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As filed with the Securities and Exchange Commission on April 26, 1996
File No. 33-31375
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE
[X] SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ____
[X] Post-Effective Amendment No. 13
and/or
REGISTRATION STATEMENT UNDER THE
[X] INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 14
(Check appropriate box or boxes)
AUL AMERICAN UNIT TRUST
(Exact Name of Registrant)
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Name of Depositor)
One American Square, Indianapolis, Indiana 46204
(Address of Depositor's Principal Executive Offices)(Zip Code)
Depositor's Telephone Number: (317) 263-1877
Richard A. Wacker, One American Square, Indianapolis, Indiana 46204
(Name and Address of Agent for Service)
Title of Securities Being Registered: Interests in group variable annuity
contracts
Declaration Pursuant to Rule 24f-2: Pursuant to Rule 24f-2 under the Investment
Company Act of 1940, the Registrant has registered an indefinite number or
amount of securities under the Securities Act of 1933. Registrant will file its
notice pursuant to Rule 24f-2 for its fiscal year ending December 31, 1996 on or
before February 29, 1997.
It is proposed that this filing will become effective (Check appropriate Space)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
- ----- --------------
60 days after filing pursuant to paragraph (a)(i) of Rule 485
on (date) pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a) (ii) of Rule 485
this post-effective amendment designates a new effective date for a
previously filed amendment.
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CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information Required by Form N-4
PART A - PROSPECTUS
Item of Form N-4 Prospectus Caption
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1. Cover Page ...........................Cover Page
2. Definitions ..........................Definitions
3. Synopsis .............................Summary; Expense Table
4. Condensed Financial Information ......Condensed Financial Information
5. General Description ..................Information About AUL, The Variable
Account, and the Funds; Voting
Shares of the Funds
6. Deductions and Expenses ..............Charges and Deductions
7. General Description of Variable
Annuity Contracts ...................The Contracts; Contributions and
Contract Values During the
Accumulation Period; Cash
Withdrawals and Death Benefits;
Summary
8. Annuity Period .......................Annuity Period
9. Death Benefit ........................Cash Withdrawals and The Death Benefit
10. Purchase and Policy Values ...........Contributions and Contract Values
During the Accumulation Period
11. Redemptions ..........................Cash Withdrawals and The Death Benefit
12. Taxes ................................Federal Tax Matters
13. Legal Proceedings ....................Other Information
14. Table of Contents for the Statement
of Additional Information ...........Statement of Additional Information
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PART B - STATEMENT OF ADDITIONAL INFORMATION
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Statement of Additional Statement of Additional
Information Item of Form N-4 Information Caption
15. Cover Page ...........................Cover Page
16. Table of Contents ....................Table of Contents
17. General Information and History ......General Information and History
18. Services .............................Custody of Assets; Independent
Accountants
19. Purchase of Securities Being Offered .Distribution of Contracts;
(Prospectus) Charges and
and Deductions
20. Underwriters .........................Distribution of Contracts
21. Calculation of Performance Data ......Performance Information
22. Annuity Payments .....................(Prospectus) Annuity Period
23. Financial Statements .................Financial Statements
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PART C - OTHER INFORMATION
Item of Form N-4 Part C Caption
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24. Financial Statements and Exhibits ....Statement of Additional Information)
Financial Statements and Exhibits
25. Directors and Officers of the
Depositor ...........................Directors and Officers of AUL
26. Persons Controlled By or Under
Common Control with Depositor
or Registrant .......................Persons Controlled By or Under Common
Control With the Depositor or
Registrant
27. Number of Policyowners ...............Number of Contractholders
28. Indemnification ......................Indemnification
29. Principal Underwriters ...............Principal Underwriters
30. Location of Accounts and Records .....Location of Accounts and Records
31. Management Services ..................Management Services
32. Undertakings .........................Undertakings
33. Signature Page .......................Signatures
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<PAGE>
PROSPECTUS
for
AUL American Unit Trust
AUL American Series Fund, Inc.
Dated May 1, 1996
Sponsored by:
American United Life Insurance Company(R)
P.O. Box 6148
Indianapolis, Indiana 46206-6148
AUL
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Prospectus
AUL American Unit Trust
GROUP VARIABLE ANNUITY CONTRACTS
Offered By
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46204
(800) 634-1629
Annuity Service Office Mailing Address:
P.O. Box 6148, Indianapolis, Indiana 46206-6148
The date of this Prospectus is May 1, 1996.
This Prospectus describes group annuity contracts (the "Contracts") offered
by American United Life Insurance Company(R) ("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:
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Portfolio Mutual Fund Investment Adviser
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AUL American Equity AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Bond AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Managed AUL American Series Fund, Inc. American United Life Insurance Company(R)
AUL American Money Market AUL American Series Fund, Inc. American United Life Insurance Company(R)
Alger American Growth Alger American Fund Fred Alger & Company
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.
</TABLE>
Contributions may be allocated to one or more Investment Accounts available
under a Contract. Not all of the Investment Accounts may be available under a
particular Contract and some of the Investment Accounts are either not available
for certain types of Contracts or are not in operation as of the date of this
Prospectus. 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 May 1, 1996, 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.
