contract used for a
403(b) Program must total at least
$200 each Contract Year. Contributions for each Participant under
a Recurring Contribution
Contract used for any other Plan must total at least $300 each
Contract Year. In addition, the
maximum and minimum amounts that may be contributed under a Plan
may be subject to
limitations depending on the type of Plan. In a Single
Contribution Contract, contributions for
each Participant must be at least $100,000. Contributions of less
than $100,000 will initially be
allocated to a Recurring Contribution Contract. To allow the
consolidation of assets from
different sources, Participants will be allowed a twelve month
period, measured from the date of
first deposit, to reach the $100,000 minimum required
contribution for Single Contribution
Contracts. If less than $100,000 is received and allocated to a
Recurring Contribution Contract,
but the $100,000 required minimum contribution for Single
Contribution Contracts is received
within the twelve month period, measured from the date of the
first deposit, then the Participant's
Account Value will be immediately transferred from the Recurring
Contribution Contract to a
Single Contribution Contract pursuant to the terms of a Transfer
Agreement between AUL and
the Participant. However, after this twelve month period, no
further contributions will be accepted
under Single Contribution Contracts and any subsequent
contributions will be allocated to a
Recurring Contribution Contract, unless the $100,000 mini-
mum contribution for establishing an additional Participant's
Account under a Single Contribution
Contract is made. See "Contributions under the Contracts."
Transfers
A Participant's Variable Account Value may be transferred among
the Investment Accounts of the
Variable Account that are available under the Contract or to the
Fixed Account at any time during
the Accumulation Period. Part of a Participant's Fixed Account
Value may be transferred to one
or more available Investment Accounts of the Variable Account
during the Accumulation Period,
subject to certain restrictions. The minimum transfer from any
Investment Account or from the
Fixed Account is the lesser of $500 or a Participant's entire
Account Value in that Investment
Account or in the Fixed Account, provided however, that amounts
transferred from the Fixed
Account to an Investment Account during any given Contract Year
cannot exceed 20% of the
Participant's Fixed Account Value as of the beginning of that
Contract Year. However, if a
Participant's Fixed Account Value at the beginning of the
Contract Year is less than $2,500, the
amount that will be transferred for that Contract Year from the
Fixed Account is the lesser of
$500 or the entire Fixed Account Value. If, after any transfer,
the Participant's remaining Account
Value in an Investment Account or in the Fixed Account would be
less than $500, then such
request will be treated as a request for a transfer of the entire
Account Value. See "Transfers of
Account Value."
Withdrawals
At any time before the Annuity Commencement Date, a Participant's
Account may be surrendered
or a partial withdrawal may be taken from a Contract or a
Participant's Account subject to the
provisions of the Contract. The minimum amount that may be
withdrawn from a Participant's
Account Value in any one Investment Account or the Fixed Account
is the lesser of $500 or the
Participant's entire Account Value in the Investment Account or
Fixed Account. If a partial
withdrawal is requested that would leave a Participant's Account
Value in the Fixed Account or
any Investment Account, from whichever the withdrawal is
requested, less than $500, then such
request will be treated as a request for a full surrender from
the Fixed Account or Investment
Account. See "Cash Withdrawals."
Certain retirement programs, such as 403(b) Programs, are subject
to constraints on withdrawals
and full surrenders. See "Constraints on Withdrawals." In
addition, distributions under certain
retirement programs may result in a tax penalty. See "Tax
Penalty." A withdrawal or surrender
may also be subject to a withdrawal charge. See "Withdrawal
Charge."
The Death Benefit
If a Participant dies during the Accumulation Period, AUL will
pay a death benefit to the
Beneficiary. The amount of the death benefit is equal to the
vested portion of the Participant's
Account Value minus any outstanding loan balances and any due and
unpaid charges on those
loans. If the death of the Participant occurs on or after the
Annuity Commencement Date, no
death benefit will be payable, except as may be provided under
the Annuity Option elected. See
"The Death Benefit" and "Annuity Options."
Annuity Options
The Contracts provide for several optional fixed Annuity Options,
any one of which may be
elected if permitted by the applicable Plan and applicable law.
Payments under the Annuity
Options will be fixed and guaranteed by AUL. See "Annuity
Period."
Charges
Certain charges will be deducted in connection with the operation
of the Contracts and the
Variable Account:
Withdrawal Charge--AUL does not impose a sales charge at the time
a contribution is made to a
Participant's Account under a Contract. If a cash withdrawal is
made or a Participant's Account is
surrendered, a withdrawal charge (which may also be referred to
as a contingent deferred sales
charge) may be assessed by AUL where the Participant's Account
has not been in existence for a
certain period of time (see chart below). No withdrawal charge
will be taken on or after the
Annuity Commencement Date or upon payment of a death benefit
under a Contract. Under
certain Contracts known as "benefit responsive" Contracts,
withdrawal charges are not imposed
for payment of retirement, death, disability, termination of
employment, hardship, loan, age 701/2
required minimum distribution benefits, or benefits upon
attainment of age 591/2 (provided that
the age 591/2 benefit is a taxable distribution paid to the
Participant and not to any other person
or entity, including any alternative or substitute funding
medium. For certain other Contracts
known as "modified benefit responsive" Contracts, withdrawal
charges are not imposed for cash
lump-sum payments of death benefits. Withdrawal charges are also
not imposed for cash
lump-sum payments provided the Participant has (1) attained age
55 and has 10 years of service
with the employer identified in the Plan, or (2) attained age 62,
and is receiving benefits for
retirement, disability, termination of employment, hardships,
loans, or required minimum
distribution benefits pursuant to Internal Revenue Code Section
401(a)(9) and Regulations issued
thereunder, or for benefits upon attainment of age 591/2
(provided that such benefit upon
attainment of age 591/2 is a taxable distribution paid to the
Participant and not to any other
person or entity, including any substitute funding medium).
For the first two Contract Years that a Participant's Account
exists, the amount withdrawn during
a Contract Year that will not be subject to an otherwise
applicable withdrawal charge is 10% of
(i) the total of all contributions made during the year that the
withdrawal is being made, plus (ii)
the Participant Account Value at the beginning of the Contract
Year. After the first two Contract
Years, and until the withdrawal charge has decreased to 0% (the
eleventh year for
Charge on Withdrawal Exceeding 10% Allowable Amount
AccountYear 1 2 3 4 5 6 7 8 9 10 11 or more
Recurring Contribution Contracts 8% 8% 8% 8% 8% 4% 4% 4%
4% 4% 0%
Single Contribution Contracts 6% 5% 4% 3% 2% 1% 0%
0% 0% 0% 0%
Recurring Contribution Contracts and the seventh year for Single
Contribution Contracts), the
amount withdrawn during a Contract Year that will not be subject
to a withdrawal charge is 10%
of the Participant's Account Value at the beginning of the
Contract Year in which the withdrawal
is being made.
If a Participant's contributions were initially allocated to a
Recurring Contribution Contract and
then transferred to a Single Contribution Contract pursuant to
the terms of a Transfer Agreement
between AUL and the Participant when the required minimum of
$100,000 was reached, then for
purposes of establishing the number of Account Years that an
account has been in existence,
credit will be given for the time that the contributions were in
the Recurring Contribution
Contract.
If a surrender or a withdrawal in excess of this 10% allowable
amount is made to pay a
non-benefit responsive benefit, a withdrawal charge will be
assessed on the amount withdrawn in
excess of the 10% allowable amount. The chart on the next page
illustrates the amount of the
withdrawal charge that applies to the different types of
contracts based on the number of years
that the Account has been in existence. However, the total
withdrawal charge will never exceed
9% of total contributions made by or on behalf of a Participant.
See "Withdrawal Charge" on
page 25.
Premium Tax Charge--Various states and municipalities impose a
tax on premiums received by
insurance companies. AUL assesses a premium tax charge to
reimburse itself for premium taxes
that it incurs, which usually will be deducted at the time
annuity payments commence. Premium
taxes currently range from 0% to 3.5%, but are subject to change
by such governmental entities.
See "Premium Tax Charge" on page 25.
Mortality and Expense Risk Charge--AUL deducts a daily charge in
an amount equal to an annual
rate of 1.25% of the average daily net assets of each Investment
Account of the Variable Account
for mortality and expense risks that AUL assumes in connection
with the Contracts. See
"Mortality and Expense Risk Charge" on page 26.
Administrative Charge--Under Recurring Contribution Contracts,
AUL deducts from a
Participant's Account an administrative charge equal to the
lesser of 0.5% of the Participant's
Account Value or $7.50 a quarter. The charge is assessed every
quarter on a Participant Account
if it is in effect on the quarterly Contract Anniversary, and is
assessed only during the Accumula-
<FB>tion Period. Such charge may be billed to the Owner in a
"benefit responsive" Employer
Sponsored 403(b) Contract or in a combined contract which
contains both Employee Benefit Plan
contributions and 403(b) contributions. There is no
Administrative Charge imposed on Single
Contribution Contracts. See "Administrative Charge" on page 26.
Expenses of the Funds-- Each Investment Account of the Variable
Account purchases shares of
the corresponding Portfolio of one of the Funds at the net asset
value of such shares. The net
asset value reflects investment advisory fees and other expenses
paid by each Portfolio. See the
Funds' Prospectuses for a description of these fees and expenses.
Ten-Day Free Look
Under 403(b) and 408 Contracts, the Owner has the right to return
the Contract for any reason
within ten days of receipt. If this right is exercised, the
Contract will be considered void from its
inception and any contributions will be fully refunded.
Termination by the Owner
An Owner of a Contract acquired in connection with an Employee
Benefit Plan, a 457 Program,
or an Employer Sponsored 403(b) Program may terminate the
Contract by sending proper written
notice of termination to AUL at its Home Office. Upon termination
of such a Contract, the Owner
may elect from two payment options. Under one option, AUL will
assess an Investment
Liquidation Charge on Participants' Fixed Account Values from
Contracts acquired in connection
with Employee Benefit Plans and 457 Programs (but not Employer
Sponsored 403(b) Programs).
Under the second payment option, AUL will not assess an
Investment Liquidation Charge;
however, amounts attributable to the aggregate Withdrawal Values
derived from the Fixed
Account of all Participants under the Contract shall be paid in
six or seven (depending on the
Contract) equal annual installments, starting with the first
Contract Anniversary immediately
succeeding the effective date of termination. For more
information on termination by an Owner,
including information on the payment options and the Investment
Liquidation Charge, see
"Termination by the Owner" on page 23.
Contacting AUL
All written requests, notices, and forms required by the
Contracts, and any questions or inquiries
should be directed to AUL at the address of the Annuity Service
Office provided in the front of
this Prospectus.
EXPENSE TABLE
The purpose of the following table is to assist investors in
under<DH>standing the various costs
and expenses that Partici<DH>pants in the Contracts bear directly
and indirectly. The table
reflects expenses of the Variable Account as well as the Funds.
Expenses of the AUL American
Tactical Asset Allocation Portfolio are not included since the
portfolio only came into existence in
mid 1995. The table does not reflect premium taxes that may be
im<DH>posed by various
jurisdictions. See "Premium Tax Charge." The information
contained in the table is not generally
applicable to amounts allocated to the Fixed Account or to
annuity payments under an Annuity
Option.
For a complete description of a Contract's costs and expenses,
see "Charges and Deductions." For
a more complete description of the Funds' costs and expenses, see
the Funds' Prospectuses.
Participant Transaction Expenses
Maximum withdrawal charge 8%
Recurring Contribution Contracts (1) 8%
Single Contribution Contracts (2) 6%
Maximum administrative charge (per year) (3) $30
Variable Account Annual Expenses (as a percentage of average
account value)
Mortality and expense risk fee 1.25%
Fund Annual Expenses After Expense Limitation (as a percentage of
average net assets of each
Portfolio)
Management/Advisory Fee Other Expenses Total Portfolio
Annual Expenses
AUL American Series Fund, Inc.:
Equity Portfolio 0.50%(4) 0.23% 0.73%
Bond Portfolio 0.50%(4) 0.23% 0.73%
Managed Portfolio 0.50%(4) 0.25% 0.75%
Money Market Portfolio 0.50%(4) 0.23% 0.73%
Acacia Capital Corporation:
Calvert Capital Accumulation Portfolio 0.90%(5) 0.05% 0.95%
Alger American Fund
Alger American Growth Portfolio 0.75% 0.11% 0.86%
Invesco Dynamics Fund, Inc.
Invesco Dynamics Fund 0.60% 0.57%(6) 1.17%
(1) For the first two Contract Years that a Participant's Account
exists, the amount withdrawn
during a Contract Year that will not be subject to an otherwise
applicable withdrawal charge is
10% of (i) the total of all contributions made during the year
that the withdrawal is being made,
plus (ii) the Participant's Account Value at the beginning of the
Contract Year. After the first two
Contract Years, and until the withdrawal charge has decreased to
0%, the amount withdrawn
during a Contract Year that will not be subject to a withdrawal
charge is 10% of the Participant's
Account Value at the beginning of the Contract Year in which the
withdrawal is being made. The
withdrawal charge, which is applied to amounts withdrawn in
excess of the 10% allowable
amount, decreases from 8% to 4% for Account years 6 through 10,
and to 0% thereafter. See
"Withdrawal Charge."
(2) For the first two Contract Years that a Participant's Account
exists, the amount withdrawn
during a Contract Year that will not be subject to an otherwise
applicable withdrawal charge is
10% of (i) the total of all contributions made during the year
that the withdrawal withdrawal is
being made, plus (ii) the Participant's Account Value at the
beginning of the Contract Year. After
the first two Contract Years, and until the withdrawal charge has
decreased to 0%, the amount
withdrawn during a Contract Year that will not be subject to a
withdrawal charge is 10% of the
Participant's Account Value at the beginning of the Contract Year
in which the withdrawal is
being made. The withdrawal charge, which is applied to amounts
withdrawn in excess of the
10<U7> allowable amount, decreases by 1% in each account Year
until it is 0% in Account Year
7 and thereafter. If a Participant's contributions were initially
allocated to a Recurring
Contribution Contract and then transferred to a Single
Contribution Contract when the required
minimum of $100,000 was reached, then for purposes of
establishing the number of Account
Years that an account has be in existence, credit will be given
for the time that the contributions
were in the Recurring Contribution Contract. See "Withdrawal
Charge."
(3) The Administrative Charge may be less than $30.00 per year,
based on the size of the
Participant's Account. The maximum charge imposed will be the
lesser of 0.5% of the
Participant's Account Value or $30.00 per year. There are no
Administrative Charges applied to
Single Contribution Contracts.
(4) AUL has currently agreed to waive its advisory fee if the
ordinary expenses of a Portfolio
exceed 1% and, to the extent necessary, assume any expenses in
excess of its advisory fee so that
the expenses of each Portfolio, including the advisory fee but
excluding extraordinary expenses,
will not exceed 1% of the Portfolio's average daily net asset
value per year. The Adviser may
terminate the policy of reducing its fee and/or assuming Fund
expenses upon 30 days written
notice to the Fund and such policy will be terminated
automatically by the termination of the
Investment Advisory Agreement. During 1994, expenses did not
exceed 1% of the average daily
net asset value.
(5) These figures are based on expenses for the fiscal year 1994
and have been restated to reflect
anticipated expenses for 1995. Management and advisory expenses
include an administrative
service fee of 0.10% paid to Adviser's affiliate.
(6) The Other Expenses number of 0.57% contains 0.25% for
12b-1fees. In addition, if necessary,
certain Fund expenses incurred on or after September 1, 1994 will
be absorbed voluntarily by the
Fund's investment adviser and subadviser in order to ensure that
the Fund's total operating
expenses will not exceed 1.21% of the Fund's net assets.
EXPENSE TABLE (continued)
Portfolio Management/Advisory Fee Other Expenses Total
Portfolio Annual Expenses
PBHG Funds, Inc., PBHG Growth Fund 0.85% 0.55% 1.40%
TCI Portfolios, Inc., TCI Growth 1.00% 0.00% 1.00%
T. Rowe Price Equity Series, Inc., T. Rowe Price Equity Income
0.85% 0.00% 0.85%
Twentieth Century Investors, Inc.,Select Investors Portfolio
1.00% 0.00% 1.00%
Ultra Investors Portfolio 1.00% 0.00% 1.00%
Twentieth Century World Investors, Inc.,Twentieth Century
International Equity Portfolio
1.90%(7) 0.00% 1.90%(7)
Vanguard Explorer Fund, Inc., Vanguard Explorer Fund 0.66% 0.04%
0.70%
Vanguard Fixed Income Securities Fund, Inc., Vanguard Short Term
Federal Bond Portfolio
0.21% 0.05% 0.26%
Variable Insurance Products Fund:
Equity-Income Portfolio 0.52% 0.06% 0.58%
Growth Portfolio 0.62% 0.07% 0.69%
High Income Portfolio 0.61% 0.10% 0.71%
Overseas Portfolio 0.77% 0.15% 0.92%
Variable Insurance Products Fund II:
Asset Manager Portfolio 0.72% 0.08% 0.80%
Contrafund Portfolio 0.62% 0.27% 0.89%(8)
Index 500 Portfolio 0.00% 0.28% 0.28%(9)
(7)Based upon fees paid by the fund for the 1994 fiscal year. The
fund pays an annual
management fee equal to 1.90% of its first $1 billion of average
net assets, 1.25% of the next $1
billion, and 1.00% of average net assets over $2 billion.
(8)Management fees and expenses estimated for 1995. The
Contrafund commenced operations on
January 3, 1995 and first became available under AUL Contracts on
April 28, 1995.
(9)The fund's expenses were voluntarily reduced by the fund's
investment adviser. Absent such
reimbursement, management fee, other expenses, and total expenses
would have been 0.28%,
0.53%, and 0.81%, respectively.
Examples (for any Investment Account)
The following examples show expenses (for the Portfolios that had
commenced operations prior
to June 1, 1995) that a Participant would pay at the end of one,
three, five, or ten years if at the
end of those time periods, the Account is (1) surrendered, or (2)
not surrendered. Example (2)
will also apply to a Participant Account that is annuitized at
the end of the applicable time period.
The information below represents expenses on a $1,000
contribution and assumes a 5% return per
year. For an account that is surrendered, the example shows
expenses for Recurring Contribution
Contracts, and Single Contribution Contracts. Expenses will be
the same for all Contracts if not
surrendered. These examples should not be considered a
representation of past or future
expenses. Actual expenses may be greater or less than those
shown. The assumed 5% return is
hypothetical and should not be considered a representation of
past or future returns, which may be
greater or less than the assumed amount. For Recurring
Contribution Contracts, the
Administrative charge used in these examples is based on an
estimated average Participant
Account of $10,000. A pro-rata portion of the annual
Administrative Charge has, therefore, been
used in the calculations for Recurring Contribution Contracts.
(1) If your Contract is Surrendered (2) If your Contract is
not Surrendered or is Annuitized
Recurring Contribution Contracts Single Contribution Contracts
All contracts
AUL American Equity
1 year $96.95 $78.48 $23.05
3 years 148.63 109.69 70.75
5 years 202.79 141.23 120.71
10 years 303.18 256.31 256.31
Examples (for any Investment Account) (continued)<QL><RT>
(1) If your Contrat is Surrendered (2) If your Contract is
not Surrendered or is Annuitized
Recurring Contribution contracts Single Contribution Contracts
All Contracts
AUL American Bond
1 year $96.95 $78.48 $23.05
3 years 148.63 109.69 70.75
5 years 202.79 141.23 120.71
10 years 303.18 256.31 256.31
AUL American Managed
1 year 97.15 78.68 23.27
3 years 149.24 110.33 71.42
5 years 203.81 142.31 121.82
10 years 305.32 258.55 258.55
AUL American Money Market
1 year 96.95 78.48 23.05
3 years 148.63 109.69 70.75
5 years 202.79 141.23 120.71
10 years 303.18 256.31 256.31
Alger American Growth
1 year 98.17 79.72 24.37
3 years 152.29 113.51 74.72
5 years 208.89 147.73 127.35
10 years 315.93 269.68 269.68
Calvert Capital Accumulation
1 year 99.02 80.58 25.28
3 years 154.82 116.15 77.47
5 years 213.10 152.22 131.93
10 years 324.68 278.85 278.85
Invesco Dynamics
1 year 101.05 82.65 27.47
3 years 160.88 122.46 84.03
5 years 223.12 162.92 142.85
10 years 345.31 300.50 300.50
PBHG Growth
1 year 103.17 84.82 29.77
3 years 167.19 129.03 90.88
5 years 233.53 174.02 154.18
10 years 366.45 322.67 322.67
TCI Growth
1 year 99.46 81.03 25.76
3 years 156.14 117.52 78.90
5 years 215.28 154.55 134.31
10 years 329.19 283.59 283.59
Twentieth Century International Equity
1 year 107.78 89.52 34.74
3 years 180.76 143.18 105.59
5 years 255.73 197.69 178.35
10 years 410.60 368.98 368.98
Twentieth Century Select Investors
1 year 99.46 81.03 25.76
3 years 156.14 117.52 78.90
5 years 215.28 154.55 134.31
10 years 329.19 283.59 283.59
Twentieth Century Ultra Investors
1 year 99.46 81.03 25.76
3 years 156.14 117.52 78.90
5 years 215.28 154.55 134.31
10 years 329.19 283.59 283.59
Examples (for any Investment Account) (continued)
(1) If your Contract is Surrendered (2) If your Contract is
not Surrendered or is Annuitized
Recurring contribution Contracts Single Contribution Contracts
All Contracts
T. Rowe Price Equity Income
1 year $98.07 $79.62 $24.26
3 years 151.98 113.19 74.39
5 years 208.38 147.19 126.80
10 years 314.88 268.58 268.58
Vanguard Explorer
1 year 96.98 78.20 22.76
3 years 147.81 108.84 69.87
5 years 201.42 139.77 119.22
10 years 300.32 253.32 253.32
Vanguard Short Term
Federal Bond
1 year 92.60 74.04 18.35
3 years 135.48 96.00 56.51
5 years 180.75 117.73 96.72
10 years 256.33 207.19 207.19
VIP Equity-Income
1 year 95.56 77.06 21.55
3 years 144.44 105.32 66.21
5 years 195.79 133.76 113.08
10 years 288.43 240.85 240.85
VIP Growth
1 year 96.61 78.13 22.68
3 years 147.61 108.63 69.65
5 years 201.08 139.41 118.85
10 years 299.61 252.57 252.57
VIP High Income
1 year 96.78 78.30 22.87
3 years 148.12 109.16 70.20
5 years 201.94 140.32 119.78
10 years 301.40 254.44 254.44
VIP Overseas
1 year 98.75 80.31 24.99
3 years 154.01 115.30 76.59
5 years 211.75 150.79 130.47
10 years 321.89 275.93 275.93
VIP II Asset Manager
1 year 97.63 79.17 23.78
3 years 150.66 111.81 72.96
5 years 206.18 144.85 124.40
10 years 310.29 263.76 263.76
VIP II Contrafund
1 year 98.44 80.00 24.66
3 years 153.10 114.35 75.60
5 years 210.24 149.17 128.82
10 years 318.74 272.63 272.63
VIP II Index 500
1 year 92.77 74.21 18.53
3 years 136.00 96.53 57.07
5 years 181.62 118.65 97.66
10 years 258.20 209.15 209.15
CONDENSED FINANCIAL INFORMATION
The following table presents Condensed Financial Information with
respect to each of the
Investment Accounts of the Variable Account that had commenced
operations as of December
31, 1994 for the period from the date of first deposit on April
12, 1990 through December 31,
1994. The following table should be read in conjunction with the
Variable Account's financial
statements, which are included in the Variable Account's Annual
Report dated as of December 31,
1994. The Variable Account's financial statements have been
audited by Coopers & Lybrand
L.L.P., the Variable Account's independent accountants.