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TABLE OF CONTENTS
Description Page
DEFINITIONS............................................. 4-5
SUMMARY................................................. 5-8
Purpose of the Contracts.............................. 6
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........................................ 9
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(R)............. 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........................ 20-21
Contributions under the Contracts..................... 20
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............................ 21
Participant's Variable Account Value.................. 21
Accumulation Units................................... 21
Accumulation Unit Value.............................. 21
Net Investment Factor................................ 21
CASH WITHDRAWALS AND THE DEATH
BENEFIT............................................... 22-25
Cash Withdrawals...................................... 22
Systematic Withdrawal Service for 403(b) and
408 Programs......................................... 22
Constraints on Withdrawals............................ 22
General.............................................. 22
403(b) Programs...................................... 23
Texas Optional Retirement Program.................... 23
The Death Benefit..................................... 23
Termination by the Owner.............................. 24
Termination by AUL.................................... 25
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......................................... 27
Variations in Charges................................. 27
Guarantee of Certain Charges.......................... 27
Expenses of the Funds................................. 27
ANNUITY PERIOD.......................................... 27-28
General............................................... 27
Annuity Options....................................... 28
Option 1 - Life Annuity.............................. 28
Option 2 - Certain and Life Annuity.................. 28
Option 3 - Survivorship Annuity...................... 28
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....................... 30
Loans from the Fixed Account.......................... 30
MORE ABOUT THE CONTRACTS................................ 30-31
Designation and Change of Beneficiary................. 30
Assignability......................................... 31
Proof of Age and Survival............................. 31
Misstatements......................................... 31
Acceptance of New Participants or Contributions....... 31
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................................ 32
403(b) Programs....................................... 32
408 Programs.......................................... 32
457 Programs.......................................... 33
Tax Penalty........................................... 33
Withholding........................................... 33
Effect of Tax-Deferred Accumulation................... 33
OTHER INFORMATION....................................... 34-36
Voting of Shares of the Funds......................... 34
Substitution of Investments........................... 35
Changes to Comply with Law and Amendments............. 35
Reservation of Rights................................. 35
Periodic Reports...................................... 35
Legal Proceedings..................................... 36
Legal Matters......................................... 36
PERFORMANCE INFORMATION................................. 36-37
STATEMENT OF ADDITIONAL
INFORMATION........................................... 37
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4
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(R)
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.,
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5
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. Not all of the
Investment Accounts may be available under a particular Contract and some of the
Investment Accounts are either not available for certain types of Contracts or
are not in operation as of the date of this Prospectus.
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.
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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 sub-accounts referred to as 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 the
Equity, Bond, Money Market, and Managed Portfolios. 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 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 either are not available
for certain types of Contracts or are not in operation as of the date of this
Prospectus. 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
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7
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 minimum 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 as of the date the transfer request is received by AUL at its Home Office.
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 as
of the date the withdrawal request is received by AUL at its Home Office. 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 70 1/2 required
minimum distribution benefits, or benefits upon attainment of age 59 1/2
(provided that the age 59 1/2 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, dis-
<PAGE>
8
<TABLE>
<CAPTION>
Charge on Withdrawal Exceeding 10% Allowable Amount
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11 or
Account Year 1 2 3 4 5 6 7 8 9 10 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%
</TABLE>
ability, 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 59 1/2
(provided that such benefit upon attainment of age 59 1/2 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 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 above 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 per quarter. The charge is
assessed every quarter on a Participant Account if the account exists on the
quarterly Contract Anniversary, and is assessed only during the Accumulation
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
<PAGE>
9
(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 24.
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.
<TABLE>
<CAPTION>
EXPENSE TABLE
The purpose of the following table is to assist investors in understanding the
various costs and expenses that Participants in the Contracts bear directly and
indirectly. The table reflects expenses of the Variable Account as well as the
Funds. The fees in this Expense Table have been provided by the Funds and have
not been independently verified by AUL. The table does not reflect premium taxes
that may be imposed by various jurisdictions. See "Premium Tax Charge." The
information contained in the table is not generally applicable to amounts
allocated to the Fixed Account or to annuity payments under an Annuity Option.
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.
<S> <C>
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)
<S> <C> <C> <C>
Total Port-
Management/ Other folio Annual
Portfolio Advisory Fee Expenses Expenses
- --------- ------------ --------- --------
AUL American Series Fund, Inc.:
Equity Portfolio 0.50%(4) 0.20% 0.70%
Bond Portfolio 0.50%(4) 0.20% 0.70%
Managed Portfolio 0.50%(4) 0.20% 0.70%
Money Market Portfolio 0.50%(4) 0.23% 0.73%
Acacia Capital Corporation:
Calvert Capital Accumulation Portfolio 0.90%(5) 0.66% 1.56%
Alger American Fund
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Invesco Dynamics Fund, Inc.
Invesco Dynamics Fund 0.60% 0.61%(6) 1.21%
<FN>
(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%
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
been 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 1995, expenses
did not exceed 1% of the average daily net asset value.
(5) The Management and Advisory Fees are subject to a performance
adjustment, after January 31, 1997, which could cause the fee to be as high as
0.95% or as low as 0.85%, depending on performance. The figures set forth have
been restated to reflect anticipated expenses for 1996 due to an elimination of
the waiver of the .10% administrative services fee, which is included under
Management and Advisory expenses and is paid to the Advisor's affiliate. "Other
Expenses" reflect an indirect fee of 0.21%. Net fund operating expenses after
reduction for fees paid indirectly would be 1.35%.
(6) The Other Expenses number of 0.61% contains 0.25% for 12b-1fees. In
addition, if necessary, certain Fund expenses are absorbed voluntarily by the
Fund's investment adviser in order to ensure that the Fund's total operating
expenses do not exceed 1.21% of the Fund's average net assets.
</FN>
<PAGE>
10
<CAPTION>
EXPENSE TABLE (CONTINUED)
<S> <C> <C> <C>
Total Port-
Management/ Other folio Annual
Portfolio Advisory Fee Expenses Expenses
- --------- ------------ -------- --------
PBHG Funds, Inc.
PBHG Growth Fund 0.85% 0.60% 1.45%
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 0.23% 0.05% 0.28%
Variable Insurance Products Fund
Equity-Income Portfolio 0.51% 0.10% 0.61%
Growth Portfolio 0.61% 0.09% 0.70%
High Income Portfolio 0.60% 0.11% 0.71%(8)
Overseas Portfolio 0.76% 0.15% 0.91%
Variable Insurance Products Fund II
Asset Manager Portfolio 0.71% 0.08% 0.79%(8)
Contrafund Portfolio 0.61% 0.11% 0.72%(8)
Index 500 Portfolio 0.00% 0.28% 0.28%(9)
<FN>
(7) Based upon fees paid by the fund for the 1995 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) A portion of the brokerage commissions the fund paid was used to reduce
its expenses. Without this reduction, total operating expenses would have been
for High Income: 0.71%; for Asset Manager: 0.81%; and for Contrafund: 0.73%
(9) The fund's expenses were voluntarily reduced by the fund's investment
adviser. Absent reimbursement, management fee, other expenses, and total
expenses would have been 0.28%, 0.19% and 0.47%, respectively, for the Index 500
Portfolio.
</FN>
</TABLE>
EXAMPLES (FOR ANY INVESTMENT ACCOUNT)
The following examples show expenses 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.
<TABLE>
<CAPTION>
<S> <C> <C>
(2) If your Contract
is not Surrendered
(1) If your Contract is Surrendered or is Annuitized
----------------------------------- ----------------
<S> <C> <C> <C>
Recurring Single
Contribution Contribution
Contracts Contracts All Contracts
--------- --------- -------------
Investment Account
AUL American Equity
1 year $ 96.68 $ 78.20 $ 22.76
3 years 147.81 108.84 69.87
5 years 202.42 139.77 119.22
10 years 300.32 253.32 253.32
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
EXAMPLES (FOR ANY INVESTMENT ACCOUNT) (CONTINUED)
<S> <C> <C>
(2) If your Contract
is not Surrendered
(1) If your Contract is Surrendered or is Annuitized
----------------------------------- ----------------
<S> <C> <C> <C>
Recurring Single
Contribution Contribution
Contracts Contracts All Contracts
--------- --------- -------------
Investment Account
AUL American Bond
1 year $ 96.68 $ 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
AUL American Managed
1 year 96.68 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
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 98.07 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
Calvert Capital Accumulation
1 year 104.65 86.33 31.37
3 years 171.57 133.60 95.63
5 years 240.72 181.69 162.01
10 years 380.90 337.82 337.82
Invesco Dynamics
1 year 101.42 83.03 27.87
3 years 161.98 123.61 85.23
5 years 224.95 164.87 144.84
10 years 349.04 304.41 304.41
PBHG Growth
1 year 103.64 85.30 30.27
3 years 168.59 130.49 92.39
5 years 235.82 176.46 156.68
10 years 371.08 327.52 327.52
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
<PAGE>
12
<CAPTION>
EXAMPLES (FOR ANY INVESTMENT ACCOUNT) (CONTINUED)
<S> <C> <C>
(2) If your Contract
is not Surrendered
(1) If your Contract is Surrendered or is Annuitized
----------------------------------- ----------------
<S> <C> <C> <C>
Recurring Single
Contribution Contribution
Contracts Contracts All Contracts
--------- --------- -------------
Investment Account
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 96.68 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 92.77 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
VIP Equity-Income
1 year 95.86 77.37 21.88
3 years 145.36 106.28 67.21
5 years 197.33 135.40 114.76
10 years 291.69 244.27 244.27
VIP Growth
1 year 96.68 78.20 22.76
3 years 147.81 108.84 69.87
5 years 201.42 139.77 119.22
10 years 300.32 253.32 253.22
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 98.64 80.20 24.88
3 years 153.71 114.99 76.26
5 years 211.25 150.25 129.92
10 years 320.84 274.83 274.83
VIP II Asset Manager
1 year 97.53 79.06 23.67
3 years 150.36 111.49 72.63
5 years 205.67 144.30 123.85
10 years 309.22 262.65 262.65
VIP II Contrafund
1 year 96.88 78.41 22.98
3 years 148.42 109.48 70.53
5 years 202.45 140.86 120.33
10 years 302.47 255.56 255.56
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
</TABLE>
<PAGE>
13
CONDENSED FINANCIAL INFORMATION
The following table presents Condensed Financial Information with respect to
each of the Investment Accounts of the Variable Account for the period from the
date of first deposit on April 12, 1990 through December 31, 1995. 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, 1995. 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 Invesco Dynamics, PBHG Growth, Twentieth Century International
Equity, Twentieth Century Select Investors, Twentieth Century Ultra Investors,
Vanguard Explorer, and Vanguard Short Term Federal Bond.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<S>
Year End December 31,
---------------------
Investment Account 1995 1994 1993 1992 1991 1990(1)
- ------------------ ---- ---- ---- ---- ---- -------
AUL American Equity
Unit Value at beginning of period 1.518 1.497 1.321 1.215 0.980 1.000
Unit Value at end of period 1.790 1.518 1.497 1.321 1.215 0.980
Number of Units outstanding
at end of period 9,332,221.965 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 1.375 1.444 1.321 1.247 1.085 1.000
Unit Value at end of period 1.600 1.375 1.444 1.321 1.247 1.085
Number of Units outstanding
at end of period 3,613,483.251 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 1.144 1.118 1.107 1.088 1.042 1.000
Unit Value at end of period 1.189 1.144 1.118 1.107 1.088 1.042
Number of Units outstanding
at end of period 2,066,492.545 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 1.415 1.446 1.296 1.215 1.054 1.000
Unit Value at end of period 1.664 1.415 1.446 1.296 1.215 1.054
Number of Units outstanding
at end of period 9,242,020.341 8,146,955.380 2,935,364.727 1,979,512.799 399,535.438 1,612.093
Alger American Growth(2)
Unit value at beginning of period 1.000 N.A. N.A. N.A. N.A. N.A.