Information on the Investment Accounts
that had not commenced operations as of the date of this
prospectus are not presented. These
Investment Accounts include AUL American Tactical Asset
Allocation, Fidelity Contrafund and
Equity-Income, Invesco Dynamics, PBHG Growth, Twentieth Century
Select Investors,
Twentieth Century Ultra Investors, Twentieth Century
International Equity, Vanguard Explorer,
and Vanguard Short Term Federal Bond Fund.
Year End December 31,
Investment Account 1994 1993 1992 1991 1990(1)
AUL American Equity
Unit Value at beginning of period 1.497 1.321 1.215 0.980 1.000
Unit Value at end of period 1.518 1.497 1.321 1.215 0.980
Number of Units outstanding at end of period 7,471,155.099
3,727,950.202 2,576,500.035
620,179.861 3,470.730
AUL American Bond
Unit Value at beginning of period 1.444 1.321 1.247 1.085 1.000
Unit Value at end of period 1.375 1.444 1.321 1.247 1.085
Number of Units outstanding at
end of period 2,640,899.535 784,085.837 544,295.023 191,389.337
1,022.938
AUL American Money Market
Unit Value at beginning of period 1.118 1.107 1.088 1.042 1.000
Unit Value at end of period 1.144 1.118 1.107 1.088 1.042
Number of Units outstanding at
end of period 1,083,827.569 253,762.037 161,749.917 81,497.969
2,051.457
AUL American Managed
Unit Value at beginning of period 1.446 1.296 1.215 1.054 1.000
Unit Value at end of period 1.415 1.446 1.296 1.215 1.054
Number of Units outstanding at
end of period 8,146,955.380 2,935,364.727 1,979,512.799
399,535.438 1,612.093
Fidelity VIP High Income(2)
Unit Value at beginning of period 1.108 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.078 1.108 N.A. N.A. N.A.
Number of Units outstanding at
end of period 3,013,462.025 598,050.742 N.A. N.A. N.A.
Fidelity VIP Growth(2)
Unit Value at beginning of period 1.138 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.126 1.138 N.A. N.A. N.A.
Number of Units outstanding at
end of period 9,247,289.712 2,051,512.032 N.A. N.A. N.A.
Fidelity VIP Overseas(2)
Unit Value at beginning of period 1.136 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.142 1.136 N.A. N.A. N.A.
Number of units outstanding at
end of period 4,748,284.000 872,248.301 N.A. N.A. N.A.
Fidelity VIP II Asset Manager(2)<QL>
Unit Value at beginning of period 1.129 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.047 1.129 N.A. N.A. N.A.
Number of unis outstanding at
end of period 19,540,375.804 5,859,606.501 N.A. N.A. N.A.
(1) Period from April 12, 1990 through December 31, 1990.
(2) The Fidelity High Income, Growth, Overseas, Asset Manager,
and Index 500 Investment
Accounts first became available on May 1, 1993.
The TCI Growth Investment Account first became available on May
1, 1994. Therefore, there is
no information available for any period prior to these dates. The
AUL American Tactical Asset
Allocation, Alger American Growth, Calvert Capital Accumulation,
Fidelity Contrafund and
Equity-Income, Invesco Dynamics, PBHG Growth, T. Rowe Price
Equity Income, Twentieth
Century Select and Ultra Investors, Twentieth Century
International Equity, Vanguard Explorer,
Vanguard Short Term Federal Bond Investment Accounts first became
available in 1995.
/R>CONDENSED FINANCIAL INFORMATION (Continued)
Year End December 31,
1994 1993 1992 1991 1990(1)
Fidelity VIP II Index 500(2)
Unit Value at beginning of period 1.068 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.061 1.068 N.A. N.A. N.A.
Number of units outstanding at end of period 1,966,815.581
507,196.270 N.A. N.A. N.A.
TCI Growth(2)
Unit Value at beginning of period 1.000 N.A. N.A. N.A. N.A.
Unit Value at end of period 1.002 N.A. N.A. N.A. N.A.
Number of units outstanding at end of period 254,316.431 N.A.
N.A. N.A. N.A.
(2) The Fidelity High Income, Growth, Overseas, Asset Manager,
and Index 500 Investment
Accounts first became available on May 1, 1993. The TCI Growth
Investment Account first
became available on May 1, 1994. Therefore, there is no
information available for any period prior
to these dates. The Twentieth Century International Equity,
Select, and Ultra Investors
Investment Accounts are not currently in operation.
PERFORMANCE OF THE INVESTMENT ACCOUNTS
The following tables present the return on investment for the
Investment Accounts. For all of the
figures shown below, return on investment represents a change in
the Account Value allocated to
an Investment Account and takes into account Variable Account
annual expenses such as the
mortality and expense risk charge. For the Investment Accounts
that have not been in existence
for the time periods indicated, the reported performance
represents hypothetical returns that the
Investment Accounts that invest in the corresponding Mutual Fund
Portfolios would have
achieved had they invested in such Portfolios for the periods
indicated. For the periods that a
particular Investment Account has been in existence (see
"Inception Date of Investment
Account"), then the performance is actual performance and not
hypothetical in nature. The AUL
American Tactical Asset Allocation Portfolio had not commenced
operations as of December 31,
1994.
Performance (excluding charges)(1)
Investment Account Inception Date of Mutual Fund Inception
Date of Investment Account
Average Annual Return on Investment for Year ending 12/31/94
Average Annual Return on
Investment 3 Years ending 12/31/94 Average Annual Return on
Investment for 5 Years ending
12/31/94 Average Annual Return on Investment for lesser of 10
Years or Since Inception
Cumulative Return on Investment for lesser of 10 Years or Since
Inception
AUL American Equity 04/10/90 04/12/90 1.36% 7.69% N.A. 9.27%
51.95%
AUL American Bond 04/10/90 04/12/90 (4.77%<FO>) 3.30% N.A. 7.00%
37.62%
AUL American Money Market 04/10/90 04/12/90 2.25% 1.69% N.A.
2.89% 14.39%
AUL American Managed 04/10/90 04/12/90 (2.17%) 5.19% N.A. 7.65%
41.61%
Alger American Growth 01/09/89 04/28/95 0.20% 10.40% 13.93%
15.33% 134.60%
Calvert Capital Accumulation 07/16/91 04/28/95 (11.01%) 2.01%
N.A. 3.59% 12.98%
Invesco Dynamics 09/15/67 04/28/95 (3.15%) 8.39% 14.21% 13.30%
248.58%
PBHG Growth 12/19/85 04/28/95 3.45% 23.90% 20.51% 18.54% 364.90%
TCI Growth 11/20/87 05/01/94 (2.40%) 1.19% 7.20% 9.93% 96.11%
Twentieth Century International Equity 05/09/91 05/01/94 (6.07%)
11.09% N.A. 11.35%
47.98%
Twentieth Century Select Investors 10/31/58 05/01/94 (9.15%)
(0.98%) 4.41% 11.38%
193.81%
Twentieth Century Ultra Investors 11/02/81 05/01/94 (4.80%)
4.64% 17.92% 17.31% 393.57%
T. Rowe Price Equity Income 03/31/94 04/28/95 N.A. N.A. N.A. N.A.
6.16%
Vanguard Explorer 12/11/67 04/28/95 (0.71%) 8.11% 11.38% 8.75%
131.36%
Vanguard Short Term Federal Bond 12/31/87 04/28/95 (2.18%) 2.73%
5.35% 5.86% 49.98%
VIP Equity-Income 10/09/86 04/28/95 5.74% 12.57% 9.15% 9.52%
111.34%
VIP Growth 10/09/86 05/01/93 (1.05%) 7.91% 9.50% 11.28% 140.96%
VIP High Income 09/19/85 05/01/93 (2.69%) 12.04% 12.63% 9.55%
133.20%
VIP Overseas 01/28/87 05/01/93 0.59% 6.31% 4.47% 5.70% 55.19%
VIP II Asset Manager 09/06/89 05/01/93 (7.33%) 7.00% 9.34% 8.82%
56.74%
VIP II Contrafund 01/03/95 04/28/95 N.A. N.A. N.A. N.A. N.A.
VIP II Index 500 08/27/92 05/01/93 (0.68%) N.A. N.A. 5.90% 14.40%
(1) These figures do not reflect deduction of the withdrawal
charge and a pro-rata portion of the
administrative charge.
PERFORMANCE OF THE INVESTMENT ACCOUNTS (Continued)
Performance (including charges)(2)
Investment Account Inception Date of Mutual Fund Inception
Date of Investment Account
Average Annual Return on Investment for Year ending 12/31/94
Average Annual Return on
Investment for 3 Years ending 12/31/94 Average Annual Return
on Investment for 5 Years
ending 12/31/94 Average Annual Return on Investment for lesser
of 10 Years or Since
Inception Cumulative Return on Investment for lesser of 10
Years or Since Inception
AUL American Equity 04/10/90 04/12/90 (7.03%) 4.42% N.A.
7.02% 37.74%
AUL American Bond 04/10/90 04/12/90 (12.65%) 0.17% N.A.
4.80% 24.77%
AUL American Money Market 04/10/90 04/12/90 (6.21%) (1.39%)
N.A. 0.78% 3.73%
AUL American Managed 04/10/90 04/12/90 (10.27%) 2.00% N.A.
5.44% 28.40%
Alger American Growth 01/09/89 04/28/95 (8.09%) 7.06% 11.71%
14.20% 121.19%
Calvert Capital Accumulation 07/16/91 04/28/95 (18.38%)
(1.08%) N.A. 0.85% 2.97%
Invesco Dynamics 09/15/67 04/28/95 (11.16%) 5.11% 11.99%
12.50% 224.73%
PBHG Growth 12/19/85 04/28/95 (5.11%) 20.14% 18.16% 17.65%
334.30%
TCI Growth 11/20/87 05/01/94 (10.48%) (1.88%) 5.11% 8.96%
84.13%
Twentieth Century
International Equity 05/09/91 05/01/94 (13.84%) 7.72% N.A.
8.45% 34.41%
Twentieth Century
Select Investors 10/31/58 05/01/94 (16.67%) (3.99%) 2.38%
10.59% 173.63%
Twentieth Century
Ultra Investors 11/02/81 05/01/94 (12.68%) 1.47% 15.63%
16.48% 359.74%
T. Rowe Price Equity Income 03/31/94 04/28/95 N.A. N.A. N.A.
N.A. (2.55%)
Vanguard Explorer 12/11/67 04/28/95 (8.93%) 4.83% 9.21%
7.98% 115.49%
Vanguard Short Term
Federal Bond 12/31/87 04/28/95 (10.27%) (0.38%) 3.30% 4.93%
40.05%
VIP Equity-Income 10/09/86 04/28/95 (3.01%) 9.16% 7.02%
8.65% 97.91%
VIP Growth 10/09/86 05/01/93 (9.24%) 4.63% 7.37% 10.39%
125.55%
VIP High Income 09/19/85 05/01/93 (10.75%) 8.64% 10.43%
8.74% 117.68%
VIP Overseas 01/28/87 05/01/93 (7.74%) 3.08% 2.44% 4.84%
45.45%
VIP II Asset Manager 09/06/89 05/01/93 (14.99%) 3.76% 7.21%
7.65% 47.98%
VIP II Contrafund 01/03/95 04/28/95 N.A. N.A. N.A. N.A.
N.A.
VIP II Index 500 08/27/92 05/01/93 (8.90%) N.A. N.A. 1.85%
4.40%
(2) These figures reflect deduction of the withdrawal charge and
a pro-rata portion of
the administrative charge.
INFORMATION ABOUT AUL, THE VARIABLE ACCOUNT, AND THE FUNDS
American United Life Insurance Company
AUL is a legal reserve mutual life insurance company existing
under the laws of the State of
Indiana. It was originally incorporated as a fraternal society on
November 7, 1877, under the laws
of the Federal government, and reincorporated under the laws of
the State of Indiana in 1933. It is
qualified to do business in 46 states and the District of
Columbia. As a mutual company, it is
owned by and operated exclusively for the benefit of its
policyowners. AUL has its principal
business office located at One American Square, Indianapolis,
Indiana 46204.
AUL conducts a conventional life insurance, health insurance,
reinsurance, and annuity business.
At December 31, 1994, AUL had admitted assets of $5,955,710,705
and a policyowners' surplus
of $250,294,754.
The principal underwriter for the Contracts is AUL, which is
registered with the SEC as a
broker-dealer.
Variable Account
AUL American Unit Trust was established by AUL on August 17,
1989, under procedures
established under Indiana law. The income, gains, or losses of
the Variable Account are credited
to or charged against the assets of the Variable Account without
regard to other income, gains, or
losses of AUL. AUL owns the assets in the Variable Account and is
required to maintain
sufficient assets in the Variable Account to meet all Variable
Account obligations under the
Contracts. AUL may transfer to its General Account assets that
exceed anticipated obligations of
the Variable Account. All obligations arising under the Contracts
are general corporate
obligations of AUL. AUL may invest its own assets in the Variable
Account, and may accumulate
in the Variable Account proceeds from Contract charges and
investment results applicable to
those assets.
The Variable Account is currently divided into twenty-three
Investment Accounts. Each
Investment Account invests exclusively in shares of a specific
mutual fund or in a specific
Portfolio of one of the Funds. Contributions may be allocated to
one or more Investment
Accounts available under a Contract. Not all Investment Accounts
may be available under a
particular Contract and some of the Investment Accounts are
unavailable for certain types of
Contracts. AUL may in the future
establish additional Investment Accounts of the Variable Account,
which may invest in other
Portfolios of the Funds or in other securities, mutual funds, or
investment vehicles.
The Variable Account is registered with the SEC as a unit
investment trust under the Investment
Company Act of 1940 (the "1940 Act"). Registration with the SEC
does not involve supervision
by the SEC of the administration or investment practices of the
Variable Account or of AUL.
The Funds
Each of the Funds is a diversified, open-end management
investment company commonly referred
to as a mutual fund.
Each of the Funds is registered with the SEC under the 1940 Act.
Such registration does not
involve supervision by the SEC
of the investments or investment policies or practices of the
Fund. AUL American Series Fund,
Inc. currently has five separate investment portfolios that it
offers to the Investment Account,
namely: the Equity, Bond, Money Market, Managed, and Tactical
Asset Allocation. Acacia
Capital Corporation offers the Calvert Capital Accumulation
Portfolio. The Alger American Fund
offers the Alger American Growth Portfolio. Invesco Dynamics
Fund, Inc. offers the Invesco
Dynamics Fund. PBHG Funds, Inc. offers the PBHG Growth Fund. TCI
Portfolios, Inc. offers the
TCI Growth Portfolio. T. Rowe Price Equity Series, Inc. offers
the Equity Income Portfolio.
Twentieth Century Investors, Inc. offers the Select Investors and
Ultra Investors Portfolios.
Twentieth Century World Investors, Inc. offers the Twentieth
Century International Equity
Portfolio. Vanguard Explorers Fund, Inc. offers the Vanguard
Explorer Fund. Vanguard Fixed
Income Securities Fund, Inc. offers the Vanguard Short Term
Federal Bond Portfolio. Variable
Insurance Products Fund offers the Equity-Income, Growth, High
Income, and Overseas
Portfolios. Variable Insurance Products Fund II offers the Asset
Manager, Contrafund, and Index
500 Portfolios. Each Portfolio has its own investment objective
or objectives and policies. The
shares of each mutual fund Portfolio are purchased by AUL for the
corresponding Investment
Account at the Portfolio's net asset value per share, i.e.,
without any sales load. All dividends and
capital gain distributions received from a Portfolio are
automatically reinvested in such Portfolio
at net asset value, unless AUL instructs otherwise. AUL has
entered into agreements with the
Distributors/Advisers of Acacia Capital Corporation, TCI
Portfolios, Inc., Twentieth Century
Investors, Inc., Twentieth Century World Investors, Inc., Invesco
Dynamics Fund, Inc. and
PBHG Funds, Inc. under which AUL has agreed to render certain
services and to provide
information about these funds to its Contractowners and/or
Participants who invest in these funds.
Under these agreements and for providing these services, AUL
receives compensation from the
Distributor/Adviser of these funds.
AUL serves as investment adviser to each Portfolio of the AUL
American Series Fund, Inc. Dean
Investment Associates serves as Sub-Adviser to the AUL American
Tactical Asset Allocation
Portfolio. Fred Alger & Company acts as investment adviser to the
Alger American Fund. Calvert
Management Company acts as investment adviser to the Acacia
Capital Corporation. Fidelity
Management & Research Company acts as investment adviser to the
Variable <?FB>Insurance
Products Fund and to the Variable Insurance Products Fund II.
Invesco Funds Group, Inc. acts as
investent manager to the Invesco Dynamics Fund, Inc. Pilgrim
Baxter & Associates, Inc. acts as
investment adviser to PBHG Funds, Inc. Investors Research
Corporation acts as investment
adviser to Twentieth Century World Investors, Inc., Twentieth
Century Investors, Inc. and TCI
Portfolios, Inc. T. Rowe Price & Associates, Inc. acts as
investment adviser to T. Rowe Price
Equity Series, Inc. Wellington Management Company and Granahan
Investment Management,
Inc. act as investment advisers to Vanguard Explorer Fund, Inc.
Vanguard Group, Inc. acts as
investment adviser to Vanguard Fixed Income Securities Fund, Inc.
A summary of the investment objective or objectives of each
Portfolio of each of the Funds is
provided below. There can be no assurance that any Portfolio will
achieve its objective or
objectives. More detailed information is contained in the
Prospectuses for the Funds, including
information on the risks associated with the investments and
investment techniques of each
Portfolio.
AUL American Series Fund, Inc.
AUL American Equity Portfolio
The primary investment objective of the AUL American Equity
Portfolio is long-term capital
appreciation. The Portfolio seeks current investment income as a
secondary objective. The
Portfolio attempts to achieve these objectives by investing
primarily in equity securities selected
on the basis of fundamental investment research for their
long-term growth prospects.
AUL American Bond Portfolio
The primary investment objective of the AUL American Bond
Portfolio is to provide a high level
of income consistent with prudent investment risk. As a secondary
objective, the Portfolio seeks
to provide capital appreciation to the extent consistent with the
primary objective. The Portfolio
attempts to achieve these objectives by investing primarily in
corporate bonds and other debt
securities.
AUL American Money Market Portfolio
The investment objective of the AUL American Money Market
Portfolio is to provide a high level
of current income while preserving assets and maintaining
liquidity and invest-
ment quality. The Portfolio attempts to achieve this objective by
investing in short-term money
market instruments that are of the highest quality.
AUL American Managed Portfolio
The investment objective of the AUL American Managed Portfolio is
to provide a high total
return consistent with prudent investment risk. The Portfolio
attempts to achieve this objective
through a fully managed investment policy utilizing publicly
traded common stock, debt securities
(including convertible debentures), and money market securities.
AUL American Tactical Asset Allocation Portfolio
The investment objective of the Tactical Asset Allocation
Portfolio is preservation of capital and
competitive investment
returns. The Portfolio seeks to achieve its objective by
investing primarily in stocks, United States
Treasury bonds, notes and bills, and money market funds.
FOR ADDITIONAL INFORMATION CONCERNING AUL AMERICAN SERIES FUND,
INC. AND ITS PORTFOLIOS, PLEASE SEE THE AUL AMERICAN SERIES FUND,
INC.
PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
Acacia Capital Corporation
Calvert Capital Accumulation Portfolio
The Calvert Capital Accumulation Portfolio is a socially
responsible growth Portfolio that seeks
long-term capital appreciation by investing primarily in the
stock of small to medium sized
companies. To the extent possible, investments are made in
enterprises that make a significant
contribution to society through their products and services and
through the way they do business.
FOR ADDITIONAL INFORMATION CONCERNING ACACIA CAPITAL CORPORATION
AND THE CALVERT CAPITAL ACCUMULATION PORTFOLIO, PLEASE SEE THE
ACACIA CAPITAL CORPORATION PROSPECTUS, WHICH SHOULD BE READ
CAREFULLY BEFORE INVESTING.
Alger American Fund
Alger American Growth Portfolio
The Alger American Growth Portfolio is a growth portfolio that
seeks to obtain long-term capital
appreciation by investing in a diversified, actively managed
portfolio of equity securities. Except
during temporary defensive periods, the Portfolio invests at
least 85% of its net assets in equity
securities and at least 65% of its net assets in equity
securities of companies that have a total
market capitalization of one billion dollars or greater.
FOR ADDITIONAL INFORMATION CONCERNING THE ALGER AMERICAN FUND
AND ITS PORTFOLIO, PLEASE SEE THE ALGER AMERICAN FUND PROSPECTUS,
WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
Invesco Funds Group, Inc.
Invesco Dynamics Fund, Inc.
Invesco Dynamics seeks to achieve its investment objective of
providing appreciation of capital
through aggressive investment policies by investing its assets in
a variety of securities which are
believed to present opportunities for capital enhancement. The
fund normally invests in common
stocks, but may invest in convertible or straight issues of
debentures and preferred stocks, when
determined appropriate by management. The fund should not be
considered by investors seeking
current income. This Portfolio is only available to AUL
Participants under 401 Contracts.
FOR ADDITIONAL INFORMATION CONCERNING THE INVESCO FUNDS GROUP,
INC. AND ITS PORTFOLIO, PLEASE SEE THE INVESCO FUNDS GROUP, INC.
PROSPECTUS, WHICH
SHOULD BE READ CAREFULLY BEFORE INVESTING.
PBHG Funds, Inc.
PBHG Growth
The Growth Fund seeks capital appreciation by investing primarily
in the common stock of small
companies which are believed to have an outlook for strong growth
in earnings and the potential
for significant capital appreciation. The Fund will normally be
as fully invested as practicable in
common stocks, but may invest up to 5% of its assets in warrants
and rights to purchase common
stocks. Securities will be sold when the Adviser believes that
anticipated appreciation is no longer
probable, alternative investments offer superior appreciation
prospects, or the risk of a decline in
market price is too great. This Portfolio is only available to
AUL Participants under 401
contracts.
FOR ADDITIONAL INFORMATION CONCERNING PBHG FUNDS, INC. AND ITS
PORTFOLIO, PLEASE SEE THE PBHG FUNDS, INC. PROSPECTUS, WHICH
SHOULD
BE READ CAREFULLY BEFORE INVESTING.
TCI Portfolios, Inc.
TCI Growth
The TCI Growth Portfolio seeks capital growth by investing in
common stocks (including
securities convertible into common stocks and other equity
equivalents) and other securities that
meet certain fundamental and technical standards of selection and
have, in the opinion of the
Fund's investment manager, better than average potential for
appreciation. The Fund tries to stay
fully invested in such securities, regardless of the movement of
prices generally. This Portfolio is
not currently available to AUL Participants under 457 contracts.