Unit value at end of period 1.259 N.A. N.A. N.A. N.A. N.A.
Number of units outstanding
at end of period 1,028,838.673 N.A. N.A. N.A. N.A. N.A.
Calvert Capital Accumulation(2)
Unit value at beginning of period 1.000 N.A. N.A. N.A. N.A. N.A.
Unit value at end of period 1.266 N.A. N.A. N.A. N.A. N.A.
Number of units outstanding
at end of period 71,033.449 N.A. N.A. N.A. N.A. N.A.
Fidelity VIP Equity-Income(2)
Unit value at beginning of period 1.000 N.A. N.A. N.A. N.A. N.A.
Unit value at end of period 1.223 N.A. N.A. N.A. N.A. N.A.
Number of units outstanding
at end of period 762,131.875 N.A. N.A. N.A. N.A. N.A.
Fidelity VIP Growth(2)
Unit Value at beginning of period 1.126 1.138 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.505 1.126 1.138 N.A. N.A. N.A.
Number of Units outstanding
at end of period 14,966,606.367 9,247,289.712 2,051,512.032 N.A. N.A. N.A.
Fidelity VIP High Income(2)
Unit Value at beginning of period 1.078 1.108 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.285 1.078 1.108 N.A. N.A. N.A.
Number of Units outstanding
at end of period 4,719,928.038 3,013,462.025 598,050.742 N.A. N.A. N.A.
Fidelity VIP Overseas(2)
Unit Value at beginning of period 1.142 1.136 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.237 1.142 1.136 N.A. N.A. N.A.
Number of units outstanding
at end of period 6,385,519.182 4,748,284.000 872,248.301 N.A. N.A. N.A.
Fidelity VIP II Asset Manager(2)
Unit Value at beginning of period 1.047 1.129 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.209 1.047 1.129 N.A. N.A. N.A.
Number of units outstanding
at end of period 22,931,562.511 19,540,375.804 5,859,606.501 N.A. N.A. N.A.
Fidelity VIPII Contrafund(2)
Unit value at beginning of period 1.000 N.A. N.A. N.A. N.A. N.A.
Unit value at end of period 1.266 N.A. N.A. N.A. N.A. N.A.
Number of units outstanding
at end of period 691,977.949 N.A. N.A. N.A. N.A. N.A.
<FN>
(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. The Alger American
Growth, Calvert Capital Accumulation, Fidelity Contrafund and Equity-Income, and
the T. Rowe Price Equity Income Investment Accounts first became available on
April 28, 1995. Therefore, there is no information available for any period
prior to these dates.
</FN>
<PAGE>
14
<CAPTION>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<S> <C> <C> <C> <C> <C> <C>
Year End December 31,
---------------------
Investment Account 1995 1994 1993 1992 1991 1990(1)
- ------------------ ---- ---- ---- ---- ---- -------
Fidelity VIP II Index 500(2)
Unit Value at beginning of period 1.061 1.068 1.000 N.A. N.A. N.A.
Unit Value at end of period 1.437 1.061 1.068 N.A. N.A. N.A.
Number of units outstanding
at end of period 3,976,682.434 1,966,815.581 507,196.270 N.A. N.A. N.A.
T. Rowe Price Equity Income(2)
Unit value at beginning of period 1.000 N.A. N.A. N.A. N.A. N.A.
Unit value at end of period 1.230 N.A. N.A. N.A. N.A. N.A.
Number of units outstanding
at end of period 388,731.509 N.A. N.A. N.A. N.A. N.A.
TCI Growth(2)
Unit Value at beginning of period 1.002 1.000 N.A. N.A. N.A. N.A.
Unit Value at end of period 1.297 1.002 N.A. N.A. N.A. N.A.
Number of units outstanding
at end of period 747,778.781 254,316.431 N.A. N.A. N.A. N.A.
<FN>
(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. The Alger American
Growth, Calvert Capital Accumulation, Fidelity Contrafund and Equity-Income, and
the T. Rowe Price Equity Income Investment Accounts first became available on
April 28, 1995. Therefore, there is no information available for any period
prior to these dates.
</FN>
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Performance (excluding charges)(1)
----------------------------------
Average Average Average Average
Annual Annual Annual Annual Cumulative
Return on Return on Return on Return on Return on
Inception Inception Investment Investment Investment Investment Investment for
Date of Date of for Year for 3 Years for 5 Years for lesser of lesser of 10
Investment Mutual Investment ending ending ending 10 Years or Years or Since
Account Fund Account 12/31/95 12/31/95 12/31/95 Since Inception Inception
- ------- ---- ------- -------- -------- -------- --------------- ---------
AUL American Equity 04/10/90 04/12/90 17.97% 10.67% 12.81% 10.74% 79.22%
AUL American Bond 04/10/90 04/12/90 16.32% 6.59% 8.06% 8.58% 60.13%
AUL American Money Market 04/10/90 04/12/90 3.97% 2.42% 2.67% 3.08% 18.95%
AUL American Managed 04/10/90 04/12/90 17.65% 8.70% 9.56% 9.33% 66.56%
Alger American Growth 01/09/89 04/28/95 34.68% 17.75% 20.24% 17.64% 210.72%
Calvert Capital Accumulation 07/16/91 04/28/95 37.79% 9.20% N.A. 10.76% 57.74%
Invesco Dynamics 09/15/67 N.A. 35.66% 15.62% 23.31% 13.99% 270.40%
PBHG Growth 12/19/85 N.A. 48.46% 30.58% 33.43% 21.24% 586.21%
TCI Growth 11/20/87 05/01/94 29.47% 11.24% 13.46% 12.18% 154.10%
Twentieth Century International Equity 05/09/91 N.A. 10.49% 13.52% N.A. 11.17% 63.54%
Twentieth Century Select Investors 10/31/58 N.A. 21.37% 7.69% 8.90% 10.42% 169.45%
Twentieth Century Ultra Investors 11/02/81 N.A. 36.20% 15.98% 23.52% 18.36% 439.57%
T. Rowe Price Equity Income 03/31/94 04/28/95 33.08% N.A. N.A. 21.83% 41.28%
Vanguard Explorer 12/11/67 N.A. 25.01% 12.27% 19.46% 9.11% 139.14%
Vanguard Short Term Federal Bond 12/31/87 N.A. 10.17% 4.43% 5.78% 6.39% 64.14%
VIP Equity-Income 10/09/86 04/28/95 33.40% 18.13% 19.83% 11.91% 182.48%
VIP Growth 10/09/86 05/01/93 33.68% 15.88% 19.28% 13.53% 222.54%
VIP High Income 09/19/85 05/01/93 19.10% 11.25% 17.46% 10.10% 161.74%
VIP Overseas 01/28/87 05/01/93 8.31% 13.86% 6.78% 5.99% 68.09%
VIP II Asset Manager 09/06/89 05/01/93 15.50% 8.64% 11.36% 10.02% 82.79%
VIP II Contrafund 01/03/95 04/28/95 N.A. N.A. N.A. N.A. 37.77%
VIP II Index 500 08/27/92 05/01/93 35.48% 13.57% N.A. 14.02% 55.13%
<FN>
(1) These figures do not reflect deduction of the withdrawal charge and a
pro-rata portion of the administrative charge.