FOR ADDITIONAL INFORMATION CONCERNING TCI PORTFOLIOS, INC. AND
THE
GROWTH PORTFOLIO, PLEASE SEE THE TCI PORTFOLIOS, INC. PROSPECTUS,
WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
The T. Rowe Price Equity Income Portfolio seeks to provide
substantial dividend income as well
as long-term capital appreciation through investments in common
stocks of established
companies.
FOR ADDITIONAL INFORMATION CONCERNING
T. ROWE PRICE EQUITY SERIES, INC. AND ITS PORTFOLIO, PLEASE SEE
THE T.
ROWE PRICE EQUITY SERIES, INC. PROSPECTUS, WHICH SHOULD BE READ
CAREFULLY BEFORE INVESTING.
Twentieth Century Investors, Inc.
Select Investors
The Select Investors Portfolio seeks capital growth by investing
in equity securities, primarily
common stocks' of companies that meet certain fundamental and
technical standards of selection
and have, in the opinion of the investment manager, better than
average potential for appreciation.
Such companies must have a record of paying or have committed
themselves to the payment of
regular dividends (although their income payments are only a
secondary consideration and may
not be significant). The Select Portfolio primarily invests in
securities of larger companies with
larger share trading volume and attempts to stay full invested,
regardless of the movement of
stock prices generally. This Portfolio is only available to AUL
Participants under 401(k)
Contracts.
Ultra Investors
The Ultra Investors Portfolio seeks capital growth by investing
in equity securities, primarily
common stocks' of companies that meet certain fundamental and
technical standards of selection
and have, in the opinion of the investment manager, better than
average potential for appreciation.
The Ultra Portfolio primarily invests in securities of medium and
smaller companies and attempts
to stay fully invested, regardless of the movement of stock
prices generally. This Portfolio is only
available to AUL Participants under 401(k) Contracts.
FOR ADDITIONAL INFORMATION CONCERNING TWENTIETH CENTURY
INVESTORS, INC. AND ITS PORTFOLIOS, PLEASE SEE THE TWENTIETH
CENTURY
INVESTORS, INC. PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING.
Twentieth Century World Investors, Inc.
Twentieth Century International Equity
The Twentieth Century International Equity Portfolio seeks
capital growth by investing primarily
in securities of foreign companies primarily located in developed
markets that meet certain
fundamental and technical standards of selection and have, in the
opinion of the Fund's investment
manager, potential for appreciation. The Portfolio will invest
primarily in common stocks
(including depository receipts for common stocks) and other
equity securities and equity
equivalents of such companies and attempts to stay fully invested
in such securities, regardless of
the movement of prices generally. This Portfolio is only
available to AUL Participants under
401(k) Contracts.
FOR ADDITIONAL INFORMATION CONCERNING TWENTIETH CENTURY WORLD
INVESTORS, INC. AND ITS PORTFOLIO, PLEASE SEE THE TWENTIETH
CENTURY
WORLD, INC. PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING.
Vanguard Explorer Fund, Inc.
Vanguard Explorer Fund
The Vanguard Explorer Fund seeks to provide long-term growth of
capital. The fund invests
primarily in equity securities of small companies deemed to have
favorable prospects for growth
in market value. These securities are primarily common stocks
generally traded on the
over-the-counter market, but may also include securities
convertible into common stocks.
Dividend income is expected to be incidental to this objective.
This Portfolio is only available to
AUL Participants under 401 contracts.
FOR ADDITIONAL INFORMATION CONCERNING VANGUARD EXPLORER FUND,
INC. AND ITS PORTFOLIO, PLEASE SEE THE VANGUARD EXPLORER FUND,
INC.
PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
Vanguard Fixed Income Securities Fund, Inc.
Vanguard Short Term Federal Bond Portfolio
The Short Term Federal Bond Portfolio invests primarily in U.S.
Government agency securities,
U.S. Treasury securities, and repurchase agreements
collateralized by U.S. Government agency
securities or U.S. Treasury securities. In an effort to minimize
fluctuations in market value, the
Portfolio expects to maintain a dollar weighted-average maturity
between one and three years.
This Portfolio is only available to AUL Participants under 401
contracts.
FOR ADDITIONAL INFORMATION CONCERNING VANGUARD FIXED INCOME
SECURITIES FUND, INC. AND ITS PORTFOLIO, PLEASE SEE THE VANGUARD
FIXED
INCOME SECURITIES FUND, INC. PROSPECTUS, WHICH SHOULD BE READ
CAREFULLY BEFORE INVESTING.
Variable Insurance Products Fund
Equity-Income Portfolio
The Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing
equity securities; the fund will also consider the potential for
capital appreciation.
High Income Portfolio
The High Income Portfolio seeks to obtain a high level of current
income by investing primarily in
high-yielding, lower-rated, fixed-income securities, while also
considering growth of capital.
These include securities commonly referred to as junk bonds, the
risks of which are described in
the prospectus for the Fund.
Growth Portfolio
The Growth Portfolio seeks to achieve capital appreciation. The
Portfolio normally purchases
common stocks, although
the Portfolio's investments are not restricted to any one type of
security. Capital appreciation may
also be found in other types of securities, including bonds and
preferred stocks.
Overseas Portfolio
The Overseas Portfolio seeks long-term growth of capital
primarily through investments in foreign
securities. The Overseas Portfolio provides a means for investors
to diversify their own portfolios
by participating in companies and economies outside of the United
States.
Variable Insurance Products Fund II
Asset Manager Portfolio
The Asset Manager Portfolio seeks high total return with reduced
risk over the long-term by
allocating its assets among domestic and foreign stocks, bonds
and short-term fixed income
instruments.
Contrafund
The Contrafund Portfolio seeks capital appreciation by
investing primarily in companies that Fidelity Management &
Research, the investment adviser,
believes to be undervalued due to an overly pessimistic appraisal
by the public.
Index 500 Portfolio
The Index 500 Portfolio seeks to provide investment results that
correspond to the total return
(i.e., the combination of capital changes and income) of common
stocks publicly traded in the
United States. In seeking this objective, the Portfolio attempts
to duplicate the composition and
total return of the Standard & Poor's 500 Composite Stock Price
Index.
FOR ADDITIONAL INFORMATION CONCERNING VARIABLE INSURANCE
PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II AND THEIR
PORTFOLIOS, PLEASE SEE THE VARIABLE INSURANCE PRODUCTS FUND AND
VARIABLE INSURANCE PRODUCTS FUND II PROSPECTUS, WHICH SHOULD BE
READ CAREFULLY BEFORE INVESTING.
THE CONTRACTS
General
The Contracts are offered for use in connection with retirement
plans that meet the requirements
of Sections 401, 403(b), 408, or 457 of the Internal Revenue
Code. Certain Federal tax
advantages are currently available to retirement plans that
qualify as (1) self-employed individuals'
retirement plans under Section 401, such as HR-10 Plans, (2)
pension or profit-sharing plans
established by an Employer for the benefit of its employees under
Section 401, (3) annuity
purchase plans sponsored by certain tax-exempt organizations or
public school organizations
under Section 403(b), (4) individual retirement accounts or
annuities, including those established
by an employer as a simplified employee pension plan, under
Section 408, or (5) deferred
compensation plans for employees established by a unit of a state
or local government or by a
tax-exempt organization under Section 457.
A Contract is issued to the Owner. Generally, persons eligible to
participate in the Owner's Plan
are eligible to become Participants under the Contract. The Owner
shall be responsible for
determining persons who are eligible tobecome Participants and
for designating such persons to
AUL. AUL will issue to the Owner for delivery to each Participant
(or may deliver directly to
each Participant) a Certificate that evidences the Participant's
participation in the Contract. For
purposes of determining benefits under a Contract, an account
called a Participant's Account is
established for each Participant during the Accumulation Period.
The Owner of the Contract is generally responsible for providing
all communications and
instructions concerning Participant Accounts to AUL. However, in
some instances
a Participant may communicate directly with AUL. For example, a
Participant in a 403(b)
Program may request a partial withdrawal directly from AUL. While
the Owner generally is
responsible for transmitting contributions and instructions for
Par-
ticipants, the Participant may be permitted or required to make
certain decisions and elections
under the Contract, as specified by the Owner in the Plan, trust,
or other appropriate document.
The pertinent Plan document and, if applicable, the Employer's
plan administrator should be
consulted with any questions on benefits under the Contract.
CONTRIBUTIONS AND CONTRACT VALUES DURING THE ACCUMULATION PERIOD
Contributions under the Contracts
Contributions under Recurring Contribution Contracts may be made
by or on behalf of a
Participant at any time during the Participant's life and before
the Participant's Annuity
Commencement Date. Contributions must be at least equal to the
minimum required contribution
and the amount of contributions made by or on behalf of a
Participant is subject to certain
limitations. Contributions for each Participant under a Recurring
Contribution Contract used for a
403(b) Program must total at least $200 each Contract Year.
Contributions for each Participant
under a Recurring Contribution Contract used for any other Plan
must total at least $300 each
Contract Year. In Single Contribution Contracts, the minimum
contributions for each Participant
must be at least $100,000. Contributions of less than $100,000
will initially be allocated to a
Recurring Contribution Contract. To allow the consolidation of
assets from different sources,
Participants will be allowed a twelve month period, measured from
the date of first deposit, to
reach the $100,000 minimum required contribution for Single
Contribution Contracts. If the
$100,000 required minimum contribution for Single Contribution
Contracts is received within the
twelve month period, measured from the date of the first deposit,
then the Participant's Account
Value will be immediately transferred to a Single Contribution
Contract
pursuant to a Transfer Agreement between AUL and the Participant.
However, after this twelve
month period, no further contributions will be accepted to that
specific Account under a Single
Contribution Contract and any subsequent contributions will be
allocated to a Recurring
Contribution Contract, unless the $100,000 minimum contribution
for an additional Single
Contribution Contract is met. AUL may change the minimum
contributions permitted under a
Contract, but any such change shall apply only to Participant
Accounts established on or after the
effective date of the change. AUL may, at its discretion, waive
any minimum required
contribution.
Annual contributions under any of the Plans are subject to
maximum limits imposed by the
Internal Revenue Code. See the Statement of Additional
Information for a discussion of these
limits or consult the pertinent Plan document.
Ten-Day Free Look
Under 403(b) and 408 Contracts, the Owner has the right to return
the Contract for any reason
within ten days of receipt. If a particular state requires a
longer free-look period, Owners in that
state will be allowed the longer statutory period in which to
return the Contract. If this right is
exercised, the Contract will be considered void from its
inception and any contributions will be
fully refunded.
Initial and Single Contributions
Initial contributions received for a Participant will be credited
to the Participant's Account no later
than the end of the second Business Day after it is received by
AUL at its Home Office if it is
preceded or accompanied by a completed application for the
Participant that contains all the
information necessary for opening the Participant's Account. The
application form will be
provided by AUL. If AUL does not receive a complete application
for a Participant, AUL will
notify the applicant that AUL does not have the necessary
information to open the account. If the
necessary information is not provided to AUL within five Business
Days after AUL first receives
the initial contribution, AUL will return the initial
contribution to the contributing party.
However, if the Contract so allows, AUL may retain the
contribution, if consent is received, until
the application for the Participant is made complete.
Allocation of Contributions
Initial and subsequent contributions under the Contracts will be
allocated among the Investment
Accounts of the Variable Account and the Fixed Account as
instructed by the Owner or
Participant and as provided by the terms of the Contract. The
investment allocation of the initial
contribution is to be designated on an investment allocation form
at the time the enrollment
application is completed and the completed allocation form should
accompany the enrollment
application to open an account for a Participant. The enrollment
application specifies that in the
absence of an investment allocation form or other instructions,
initial and subsequent
contributions shall be allocated to the AUL American Money Market
Investment Account. A
Participant's Account Value that has been initially allocated to
the Money Market Investment
Account may be transferred to other available investment options
upon receipt by AUL at its
Home Office of an investment allocation form or other proper
request. Under some Contracts,
allocation to any Investment Account or the Fixed Account must be
made in increments of 10%,
25%, or 331/3% of any contribution. Not all Investment Accounts
may be available under a
particular Contract, and some of the Investment Accounts are
unavailable for certain types of
Contracts.
Any change in allocation instructions will be effective upon
receipt by AUL at its Home Office
and will continue in effect until subsequently changed. Changes
in the allocation of future
contributions have no effect on amounts already contributed on
behalf of a Participant. Such
amounts, however, may be transferred among the Investment
Accounts of the Variable Account
or the Fixed Account in the manner described in "Transfers of
Account Value."
Subsequent Contributions Under Recurring Contribution Contracts
When forwarding contributions to AUL, the amount being
contributed on behalf of each
Participant must be specified. The contributions shall be
allocated among the Investment
Accounts of the Variable Account that are available under a
Contract and the Fixed Account as
described above in "Allocation of Contributions." Contributions
(other than the initial contribution
for each Participant) are credited as of the end of the Valuation
Period in which they are received
by AUL at its Home Office. A contribution shall be received by
AUL at its Home Office at such
time as AUL has received full payment for the contribution, the
information needed to establish
the Participant's account, and proper instructions regarding the
application and allocation of the
contributions among Participants.
Transfers of Account Value
All or part of a Participant's Variable Account Value may be
transferred among the Investment
Accounts of the Variable Account that are available under a
Contract or to the Fixed Account at
any time during the Accumulation Period upon receipt of a proper
written request by AUL at its
Home Office. Transfers may be made by telephone if a Telephone
Authorization Form has been
properly completed and received by AUL at its Home Office. The
minimum transfer from any
Investment Account or from the Fixed Account is the lesser of
$500 or a Participant's entire
Account Value in that Investment Account or in the Fixed Account,
provided however, that
amounts transferred from the Fixed Account to an Investment
Account during any given Contract
Year cannot exceed 20% of the Participant's Fixed Account Value
as of the beginning of that
Contract Year. However, if a Participant's Fixed Account Value at
the beginning of the Contract
Year is less than $2,500, the amount that will be transferred for
that Contract Year from the Fixed
Account is the lesser of $500
or the entire Fixed Account Value. If, after any transfer, the
Participant's remaining Account
Value in an Investment Account or in the Fixed Account would be
less than $500, then such
request will be treated as a request for a transfer of the entire
Account Value. Transfers may also
be subject to other limitations provided in a Plan document and
in the Contract. Currently, there
are no limitations on the number of transfers between Investment
Accounts available under a
Contract or the Fixed Account. In addition, no charges are
currently imposed upon transfers.
AUL reserves the right, however, at a future date, to change the
limitation on the minimum
transfer, to assess transfer charges, to change the limit on
remaining balances, to limit the number
and frequency of transfers, and to suspend the transfer privilege
or the telephone transfer
authorization. Any transfer from an Investment Account of the
Variable Account shall be effected
as of the end of the Valuation Date in which AUL receives the
request in proper form.
Participant's Variable Account Value
Accumulation Units
Contributions to be allocated to the Investment Accounts
available under a Contract will be
credited to the Participant's Account in the form of Accumulation
Units. Except for allocation of a
Participant's initial contribution, the number of Accumulation
Units to be credited is determined
by dividing the dollar amount allocated to the particular
Investment Account by the Accumulation
Unit value for the particular Investment Account at the end of
the Valuation Period in which the
contribution is received by AUL at its Home Office. The number of
Accumulation Units so
credited to the account shall not be changed by a subsequent
change in the value of an
Accumulation Unit, but the dollar value of an Accumulation Unit
may vary from Valuation Date
to Valuation Date depending upon the investment experience of the
Investment Account and
charges against the Investment Account.
Accumulation Unit Value
AUL determines the Accumulation Unit value for each Investment
Account of the Variable
Account on each Valuation Date. The Accumulation Unit value for
each Investment Account was
initially set at one dollar ($1) when operations commenced.
Subsequently, the Accumulation Unit
value for each Investment Account is determined by multiplying
the Net Investment Factor for the
particular Investment Account by the Accumulation Unit value for
the Investment Account as of
the immediately preceding Valuation Period. The Accumulation Unit
value for each Investment
Account may increase, decrease, or remain the same from Valuation
Period to Valuation Period in
accordance with the Net Investment Factor.
Net Investment Factor
The Net Investment Factor is used to measure the investment
performance of an Investment
Account from one Valuation Period to the next. For any Investment
Account for a Valuation
Period, the Net Investment Factor is determined by dividing (a)
by (b) and then subtracting (c)
from the result where
(a) is equal to:
(1) the net asset value per share of the Portfolio of the Fund in
which the Investment Account
invests, determined as of the end of the Valuation Period, plus
(2) the per share amount of any dividend or other distribution,
if any, paid by the Portfolio during
the Valuation Period, plus or minus
(3) a credit or charge with respect to taxes paid, if any, or
reserved for by AUL during the
Valuation Period that are determined by AUL to be attributable to
the operation of the Investment
Account (although no Federal income taxes are applicable under
present law and no such charge
is currently assessed).
(b) is the net asset value per share of the Portfolio, determined
as of the end of the preceding
Valuation Period; and
(c) is a daily charge factor determined by AUL to reflect the fee
assessed against the assets of the
Investment Account for the mortality and expense risk charge.
CASH WITHDRAWALS AND THE DEATH BENEFIT
Cash Withdrawals
During the lifetime of the Participant, at any time before the
Annuity Commencement Date and
subject to the limitations under the applicable Plan and
applicable law, a Participant's Account
may be surrendered or a partial withdrawal may be taken from a
Participant's Account Value. A
surrender or withdrawal request will be effective as of the end
of the Valuation Date that a proper
written request in a form acceptable to AUL is received by AUL at
its Home Office.
A full surrender of a Participant's Variable Account Value will
result in a withdrawal payment
equal to the value of the Participant's Variable Account Value as
of the end of the Valuation
Period during which a proper withdrawal request is received by
AUL at its Home Office, minus
any applicable withdrawal charge. A partial withdrawal may be
requested for a specified
percentage or dollar amount of a Participant's Variable Account
Value. A request for a partial
withdrawal will result in a payment by AUL equal to the amount
specified in the partial
withdrawal request. Upon payment, the Participant's Variable
Account Value will be reduced by
an amount equal to the payment and any applicable withdrawal
charge. If a partial withdrawal is
requested that would leave a Participant's Variable Account Value
in any Investment Account less
than $500, then such partial withdrawal request
will be treated as a request for a full withdrawal from the
Investment Account.
The minimum amount that may be withdrawn from a Participant's
Variable Account Value in an
Investment Account is the lesser of $500 or the Participant's
entire Account Value in the
Investment Account. However, if after the withdrawal, the amount
or value of the Investment
Account would be less than $500, then the request will be treated
as a request for a withdrawal of
the entire Account Value.
The amount of a partial withdrawal will be taken from the
Investment Accounts and the Fixed
Account as instructed. A partial withdrawal will not be effected
until proper instructions are
received by AUL at its Home Office.
A surrender or a partial withdrawal may result in the deduction
of a withdrawal charge. See
"Withdrawal Charge."
In addition, distributions under certain retirement programs may
result in a tax penalty. See "Tax
Penalty."
Systematic Withdrawal Service for 403(b) and 408 Programs
A Participant in a Contract used in connection with a 403(b) plan
(other than an Employer
Sponsored 403(b) plan) or 408 Program who is at least age 591/2
can arrange to have systematic
cash withdrawals from his or her Account Value paid on a regular
monthly, quarterly, or annual
basis. Each withdrawal payment must be at least equal to $100. An
application form containing
details of the service is available upon request from AUL. The
service is voluntary and can be
terminated at any time by the Participant or Owner. AUL does not
currently deduct a service
charge for withdrawal payments, but reserves the right to do so
in the future and similarly,
reserves the right to increase the minimum required amount for
each withdrawal payment.
Participants will pay a withdrawal charge in connection with the
systmatic cash withdrawals to the
extent the withdrawal charge is applicable (e.g., for a Recurring
Contribution Contract, during the
first ten Account Years and excluding the 10% allowable amount
each Contract Year. Systematic
withdrawals of up to 10% of (i) the total of all contributions
made during the year that the
withdrawal is being made, plus (ii) the Participant's Account
Value at the beginning of the
Contract Year may begin in the year the Participant's Account is
established. After the first two
Contract Years, and until the withdrawal charge has decreased to
0%, the amount withdrawn
during a Contract Year that will not be subject to a withdrawal
charge is 10% of the Participant's
Account Value at the beginning of the Contract Year in which the
withdrawal is being made. See
"Withdrawal Charge." In addition, receipt of the cash withdrawals
may result in the receipt of
taxable income to the Participant. See "Federal Tax Matters." No
withdrawal charges are applied
to "benefit responsive" Contracts for payment of retirement,
death, disability, termination of
employment, hardship, loan, age 701/2 required minimum
distribution benefits or benefits upon
attainment of age 591/2 (provided that the age 591/2 benefit is a
taxable distribution paid to the
Participant and not to any other person or entity, including any
alternative or substitute funding
medium). For certain other Contracts known as "modified benefit
responsive" Contracts,
withdrawal charges are not imposed for cash lump-sum payments of
death benefits. Withdrawal
charges are not imposed for cash lump-sum payments provided the
Participant has (1) attained
age 55 and has 10 years of service with the employer identified
in the Plan, or (2) attained age 62,
and is receiving benefits for retirement, disability, termination
of employment, hardships, loans, or
required minimum distribution benefits pursuant to Internal
Revenue Code Section 401 (a)(9) and
Regulations issued thereunder, or for benefits upon attainment of
age 591/2 (provided that such
benefit upon attainment of age 591/2 is a taxable distribution
paid to the Participant and not to
any other person or entity, including any substitute funding
medium).
Constraints on Withdrawals
General
Since the Contracts offered by this Prospectus will be issued in
connection with retirement plans
that meet the requirements of Section 401, Section 403(b),
Section 408, or Section 457 of the
Internal Revenue Code, reference should be made to the terms of
the particular Plan or Contract
for any limitations or restrictions on cash withdrawals. A
surrender or withdrawal that results in
receipt of proceeds by a Participant may result in receipt of
taxable income to the Participant and,
in some instances, in a tax penalty. The tax consequences of a
surrender or withdrawal under the
Contracts should be carefully considered. See "Federal Tax
Matters."
403(b) Programs
Section 403(b) of the Internal Revenue Code permits public school
employees and employees of
certain types of charitable, educational, and scientific
organizations specified in Section 501(c)(3)
of the Internal Revenue Code to purchase annuity contracts, and,
subject to certain limitations, to
exclude the amount of purchase payments from gross income for
federal tax purposes. Section
403(b) imposes restrictions on certain distributions from
tax-sheltered annuity contracts meeting
the requirements of Section 403(b) that apply to tax years
beginning on or after January 1, 1989.
Section 403(b) requires that distributions from Section 403(b)
tax-sheltered annuities that are
attributable to employee contributions made after December 31,
1988 under a salary reduction
agreement not begin before the employee reaches age 591/2,
separates from service, dies,
becomes disabled, or incurs a hardship. Furthermore,
distributions of income or gains attributable
to such contributions accrued after December 31, 1988 may not be
made on account of hardship.
Hardship, for this purpose, is generally defined as an immediate
and heavy financial need, such as
paying for medical expenses, the purchase of a principal
residence, or paying certain tuition
expenses.
A Participant in a Contract purchased as a tax-sheltered Section
403(b) annuity contract will not,
therefore, be entitled to exercise the right of surrender or
withdrawal, as described in this
Prospectus, in order to receive his or her Account Value
attributable to contributions made under
a salary reduction agreement or any income or gains credited to
such Participant after December
31, 1988 under the Contract unless one of the above-described
conditions has been satisfied, or
unless the withdrawal is otherwise permitted under applicable
federal tax law. In the case of
transfers of amounts accumulated in a different Section 403(b)
contract to this Contract under a
Section 403(b) Program, the withdrawal constraints described
above would not apply to the
amount transferred to the Contract attributable to a
Participant's December 31, 1988 account
balance under the old contract, provided that the amounts
transferred between contracts qualifies
as a tax-free exchange under the Internal Revenue Code. A
Participant's Account Value in a
Contract may be able to be transferred to certain other
investment alternatives meeting the
requirements of Section 403(b) that are available under an
Employer's Section 403(b)
arrangement.
Texas Optional Retirement Program
AUL intends to offer the Contract within the Texas Optional
Retirement Program. Under the
terms of the Texas Optional Retirement Program, if a Participant
makes the required contribution,
the State of Texas will contribute a specified amount to the
Participant's Account. If a Participant
does not commence the second year of participation in the plan as
a "faculty member," as defined
in Title 110B of the State of Texas Statutes, AUL will return the
State's contribution. If a
Participant does begin a second year of participation, the
Employer's first-year contributions will
then be applied as a contribution under the Contract, as will the
Employer's subsequent
contributions.
The Attorney General of the State of Texas has ruled that under
Title 110B of the State of Texas
Statutes, withdrawal benefits of contracts issued under the
Optional Retirement Program are
available only in the event of a participant's death, retirement,
termination of employment due to
total disability, or other termination of employment in a Texas
public institution of higher
education. A Participant under a Contract issued in connection
with the Texas Optional
Retirement Program will not, therefore, be entitled to exer-
cise the right of surrender or withdrawal to receive the Account
Value credited to such
Participant unless one of the foregoing conditions has been
satisfied. The Withdrawal Value of
such Participant may, however, be transferred to other contracts
or other carriers during the
period of participation in the program.
The Death Benefit
If a Participant dies during the Accumulation Period, AUL will
pay a death benefit to the
Beneficiary upon receipt of due proof of the Participant's death
and instructions regarding
payment to the Beneficiary. If there is no designated Beneficiary
living on the date of death of the
Participant, AUL will pay the death benefit in one sum to the
estate of the Participant upon
receipt of due proof of death of both the Participant and the
designated Beneficiary and
instructions regarding payment. If the death of the Participant
occurs on or after the Annuity
Commencement Date, no death benefit will be payable under the
Contract except as may be
provided under the Annuity Option elected.
The amount of the death benefit equals the vested portion of the
Participant's Account Value
minus any outstanding loan balances and any due and unpaid
charges on those loans. Under
Contracts acquired in connection with 408 Programs,
457 Programs, and 403(b) Programs other than Employer Sponsored
403(b) Programs, the vested
portion of a Participant's Account Value shall be the
Participant's entire Account Value. Under
Employee Benefit Plans and Employer Sponsored 403(b) Programs,
the vested portion of a
Participant's Account Value is the amount to which the
Participant is entitled upon death or
separation from service under a vesting schedule contained in the
pertinent Plan. If the death
benefit is less than a Participant's Account Value, the death
benefit shall be paid pro rata from the
Investment Accounts and the Fixed Account, and the remainder of
the Account Value shall be
distributed to the Owner or as directed by the Owner. Prior to
such distribution, any remaining
Account Value in the Investment Accounts shall be transferred to
AUL's General Account. In the
case of a 457 Program, the Owner of the Contract shall be the
Beneficiary.
The death benefit will be paid to the Beneficiary in a single sum
or under one of the Annuity
Options, as directed by the Participant or as elected by the
Beneficiary. If the Beneficiary is to
receive annuity payments under an Annuity Option, there may be
limits under applicable law on
the amount and duration of payments that the Beneficiary may
receive, and requirements
respecting timing of payments. A tax adviser should be consulted
in considering payout options.
Termination by the Owner
An Owner of a Contract acquired in connection with an Employee
Benefit Plan, a 457 Program,
or an Employer Sponsored 403(b) Program may terminate the
Contract by sending proper written
notice of termination to AUL at its Home Office. Termination
shall be effective as of the end of
the Valuation Date that the notice is received by AUL at its Home
Office. Proper notice of
termination must include an election of the method of payment or
payments from AUL, an
indication of the person or persons to whom payment is to be
made, and the Owner's agreement
(and the Plan Sponsor's agreement, if the Contract is issued in
connection with an Employee
Benefit Plan or an Employer Sponsored 403(b) Program) that AUL
shall not be held responsible
for any losses or claims that may arise against AUL in connection
with making a payment or
payments upon termination.
Upon termination of such a Contract used in connection with an
Employee Benefit Plan, a 457
Program, or Employee Benefit Plan contributions in a combined
Contract for an Employee
Benefit Plan and Employer Sponsored 403(b)
Plan, the Owner (and the Plan Sponsor, if the Contract is issued
in connection with an Employee
Benefit Plan) may elect from two payment options. Under one
option, AUL will pay an amount
equal to the aggregate Withdrawal Values of all of the
Participant Accounts under the Contract
determined as of the end of the Valuation Date that the
termination is effective, minus any
applicable Investment Liquidation Charge. The Investment
Liquidation Charge applies only to
Participants' Fixed Account Values under these Contracts. The
charge is equal to a certain
percentage, as described below, multiplied by the Withdrawal
Value derived from the Fixed
Account of each Participant under a Contract. The percentage is
determined by the following
formula: 6(x - y), where "x" is the Current Rate of interest, as
described under "Interest," being
credited by AUL to new Contributions allocated to the Fixed
Account as of the effective date of
termination, and "y" is the average rate of interest being
credited by AUL to various portions of a
Participant's Fixed Account Value as of the effective date of
termination. Payment under this
option shall be made as described under "Payments from the
Variable Account," except that
payment of amounts attributable to the Fixed Account may be
delayed for up to six months after
the effective date of termination.
Under the second payment option for a 457 Program Contract, AUL
will pay an amount equal to
the aggregate Withdrawal Values derived from the Variable Account
of all Participants under the
Contract determined as of the end of the Valuation Date on which
termination is effective.
Payment of this amount shall be made as described under "Payments
from the Variable Account."
AUL will also pay an amount equal to the aggregate Withdrawal
Values derived from the Fixed
Account of all Participants under the Contract as of the Contract
Anniversary immediately
succeeding the effective date of termination. This amount shall
be payable in six equal annual
installments, the first of which shall be paid on the Contract
Anniversary immediately succeeding
the effective date of termination. As of this date, AUL shall
have the right to refuse to accept
further contributions and shall cease to maintain individual
Participant Accounts, and amounts
remaining under the Contract after each annual installment shall
be paid interest by AUL at an
annual effective rate that shall be equal to the lesser of (a)
the weighted average of each of the
various Current Rates of interest being credited to amounts held
in the Fixed Account under the
Contract determined as of the Contract Anniversary immediately
succeeding the effective date of
termination, or (b) the interest rate for U.S. Government
Security Treasury Constant Maturity for
three years (as set forth in the Federal Reserve Statistical
Releases), as determined on the
Business Day coincident with or next following the Contract
Anniversary immediately succeeding
the effective date of termination. Interest earned during the
Contract Year following payment of
any annual installment shall be paid by AUL on the next
succeeding Contract Anniversary.
Under the second payment option for an Employee Benefit Plan
Contract, or for the Employee
Benefit Plan contributions in a combined Contract for an Employee
Benefit Plan and Employer
Sponsored 403(b) Plan, AUL will pay an amount equal to the
aggregate Withdrawal Values
derived from the Variable Account of all Participants under the
Contract determined as of the end
of the Valuation Date on which termination is effective. Payment
shall be made as described under
"Payments from the Variable Account." AUL will also pay amounts
derived from the Fixed
Account in seven annual installments as follows: As of the first
Contract Anniversary immediately
succeeding the effective date of termination, one-seventh of that
portion of the Withdrawal Value
of each Participant's Account consisting of the net dollar
balance in the Fixed Account credited to
each such Participant's Account will be calculated and paid. On
the next succeeding six Contract
Anniversaries thereafter, a fraction of the remaining Withdrawal
Values will be paid. The fraction
paid in each succeeding year shall have the number "1" as the
numerator and the denominator
shall be a number which is, numerically, "1" less than the
denominator of the fraction paid on the
prior Contract Anniversary. Therefore, the payment on the second
Contract Anniversary would be
one-sixth, on the third Contract Anniversary, the payment would
be one-fifth, and so forth until
the final payment is the remaining balance in the Fixed Account
credited to each
such Participant. Until all funds have been paid by AUL, the
Current Rates of interest credited to
other Contracts of the same type will be credited to the
remaining Withdrawal Values.
Upon termination of a Contract used in connection with an
Employer Sponsored 403(b) Program
or a combined Contract for an Employee Benefit Plan and Employer
Sponsored 403(b) Plan,
AUL shall have the right to refuse to accept further
contributions. Upon such a termination,
amounts attributable to Employer Sponsored 403(b) contributions
will be paid by AUL as
described in the prior paragraph.
Termination by AUL
AUL has the right, subject to applicable state law, to terminate
any Participant's Account
established under a Contract acquired in connection with an
Employee Benefit Plan, a 457
Program, or an Employer Sponsored 403(b) Program at any time
during the Contract Year if the
Participant's Account Value falls below $300 ($200 for an
Employer Sponsored 403(b) Program
or for a Contract with both 403(b) and 401(a) funds) during the
first Contract Year, or $500
($400 for an Employer Sponsored 403(b) Program or for a Contract
with both 403(b) and 401(a)
funds) during any subsequent Contract Year, provided that at
least six months have elapsed since
the Owner's last contribution to the Contract. AUL will give
notice to the Owner and the
Participant that the Participant's Account is to be terminated.
Termination shall be effective six
months from the date that AUL gives such notice, provided that
any contributions made during
the six month notice period are insufficient to bring the
Participant's Account Value up to the
applicable minimum. Single Contribution Contracts have a minimum
required contribution of
$100,000. After the twelve month contribution period, as measured
from the date of first deposit,
no further contri-
butions to that specific Account will be accepted or required
under Single Contribution Contracts
and AUL will not terminate such a Contract or Account for failure
to make further contributions.
Upon termination of a Participant's Account by AUL, AUL will pay
an amount equal to the
Participant's Account Value as of the close of business on the
effective date of termination.
Payment of this amount will be made within seven days from such
effective date of termination.
AUL may, at its option, terminate any Contract if there are no
Participant Accounts in existence
under the Contract.
Payments from the Variable Account
Payment of an amount from the Variable Account resulting from a
surrender, cash withdrawal,
transfer from a Participant's Variable Account Value, payment of
the death benefit, or payment
upon termination by the Owner will be made within seven days from
the date a proper request is
received at AUL's Home Office. However, AUL can postpone the
calculation or payment of such
an amount to the extent permitted under applicable law, which is
currently permissible only for
any period (a) during which the New York Stock Exchange is closed
other than customary
week-end and holiday closings, (b) during which trading on the
New York Stock Exchange is
restricted as determined by the SEC, (c) during which an
emergency, as determined by the SEC,
exists as a result of which (i) disposal of securities held by
the Variable Account is not reasonably
practicable, or (ii) it is not reasonably practicable to
determine the value of the assets of the
Variable Account, or (d) for such other periods as the SEC may by
order permit for the
protection of investors. For information concerning payment of an
amount from the Fixed
Account, see "The Fixed Account" and "Termination by the Owner."
CHARGES AND DEDUCTIONS
Premium Tax Charge
Various states and municipalities impose a tax on premiums
received by insurance companies.
Whether or not a premium tax is imposed will depend upon, among
other things, the Owner's
state of residence, the Annuitant's state of residence, and the
insurance tax laws and AUL's status
in a particular state. AUL assesses a premium tax charge to
reimburse itself for premium taxes
that it incurs. This charge will be deducted as premium taxes are
incurred by AUL, which is
usually when an annuity is effected. Premium tax rates currently
range from 0% to 3.5%, but are
subject to change by such governmental entities.
Withdrawal Charge
No deduction for sales charges is made from contributions for a
Contract. However, if a cash
withdrawal is made, a Participant's Account is surrendered, or
the Contract is terminated by the
Owner, then, depending on the type of Contract, a withdrawal
charge (which may also be referred
to as a contingent deferred sales charge) may be assessed by AUL
if the Participant's Account has
not been in existence for a certain period of time. For the first
two Contract Years that a
Participant's Account exists, the amount withdrawn during a
Contract Year that will not be
subject to a withdrawal charge is 10% of (1) the total of all
contributions made during the year
that the withdrawal is being made, plus (2) the Participant's
Account Value at the beginning of the
Contract Year. After the first two Contract Years, and until the
withdrawal charge has decreased
to 0%, the amount withdrawn during a Contract Year that will not
be subject to an otherwise
applicable withdrawal charge is 10% of the Participant's Account
Value at the beginning of the
Contract Year in which the withdrawal is being made. If a
Participant's contributions were initially
allocated to a Recurring Contribution Contract and then
transferred to a Single Contribution
Contract pursuant to a Transfer Agreement between AUL and the
Participant when the required
minimum of $100,000 was reached, then, for purposes of
establishing the number of Account
Years that an account has been in existence, credit will be given
for the time that the contributions
were in the Recurring Contribution Contract. The chart below
illustrates the amount of the
withdrawal charge that applies to the different types of
Contracts based on the number of years
that the Account has been in existence.
Charge on Withdrawal Exceeding 10% Allowable Amount
Account Year 1 2 3 4 5 6 7 8 9 10 11 or more
Recurring Contribution Contracts 8% 8% 8% 8% 8% 4% 4% 4% 4% 4% 0%
Single Contribution Contracts 6% 5% 4% 3% 2% 1% 0% 0% 0% 0% 0%
Withdrawal charges are not imposed for many benefits provided
under "benefit responsive"
Contracts. A "benefit responsive" Contract can be distinguished
from a Contract that is not
"benefit responsive" by the contractual condition that under a
"benefit responsive" Contract,
withdrawal charges are not imposed for payment of retirement,
death, disability, termination of
employment, hardship, loan, age 701/2 required minimum
distribution benefits, or benefits upon
attainment of age 591/2 (provided that the age 591/2 benefit is a
taxable distribution paid to the
Participant and not to any other person or entity, including any
alternative or substitute fund medium).
Under certain circumstances,
withdrawal charges are not imposed under "modified benefit
responsive" Contracts. A "modified
benefit responsive" Contract can be distinguished from a Contract
that is not "modified benefit
responsive" by the contractual condition that under a "modified
benefit responsive" Contract,
withdrawal charges are not imposed for cash lump-sum payments of
death benefits, or, provided
the Participant has (1) attained age 55 and has 10 years of
service with the employer identified in
the Plan, or (2) attained age 62 for Plan benefits due to
retirement, disability, termination of
employment, hardships, loans, or required minimum distribution
benefits pursuant to Internal
Revenue Code Section 401(a)(9) and Regulations issued thereunder,
or for benefits upon
attainment of age 591/2 (provided that such benefit upon
attainment of age 591/2 is a taxable
distribution paid to the Participant and not to any other person
or entity, including any substitute
funding medium).
In no event will the amount of any withdrawal charge, when added
to any withdrawal charges
previously assessed against any amount withdrawn from a
Participant's Account, exceed 9% of
the contributions made by or on behalf of a Participant under a
Contract. In addition, no
withdrawal charge will be imposed on or after the Annuity
Commencement Date or upon payment
of a death benefit under the Contract.
The withdrawal charge will be used to recover certain expenses
relating to sales of the Contracts,
including commissions paid to sales personnel and other
promotional costs. AUL reserves the
right to increase the withdrawal charge for any Participant
Accounts established on or after the
effective date of the change, but the withdrawal charge will not
exceed 9% of the contributions
made by or on behalf of a Participant.
Mortality and Expense Risk Charge
AUL deducts a daily charge from the assets of each Investment
Account for mortality and
expense risks assumed by AUL. The charge is equal to an annual
rate of 1.25% of the average
daily net assets of each Investment Account. This amount is
intended to compensate AUL for
certain mortality and expense risks AUL assumes in offering and
administering the Contracts and
in operating the Variable Account. The 1.25% charge was
originally based on estimates of .40%
for expense risk and .85% for mortality risk.
The expense risk is the risk that AUL's actual expenses in
issuing and administering the Contracts
and operating the Variable Account will be more than the charges
assessed for such expenses. The
mortality risk borne by AUL is the risk that Annuitants, as a
group, will live longer than the
Company's actuarial tables predict. AUL may ultimately realize a
profit from this charge to the
extent it is not needed to address mortality and administrative
expenses, but AUL may realize a
loss to the extent the charge is not sufficient. AUL may use any
profit derived from this charge for
any lawful purpose, including any distribution expenses not
covered by the withdrawal charge.
Administrative Charge
Under Recurring Contribution Contracts, AUL deducts an
administrative charge from each
Participant's Account equal to the lesser of 0.5% of the
Participant's Account Value or $7.50 a
quarter. The charge is assessed every quarter on a Participant
Account if it is in effect on the
quarterly Contract Anniversary, and is assessed only during the
Accumulation Period. When a
Participant annuitizes or surrenders on any day other than a
quarterly Contract Anniversary, a pro
rata portion of the charge for that portion of the quarter will
not be assessed. The charge is
deducted proportionately from the Participant's Account Value
allocated among the Investment
Accounts and the Fixed Account. The purpose of this charge is to
reimburse AUL for the
expenses associated with administration of the Contracts and
operation of the Variable Account.
The Administrative charge may, at the Employer's option, be
billed directly to and paid directly
by, the Employer in lieu of being deducted from a Participant's
Account under Employer
Sponsored 403(b) Contracts or under combined Contracts containing
an Employee Benefit Plan
and Employer Sponsored 403(b) contributions, or the charge may be
paid on any other basis
mutually agreed upon by the Employer and AUL. AUL does not expect
to profit from this charge.
There is no Administrative Charge deducted from Participant's
accounts that are allocated to
Single Contribution Contracts.
Other Charges
AUL may charge the Investment Accounts of the Variable Account
for the federal, state, or local
income taxes incurred by AUL that are attributable to the
Variable Account and its Investment
Accounts. No such charge is currently assessed. An Investment
Liquidation Charge, which applies
only to Participants' Fixed Account Values under a Contract, may
be imposed upon termination
by an Owner of a Contract acquired in connection with an Employee
Benefit Plan or 457
Program. See "Termination by the Owner."
Variations in Charges
AUL may reduce or waive the amount of the withdrawal charge and
administrative charge for a
Contract where the expenses associated with the sale of the
Contract or the administrative costs
associated with the Contract are reduced.
For example, the withdrawal and/or administrative charge may be
reduced in connection with
acquisition of the Contract in exchange for another annuity
contract issued by AUL. AUL may
also reduce or waive the withdrawal charge and administrative
charge on Contracts sold to the
directors or employees of AUL or any of its affiliates or to
directors or any employees of any of
the Funds.
Guarantee of Certain Charges
AUL guarantees that the mortality and expense risk charge shall
not increase. AUL also
guarantees that through the year 2000, the administrative charge
may not increase to more<EL>
than $15.00 per quarter. After the year 2000, AUL may increase
the fee but only to the extent
necessary to recover the expenses associated with administration
of the Contracts and operation
of the Variable Account.
Expenses of the Funds
Each Investment Account of the Variable Account purchases shares
at the net asset value of the
corresponding Portfolio of one of the Funds. The net asset value
reflects the investment advisory
fee and other expenses that are deducted from the assets of the
Portfolio. The advisory fees and
other expenses are more fully described in the Funds'
Prospectuses.
ANNUITY PERIOD
General
On the Annuity Commencement Date, the adjusted value of the
Participant's Account may be
applied to provide an annuity under one of the options described
below. The adjusted value will
be equal to the value of the Participant's Account as of the
Annuity Commencement Date,
reduced by any applicable premium or similar taxes and any
outstanding loan balances and unpaid
expense charges on those loans.
The Contracts provide for five optional annuity forms, any one of
which may be elected if
permitted by the particular Plan or applicable law. A lump sum
distribution may also be elected
under most Plans. Other Annuity Options may be available upon
request at the discretion of AUL.
All Annuity Options are fixed and the annuity payments remain
constant throughout the Annuity
Period. Annuity payments are based upon annuity rates that vary
with the Annuity Option selected
and the age of the Annuitant (except that in the case of Option
5, the Fixed Period Option, age is
not a consideration). The annuity rates are based upon an assumed
interest rate of 4%,
compounded annually. If no Annuity Option has been selected for a
Participant, annuity payments
will be made to the Annuitant under an automatic option. For
403(b) (other than Employer
Sponsored 403(b) Programs) and 457 Programs, the automatic option
shall be an annuity payable
during the lifetime of the Annuitant with payments certain for
120 months. For an Employee
Benefit Plan or Employer Sponsored 403(b) Program, the automatic
option shall be an annuity
payable during the lifetime of the Annuitant with payments
certain for 120 months or, for a
married Annuitant, a Survivorship Annuity as described in Option
3 below. For 408 Programs, the
automatic option for unmarried Participants shall be a 10 Year
Certain and Life Annuity; for
married Participants, the automatic option shall be a 50%
Survivorship Annuity. For "benefit
responsive" Employer Sponsored 403(b) Contracts, and for an
Employee Benefit Plan combined
with an Employer Sponsored 403(b) Contract, there is no automatic
annuity option.
Once annuity payments have commenced, a Participant cannot
surrender his or her annuity and
receive a lump sum settlement in lieu thereof and cannot change
the Annuity Option. If, under any
option, monthly payments are less than $25 each, AUL has the
right to make either a lump sum
settlement or to make larger payments at quarterly, semi-annual,
or annual intervals. AUL also
reserves the right to change the minimum payment amount. AUL will
not allow annuitization of a
Participant's Account if the total Account Value is less than
$2000. Should this occur, a
Participant will receive the Account Value in a lump sum
settlement.
Annuity payments will begin on the Annuity Commencement Date. No
withdrawal charge will be
applied on this Date.
A Participant or, depending on the Contract, an Owner on behalf
of a Participant, may designate
an Annuity Commencement Date, Annuity Option, contingent
Annuitant, and Beneficiary on an
Annuity Election Form that must be received by AUL at its Home
Office at least 30 days prior to
the Annuity Commencement Date. AUL may also require additional
information before annuity
payments commence. During the lifetime of the Participant and up
to 30 days prior to the Annuity
Commencement Date, the Annuity Option, the Annuity Commencement
Date, or the designation
of a contingent Annuitant or Beneficiary, if any, under an
Annuity Option may be changed. To
help ensure timely receipt of the first annuity payment, a
transfer of a Participant's Variable
Account Value should be made to the Fixed Account at least two
weeks prior to the Annuity
Commencement Date.
Annuity Options
Option 1 -- Life Annuity
An annuity payable monthly during the lifetime of the Annuitant
that ends with the last monthly
payment before the death of the Annuitant.
Option 2 -- Certain and Life Annuity
An annuity payable monthly during the lifetime of the Annuitant
with the promise that if, at the
death of the Annuitant, payments have been made for less that a
stated period, which may be five,
ten, fifteen, or twenty years, as elected, annuity payments will
be continued during the remainder
of such period to the Beneficiary.