</FN>
</TABLE>
<PAGE>
15
<TABLE>
<CAPTION>
PERFORMANCE OF THE INVESTMENT ACCOUNTS (CONTINUED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Performance (including charges)(1)
----------------------------------
Average Average Average Average
Annual Annual Annual Annual Cumulative
Return on Return on Return on Return on Return on
Inception Inception Investment Investment Investment Investment Investment for
Date of Date of for Year for 3 Years for 5 Years for lesser of lesser of 10
Investment Mutual Investment ending ending ending 10 Years or Years or Since
Account Fund Account 12/31/95 12/31/95 12/31/95 Since Inception Inception
- ------- ---- ------- -------- -------- -------- --------------- ---------
AUL American Equity 04/10/90 04/12/90 8.20% 7.32% 10.61% 9.62% 69.10%
AUL American Bond 04/10/90 04/12/90 6.69% 3.36% 5.96% 7.48% 51.07%
AUL American Money Market 04/10/90 04/12/90 (4.64%) (0.68%) 0.67% 2.04% 12.24%
AUL American Managed 04/10/90 04/12/90 7.91% 5.40% 7.43% 8.23% 57.20%
Alger American Growth 01/09/89 04/28/95 23.53% 14.18% 17.90% 16.60% 192.05%
Calvert Capital Accumulation 07/16/91 04/28/95 26.39% 5.89% N.A. 8.35% 43.00%
Invesco Dynamics 09/15/67 N.A. 24.43% 12.11% 20.91% 13.19% 245.21%
PBHG Growth 12/19/85 N.A. 36.18% 26.62% 30.83% 20.38% 539.06%
TCI Growth 11/20/87 05/01/94 18.75% 7.87% 11.25% 11.27% 137.85%
Twentieth Century International Equity 05/09/91 N.A. 1.35% 10.08% N.A. 8.82% 48.09%
Twentieth Century Select Investors 10/31/58 N.A. 11.33% 4.42% 6.78% 9.64% 151.01%
Twentieth Century Ultra Investors 11/02/81 N.A. 24.93% 12.46% 23.02% 17.52% 402.48%
T. Rowe Price Equity Income 03/31/94 04/28/95 22.07% N.A. N.A. 15.82% 29.31%
Vanguard Explorer 12/11/67 N.A. 14.67% 8.86% 17.13% 8.34% 122.79%
Vanguard Short Term Federal Bond 12/31/87 N.A. 1.05% 1.26% 3.72% 5.53% 53.82%
VIP Equity-Income 10/09/86 04/28/95 22.36% 14.54% 17.50% 11.07% 163.51%
VIP Growth 10/09/86 05/01/93 22.62% 12.36% 16.96% 12.68% 200.93%
VIP High Income 09/19/85 05/01/93 9.25% 7.88% 15.17% 9.32% 143.78%
VIP Overseas 01/28/87 05/01/93 (0.65%) 10.41% 4.70% 5.19% 57.10%
VIP II Asset Manager 09/06/89 05/01/93 5.94% 5.35% 9.19% 8.98% 72.15%
VIP II Contrafund 01/03/95 04/28/95 N.A. N.A. N.A. N.A. 26.40%
VIP II Index 500 08/27/92 05/01/93 24.27% 10.12% N.A. 10.85% 41.16%
<FN>
(2) These figures reflect deduction of the withdrawal charge and a pro-rata
portion of the administrative charge.
</FN>
</TABLE>
INFORMATION ABOUT AUL, THE VARIABLE ACCOUNT, AND THE FUNDS
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
AUL is a legal reserve mutual life insurance company existing under the laws
of the State of Indiana. It was originally incorporated as a fraternal society
on November 7, 1877 under the laws of the Federal government, and reincorporated
under the laws of the State of Indiana in 1933. It is qualified to do business
in 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, reinsurance, and annuity
business. At December 31, 1995, AUL had admitted assets of $6,453,558,834 and a
policyowners' surplus of $289,363,821.
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 sub-accounts referred to as
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 of the Investment Accounts may be available under a
particular Contract and some of the Investment Accounts are either not available
for certain types of Contracts or are not in operation as of the date of this
Prospectus. 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.
<PAGE>
16
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 four separate investment portfolios
that it offers to the Variable Account, namely: the Equity, Bond, Money Market,
and Managed. 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.. 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 Insurance Products Fund and to the Variable
Insurance Products Fund II. Invesco Funds Group, Inc. acts as investment 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 investment 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.
<PAGE>
17
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 that 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, as well as
foreign securities, 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 primarily in common
stocks (including securities convertible into common stocks and other equity
equivalents) and other securities that meet certain fundamental and technical
standards of selection and have, in the opinion of the Fund's investment
manager, better than average potential for appreciation. The Fund tries to stay
fully invested in such securities, regardless of the movement of prices
generally. 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.
<PAGE>
18
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. Eighty percent of fund
assets must be invested in securities that pay dividends or otherwise produce
income (although such income payments on dividend paying securities is 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
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
tends to invest in securities of medium sized 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 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 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.
GROWTH PORTFOLIO
The Growth Portfolio seeks to achieve capital appreciation.
<PAGE>
19
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.
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.
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 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 to become
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 Participants, 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.
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20
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 33 1/3% of any contribution. Not all of the
Investment Accounts may be available under a particular Contract, and some of
the Investment Accounts are either not available for certain types of Contracts
or are not in operation as of the date of this Prospectus.
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.
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21
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 created as of the end of the
Valuation Period in which they are received by AUL 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 as of
the date the transfer request is received by AUL at its Home Office, 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 as of the
date the transfer request is received by AUL at its Home Office.. 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 effective 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.
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22
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 as of the date the withdrawal request is
received by AUL. 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 59
1/2 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 systematic
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 70 1/2 required minimum distribution benefits or benefits
upon attainment of age 59 1/2 (provided that the age 59 1/2 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 59 1/2
(provided that such benefit upon attainment of age 59 1/2 is a taxable
distribution paid to the Participant and not to any other person or entity,
including any alternative or 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 limita-
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23
tions 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 59 1/2, separates from service, dies, becomes disabled, or
incurs a hardship. Furthermore, distributions of income or gains attributable to
such contributions accrued after December 31, 1988 may not be made on account of
hardship. Hardship, for this purpose, is generally defined as an immediate and
heavy financial need, such as paying for medical expenses, the purchase of a
principal residence, or paying certain tuition expenses.
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 exercise 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's Account 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,
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24
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
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25
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 contributions 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.
<PAGE>
26
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.
<TABLE>
<CAPTION>
Charge on Withdrawal Exceeding 10% Allowable Amount
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11 or
Account Year 1 2 3 4 5 6 7 8 9 10 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%
</TABLE>
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 70 1/2 required minimum distribution benefits, or benefits upon
attainment of age 59 1/2 (provided that the age 59 1/2 benefit is a taxable
distribution paid to the Participant and not to any other person or entity,
including any alternative or substitute funding medium). 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 59 1/2 (provided that such benefit upon attainment of age 59
1/2 is a taxable distribution paid to the Participant and not to any other
person or entity, including any alternative or 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 the account exists 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.
<PAGE>
27
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 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
<PAGE>
28
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
than a stated period, which may be five, ten, fifteen, or twenty years, as
elected, annuity payments will be continued during the remainder of such period
to the Beneficiary.
OPTION 3 - SURVIVORSHIP ANNUITY
An annuity payable monthly during the lifetime of the Annuitant, and, after
the death of the Annuitant, an amount equal to 50%, 66 2/3%, or 100% (as
specified in the election) of such annuity will be paid to the contingent
Annuitant named in the election if and so long as such contingent Annuitant
lives.
An election of this option is automatically cancelled if either the
Participant or the contingent Annuitant dies 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 70 1/2. 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 70 1/2 and must be shorter than such joint life expectancy if the
Beneficiary is not the Annuitant's spouse and is more than 10 years younger than
the Annuitant. Under Option 3, if the contingent Annuitant is not the
Annuitant's spouse and is more than 10 years younger than the Annuitant, the 66
2/3% 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
<PAGE>
29
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 as of the date the withdrawal request
is received by AUL at its Home Office. 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 as of the date the transfer request is received
by AUL at its Home Office, 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 as of the date the transfer request is received by
AUL at its Home Office. 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
<PAGE>
30
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
"Charges 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 or Department of Labor regulations. 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 to the extent permitted by law. 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 or its regulations, under which a
loan will not be treated as a distribution under a 403(b) Program, or other
applicable law as determined by AUL. It should be noted that the Internal
Revenue Service has issued proposed regulations which may cause the outstanding
balance of a loan to be treated as a taxable distribution if the loan is not
repaid in a timely manner.
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,
<PAGE>
31
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.
FEDERAL TAX MATTERS
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
<PAGE>
32
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 received tax free. The
balance of the distribution will be treated as ordinary income. Special
five-year forward averaging provisions under Code Section 402 may be utilized on
any amount subject to ordinary income tax treatment, provided that the
Participant has reached age 59 1/2, has not previously elected forward averaging
for a distribution from any Employee Benefit Plan after reaching age 59 1/2, and
has not rolled over a partial distribution from a similar plan into an
individual retirement account or annuity. Special ten-year averaging and a
capital-gains election may be available to a Participant who reached age 50
before 1986.
Under an Employee Benefit Plan under Section 401 of the Code, when annuity
payments commence (as opposed to a lump-sum distribution), under Section 72 of
the Code, the portion of each payment attributable to contributions that were
taxable to the Participant in the year made, if any, is excluded from gross
income as a return of the Participant's investment. The portion so excluded is
determined at the time the payments commence by dividing the Participant's
investment in the Contract by the expected return. The periodic payments in
excess of this amount are taxable as ordinary income. Once the Participant's
investment has been recovered, the full annuity payment will be taxable. If the
annuity should stop before the investment has been received, the unrecovered
portion is deductible on the Annuitant's final return. If the Participant made
no contributions that were taxable to the Participant in the year made, there
would be no portion excludable.