Option 3 -- Survivorship Annuity
An annuity payable monthly during the lifetime of the Annuitant,
and, after the death of the
Annuitant, an amount equal to 50%, 662/3%, or 100% (as specified
in the election) of such
annuity will be paid to the contingent Annuitant named in the
election if and so long as such
contingent Annuitant lives.
An election of this option is automatically cancelled if either
the Participant or the contingent
Annuitant dies before the Annuity Commencement Date.
Option 4 -- Unit Refund Life Annuity
An annuity payable monthly during the lifetime of the Annuitant
that ends with the last payment
due prior to the death of the Annuitant, except, that at the
death of the Annuitant, the Beneficiary
will receive additional annuity payments until the amount paid to
purchase the annuity has been
distributed.
Option 5 -- Fixed Periods
An annuity payable monthly for a fixed period (not less than 5
years or more than 30 years) as
elected, with the guarantee that if, at the death of the
Annuitant, payments have been made for
less than the selected fixed period, annuity payments will be
continued during the remainder of
said period to the Beneficiary.
Selection of an Option
Participants should carefully review the Annuity Options
with their financial or tax advisers, and reference should be
made to the terms of a particular Plan
for pertinent limitations respecting annuity payments and other
matters. For instance, under
requirements for retirement plans that qualify for treatment
under Sections 401, 403(b), 408, or
457 of the Internal Revenue Code, annuity payments generally must
begin no later than April 1 of
the calendar year following the calendar year in which the
Participant reaches age 701/2. For
Options 2 and 5, the period elected for receipt of annuity
payments under the terms of the Annuity
Option generally may be no longer than the joint life expectancy
of the Annuitant and Beneficiary
in the year that the Annuitant reaches age 701/2 and must be
shorter than such joint life
expectancy if the Beneficiary is not the Annuitant's spouse and
is more than 10 years younger than
the Annuitant. Under Option 3, if the contingent Annuitant is not
the Annuitant's spouse and is
more than 10 years younger than the Annuitant, the 662/3% and
100% elections specified above
may not be available.
THE FIXED ACCOUNT
Contributions or transfers to the Fixed Account become part of
AUL's General Account. The
General Account is subject to regulation and supervision by the
Indiana Insurance Department as
well as the insurance laws and regulations of other jurisdictions
in which the Contracts are
distributed. In reliance on certain exemptive and exclusionary
provisions, interests in the Fixed
Account have not been registered as securities under the
Securities Act of 1933 (the "1933 Act")
and the Fixed Account has not been registered as an investment
company under the 1940 Act.
Accordingly, neither the Fixed Account nor any interests therein
are generally subject to the
provisions of the 1933 Act or the 1940 Act. AUL has been advised
that the staff of the SEC has
not reviewed the disclosure in this Prospectus relating to the
Fixed Account. This disclosure,
however, may be subject to certain generally applicable
provisions of the federal securities laws
relating to the accuracy and completeness of statements made in
the Prospectus. This Prospectus
is generally intended to serve as a disclosure document only for
aspects of a Contract involving
the Variable Account and contains only selected information
regarding the Fixed Account. For
more information regarding the Fixed Account, see the Contract
itself or a Participant's
Certificate.
Interest
A Participant's Fixed Account Value earns interest at fixed rates
that are paid by AUL. The
Account Value in the Fixed Account earns interest at one or more
interest rates determined by
AUL at its discretion ("Current Rate"), which are guaranteed to
be at least an annual effective rate
of 4% per year ("Guaranteed Rate"). AUL will determine a Current
Rate from time to time, and
any Current Rate that exceeds the Guaranteed Rate will be in
effect for a period of at least one
year. If AUL determines a Current Rate in excess of the
Guaranteed Rate, contributions or
transfers to a Participant's Account during the time the Current
Rate is in effect are guaranteed to
earn interest at that particular Current Rate for at least one
year. AUL may declare a different
Current Rate for a particular contract based on costs of
acquisition to AUL or the level of service
provided by AUL. Transfers from other AUL annuity contracts may
be transferred at a rate of
interest different than the Current Rate.
Except for transfers from other AUL annuity contracts, and
automatic transfers to Single
Contribution Contracts from Recurring Contribution Contracts when
the minimum required
contribution of $100,000 is reached, amounts contributed or
transferred to the Fixed Account
earn interest at the Current Rate then in effect. Amounts
transferred from other AUL annuity
contracts may not earn the Current Rate, but may, at AUL's
discretion, continue to earn the rate
of interest which was paid under the former Contract. Automatic
transfers to Single Contribution
Contracts will, as of the date of such transfer, be credited with
the Single Contribution Contract
interest rate which was in effect on the date the transferred
contribution was originally deposited
into the Recurring Contribution Contract. If AUL changes the
Current Rate, such amounts
contributed or transferred on or after the effective date of the
change earn interest at the new
Current Rate; however, amounts contributed or transferred prior
to the effective date of the
change may earn interest at the prior Current Rate or other
Current Rate determined by AUL.
Therefore, at any given time, various portions of a Participant's
Fixed Account Value may be
earning interest at different Current Rates for different periods
of time, depending upon when
such portions were originally contributed or transferred to the
Fixed Account. AUL bears the
investment risk for Participant's Fixed Account Values and for
paying interest at the Current Rate
on amounts allocated to the Fixed Account.
AUL reserves the right at any time to change the Guaranteed Rate
of interest for any Participant
Accounts established on or after the effective date of the
change, although once a Participant
Account is established, the Guaranteed Rate may not be changed
for the duration of that Account.
Withdrawals and Transfers
A Participant may make a full surrender or a partial withdrawal
from his or her Fixed Account
Value subject to the provisions of the Contract. A full surrender
of a Participant's Fixed Account
Value will result in a withdrawal payment equal to the value of
the Participant's Fixed Account
Value as of the day the surrender is effected, minus any
applicable withdrawal charge and minus
the Participant's outstanding loan balance(s), if any, and any
expense charges due thereon. A
partial withdrawal may be requested for a specified percentage or
dollar amount of the
Participant's Fixed Account Value, except, where a Participant
has outstanding loans under a
Contract, a partial withdrawal will be permitted only to the
extent that the Participant's remaining
Withdrawal Value in the Fixed Account equals twice the total of
the outstanding loans under the
Participant's account. The minimum amount that may be withdrawn
from a Participant's share of
the Fixed Account is the lesser of $500 or the Participant's
entire Fixed Account Value. If a partial
withdrawal is requested that would leave the Participant's Fixed
Account Value less than $500,
then such partial withdrawal request will be treated as a request
for a full withdrawal from the
Fixed Account. If a Participant has more than one Account, then
the Account from which the
partial withdrawal is to be taken must be specified and any
withdrawal restrictions shall be
effective at an Account level. For a further discussion of
surrenders and partial withdrawals as
generally applicable to a Participant's Variable Account Value
and Fixed Account Value, see
"Cash Withdrawals."
A Participant's Fixed Account Value may be transferred from the
Fixed Account to the Variable
Account subject to certain limitations. Where a Participant has
outstanding loans under a
Contract, a transfer will be permitted only to the extent that
the Participant's remaining
Withdrawal Value in the Fixed Account equals twice the total of
the outstanding loans under the
Participant's Account. The minimum transfer from any Investment
Account or from the Fixed
Account is the lesser of $500 or a Participant's entire Account
Value in that Investment Account
or in the Fixed Account, provided however, that amounts
transferred from the Fixed Account to
an Investment Account during any given Contract Year cannot
exceed 20% of the Participant's
Fixed Account Value as of the beginning of that Contract Year.
However, if a Participant's Fixed
Account Value at the beginning of the Contract Year is less than
$2,500, the amount that will be
transferred for that Contract Year from the Fixed Account is the
lesser of $500 or the entire Fixed
Account Value. If, after any transfer, the Participant's
remaining Account Value in an Investment
Account or in the Fixed Account would be less than $500, then
such request will be treated as a
request for a transfer of the entire Account Value. Transfers and
withdrawals of a Participant's
Fixed Account Values will be effected on a first-in first-out
basis. If a Participant has more than
one Account, then the Account from which the transfer is to be
taken must be specified and any
transfer restrictions shall be effective at an Account level. For
a discussion of transfers as
generally applicable to a Participant's Variable Account Value
and Fixed Account Value, see
"Transfers of Account Value."
Contract Charges
The withdrawal charge will be the same for amounts surrendered or
withdrawn from a
Participant's Fixed Account Value as for amounts surrendered or
withdrawn from a Participant's
Variable Account Value. In addition, the administrative charge
will be the same whether or not a
Participant's Account Value is allocated to the Variable Account
or the Fixed Account. The
charge for mortality and expense risks will not be assessed
against the Fixed Account, and any
amounts that AUL pays for income taxes allocable to the Variable
Account will not be charged
against the Fixed Account. In addition, the investment advisory
fees and operating expenses paid
by the Funds will not be paid directly or indirectly by
Participants to the extent the Account Value
is allocated to the Fixed Account; however, such Participants
will not participate in the investment
experience of the Variable Account. See "Charge and Deductions."
An Investment Liquidation Charge may be imposed upon termination
by an Owner of a Contract
acquired in connection with an Employee Benefit Plan or 457
Program. See "Termination by the
Owner."
Payments from the Fixed Account
Surrenders, withdrawals, and transfers from the Fixed Account and
payment of a death benefit
based upon a Participant's Fixed Account Value may be delayed for
up to six months after a
written request in proper form is received by AUL at its Home
Office. During the period of
deferral, interest at the applicable interest rate or rates will
continue to be credited to the
Participant's Fixed Account Value. For information on payment
upon termination by the Owner of
a Contract acquired in connection with an Employee Benefit Plan,
an Employer Sponsored 403(b)
Program, or a 457 Program, see "Termination by the Owner."
Loans from the Fixed Account
A Participant under a 403(b) Program, other than an Employer
Sponsored 403(b) Program, who
has a Participant Account Value in the Fixed Account may borrow
money from AUL using his or
her Fixed Account Value as the only security for the loan by
submitting a proper written request
to AUL's Home Office. A loan may be taken any time prior to the
Annuity Commencement Date.
The minimum loan that can be taken at any time is $2000, unless a
lower minimum loan amount is
specified by state law. The maximum amount that can be borrowed
at any time is an amount
which, when combined with the largest loan balance during the
prior 12 months, does not exceed
the lesser of (1) 50% of the Participant's Withdrawal Value in
the Fixed Account, or (2) $50,000. The Participant's
Withdrawal Value in the Fixed Account, which must be at least
twice the amount of the
outstanding loan balance, shall serve as security for the loan,
and shall continue to earn interest as
described under "Interest." Payment by AUL of the loan amount may
be delayed for up to six
months. If a Participant has more than one Participant Account
invested in the Fixed Account,
then the account in which funds are to be held as security for
the loan must be specified and any
loan restrictions shall be effective at an Account level.
Interest will be charged for the loan, and will accrue on the
loan balance from the effective date of
any loan. The interest rate will be declared by AUL at the
beginning of each calendar quarter, or,
with respect to Contracts or Participants in some states,
annually. The interest charged will be
determined under a procedure specified in the loan provision of
the Contract; the interest rate
generally follows the Moody's Corporate Bond Yield
Average--Monthly Average Corporates as
published by Moody's Investors Service. However, no change from a
previously established rate
will be made in an amount less than .50% in any periodic
adjustment. The Contract should be
consulted for more information. The loan balance shall also be
subject to a loan expense charge
equal to 2% of each loan repayment unless such a charge is
prohibited by state law.
Loans to Participants must be repaid within a term of five years,
unless the Participant certifies to
AUL that the loan is to be used to acquire a principal residence
for the Participant, in which case
the term may be longer. Loan repayments must be made at least
quarterly. Upon receipt of a
repayment, AUL will deduct the 2% expense charge from the
repayment and will apply the
balance first to any accrued interest and then to the outstanding
loan principal.
If a loan either remains unpaid at the end of its term, or if at
any time during the Accumulation
Period, 102% of the total of all the Participant's loan balances
equals the Participant's Withdrawal
Value allocated to the Fixed Account, then AUL will deduct these
loan balances, as well as an
expense charge equal to 2% of the outstanding loan balances, from
the Participant's Fixed
Account Value. If a Participant has outstanding loans, then
withdrawals or transfers to the
Variable Account will be permitted only to the extent that the
remaining Participant's Withdrawal
Value in the Fixed Account equals or exceeds twice the total of
any outstanding loans under the
Contract. All loan balances plus the 2% expense charge must be
paid or satisfied in full before any
amount based upon a Participant's Fixed Account Value is paid
upon surrender, as a death benefit,
upon annuitization, or other permitted distribution. The
restrictions or limitations stated above
may be modified, or new restrictions and limitations added, to
the extent necessary to comply
with Section 72(p) of the Internal Revenue Code, under which a
loan will not be treated as a
distribution under a 403(b) Program, or other applicable law as
determined by AUL.
MORE ABOUT THE CONTRACTS
Designation and Change of Beneficiary
The Beneficiary designation contained in an application to open a
Participant's Account will
remain in effect until changed. Payment of benefits to any
Beneficiary are subject to the specified
Beneficiary surviving the Participant. Unless otherwise provided,
if no designated Beneficiary is
living upon the death of the Participant prior to the Annuity
Commencement Date, the
Participant's estate is the Beneficiary. Unless otherwise
provided, if no designated Beneficiary
under an Annuity Option is living after the Annuity Commencement
Date, upon the death of the
Annuitant, the Annuitant's estate is the Beneficiary. In the case
of a 457 Program, the Owner of
the Contract shall be the Beneficiary prior to the Participant's
Annuity Commencement Date.
Subject to the rights of an irrevocably designated Beneficiary,
the designation of a Beneficiary
may be changed or revoked at any time while the Participant is
living by filing with AUL a written
beneficiary designation or revocation in such form as AUL may
require. The change or revocation
will not be binding upon AUL until it is received by AUL at its
Home Office. When it is so
received, the change or revocation will be effective as of the
date on which the beneficiary
designation or revocation was signed, but the change or
revocation will be without prejudice to
AUL if any payment has been made or any action has been taken by
AUL prior to receiving the
change or revocation.
Reference should be made to the terms of the particular Plan and
any applicable law for any
restrictions on the beneficiary designation. For instance, under
an Employee Benefit Plan or
Employer Sponsored 403(b) Program, the Beneficiary (or contingent
Annuitant) must be the
Participant's spouse if the Participant is married, unless the
spouse properly consents to the
designation of a Beneficiary (or contingent Annuitant) other than
the spouse.
Assignability
No benefit or privilege under a Contract may be sold, assigned,
discounted, or pledged as
collateral for a loan or as security for the performance of an
obligation or for any other purpose to
any person or entity other than AUL.
Proof of Age and Survival
AUL may require proof of age or survival of any person on whose
life annuity payments depend.
Misstatements
If the age of an Annuitant or contingent Annuitant has been
misstated, the correct amount paid or
payable by AUL shall be such as the Participant's Account Value
would have provided for the
correct age.
Acceptance of New Participants or Contributions
AUL reserves the right to refuse to accept new Participants or
new Contributions to a Contract at
any time.
Introduction
The Contracts described in this Prospectus are designed for use
by Employer, association, and
other group retirement plans under the provisions of Sections
401, 403, 408, and 457 of the
Internal Revenue Code ("Code"). The ultimate effect of Federal
income taxes on values under a
Contract, the Participant's Account, on annuity payments, and on
the economic benefits to the
Owner, the Participant, the Annuitant, and the Beneficiary or
other payee may depend upon the
type of Plan for which the Contract is purchased and a number of
different factors. The discussion
contained herein and in the Statement of Additional Information
is general in nature. It is based
upon AUL's understanding of the present Federal income tax laws
as currently interpreted by the
Internal Revenue Service ("IRS"), and is not intended as tax
advice. No representation is made
regarding the likelihood of continuation of the present Federal
income tax laws or of the current
interpretations by the IRS. Moreover, no attempt is made to
consider any applicable state or other
laws. Because of the inherent complexity of such laws and the
fact that tax results will vary
according to the particular circumstances of the Plan or
individual involved, any person
contemplating the purchase of a Contract, or becoming a
Participant under a Contract, or
receiving annuity payments under a Contract should consult a
qualified tax adviser.
AUL DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS,
FEDERAL, STATE, OR LOCAL, OF ANY CONTRACT OR PARTICIPANT'S
ACCOUNT
OR ANY TRANSACTION INVOLVING THE CONTRACTS.
Tax Status of the Company and the Variable Account
AUL is taxed as a life insurance company under Part I, Subchapter
L of the Code. Because the
Variable Account is not taxed as a separate entity and its
operations form a part of AUL, AUL
will be responsible for any Federal income taxes that become
payable with respect to the income
of the Variable Account. However, each Investment Account will
bear its allocable share of such
liabilities. Under current law, no item of dividend income,
interest income, or realized capital gain
attributable, at a minimum, to appreciation of the Investment
Accounts will be taxed to AUL to
the extent it is applied to increase reserves under the
Contracts.
The Funds in which the Variable Account will invest its assets
are each intended to qualify as a
regulated investment company under Part I, Subchapter M of the
Code. If the requirements of the
Code are met, the Funds will not be taxed on amounts distributed
on a timely basis to the Variable
Account.
Tax Treatment of Retirement Programs
The Contracts described in this Prospectus are offered for use
with several types of retirement
programs as described in "The Contracts." The tax rules
applicable to Participants in such
retirement programs vary according to the type of retirement plan
and its terms and conditions.
Therefore, no attempt is made herein to provide more than general
information about the use of
the Contracts with the various types of retirement programs.
Participants under such programs, as
well as Owners, Annuitants, Beneficiaries and other payees are
cautioned that the rights of any
person to any benefits under these programs may be subject to the
terms and conditions of the
Plans themselves, regardless of the terms and conditions of the
Contracts issued in connection
therewith.
Generally, no taxes are imposed on the increases in the value of
a Contract by reason of
investment experience or Employer contributions until a
distribution occurs, either as a lump-sum
payment or annuity payments under an elected Annuity Option or in
the form of cash withdrawals,
surrenders, or other distributions prior to the Annuity
Commencement Date.
The amounts that may be contributed to the Plans are subject to
limitations that may vary
depending on the type of Plan. In addition, early distributions
from most Plans may be subject to
penalty taxes, or in the case of distributions of amounts
contributed under salary reduction
agreements, could cause the Plan to be disqualified. Furthermore,
distributions from most Plans
are subject to certain minimum distribution rules. Failure to
comply with these rules could result
in disqualification of the Plan or subject the Annuitant to
penalty taxes. As a result, the minimum
distribution rules could limit the availability of certain
Annuity Options to Participants and their
Beneficiaries.
Below are brief descriptions of various types of retirement
programs and the use of the Contracts
in connection therewith.
Employee Benefit Plans
Code Section 401 permits business employers and certain
associations to establish various types
of retirement plans for employees. Such retirement plans may
permit the purchase of Contracts to
provide benefits thereunder.
If a Participant under an Employee Benefit Plan receives a
lump-sum distribution, the portion of
the distribution equal to any contribution that was taxable to
the Participant in the year when paid
is generally received tax free. The balance of the distribution
will generally be treated as ordinary
income. Special five-year forward averaging provisions under Code
Section 402 may be utilized
on any amount subject to ordinary income tax treatment, provided
that the Participant has reached
age 591/2, has not previously elected forward averaging for a
distribution from any Employee
Benefit Plan after reaching age 591/2, and has not rolled over a
partial distribution from a similar
plan into an individual retirement account or annuity. Special
ten-year averaging and a
capital-gains election may be available to a Participant who
reached age 50 before 1986.
Under an Employee Benefit Plan under Section 401 of the Code,
when annuity payments
commence (as opposed
to a lump-sum distribution), under Section 72 of the Code, the
portion of each payment
attributable to contributions that were taxable to the
Participant in the year made, if any, is
excluded from gross income as a return of the Participant's
investment. The portion so excluded is
determined at the time the payments commence by dividing the
Participant's investment in the
Contract by the expected return. The periodic payments in excess
of this amount are taxable as
ordinary income. Once the Participant's investment has been
recovered, the full annuity payment
will be taxable. If the annuity should stop before the investment
has been received, the
unrecovered portion is deductible on the Annuitant's final
return. If the Participant made no
contributions that were taxable to the Participant in the year
made, there would be no portion
excludable.
403(b) Programs
Code Section 403(b) permits public school systems and certain
types of charitable, educational,
and scientific organizations specified in Code Section 501(c)(3)
to purchase annuity contracts on
behalf of their employees, and, subject to certain limitations,
allows employees of those
organizations to exclude the amount of contributions from gross
income for Federal income tax
purposes.
If a Participant under a 403(b) Program makes a surrender or
partial withdrawal from the
Participant's Account, the Participant generally will realize
income taxable at ordinary tax rates on
the full amount received. See "Constraints on Withdrawal --
403(b) Programs." Since, under a
403(b) Program, contributions generally are excludable from the
taxable income of the employee,
the full amount received will usually be taxable as ordinary
income when annuity payments com-
mence.
408 Programs
Code Sections 219 and 408 permit eligible individuals to
contribute to an individual retirement
program, including Simplified Employee Pension Plans and
Employer/Association Established
Individual Retirement Account Trusts, known as an Individual
Retirement Account ("IRA").
These IRA accounts are subject to limitations on the amount that
may be contributed, the persons
who may be eligible, and on the time when distributions may
commence. In addition, certain
distributions from some other types of retirement plans may be
placed on a tax-deferred basis in
an IRA. Sale of the Contracts for use with IRA's may be subject
to special requirements imposed
by the Internal Revenue Service. Purchasers of the Contracts for
such purposes will be provided
with such supplementary information as may be required by the
Internal Revenue Service or other
appropriate agency, and will have the right to revoke the
Contract under certain circumstances.
If a Participant under a 408 Program makes a surrender or partial
withdrawal from the
Participant's Account, the Participant generally will realize
income taxable at ordinary tax rates on
the full amount received. Since under a 408 Program,
contributions generally are excludable from
the taxable income of the employee, the full amount received will
usually be taxable as ordinary
income when annuity payments commence.
457 Programs
Section 457 of the Code permits employees of state and local
governments and units and agencies
of state and local governments as well as tax-exempt
organizations described in Section 501(c)(3)
of the Code to defer a portion of their compensation without
paying current taxes. The employees
must be Participants in an eligible deferred compensation plan.
Although a Participant under a 457 Program may direct or choose
methods of investment, all
amounts deferred under the Program, and any income thereon,
remain solely the property of the
Employer and subject to the claims of its general creditors,
until paid or made available to the
Participant or Beneficiary under the Program.
If the Employer sponsoring a 457 Program requests and receives a
withdrawal for an eligible
employee in connection with a 457 Program, then the amount
received by the employee will be
taxed as ordinary income. Since under a 457 Program,
contributions are excludable from the
taxable income of the employee, the full amount received will
usually be taxable as ordinary
income when annuity payments commence or other distribution is
made.
Tax Penalty
Any distribution made to a Participant from an Employee Benefit
Plan or a 408 Program other
than on account of one or more of the following events will be
subject to a 10% penalty tax on
the amount distributed:
(a) the Participant has attained age 591/2;
(b) the Participant has died; or
(c) the Participant is disabled.