403(B) PROGRAMS
Code Section 403(b) permits public school systems and certain types of
charitable, educational, and scientific organizations specified in Code Section
501(c)(3) to purchase annuity contracts on behalf of their employees, and,
subject to certain limitations, allows employees of those organizations to
exclude the amount of contributions from gross income for Federal income tax
purposes.
If a Participant under a 403(b) Program makes a surrender or partial
withdrawal from the Participant's Account, the Participant will realize income
taxable at ordinary tax rates on the full amount received. See "Constraints on
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
commence.
408 PROGRAMS
Code Sections 219 and 408 permit eligible individuals to contribute to an
individual retirement program, including Simplified Employee Pension Plans and
Employer/Association Established Individual Retirement Account Trusts, known as
an Individual Retirement Account ("IRA"). These IRA accounts are subject to
limitations on the amount that may be contributed, the persons who may be
eligible, and on the time when distributions may commence. In addition, certain
distributions from some other types of retirement plans may be placed on a
tax-deferred basis in an IRA. Sale of the Contracts for use with IRA's may be
subject to special requirements imposed by the Internal Revenue Service.
Purchasers of the Contracts for such purposes will be provided with such
supplementary information as may be required by the Internal Revenue Service or
other appropriate agency, and will have the right to revoke the Contract under
certain circumstances.
If a Participant under a 408 Program makes a surrender or partial withdrawal
from the Participant's Account, the Participant generally will realize income
taxable at ordinary tax rates on the full amount received. Since under a 408
Program, contributions generally are deductible from the taxable income of the
employee, the full amount received will usually be taxable as ordinary income
when annuity payments commence.
<PAGE>
33
457 PROGRAMS
Section 457 of the Code permits employees of state and local governments and
units and agencies of state and local governments as well as tax-exempt
organizations described in Section 501(c)(3) of the Code to defer a portion of
their compensation without paying current taxes. The employees must be
Participants in an eligible deferred compensation plan.
Although a Participant under a 457 Program may direct or choose methods of
investment, all amounts deferred under the Program, and any income thereon,
remain solely the property of the Employer and subject to the claims of its
general creditors, until paid or made available to the Participant or
Beneficiary under the Program.
If the Employer sponsoring a 457 Program requests and receives a withdrawal
for an eligible employee in connection with a 457 Program, then the amount
received by the employee will be taxed as ordinary income. Since under a 457
Program, contributions are excludable from the taxable income of the employee,
the full amount received will be taxable as ordinary income when annuity
payments commence or other distribution is made.
TAX PENALTY
Any distribution made to a Participant from an Employee Benefit Plan or a 408
Program other than on account of one or more of the following events will be
subject to a 10% penalty tax on the amount distributed:
(a) the Participant has attained age 59 1/2;
(b) the Participant has died; or
(c) the Participant is disabled.
In addition, a distribution from an Employee Benefit Plan will not be subject to
a 10% excise tax on the amount distributed if the Participant is 55 and has
separated from service. Distributions 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.
EFFECT OF TAX DEFERRED ACCUMULATION
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 do not
reflect the deduction for mortality and expense risk charges under a variable
annuity contract. 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 59 1/2.
<PAGE>
34
(Chart omitted; the following information is an explanation of the
information contained in the chart.)
<TABLE>
<CAPTION>
$250 per month at gross annual rate of 6.00%, taxed at 31%
<S> <C> <C> <C>
Period After Tax Conventional Savings Tax Deferred Accumulation After Tax Pre-Tax Accumulation Value
- ------ ------------------------------ ----------------------------------- --------------------------
5 Years $11,455 $11,555 $17,371
10 Years $25,486 $28,027 $40,618
20 Years $63,722 $78,218 $113,360
30 Years $121,087 $168,103 $243,628
40 Years $207,152 $329,074 $476,919
</TABLE>
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 an additional
$100 available; after 10 years there would be an additional $2,541 available;
after 20 years, there would be an additional $14,496 available; after 30 years,
there would be an additional $47,016 available; and after 40 years, there would
be an additional $121,922 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 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.
<PAGE>
35
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
<PAGE>
36
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 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
<PAGE>
37
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:
<TABLE>
<S> <C>
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....................................................................................................... 4-6
FINANCIAL STATEMENTS.......................................................................................................... 6-16
</TABLE>
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.
<PAGE>
38
================================================================================
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(R)
One American Square
Indianapolis, Indiana 46204
PROSPECTUS
Dated: May 1, 1996
================================================================================
<PAGE>
1
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
AUL American Unit Trust
Group Variable Annuity Contracts
Offered By
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46204
(800) 634-1629
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 May 1, 1996.
A Prospectus is available without charge by calling or writing to
American United Life Insurance Company(R) at the telephone number or
address shown above or by mailing the Business Reply Mail card included
in this Statement of Additional Information.
<PAGE>
2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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.................................................................................................... 4-6
FINANCIAL STATEMENTS....................................................................................................... 6-16
</TABLE>
<PAGE>
3
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 59 1/2. 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 anoth-
<PAGE>
4
er 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 70 1/2 and excluding any distribution which is one of a series of
substantially equal payments made (1) over the life expectancy of the
Participant or his beneficiary or (2) over a specified period of 10 years or
more. Provisions of the Internal Revenue Code require that 20% of every eligible
rollover distribution that is not directly rolled over be withheld by the payor
for federal income taxes.
408 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) $30,000. 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) 33 1/3% 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 Program, 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
<PAGE>
5
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 7-day period ending December 31, 1995, the current yield for the
AUL Money Market Investment Account was 4.24% and the effective yield was 4.33%.