In addition, a distribution from an Employee Benefit Plan will
not be subject to a 10% excise tax
on the amount distributed if the Participant is 55 and has
separated from service. Distributions
that are received as a life annuity where payment is made at
least annually will not be subject to an
excise tax. Certain amounts paid for medical care also may not be
subject to an excise tax.
Any permitted distribution from a Participant Account under a
403(b) Program will be subject to
a 10% excise tax unless the Participant satisfies one of the
exemptions listed above for Employee
Benefit Plans. See "Constraints on Withdrawals--403(b) Programs."
Withholding
Distributions from an Employee Benefit Plan under Code Section
401(a) or a 403(b) Program to
an employee, surviving spouse, or former spouse who is an
alternate payee under
a qualified domestic relations order, in the form of a lump-sum
settlement or periodic annuity
payments for a fixed period of fewer than 10 years are subject to
mandatory federal income tax
withholding of 20% of the taxable amount of the distribution,
unless the distributee directs the
transfer of such amounts to another Employee Benefit Plan or
403(b) Program or to an Individual
Retirement Account under Code Section 408. The taxable amount is
the amount of the
distribution, less the amount allocable to after-tax
contributions.
All other types of distributions from Employee Benefit Plans and
403(b) Programs, and all
distributions from Individual Retirement Accounts, are subject to
federal income tax withholding
on the taxable amount unless the distributee elects not to have
the withholding apply. The amount
withheld is based on the type of distribution. Federal tax will
be withheld from annuity payments
(other than those subject to mandatory 20% withholding) pursuant
to the recipient's withholding
certificate. If no withholding certificate is filed with AUL, tax
will be withheld on the basis that
the payee is married with three withholding exemptions. Tax on
all surrenders and lump-sum
distributions from Individual Retirement Accounts will be
withheld at a flat 10% rate.
Withholding on annuity payments and other distributions from the
Contract will be made in
accordance with regulations of the Internal Revenue Service.
In general, participants in retirement plans that own annuity
contracts are not taxed on increases
in the value of their accounts until some form of distribution is
made to the participant. Due to
this tax deferral during the accumulation period, participation
in a retirement plan funded by an
annuity contract generally results in more rapid growth than a
comparable investment under which
contributions and increases in value are taxed on a current
basis. The chart illustrates this benefit
by comparing a retirement plan that invests in a variable annuity
contract to accumulation from an
investment whose contributions and gains are taxed on a current
basis. The chart illustrates
accumulation of $250 of monthly before-tax contributions going
into an annuity contract for a
retirement plan and $172.50 of monthly after-tax contributions
going into a conventional savings
plan ($250 minus $77.50 of income taxes based on an assumed
combined rate of 31%, for state
and federal income tax equals $172.50 of after-tax
contributions). Each contribution is made at
the end of each month. This chart also assumes a 6% before-tax
earnings rate. Values for Tax
Deferred Accumulation After Tax and Pre Tax Accumulation Value
reflect the deduction for
mortality and expense risk charges under a variable annuity
contract, and values shown for Tax
Deferred Accumulation After Tax reflect appropriate withdrawal
charges at the end of the periods
shown.
The hypothetical rate of return used in the chart is an
assumption only, and no implication is
intended that the return is guaranteed in any way or that it
represents an average or expected rate
of return over the period depicted.
The portion of a participant's account value that exceeds the
variable annuity contract owner's or
participant's investment in the participant's account is taxed at
ordinary income tax rates upon
distribution, and a 10% tax penalty may apply to withdrawals
taken before the taxpayer reaches
the age of 591/2.
After state and federal income tax at 31% has been paid on the
amount distributed, with a variable
annuity, after 5 years
return is guaranteed in any way or that it represents an average
or expected rate of return over the
period depicted.
The portion of a participant's account value that exceeds the
variable annuity contract owner's or
participant's investment in the participant's account is taxed at
ordinary income tax rates upon
distribution, and a 10% tax penalty may apply to withdrawals
taken before the taxpayer reaches
the age of 591/2.
After state and federal income tax at 31% has been paid on the
amount distributed, with a variable
annuity, after 5 years there would be $686 less; after 10 years
there would be an additional $804
available; after 20 years, there would be an additional $4,383
available; after 30 years, there
would be an additional $8,012 available; and after 40 years,
there would be an additional $33,243
available. Tax rates may vary for different taxpayers from the
31% used in this chart, which would
result in different values from those shown in the chart.
OTHER INFORMATION
Voting of Shares of the Funds
AUL is the legal owner of the shares of the Funds held by the
Investment Accounts of the
Variable Account. In accordance with its view of present
applicable law, AUL will exercise voting
rights attributable to the shares of each Portfolio of the Funds
held in the Investment Accounts at
any regular and special meetings of the shareholders of the Funds
on matters requiring
shareholder voting under the 1940 Act.
AUL will exercise these voting rights based on instructions
received from persons having the
voting interest in corresponding Investment Accounts of the
Variable Account and consistent with
any requirements imposed on AUL under contracts with any of the
Funds, or under applicable
law. However, if the 1940 Act or any regulations thereunder
should be amended, or if the present
interpretation thereof should change, and as a result AUL
determines that it is permitted to vote
the shares of the Funds in its own right, it may elect to do so.
The person having the voting interest under a Contract is the
Owner or the Participant, depending
on the type of Plan. Generally, a Participant will have a voting
interest under a Contract to the
extent of the vested portion of his or her Account Value. AUL
shall send to each Owner or
Participant a Fund's proxy materials and forms of instruction by
means of which instructions may
be given to AUL on how to exercise voting rights attributable to
the Funds' shares. In the case of
a Contract acquired in connection with an Employee Benefit Plan
or an Employer Sponsored
403(b) Program, AUL may furnish the Owner with sufficient Fund
proxy materials and voting
instruction forms for all Participants under a Contract with any
voting interest.
Unless otherwise required by applicable law or under a contract
with any of the Funds, with
respect to each of the Funds, the number of Fund shares of a
particular Portfolio as to which
voting instructions may be given to AUL is determined by dividing
the value of all of the
Accumulation Units of the corresponding Investment Account
attributable to a Contract or a
Participant's Account on a particular date by the net asset value
per share of that Portfolio as of
the same date. Fractional votes will be counted. The number of
votes as to which voting
instructions may be given will be determined as of the date
coincident with the date established by
a Fund for determining shareholders eligible to vote at the
meeting <?FB>of the Fund. If required
by the SEC or under a contract with any of the Funds, AUL
reserves the right to determine in a
different fashion the voting rights attributable to the shares of
the Fund. Voting instructions may
be cast in person or by proxy.
Voting rights attributable to the Contracts or Participant
Accounts for which no timely voting
instructions are received will be voted by AUL in the same
proportion as the voting instructions
which are received in a timely manner for all Contracts and
Participant Accounts participating in
that Investment Account. AUL will vote shares of any Investment
Account, if any, that it owns
beneficially in its own discretion, except that if a Fund offers
its shares to any insurance company
separate account that funds variable life insurance contracts or
if otherwise required by applicable
law, AUL will vote its own shares in the same proportion as the
voting instructions that are
received in a timely manner for Contracts and Participant
Accounts participating in the Investment
Account.
Neither the Variable Account nor AUL is under any duty to inquire
as to the instructions received
or the authority of Owners or others to instruct the voting of
shares of any of the Funds.
Substitution of Investments
AUL reserves the right, subject to compliance with the law as
then in effect, to make additions to,
deletions from, substitutions for, or combinations of the
securities that are held by the Variable
Account or any Investment Account or that the Variable Account or
any Investment Account may
purchase. If shares of any or all of the Portfolios of a Fund
should no longer be available for
investment, or if, in the judgment of AUL's management, further
investment in shares of any or all
Portfolios of a Fund should become inappropriate in view of the
purposes of the Contracts, AUL
may substitute shares of another Portfolio of a Fund or of a
different fund for shares already
purchased, or to be purchased in the future under the Contracts.
AUL may also purchase, through
the Variable Account, other securities for other classes of
contracts, or permit a conversion
between classes of contracts on the basis of requests made by
Owners or as permitted by Federal
law.
Where required under applicable law, AUL will not substitute any
shares attributable to an
Owner's interest in an Investment Account or the Variable Account
without notice, Owner or
Participant approval, or prior approval of the SEC
or a state insurance commissioner, and without following the
filing or other procedures
established by applicable state insurance regulators.
AUL also reserves the right to establish additional Investment
Accounts of the Variable Account
that would invest in a new Portfolio of a Fund or in shares of
another investment company, a
series thereof, or other suitable investment vehicle. New
Investment Accounts may be established
in the sole discretion of AUL, and any new Investment Account
will be made available to existing
Owners on a basis to be determined by AUL. Not all Investment
Accounts may be available under
a particular Contract. AUL may also eliminate or combine one or
more Investment Accounts or
cease permitting new allocations to an Investment Account if, in
its sole discretion, marketing,
tax, or investment conditions so warrant.
Subject to any required regulatory approvals, AUL reserves the
right to transfer assets of any
Investment Account of the Variable Account to another separate
account or Investment Account.
In the event of any such substitution or change, AUL may, by
appropriate endorsement, make
such changes in these and other Contracts as may be necessary or
appropriate to reflect such
substitution or change. If deemed by AUL to be in the best
interests of persons having voting
rights under the Contracts, the Variable Account may be operated
as a management investment
company under the 1940 Act or any other form permitted by law, it
may be deregistered under
that Act in the event such registration is no longer required, or
it may be combined with other
separate accounts of AUL or an affiliate thereof. Subject to
compliance with applicable law, AUL
also may combine one or more Investment Accounts and may
establish a committee, board, or
other group to manage one or more aspects of the operation of the
Variable Account.
Changes to Comply with Law and Amendments
AUL reserves the right, without the consent of Owners or
Participants, to make any change to the
provisions of the Contracts to comply with, or to give Owners or
Participants the benefit of, any
Federal or state statute, rule, or regulation, including, but not
limited to, requirements for annuity
contracts and retirement plans under the Internal Revenue Code
and regulations thereunder or any
state statute or regulation.
AUL reserves the right to make certain changes in the Contracts.
AUL has the right at any time to
change the Guaranteed Rate of interest credited to amounts
allocated to the Fixed Account for
any Participant Accounts established on or after the effective
date of the change, although once a
Participant's Account is established, the Guaranteed Rate may not
be changed for the duration of
the Account.
After the fifth anniversary of a Contract, AUL has the right to
change any annuity tables included
in the Contract, but any such change shall apply only to
Participant Accounts established on or
after the effective date of such a change. AUL also has the right
to change the withdrawal charge
and, within the limits described under "Guarantee of Certain
Charges," the administrative charge.
Reservation of Rights
AUL reserves the right to refuse to accept new contributions
under a Contract and to refuse to
accept new Participants under a Contract.
Periodic Reports
AUL will send quarterly statements showing the number, type, and
value of Accumulation Units
credited to the Contract or to the Participant's Account, as the
case may be. AUL will also send
statements reflecting transactions in a Participant's Account as
required by applicable law. In
addition, every person having voting rights will receive such
reports or Prospectuses concerning
the Variable Account and the Funds as may be required by the 1940
Act and the 1933 Act.
Legal Proceedings
There are no legal proceedings pending to which the Variable
Account is a party, or which would
materially affect the Variable Account.
Legal Matters
Legal matters in connection with the issue and sale of the
Contracts described in this Prospectus
and the organization of AUL, its authority to issue the Contracts
under Indiana law, and the
validity of the forms of the Contracts under Indiana law have
been passed upon by the Associate
General Counsel of AUL.
Legal matters relating to the Federal securities and Federal
income tax laws have been passed
upon by Dechert Price & Rhoads, Washington, D.C.
PERFORMANCE INFORMATION
Performance information for the Investment Accounts is shown
under "Performance of the
Investment Accounts." Performance information for the Investment
Accounts may also appear in
promotional reports and literature to current or prospective
Owners or Participants in the manner
described in this section. Performance information in promotional
reports and literature may
include the yield and effective yield of the Investment Account
investing in the AUL American
Money Market Portfolio ("Money Market Investment Account"), the
yield of the remaining
Investment Accounts, the average annual total return and the
total return of all Investment
Accounts.
Current yield for the Money Market Investment Account will be
based on income received by a
hypothetical investment over a given 7-day period (less expenses
accrued during the period), and
then "annualized" (i.e., assuming that the 7-day yield would be
received for 52 weeks, stated in
terms of an annual percentage return on the investment).
"Effective
yield" for the Money Market Investment Account is calculated in a
manner similar to that used to
calculate yield, but reflects the compounding effect of earnings.
For the remaining Investment Accounts, quotations of yield will
be based on all investment
income per Accumulation Unit earned during a given 30-day period,
less expenses accrued during
the period ("net investment income"), and will be computed by
dividing net investment income by
the value of an Accumulation Unit on the last day of the period.
Quotations of average annual
total return for any Investment Account will be expressed in
terms of the average annual
compounded rate of return on a hypothetical investment in a
Contract over a period of one, five,
and ten years (or, if less, up to the life of the Investment
Account), and
will reflect the deduction of the applicable withdrawal charge,
the mortality and expense risk
charge, and if applicable, the administrative charge.
Hypothetical quotations of average annual
total return may also be shown for an Investment Account for
periods prior to the time that the
Investment Account commenced operations, based upon the
performance of the mutual fund
portfolio in which that Investment Account invests, and will
reflect the deduction of the applicable
withdrawal charge, the administrative charge, and the mortality
and expense risk charge as if, and
to the extent that, such charges had been applicable. Quotations
of total return, actual and
hypothetical, may simultaneously be shown that do not take into
account certain contractual
charges such as the withdrawal charge and the administrative
charge.
Performance information for an Investment Account may be
compared, in promotional reports
and literature, to: (i) the Standard & Poor's 500 Composite Index
("S & P 500"), Dow Jones
Industrial Average ("DJIA"), Donoghue Money Market Institutional
Averages, or other indices
measuring performance of a pertinent group of securities so that
investors may compare an
Investment Account's results with those of a group of securities
widely regarded by investors as
representative of the securities markets in general; (ii) other
variable annuity separate accounts or
other investment products tracked by Lipper Analytical Services,
a widely used independent
research firm which ranks mutual funds and other investment
companies <?FB>by overall
performance, investment objectives, and assets, or tracked by
other ratings services, companies,
publications, or persons who rank separate accounts or other
investment products on overall
performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess
the real rate of return from an investment in the Contract.
Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions
for administrative and
management costs and expenses.
Performance information for any Investment Account reflects only
the performance of a
hypothetical Contract under which Account Value is allocated to
an Investment Account during a
particular time period on which the calculations are based.
Performance information should be
considered in light of the investment objectives and policies,
characteristics, and quality of the
Portfolio of a Fund in which the Investment Account invests, and
the market conditions during
the given time period, and should not be considered as a
representation of what may be achieved
in the future. For a description of the methods used to determine
yield and total return in
promotional reports and literature for the Investment Accounts,
see the Statement of Additional
Information.
Promotional reports and literature may also contain other
information including (i) the ranking of
any Investment Account derived from rankings of variable annuity
separate accounts or other
investment products tracked by Lipper Analytical Services or by
other rating services, companies,
publications, or other persons who rank separate accounts or
other investment products on
overall performance or other criteria, (ii) the effect of
tax-deferred compounding on an
Investment Account's investment returns, or returns in general,
which may be illustrated by
graphs, charts, or otherwise, and which may include a comparison,
at various points in time, of
the return from an investment in a Contract (or returns in
general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a taxable
basis, and (iii) AUL's rating or a
rating of AUL's claim-paying ability by firms that analyze and
rate insurance companies and by
nationally recognized statistical rating organizations.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific
information and financial
statements relating to AUL. The Table of Contents of the
Statement of Additional Information is
set forth below:
GENERAL INFORMATION AND HISTORY 3
DISTRIBUTION OF CONTRACTS 3
CUSTODY OF ASSETS 3
LIMITS ON CONTRIBUTIONS TO RETIREMENT PLANS 3-4
403(b) Programs 3
408 Programs 4
457 Programs 4
Employee Benefit Plans 4
INDEPENDENT ACCOUNTANTS 4
PERFORMANCE INFORMATION 4-7
FINANCIAL STATEMENTS 7-18
A Statement of Additional Information may be obtained by calling
or writing to AUL at the
telephone number and address set forth in the front of this
Prospectus.
No dealer, salesman or any other person is authorized by the AUL
American Unit Trust or by
AUL to give any information or to make any representation other
than as contained in this
Prospectus in connection with the offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a
Registration Statement under the Securities Act of 1933, as
amended, and the Investment
Company Act of 1940, as amended, with respect to the offering
herein described. For further
information with respect to the AUL American Unit Trust, AUL and
its variable annuities,
reference is made thereto and the exhibits filed therewith or
incorporated therein, which include
all contracts or documents referred to herein.
AUL AMERICAN UNIT TRUST
Group Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY
One American Square
Indianapolis, Indiana 46204
PROSPECTUS
Dated: July 12, 1995
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
for
AUL American Unit Trust
AUL American Series Fund, Inc.
July 12, 1995
Sponsored by:
American United Life Insurance Company
P.O. Box 6148
Indianapolis, Indiana 46209-9550
STATEMENT OF
ADDITIONAL INFORMATION
for
AUL American Unit Trust
AUL American Series Fund, Inc.
July 12, 1995
Sponsored by:
American United Life Insurance Company
P.O. Box 6148
Indianapolis, Indiana 46206-6148
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<DRV50,12,0><EL>
<XY2,4><LL29><PS11<LS12<FT1><AL>YES, I am interested in more
information on
American United Life Insurance Company and the AUL American
Series Fund.
<PLS><PS14><U6> <PS11>Please send a current Prospectus to me at
the address listed below.
<PLS><PS14><U6> <PS11>Please send a copy of the Statement of
Additional Information to
me at
<NFO><PS14><U6> <PS11><NFX>the address listed below.
<PLS><DRH50><EL>
<ALD8<PS8<FT2>Please print or type Name
<ALD4><DRH50><EL>
<ALD8>Address
<ALD4><DRH40><EL>
<ALD8>City<IS>State<EM><EM><EM><EM><EM><EM><EM><EM>Zip
Code<EM><EM><EM><EM>
<EL>
<NP><PAGE47,64,3,T><LS13<AL><HYX><KO><EL>
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<XY0,0><STP1,2,100,1,2,0><STR0,0,47,32.3><XY0,8><PS24<LS26<FT3><N
FRO>STATEMENT OF
ADDITIONAL INFORMATION
<FT4>for
AUL American Unit Trust
AUL American Series Fund, Inc.
<ALD10><FT3<PS16>April 28, 1995
<ALD10<FT1>Sponsored by:
<FT2>American United Life Insurance Company
P.O. Box 6148
Indianapolis, Indiana 46206-6148
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<NFRX><EL>
<EL>
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<ALD2><IS><PS6>PEN/SAI/795<EL>
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<XY4.6,13.9><PS12><LS13><FT1>American <AT1,L><TB>United Life
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P.O. Box 6148
Indianapolis, Indiana 46209-9550
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NECESSARY
IF MAILED
IN THE
UNITED STATES
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<EL>
STATEMENT OF ADDITIONAL INFORMATION
July 12, 1995
AUL American Unit Trust
Group Variable Annuity Contracts
Offered By
American United Life Insurance Company
One American Square
Indianapolis, Indiana 46204
(317) 263-1877
Annuity Service Office Mail Address:
P.O. Box 6148, Indianapolis, Indiana 46206-6148
This Statement of Additional Information is not a prospectus and
should be read in conjunction
with the current Prospectus for AUL American Unit Trust, dated
July 12, 1995.
A Prospectus is available without charge by mailing the Business
Reply Mail card included in this
Statement of Additional Information to American United Life
Insurance Company ("AUL").
TABLE OF CONTENTS
Description Page
GENERAL INFORMATION AND HISTORY 3
DISTRIBUTION OF CONTRACTS 3
CUSTODY OF ASSETS 3
LIMITS ON CONTRIBUTIONS TO RETIREMENT PLANS 3-4
403(b) Programs 3
408 Programs 4
457 Programs 4
Employee Benefit Plans 4
INDEPENDENT ACCOUNTANTS 4
PERFORMANCE INFORMATION 4-7
FINANCIAL STATEMENTS 7-18
GENERAL INFORMATION AND HISTORY
For a general description of AUL and AUL American Unit Trust (the
"Variable Account"), see
the section entitled "Information about AUL, The Variable
Account, and The Funds" in the
Prospectus.
DISTRIBUTION OF CONTRACTS
AUL is the Principal Underwriter for the group variable annuity
contracts (the "Contracts")
described in the Prospectus and in this Statement of Additional
Information. AUL is registered
with the Securities and Exchange Commission (the "SEC") as a
broker-dealer. The Contracts are
currently being sold in a continuous offering. While AUL does not
anticipate discontinuing the
offering of the Contracts, it reserves the right to do so. The
Contracts are sold by registered
representatives of AUL who are also licensed insurance agents.
AUL also has sales agreements with various broker-dealers under
which the Contracts will be sold
by registered representatives of the broker-dealers. The
registered representatives are required to
be authorized under applicable state regulations to sell variable
annuity contracts. The
broker-dealers are required to be registered with the SEC and
members of the National
Association of Securities Dealers, Inc.
AUL serves as the Principal Underwriter without compensation from
the Variable Account.
CUSTODY OF ASSETS
The assets of the Variable Account are held by AUL. The assets
are kept physically segregated
and are held separate and apart from the assets of other separate
accounts of AUL and from
AUL's General Account assets. AUL maintains records of all
purchases and redemptions of shares
of AUL American Series Fund, Inc., Acacia Capital Corporation,
Alger American Fund, Invesco
Dynamics Fund, Inc., PBHG Funds, Inc., TCI Portfolios, Inc., T.
Rowe Price Equity Series, Inc.,
Twentieth Century Investors, Inc., Twentieth Century World
Investors, Inc., Vanguard Explorer
Fund, Inc., Vanguard Fixed Income Securities Fund, Inc., Variable
Insurance Products Fund, and
Variable Insurance Products Fund II (each a "Fund" and
collectively the "Funds").
LIMITS ON CONTRIBUTIONS TO RETIREMENT PLANS
403(b) Programs
Contributions to a 403(b) Program are excludable from a
Participant's gross income if they do not
exceed the smallest of the limits calculated under Sections
402(g), 403(b)(2), and 415 of the
Internal Revenue Code. Section 402(g) generally limits a
Participant's salary reduction
contributions to a 403(b) Program to $9,500 a year. The $9,500
limit may be reduced by salary
reduction contributions to another type of retirement plan. A
Participant with at least 15 years of
service for a "qualified employer" (i.e., an educational
organization, hospital, home health service
agency, health and welfare service agency, church or convention
or association of churches)
generally may exceed the $9,500 limit by $3,000 per year, subject
to an aggregate limit of
$15,000 for all years.
Section 403(b)(2) provides an overall limit on Employer and
Participant salary reduction
contributions that may be made to a 403(b) Program. Section
403(b)(2) generally provides that
the maximum amount of contributions a Participant may exclude
from his gross income in any
taxable year is equal to the excess, if any, of:
(a) the amount determined by multiplying 20% of his includable
compensation by the number of
his years of service with his Employer, over
(b) the total amount contributed to retirement plans sponsored by
his Employer, including the
Section 403(b) Program, that were excludable from his gross
income in prior years.
Participants employed by "qualified employers" may elect to have
certain alternative limitations
apply.
Section 415(c) also provides an overall limit on the amount of
Employer and Participant's salary
reduction contributions to a Section 403(b) Program that will be
excludable from an employee's
gross income in a given year. The Section 415(c) limit is the
lesser of (a) $30,000, or (b) 25% of
the Participant's annual compensation. This limit will be reduced
if a Participant also participates
in an Employee Benefit Plan maintained by a business that he or
she controls.
The limits described above do not apply to amounts "rolled over"
from another Section 403(b)
Program. With respect to distributions made prior to 1993,
Section 403(b)(8) of the Internal
Revenue Code permits a Participant who receives a "total
distribution" and certain partial
distributions from a Section 403(b) Program to transfer the
proceeds (excluding amounts
previously included in his gross income) to another Section
403(b) Program within 60 days of
receipt without recognizing income on the distribution. A "total
distribution" is a distribution of
the balance to the credit of a Participant under a Section 403(b)
Program (and all other Section
403(b) Programs in which he has participated in connection with
his employment with his
Employer) (a) on account of his death, disability, or termination
of employment, or (b) after he
reaches age 591/2. Beginning in 1993, a Participant who receives
an "eligible rollover
distribution" will be permitted either to roll over such amount
to another Section 403(b) Program
or an IRA within 60 days of receipt or to make a direct rollover
to another Section 403(b)
Program or an IRA without recognition of income. An "eligible
rollover distribution" means any
distribution to a Participant of all or any taxable portion of
the balance to his credit under a
Section 403(b) Program, other than a required minimum
distribution to a Participant who has
reached age 701/2
and excluding any distribution which is one of a series of
substantially equal payments made (1)
over the life expectancy of the Participant or his beneficiary or
(2) over a specified period of 10
years or more. Provisions of the Internal Revenue Code require
that 20<U7> of every eligible
rollover distribution that is not directly rolled over be
withheld by the payor for federal income
taxes.
408 Programs
Contributions to the individual retirement account of a
Participant under a 408 Program that is
described in Section 408(c) of the Internal Revenue Code are
subject to the limits on
contributions to individual retirement accounts under Section
219(b) of the Internal Revenue
Code. Under Section 219(b) of the Code, contributions to an
individual retirement account are
limited to the lesser of $2,000 per year or the Participant's
annual compensation. An additional
$250 may be contributed if the Participant has a spouse with
little or no compensation for the
year, provided separate accounts are maintained for the
Participant and his spouse, and no more
than $2,000 is contributed to either account in any one year. The
extent to which a Participant
may deduct contributions to this type of 408 Program depends on
his and his spouse's gross
income for the year and whether either participate in another
employer-sponsored retirement plan.
Contributions to a 408 Program that is a simplified employee
pension plan are subject to limits
under Section 402(h) of the Internal Revenue Code. Section 402(h)
currently limits Employer
contributions and Participant salary reduction contributions (if
permitted) to a simplified employee
pension plan to the lesser of (a) 15% of the Participant's
compensation, or (b) $22,500. Salary
reduction contributions, if any, are subject to additional annual
limits.
457 Programs
Contributions on behalf of a Participant to a 457 Program
generally are limited under Section
457(b) of the Internal Revenue Code to the lesser of (a) $7,500
or (b) 331/3% of the Participant's
includable compensation. If the Participant participates in more
than one 457 Program, the $7,500
limit applies to contributions to all such programs. The $7,500
limit is reduced by the amount of
any salary reduction contribution the Participant makes to a
403(b) Program, a 408 Pro-
gram, or an Employee Benefit Program. The Section 457(b) limit is
increased during the last three
years ending before the Participant reaches his normal retirement
age under the 457 Program.
Employee Benefit Plans
The applicable annual limits on contributions to an Employee
Benefit Plan depend upon the type
of plan. Total contributions on behalf of a Participant to all
defined contribution plans maintained
by an Employer are limited under Section 415(c) of the Internal
Revenue Code to the lesser of (a)
$30,000, or (b) 25% of a Participant's annual compensation.
Salary reduction contributions to a
cash-or-deferred arrangement under a profit sharing plan are
subject to additional annual limits.
Contributions to a defined benefit pension plan are actuarially
determined based upon the amount
of benefits the Participants will receive under the plan formula.
The maximum annual benefit any
Participant may receive under an Employer's defined benefit plan
is limited under Section 415(b)
of the Internal Revenue Code. The limits determined under Section
415(b) and (c) of the Internal
Revenue Code are further reduced for a Participant who
participates in a defined contribution plan
and a defined benefit plan maintained by the same employer.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One American Square, Indianapolis,
Indiana 46282, independent
accountants, performs certain accounting and auditing services
for AUL and performs the same
services for the Variable Account. The AUL financial statements
included in this Statement of
Additional Information have been audited to the extent and for
the periods indicated in their
report thereon. As independent accountants, Coopers & Lybrand
L.L.P. audits the financial
statements of AUL and reviews its internal accounting controls,
and performs the same services
for the Variable Account.
PERFORMANCE INFORMATION
Performance information for the Investment Accounts is shown in
the prospectus under
"Performance of the Investment Accounts." Performance information
for the Investment
Accounts may also appear in promotional reports and literature to
current or prospective Owners
or Participants in the manner described in this section.
Performance information in promotional
reports and literature may include the yield and effective yield
of the Investment Account
investing in the AUL American Money Market Portfolio ("Money
Market Investment Account"),
the yield of the remaining Investment Accounts, the average
annual total return and the total
return of all Investment Accounts.
Current yield for the Money Market Investment Account will be
based on the change in the value
of a hypothetical investment (exclusive of capital charges) over
a particular 7-day period, less a
pro-rata share of the Investment Account's expenses accrued over
that period (the "base period"),
and stated as a percentage of the investment at the start of the
base period (the "base period
return"). The base period return is then annualized by
multiplying by 365/7, with the resulting
yield figures carried to at least the nearest hundredth of one
percent.
Calculation of "effective yield" begins with the same "base
period return" used in the calculation
of yield, which is then
annualized to reflect weekly compounding pursuant to the
following formula:
Effective Yield = [(Base Period Return + 1)**365/7] - 1
For the seven day period ending December 31, 1994, the current
yield for the AUL Money
Market Investment Account was 4.30% and the effective yield was
4.39%.
Quotations of yield for the remaining Investment Accounts will be
based on all investment income
per Accumulation Unit earned during a particular 30-day period,
less expenses accrued during the
period ("net investment income"), and will be computed by
dividing net investment income by the
value of the Accumulation Unit on the last day of the period,
according to the following formula:
YIELD = 2[((a - b / cd) + 1)**6 - 1]
where a = net investment income earned during the period by the
Portfolio attributable to shares
owned by the Investment Account,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Accumulation Units outstanding
during the period that were
entitled to receive dividends, and
d = the value (maximum offering period) per Accumulation Unit on
the last day of the period.
For the one year period ending December 31, 1994, the yield for
the Investment Accounts
corresponding to the Portfolios of the AUL American Series Fund,
Inc. was 0.78% for the Equity
Investment Account, 5.28% for the Bond Investment Account, and
2.62% for the Managed
Investment Account.
Quotations of average annual total return for any Investment
Account will be expressed in terms
of the average annual compounded rate of return of a hypothetical
investment in a Contract over a
period of one, five, and ten years (or, if less, up to the life
of the Investment Account), calculated
pursuant to the following formula: P(1 + T) **n = ERV (where P =
a hypothetical initial payment
of $1,000, T = the average annual total return, n = the number of
years, and ERV = the
ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period).
Hypothetical quotations of average annual total return may also
be shown for an Investment
Account for periods prior to the time that the Investment Account
commenced operations based
upon the performance of the mutual fund portfolio in which that
Investment Account invests, as
adjusted for applicable charges. All total return figures reflect
the deduction of the applicable
withdrawal charge, the administrative charge, and the mortality
and expense risk charge.
Quotations of total return, actual and hypothetical, may
simultaneously be shown that do not take
into account certain contractual charges such as the withdrawal
charge and the administrative
charge and quotations of total return may reflect other periods
of time.
The average annual total return is calculated from the actual
inception date of the AUL American
Investment Accounts and from the inception date of the
corresponding mutual funds for all of the
other Investment Accounts. The reported performance is,
therefore, hypothetical to the extent and
for the periods that the Investment Accounts have not been in
existence and reflects the
performance that such Investment Accounts would have achieved had
they invested in the
corresponding Mutual Funds for those periods. For the periods
that an Investment Account has
actually been in existence, however, the performance represents
actual and not hypothetical
performance. The AUL American Equity, Bond, Money Market, and
Managed Investment
Accounts commenced operations on April 10, 1990. The AUL American
Tactical Asset
Allocation Investment Account commenced operations on July 12,
1995; Alger American Growth
Portfolio on January 9, 1989; Calvert Capital Accumulation
Portfolio on July 16, 1991; Invesco
Dynamics Portfolio on September 15, 1967; PBHG Growth Portfolio
on December 19, 1985;
TCI Growth Portfolio on November 20, 1987; Twentieth Century
International Equity Portfolio
on May 9, 1991; TCI Select Investors Portfolio on October 31,
1958; TCI Ultra Investors
Portfolio on November 2, 1981; T. Rowe Price Equity Income
Portfolio on March 31, 1994;
Vanguard Explorer Portfolio on December 11, 1967; Vanguard Short
Term Federal Bond
Portfolio on December 31, 1987; VIP Equity-Income Portfolio on
October 9, 1986; VIP Growth
Portfolio on October 9, 1986; VIP High Income Portfolio on
September 19, 1985; VIP Overseas
Portfolio on January 28, 1987; VIP II Asset Manager Portfolio on
September 6, 1989; VIP II
Contrafund Portfolio on January 3, 1995; and, VIP II Index 500
Portfolio on August 27, 1992.
For the one year period ending December 31, 1994, the average
annual total return for each of the
Investment Accounts was: (7.03%) for AUL American Equity,
(12.65%) for AUL American
Bond, (6.21%) for AUL American Money Market, (10.27%) for AUL
American Managed,
(8.09%) for Alger American Growth, (18.38%) for Calvert Capital
Accumulation, (11.16%) for
Invesco Dynamics, (5.11%) for PBHG Growth, (10.48%) for TCI
Growth, (13.84%) for
Twentieth Century International Equity, (16.67%) for TCI Select
Investors, (12.68%) for TCI
Ultra Investors, (8.93%) for the Vanguard Explorer, (10.27%) for
the Vanguard Short Term
Federal Bond, (3.01%) for VIP Equity-Income, (9.24%) for VIP
Growth, (10.75%) for VIP High
Income, (7.74%) for VIP Overseas, (14.99%) for VIP II Asset
Manager, and (8.90%) for VIP II
Index 500. If the withdrawal charge is not taken into account in
computing the ending redeemable
value, the average annual total return for each of the Investment
Accounts for the one year period
ending December 31, 1994 was: 1.36% for AUL American Equity,
(4.77%) for AUL American
Bond, 2.25% for AUL American Money Market, (2.17%) for AUL
American Managed, 0.20%
for Alger American Growth, (11.01%) for Calvert Capital
Accumulation, (3.15%) for Invesco
Dynamics, 3.45% for PBHG Growth, (2.40%) for TCI Growth, (6.07%)
for Twen-tieth Century International Equity, (9.15%) for TCI
Select
Investors, (4.80%) for TCI Ultra
Investors, (0.71%) for Vanguard Explorer, (2.18%) for Vanguard
Short Term Federal Bond,
5.74% for VIP Equity-Income, (1.05%) for VIP Growth, (2.69%) for
VIP High Income, 0.59%
for VIP Overseas, (7.33%) for VIP II Asset Manager, and (0.68%)
for VIP II Index 500.
For the three year period ending December 31, 1994, the average
annual total return for each of
the Investment Accounts was: 4.42%, for AUL American Equity,
0.17% for AUL American
Bond, (1.39%) for AUL American Money Market, 2.00% for AUL
American Managed, 7.06%
for Alger American Growth, (1.08%) for Calvert Capital
Accumulation, 5.11% for Invesco
Dynamics, 20.14% for PBHG Growth, (1.88%) for TCI Growth, 7.72%
for Twentieth Century
International Equity, (3.99%) for TCI Select Investors, 1.47% for
TCI Ultra Investors, 4.83% for
Vanguard Explorer, (0.38%) for Vanguard Short Term Federal Bond,
9.16% for VIP
Equity-Income, 4.63% for VIP Growth, 8.64% for VIP High Income,
3.08% for VIP Overseas,
and 3.76% for VIP II Asset Manager. If the withdrawal charge is
not taken into account in
computing the ending redeemable value, the average annual total
return for each of the
Investment Accounts for the three year period ending December 31,
1994 was: 7.69%, for AUL
American Equity, 3.30% for AUL American Bond, 1.69% for AUL
American Money Market,
5.19% for AUL American Managed, 10.40% for Alger American Growth,
2.01% for Calvert
Capital Accumulation, 8.39% for Invesco Dynamics, 23.90% for PBHG
Growth, 1.19% for TCI
Growth, 11.09% for Twentieth Century International Equity,
(0.98%) for TCI Select Investors,
4.64% for TCI Ultra Investors, 8.11% for Vanguard Explorer, 2.73%
for Vanguard Short Term
Federal Bond, 12.57% for VIP Equity-Income, 7.91% for VIP Growth,
12.04% for VIP High
Income, 6.31% for VIP Overseas, and 7.00% for VIP II Asset
Manager.
For the five year period ending December 31, 1994, the average
annual total return for each of the
Investment Accounts was: 11.71% for Alger American Growth, 11.99%
for Invesco Dynamics,
18.16% for PBHG Growth, 5.11% for TCI Growth, 2.38% for TCI
Select Investors, 15.63% for
TCI Ultra Investors, 9.21% for Vanguard Explorer, 3.30% for
Vanguard Short Term Federal
Bond, 7.02% for VIP Equity-Income, 7.37% for VIP Growth, 10.43%
for VIP High Income,
2.44% for VIP Overseas, and 7.21% for VIP II Asset Manager. If
the withdrawal charge is not
taken into account in computing the ending redeemable value, the
average annual total return for
each of the Investment Accounts for the five year period ending
December 31, 1994 was: 13.93%
for Alger American Growth, 14.21% for Invesco Dynamics, 20.51%
for PBHG Growth, 7.20%
for TCI Growth, 4.41% for TCI Select Investors, 17.92% for TCI
Ultra Investors, 11.38% for
Vanguard Explorer, 5.35% for Vanguard Short Term Federal Bond,
9.15% for VIP
Equity-Income, 9.50% for VIP Growth, 12.63% for VIP High Income,
4.47% for VIP Overseas,
and 9.34% for VIP II Asset Manager.
For the lesser of (i) ten years or (ii) the actual inception date
for the period ending December 31,
1994, the average annual total return for each of the Investment
Accounts was: 7.02% for AUL
American Equity, 4.80% for AUL American Bond, 0.78% for AUL
American Money Market,
5.44% for AUL American Managed, 14.20% for Alger American Growth,
0.85% for Calvert
Capital Accumulation, 12.50% for Invesco Dynamics, 17.65% for
PBHG Growth, 8.96% for TCI
Growth, 8.45% for Twentieth Century International Equity, 10.59%
for TCI Select Investors,
16.48% for TCI Ultra Investors, 7.98% for Vanguard Explorer,
4.93% for Vanguard Short Term
Federal Bond, 8.65% for VIP Equity-Income, 10.39% for VIP Growth,
8.74% for VIP High
Income, 4.84% for VIP Overseas, 7.65% for VIP II Asset Manager,
and 1.85% for VIP II Index
500. If the withdrawal charge is not taken into account in
computing the ending redeemable value,
the average annual total return for each of the Investment
Accounts for the lesser of (i) ten years
or (ii) the actual inception date for the period ending December
31, 1994 was: 9.27% for AUL
American Equity, 7.00% for AUL American Bond, 2.89% for AUL
American Money Market,
7.65% for AUL American Managed, 15.33% for Alger American Growth,
3.59% for Calvert
Capital Accumulation, 13.30% for Invesco Dynamics, 18.54% for
PBHG Growth, 9.93% for TCI
Growth, 11.35% for Twentieth Century International Equity, 11.38%
for TCI Select Investors,
17.31% for TCI Ultra Investors, 8.75% for Vanguard Explorer,
5.86% for Vanguard Short Term
Federal Bond, 9.52% for VIP Equity-Income, 11.28% for VIP Growth,
9.55% for VIP High
Income, 5.70% for VIP Overseas, 8.82% for VIP II Asset Manager,
and 5.90% for VIP II Index
500.
Performance information for an Investment Account may be
compared, in promotional reports
and literature, to: (i) the Standard & Poor's 500 Composite Index
("S&P 500"), Dow Jones
Industrial Average ("DJIA"), Donoghue Money Market Institutional
Averages, or other indices
that measure performance of a pertinent group of securities so
that investors may compare an
Investment Account's results with those of a group of securities
widely regarded by investors as
representative of the securities markets in general; (ii) other
groups of variable annuity separate
accounts or other investment products tracked by Lipper
Analytical Services, a widely used
independent research firm which ranks mutual funds and other
investment companies by overall
performance, investment objectives, and assets, or tracked by
other services, companies,
publications, or persons who rank such investment companies on
overall performance or other
criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return
from an investment in the Contract. Unmanaged indices may assume
the reinvestment of dividends
but generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for any Investment Account reflects only
the performance of a
hypothetical Contract under which a Participant's Account Value
is allocated to an Investment
Account during a particular time period on which the calculations
are based. Performance
information
should be considered in light of the investment objectives and
policies, characteristics and quality
of the Portfolio of the Funds in which the Investment Account
invests, and the market conditions
during the given time period, and should not be considered as a
representation of what may be
achieved in the future.
Promotional reports and literature may also contain other
information including (i) the ranking of
any Investment Account derived from rankings of variable annuity
separate accounts or other
investment products tracked by Lipper Analytical Services or by
other rating services, companies,
publications, or other persons who rank separate accounts or
other
investment products on
overall performance or other criteria, (ii) the effect of
tax-deferred compounding on an
Investment Account's investment returns, or returns in general,
which may be illustrated by
graphs, charts, or otherwise, and which may include a comparison,
at various points in time, of
the return from an investment in a Contract (or returns in
general)
on a tax-deferred basis
(assuming one or more tax rates) with the return on a taxable
basis, and (iii) AUL's rating or a
rating of AUL's claim-paying ability by firms that analyze and
rate
insurance companies and by
nationally recognized statistical rating organizations.
FINANCIAL STATEMENTS
Financial Statements for the Variable Account, including the
Notes
thereto, are incorporated by
reference to the Annual Report for the Variable Account dated as
of
December 31, 1994.
The financial statements of AUL, which are included in this
Statement of Additional Information,
should be considered only as bearing on the ability of AUL to
meet
its obligations under the
Contracts. They should not be considered as bearing on the
investment performance of the assets
held in the Variable Account.
FINANCIAL STATEMENTS -- AUL
The following financial statements relate solely to the condition
and operations of AUL.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
American United Life Insurance Company
Indianapolis, Indiana
We have audited the accompanying balance sheet of American United
Life Insurance Company as
of December 31, 1994 and 1993, and the related statements of
operations, policyowners' surplus,
and cash flows for the years then ended. These financial
statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An
audit includes assessing the accounting principles used and
significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects,
the financial position of American United Life Insurance Company
as of December 31, 1994 and
1993, and the results of its operations and its cash flows for
the years then ended in conformity
with generally accepted accounting principles.
As discussed in Note 1, in accordance with prescribed accounting
requirements, the Company
changed its method of accounting for postretirement benefits
other than pensions in 1993.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 15, 1995
<PAGE>
AMERICAN UNITED LIFE
BALANCE
December 31, 1994 1993
ASSETS, at amortized cost $4,082,347,294 $3,797,357,439
STOCKS:
Preferred, at cost 3,390,328 3,432,568
Common, at market 26,762,298 30,820,966
30,152,626 34,253,534
MORTGAGE LOANS 1,051,896,715 1,072,059,280
SHORT-TERM INVESTMENTS, at cost 69,482,580 26,166,519
REAL ESTATE:
Investment properties, net 52,938,109 52,624,565
Home office, net 27,347,204 27,665,700
80,285,313 80,290,265
OTHER:
Policy loans 117,708,964 111,975,797
Cash and cash equivalents 8,816,165 5,340,572
Premiums deferred and uncollected 38,751,657 45,490,683
Accrued investment income 80,065,880 74,760,397
Other assets 44,866,999 30,827,000
Separate Account assets 351,336,512 199,489,634
641,546,177 467,884,083
$5,955,710,705
$5,478,011,120
INSURANCE COMPANY
SHEET
December 31, 1994 1993
LIABILITIES AND POLICYOWNERS' SURPLUS
POLICY RESERVES
Deposit administration and supplementary contracts $3,672,096,982
$3,506,066,730
Life and annuities 1,237,321,589 1,132,906,136
Accident and health 85,463,733 76,324,114
4,994,882,304 4,715,296,980
POLICY AND CONTRACT LIABILITIES
Policy claims in process of settlement 74,603,465 61,467,932
Policy dividends on deposit at interest 59,504,981 57,072,770
Policy dividends payable in following year 20,543,858 18,220,532
Other policy and contract liabilities 37,262,603 27,033,632
191,914,907
163,794,866
GENERAL LIABILITIES AND OTHER RESERVES
Accrued commissions and general expenses 4,492,396 4,826,393
Taxes, including federal income taxes 17,900,917 14,238,938
Unearned interest and rents 2,860,495 2,787,318
Other liabilities 40,967,710 51,565,645
Mortality and morbidity fluctuation reserve 5,902,184 4,420,848
Asset valuation reserve 70,496,028 69,364,359
Interest maintenance reserve 23,820,990 20,687,682
Contingent liability for reinsurance 841,508 2,807,642
Separate Account liabilities 351,336,512 199,489,634
518,618,740
370,188,459
TOTAL LIABILITIES 5,705,415,951 5,249,280,305
POLICYOWNERS' SURPLUS 250,294,754 228,730,815
$5,955,710,705
$5,478,011,120
The accompanying notes are an integral part of the financial
statements.
AMERICAN UNITED LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS
Year Ended December 31, 1994 1993
PREMIUM AND OTHER INCOME
Life and annuities $306,862,818 $292,188,444
Accident and health 101,189,449 105,299,051
Deposit administration and supplementary contracts 351,114,943
251,254,086
Net investment income 436,007,437 453,906,805
1,195,174,647 1,102,648,386
BENEFITS AND EXPENSES
Death benefits 109,503,889 99,967,671
Accident and health and disability benefits 75,377,072 65,596,128
Annuity benefits 88,718,053 84,211,945
Surrender benefits and other fund withdrawals 288,847,121
223,316,976
Supplementary contracts and endowments 1,699,279 1,920,632
Other benefits 7,863,187 7,447,287
Increase in policy reserves:
Deposit administration and supplementary contracts 166,030,251
246,391,493
Life and annuities 104,415,453 72,295,092
Accident and health 9,139,619 18,692,514
Separate accounts 152,033,307 64,994,675
Other (8,704,756) (93,366)
Reserve adjustment on reinsurance assumed (38,713,806)
(1,947,556)
Dividends to policyowners 21,039,163 24,665,535
Commissions and service fees 75,300,197 68,166,734
General expenses 76,019,074 66,531,914
Taxes, licenses and fees 11,074,820 9,948,921
1,139,641,923 1,052,106,595
Net gain from operations before federal income taxes 55,532,724
50,541,791
Federal income taxes 27,058,888 18,586,986
Net gain from operations before net realized
capital losses 28,473,836 31,954,805
Net realized capital losses net of taxes (477,559) (2,221,432)
NET INCOME $ 27,996,277 $ 29,733,373
AMERICAN UNITED LIFE INSURANCE COMPANY
STATEMENT OF POLICYOWNERS' SURPLUS
Year Ended December 31, 1994 1993
Policyowners' surplus, beginning of year $228,730,815
$207,361,479
Add (deduct):
Net income 27,996,277 29,733,373
Change in statement value of investments (3,504,915) 948,528
Change in contingent liability for reinsurance 1,966,134
2,528,287
Change in asset valuation reserve (1,131,669) (3,720,535)
Cumulative effect on prior years of change in accounting
principle
(see Notes 1 and 5) (7,521,000)
Other (3,761,888) (599,317)
Policyowners' surplus, end of year $250,294,754 $228,730,815
The accompanying notes are an integral part of the financial
statements.
AMERICAN UNITED LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
Year Ended December 31, 1994 1993
CASH FROM OPERATIONS:
Premiums and other policy considerations $755,594,547
$636,428,412
Investment income 427,781,227 439,012,508
1,183,375,774 1,075,440,920
Benefits 704,331,452 544,322,389
Commissions and general expenses 122,334,264 141,248,115
Federal income taxes 23,674,736 17,193,020
Increase (decrease) in policy loans 5,733,167 (5,055,611)
Dividends to policyowners 18,715,837 26,215,303
874,789,456 723,923,216
NET CASH FROM OPERATIONS 308,586,318 351,517,704
Proceeds from investments sold, redeemed or matured:
Bonds 525,799,172 664,901,326
Stocks 4,073,265 2,890,773
Mortgage loans 131,105,341 118,994,847
Real estate 605,533 4,652,637
Other invested assets 79,704 (1,108)
Tax on capital gains, including amounts in asset and interest
maintenance reserves (4,551,265) (15,431,717)
Other sources 26,156,329 20,188,738
TOTAL CASH PROVIDED 991,854,397 1,147,713,200
Cost of investments acquired:
Bonds 801,182,111 1,100,318,851
Stocks 759,415 2,943,762
Mortgage loans 111,872,905 88,834,295
Real estate 2,391,763 3,285,426
Other uses 28,856,549 18,871,339
TOTAL CASH APPLIED 945,062,743 1,214,253,673
Net change in cash and short-term investments 46,791,654
(66,540,473)
Cash and short-term investments, beginning of year 31,507,091
98,047,564
Cash and short-term investments, end of year $78,298,745
$31,507,091
The accompanying notes are an integral part of the financial
statements.
NOTES TO FINANCIAL STATEMENTS AMERICAN UNITED LIFE INSURANCE
COMPANY
ACCOUNTING POLICIES:
a. Basis of Presentation: The financial statements have been
prepared on the basis of accounting
practices prescribed or permitted by the Insurance Department of
the State of Indiana, which
practices are regarded as generally accepted accounting
principles (GAAP) for mutual life
insurance companies.
In January 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial
Accounting Standards (SFAS) No. 120, Accounting and Reporting by
Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain
Long-Duration Participating Contracts. This
Statement, effective for fiscal years beginning after December
15, 1995, extends the requirements
of SFAS Nos. 60, 97, and 113 to mutual life insurance companies.
It also defers the effective date
of Interpretation 40, previously issued by the FASB in 1993, for
fiscal years beginning after
December 15, 1995. Interpretation 40 indicated that financial
statements of mutual life insurance
companies prepared on a statutory basis will no longer be
considered in conformity with GAAP.
InNOTES TO FINANCIAL STATEMENTS (Continued)
ACCOUNTING POLICIES (Continued):
a. addition, the American Institute of Certified Public
Accountants has issued Statement of
Position (SOP) 95-1, Accounting for Certain Insurance Activities
of Mutual Life Insurance
Enterprises, which is also effective for fiscal years beginning
after December 15, 1995. This SOP
establishes accounting for certain participating life insurance
contracts.
The effect of initially applying, SFAS No. 120, Interpretation
40, and SOP 95-1, is to be reported
retroactively through restatement of all previously issued annual
financial statements presented for
comparative purposes for fiscal years beginning after December
15, 1992. Management has
determined it will initiate the accounting changes; the effect of
which has not yet been determined.
b. Accounting Change: In 1993, the Company began accruing for
certain postretirement benefits
other than pensions as prescribed by statutory accounting
practices. The projected future cost of
postretirement benefits, such as health care and life insurance,
is to be recognized as an expense
during the active service period of the employee. Prior to 1993,
the Company recognized expense
in the period postretirement benefits were paid. This change
resulted in a net charge to surplus of
$7,521,000 in 1993. (See Note 5.) The expense charged to the
statement of operations for 1993
was not significantly affected by the change in accounting.
c. Investments: Bonds and mortgage loans are reported principally
at amortized cost; preferred
stocks are reported at cost (market value was $3,251,000 and
$3,318,000 at December 31, 1994
and 1993, respectively); common stocks are reported at market
(cost was $25,269,000 and
$27,816,000 at December 31, 1994 and 1993, respectively);
short-term investments include
investments with maturities of one year or less and are reported
at cost, which approximates
market; policy loans are reported at unpaid balances and real
estate is reported at cost less
allowances for depreciation. Depreciation is provided over the
estimated useful lives of the related
assets using the straight-line method.
Market values of bonds, common stocks, and preferred stocks, that
are publicly traded, are
determined based on published market values. For bonds not
publicly traded, the market value is
based on discounted cash flows using current yields of comparable
publicly traded securities.
Realized gains and losses on sale or maturity of investments are
determined on the basis of
specific identification. Unrealized gains and losses are reported
as a component of surplus without
recognizing the effect of related income taxes. Realized gains,
including those deferred in the
interest maintenance reserve, were reduced by federal taxes of
$4,551,265 and $15,431,717 in
1994 and 1993, respectively.
d. Asset Valuation and Interest Maintenance Reserve: The asset
valuation reserve is provided
from policyowners' surplus in accordance with statutory
accounting requirements. The interest
maintenance reserve, reduced by federal income taxes of
$4,488,055 and $12,658,650 in 1994
and 1993, respectively, defers the recognition of net gains
realized on the sale of fixed maturity
investments, resulting from changes in interest rates. Such gains
will be amortized to income over
the remaining lives of the assets sold.
e. Separate Accounts: The assets of the Separate Accounts shown
in the balance sheet are based
on market value and represent funds which are segregated for
variable annuity contracts and
equity-based pension and profit sharing plans.
The statement of operations includes the operations of the
Separate Accounts. Realized and
unrealized gains or losses on investments held by the Separate
Accounts are accounted for as
prescribed by the National Association of Insurance Commissioners
(NAIC) as an addition to or
reduction in net investment income. Separate Account income is
offset by payments and
provisions for benefits and services, thus having no effect on
net income or policyowners' surplus.
f. Policy Reserves: Policy reserves are based on mortality,
morbidity and interest assumptions
prescribed by regulatory authorities.
An additional reserve for mortality and morbidity fluctuations is
maintained for certain policies to
provide for the risk that actual mortality and morbidity
experience may be less favorable than that
assumed in the calculation of the statutory policy reserves. This
reserve is adjusted annually and
the adjustment primarily reflects a portion of the difference
between the current year's mortality
and morbidity experience and similar average experience for
preceding years. Changes in this
reserve are reflected in operations.
Claim liabilities include provisions for reported claims and
estimates based on historical
experience, for claims incurred but not reported. Such claim
liabilities have been reduced at
December 31, 1994 and 1993 by $32,054,748 and $25,902,451,
respectively, for reinsurance
ceded.
The Company received written approval from the Insurance
Department of the State of Indiana to
record a "Separate Account Transfer Credit" for the difference
between reserves maintained in the
General Account and reserves maintained in the Separate Account
after the transfer of funds. As
of December 31, 1994 and 1993, that permitted transaction
increased statutory surplus by
approximately $14,000,000 and $2,200,000, respectively.
NOTES TO FINANCIAL STATEMENTS (Continued)
ACCOUNTING POLICIES (Continued): Federal Income Taxes:
Generally, no provision is made
for deferred income taxes due to timing differences that may
exist between financial reporting and
taxable income.
h. Revenues and Expenses: Premium income is recognized over the
premium paying period. Costs
of acquiring new business are expensed when incurred and credit
is not taken, other than by
statutory reserve modification methods applicable to some
policies, for the expectation that such
costs will be recovered from future premium income.
Policyowner dividends are determined by crediting each
participating policy with its share of the
divisible surplus as apportioned by the Company.
i. Retirement Plans: Annual provisions for employees' and
agents' retirement plans are computed
actuarially and include amortization of past service cost over
approximately 20 years.
j. Litigation: Various lawsuits have arisen in the ordinary
course of the Company's business. In
each of the matters, the Company believes its defenses are
meritorious and that the eventual
outcome will not have a material effect on the Company's
financial position.
2. INVESTMENTS:
The admitted values (principally amortized cost) and estimated
market values of investments in
bonds and short-term investments at December 31, 1994 and 1993
are as follows:
December 31, 1994
Admitted Value Gross Unrealized Gains Gross Unrealized
Losses Estimated Market Value
U.S. Treasury securities and obligations of U.S. government
agencies and corporations
$52,764,874 $19,491 $1,833,537 $50,950,828
Obligations of states and political subdivisions 101,141,851
500,600 2,496,531 99,145,919
Debt securities issued by foreign governments 87,740,434 931,396
5,796,978 82,874,852
Corporate securities 2,537,870,822 44,908,139 112,059,750
2,470,719,212
Mortgage-backed securities 1,372,311,893 20,531,761 64,300,906
1,328,542,748
$4,151,829,874 $66,891,387 $186,487,702 $4,032,233,559
December 31, 1993
Admitted Value Gross Unrealized Gains Gross Unrealized
Losses Estimated Market Value
U.S. Treasury securities and obligations of U.S. government
agencies and corporations
$98,843,506 $3,174,049 $219,699 $101,797,856
Obligations of states and political subdivisions 59,698,176
2,727,935 150,023 62,276,088
Debt securities issued by foreign governments 85,316,601
5,245,089 191,488 90,370,202
Corporate securities 2,305,106,456 196,125,740 9,196,390
2,492,035,806
Mortgage-backed securities 1,274,559,219 133,167,009 3,554,506
1,404,171,722
$ 3,823,523,958 $340,439,822 $13,312,106 $4,150,651,674
Issues of various public utilities account for approximately 21%
of the admitted value of the
Company's corporate securities.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. INVESTMENTS (Continued):
The admitted value and estimated market value of bonds and
short-term investments at December
31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from
contractual maturities because borrowers may have the right to
call or prepay obligations with or
without call or prepayment penalties.
Admitted Value Estimated Market Value
Due in one year or less $169,445,048 $169,908,280
Due after one year through five years 562,843,455 544,361,589
Due after five years through ten years 1,104,665,185
1,060,880,227
Due after ten years 942,564,293 928,540,715
2,779,517,981 2,703,690,811
Mortgage-backed securities 1,372,311,893 1,328,542,748
$4,151,829,874 $4,032,233,559
Proceeds from sales, maturities, or calls of investments in bonds
during 1994 were approximately
$525,799,000. Gross gains of $10,353,000 and gross losses of
$3,025,000 were realized. Net
capital gains of approximately $7,538,000 were transferred to
IMR.
Proceeds from sales, maturities, or calls of investments in bonds
during 1993 were approximately
$664,901,000. Gross gains of $26,947,000 and gross losses of
$79,000 were realized. Net capital
gains of approximately $26,771,000 were transferred to the
Interest Maintenance Reserve (IMR).
Net investment income consists of the following:
1994 1993
Interest $437,070,589 $442,857,948
Dividends 6,089,743 3,473,269
Rents 13,431,856 13,279,286
Gains on separate account investments:
Realized 11,064,625 4,944,639
Unrealized (16,414,460) 6,963,898
Other 4,275,265 2,251,636
455,517,618 473,770,676
Less investment expenses 19,510,181 19,863,871
Net investment income $436,007,437 $453,906,805
At December 31, 1994, the preferred stock unrealized depreciation
of approximately $139,000
has not been reflected in the financial statements. The change in
the unrealized depreciation of
preferred stocks amounted to approximately $24,000 of
depreciation and $28,000 of appreciation
in 1994 and 1993, respectively.
At December 31, 1994, the common stock unrealized appreciation of
approximately $1,493,000
is comprised of $1,525,000 of unrealized gains and $32,000 of
unrealized losses and has been
reflected directly in policyowners' surplus. The change in the
unrealized appreciation of common
stocks amounted to approximately $1,512,000 and $34,000 of
depreciation in 1994 and 1993,
respectively.
The Company maintains a diversified mortgage loan portfolio and
exercises internal limits on
concentrations of loans by geographic area, industry, use and
individual mortgagor. Mortgage
loans on various properties in eight states (California, Florida,
North Carolina, Indiana, Texas,
Illinois, Georgia and Ohio) account for approximately 59<U7> of
the total amortized cost of the
Company's mortgage loans. The remaining mortgage loans relate to
properties located throughout
the United States. A total of approximately $83,000,000 of
mortgage loans have been issued on
40 geographically diversified properties of four large retailers,
K-Mart, Wal-Mart, Publix, and
Fleming Companies. The fair value of the aggregate mortgage loan
portfolio approximates
$1,075,000,000 and was estimated by discounting the future cash
flows using current rates at
which similar loans would be made to borrowers with similar
credit ratings for similar maturities.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. INVESTMENTS (Continued):
The Company has outstanding mortgage loan commitments at December
31, 1994 of
approximately $54,000,000. The Company has made no financial
guarantees other than those
described in Note 8.
3. REAL ESTATE:
The Company owns its home office and occupies approximately
35<U7> of the complex; the
remaining space is available for lease to third parties. Real
estate is recorded net of accumulated
depreciation of $24,474,746 and $23,078,697 for investment
properties and $10,633,240 and
$9,340,266 for home office at December 31, 1994 and 1993,
respectively. Depreciation expense
on real estate amounted to $4,488,377 and $3,544,565 in 1994 and
1993, respectively.
4. POLICY RESERVES
Reserves for life policies are computed principally by the net
level and modified preliminary term
methods on the basis of interest rates (2 1/2% to 6%) and
mortality assumptions (1941, 1958 and
1980 CSO Tables) prescribed by state regulatory authorities.
Reserves for annuities and deposit
administration contacts are computed on the basis of interest
rates ranging from 2 1/2% to 10%.
At December 31, 1994 and 1993 these reserves consisted of the
following:
1994 1993
Individual, group and credit life policies $719,787,943
$641,849,881
Annuities and deposit administration funds 4,199,320,853
4,013,656,702
Accident and health and other reserves 166,873,578 151,660,576
Less reinsurance ceded (91,100,070) (91,870,179)
$4,994,882,304 $4,715,296,980
The statement values of the reserves for annuities and deposit
administration funds approximate
the estimated fair values at December 31, 1994. The estimated
fair values of the reserves
approximate the statement values because interest rates credited
to account balances approximate
current rates paid on similar investments and are not generally
guaranteed beyond one year. Fair
values for other insurance reserves are not required to be
disclosed. However, the estimated fair
values of liabilities for all insurance liabilities are taken
into consideration in the Company's overall
management of interest rate risk.
Included in the reserves for individual, group, and credit life
policies are approximately $38
million of reserves assumed from Educators Mutual Life Insurance
Company during 1994.
5. EMPLOYEES' AND AGENTS' BENEFIT PLANS:
The Company has a noncontributory defined benefit pension plan
covering substantially all
employees. Company contributions to the employee plan are made
annually in an amount between
the minimum ERISA required contribution and the maximum
tax-deductible contribution. Such
amounts are expensed as contributed. Contributions made to the
plan were $2,215,000 in 1994
and $2,105,000 in 1993. The following benefit information for the
employees' defined benefit plan
was determined by outside actuaries as of January 1, 1994 and
1993, respectively, the most recent
actuarial valuation dates:
1994 1993
Actuarial present value of accumulated benefits for the
employees' defined benefit plan:
Vested $17,138,000 $14,897,000
Nonvested 291,000 906,000
$17,429,000 $15,803,000
Related net assets available for plan benefits $23,595,000
$22,272,000
The Company has a defined contribution plan covering employees
who have completed one full
calendar year of service. Annual contributions are made by the
Company in amounts based upon
the Company's financial results. Company contributions to the
plan during 1994 and 1993 were
$1,265,000 and $1,009,000, respectively.
The Company has entered into deferred compensation agreements
with several directors, key
management employees, agents and general agents. These deferred
amounts are payable
according to the terms and subject to the conditions of said
agreements.
NOTES TO FINANCIAL STATEMENTS (Continued)
EMPLOYEES` AND AGENTS` BENEFIT PLANS (Continued):
The Company also has a defined contribution pension plan and a
401(k) plan covering
substantially all of the agents, except general agents.
Contributions of 3% of defined commissions
(plus 3% for commissions over the Social Security wage base) are
made to the pension plan. An
additional contribution of 3% of defined commissions are made to
a 401(k) plan. Company
contributions expensed for these plans for 1994 and 1993 are as
follows:
1994 1993
Agents' pension plan $349,000 $174,000
Agents' 401(k) plan 262,000 200,000
$ 611,000 $ 374,000
The funds for all plans are held by the Company under deposit
administration and group annuity
contracts.
In addition to providing pension benefits, the Company provides
certain health care and life
insurance benefits (postretirement benefits) for retired
employees and certain agents (retirees).
Substantially all employees and agents may become eligible for
such benefits if they reach
retirement age while working for the Company.
Net periodic postretirement benefit costs for the year ended
December 31, 1994 and 1993 were as
follows:
1994 1993
Service cost $252,000 $181,000
Interest cost 594,000 570,000
Amortization of unrecognized loss 42,000 --
Net postretirement benefit cost $888,000 $751,000
Company-paid premiums in 1994 were $797,000. Claims incurred in
1993 for benefits was not
significantly different than the above provision. Accrued
postretirement benefits as of December
31, 1994 were as follows:
1994 1993
Accumulated postretirement benefit obligation (APBO): Retirees
and their dependents
$5,620,000 $4,713,000
Active employees fully eligible to retire and
receive benefits 2,523,000 2,196,000
Active employees not fully eligible 843,000 612,000
Unrecognized loss (1,374,000) --
Total APBO $7,612,000 $7,521,000
The assumed discount rate used in determining the accumulated
postretirement benefit was 8.0%
and the assumed health care cost trend rate was 10% graded to 6%
over 50 years. Compensation
rates were assumed to increase 6% at each year end. The health
coverage for retirees age 65 and
over is capped in the year 2000.
The health care cost trend rate assumption has a significant
effect on the amounts reported. An
increase in the assumed health care cost trend rates by one
percentage point would increase the
accumulated postretirement benefit obligation as of December 31,
1994 by $582,000 and increase
the net periodic postretirement benefit cost for 1994 by $49,000.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. FEDERAL INCOME TAXES:
Following is a reconciliation between the amount of tax computed
at the federal statutory rate of
35% in 1994 and 1993, respectively, and the federal income tax
provision reflected in the
statement of operations:
1994 1993
Income tax computed at statutory rate $19,436,453 $17,689,627
Increases (decreases) in taxes resulting from:
Bond discount accrual (917,099) (1,096,322)
Reserve adjustments 476,495 3,410,101
Tax-exempt income (1,990,012) (2,048,109)
Accelerated depreciation (822,622) (1,014,963)
Policyowner dividends 1,006,132 (83,240<FO>)
Deferred acquisition costs 4,160,043 2,782,043
Change in mortality and morbidity fluctuation reserve 518,468
239,090
Change in discounting of accident and health reserves (131,267)
570,701
Change in interest maintenance reserve (897,837) (726,911)
Mutual company differential earnings amount,
Current year 10,295,733 1,990,460
Changes in prior period estimates (4,263,100) (2,720,882)
Other 187,501 (404,609)
Federal income taxes $27,058,888 $18,586,986
7. REINSURANCE:
The Company is a party to various reinsurance contracts under
which it receives premiums as a
reinsurer and reimburses the ceding companies for portions of the
claims incurred. At December
31, 1994 and 1993, life reinsurance assumed was approximately 62%
and 59%, respectively, of
life insurance in force. Premiums on life reinsurance assumed
were approximately 43% and 42%
of life insurance premium income in 1994 and 1993, respectively.
Premiums on accident and
health reinsurance assumed were approximately 53% and 45% of
accident and health premium
income in 1994 and 1993, respectively.
The Company cedes that portion of the total risk on an individual
life in excess of $1,000,000. For
accident and health and disability policies, the Company has
established various limits of coverage
it will retain on any one policyowner and cedes the remainder of
such coverage. Certain statistical
data with respect to reinsurance ceded follows:
1994 1993
Reinsurance ceded on ordinary life in force $6,248,499,000
$5,048,902,000
Reinsurance ceded on group and credit life in force 1,631,068,000
1,699,287,000
Life reinsurance premiums ceded 26,562,000 20,621,000
Accident and health reinsurance premiums ceded 71,318,000
57,336,000
The Company accounts for all reinsurance agreements as transfers
of risk. Premiums for policies
reinsured with other companies have been reported as a reduction
of premium income and
amounts applicable to reinsurance ceded for policy reserves and
claim liabilities have been
reported as reductions of these items.
Six reinsurers account for approximately 60<U7> of the Company's
December 31, 1994 ceded
reserves for life and accident and health insurance. The
remainder of such ceded reserves is spread
among numerous reinsurers. If companies to which reinsurance has
been ceded are unable to meet
obligations under the reinsurance agreements, the Company would
remain liable. Changes in such
contingent liabilities are reflected directly to policyowners'
surplus.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. STRATEGIC ALLIANCE:
In September 1994, the Company and State Life Insurance Company
(State Life) entered into a
strategic alliance (the alliance). The Company and State Life
will remain separate entities, in that
each will retain its own assets, liabilities, surplus, policies,
and policyowners. There will also be
separate but common boards of directors.
In accordance with the alliance, the Company has guaranteed the
insurance liabilities of State Life
to its policyholders, including present policyholders and those
acquired during the period of the
alliance (initially ten years), in the event State Life becomes
unable to honor such insurance
liabilities. As of December 31, 1994, the Company has not
recorded any liabilities relating to this
guarantee.
No dealer, salesman or any other person is authorized by the AUL
American Unit Trust or by
AUL to give any information or to make any representation other
than as contained in this
Statement Of Additional Information in connection with the
offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a
Registration Statement under the Securities Act of 1933, as
amended, and the Investment
Company Act of 1940, as amended, with respect to the offering
herein described. For further
information with respect to the AUL American Unit Trust, AUL and
its variable annuities,
reference is made thereto and the exhibits filed therewith or
incorporated therein, which include
all contracts or documents referred to herein.
AUL AMERICAN UNIT TRUST
Group Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY
One American Square
Indianapolis, Indiana 46204
STATEMENT OF ADDITIONAL INFORMATION
Dated: July 12, 1995