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, 1995, the yield for the Investment
Accounts corresponding to the Portfolios of the AUL American Series Fund, Inc.
was 0.55% for the Equity Investment Account, 4.61% for the Bond Investment
Account, and 2.12% 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 average annual return
that the Investment Accounts achieved for the one year, three year, five year,
and the lesser of ten years or since inception for the periods ending December
31, 1995 may be found in the Prospectus.
Performance information for an Investment Account may be compared, in
promotional reports and literature, to: (i) the Standard & Poor's 500 Composite
Index ("S&P 500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare an Investment Account's
results with those of a group of securities widely regarded by investors as
representative of the securities markets in general; (ii) other groups of
variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank such investment companies on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Contract. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for any Investment Account reflects only the
performance of a hypothetical Contract under which 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
<PAGE>
6
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, 1995.
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.
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
American United Life Insurance Company(R)
Indianapolis, Indiana
We have audited the accompanying balance sheet of American United Life Insurance
Company(R) as of December 31, 1995 and 1994, and the related statements of
operations, policyowners' surplus, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American United Life Insurance
Company(R) as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 19, 1996
<PAGE>
7
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
BALANCE SHEET
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
ASSETS
BONDS, at amortized cost...................................... $ 4,262,508,169 $ 4,082,347,294
STOCKS:
Preferred, at cost.......................................... 4,324,024 3,390,328
Common, at market........................................... 14,728,108 26,762,298
---------- ----------
19,052,132 30,152,626
MORTGAGE LOANS ............................................... 1,090,969,184 1,051,896,715
SHORT-TERM INVESTMENTS, at cost.............................. 65,040,000 69,482,580
OTHER INVESTED ASSETS......................................... 23,855,487 3,841,848
REAL ESTATE:
Investment properties, net.................................. 51,254,647 52,938,109
Home office, net............................................ 28,503,705 27,347,204
---------- ----------
79,758,352 80,285,313
OTHER:
Policy loans................................................ 120,283,198 117,708,964
Cash and cash equivalents................................... 7,169,522 8,816,165
Premiums deferred and uncollected........................... 46,789,680 38,751,657
Accrued investment income................................... 81,783,739 80,065,880
Other assets................................................ 52,451,849 41,025,151
Separate Account assets..................................... 603,897,522 351,336,512
----------- -----------
912,375,510 637,704,329
$ 6,453,558,834 $ 5,955,710,705
================= ==================
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
BALANCE SHEET
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
LIABILITIES AND POLICYOWNERS' SURPLUS
POLICY RESERVES
Deposit administration and supplementary contracts.......... $ 3,758,646,460 $ 3,672,096,982
Life and annuities......................................... 1,350,657,146 1,237,321,589
Accident and health......................................... 70,844,333 85,463,733
---------- ----------
5,180,147,939 4,994,882,304
POLICY AND CONTRACT LIABILITIES
Policy claims in process of settlement...................... 88,830,660 74,603,465
Policy dividends on deposit at interest..................... 59,460,245 59,504,981
Policy dividends payable in following year.................. 21,457,630 20,543,858
Other policy and contract liabilities....................... 40,590,059 37,262,603
---------- ----------
210,338,594 191,914,907
GENERAL LIABILITIES AND OTHER RESERVES
Accrued commissions and general expenses.................... 4,235,635 4,492,396
Taxes, including federal income taxes....................... 27,123,089 17,900,917
Unearned interest and rents................................. 2,829,903 2,860,495
Other liabilities........................................... 37,288,056 46,869,894
Asset valuation reserve..................................... 71,760,102 70,496,028
Interest maintenance reserve................................ 26,220,419 23,820,990
Contingent liability for reinsurance........................ 353,754 841,508
Separate Account liabilities................................ 603,897,522 351,336,512
----------- -----------
773,708,480 518,618,740
TOTAL LIABILITIES 6,164,195,013 5,705,415,951
POLICYOWNERS' SURPLUS 289,363,821 250,294,754
----------- -----------
$ 6,453,558,834 $ 5,955,710,705
================= ==================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
STATEMENT OF OPERATIONS
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
PREMIUM AND OTHER INCOME
Life and annuities.......................................... $ 340,990,486 $ 306,862,818
Accident and health......................................... 105,010,525 101,189,449
Deposit administration and supplementary contracts.......... 402,954,222 351,114,943
Net investment income....................................... 462,475,312 434,202,321
----------- -----------
1,311,430,545 1,193,369,531
BENEFITS AND EXPENSES
Death benefits.............................................. 124,196,772 109,503,889
Accident and health and disability benefits................. 76,726,189 75,377,072
Annuity benefits............................................ 95,615,467 88,718,053
Surrender benefits and other fund withdrawals............... 381,395,809 288,847,121
Supplementary contracts and endowments...................... 1,827,156 1,699,279
Other benefits.............................................. 8,060,901 7,863,187
Increase in policy reserves:
Deposit administration and supplementary contracts......... 96,222,658 166,030,251
Life and annuities......................................... 101,804,514 104,415,453
Accident and health........................................ (14,619,400) 9,139,619
Separate accounts.......................................... 160,395,977 150,228,191
General expenses............................................ 84,398,348 76,019,074
Commissions and service fees................................ 80,923,848 75,300,197
Taxes, licenses and fees.................................... 9,447,928 11,074,820
Dividends to policyowners................................... 22,715,891 21,039,163
Reserve adjustment on reinsurance assumed................... 26,064,924 (39,550,876)
Other....................................................... (10,187,186) (7,867,686)
----------- ----------
1,244,989,796 1,137,836,807
Net gain from operations before federal income taxes..... 66,440,749 55,532,724
Federal income taxes........................................ 21,726,053 27,058,888
---------- ----------
Net gain from operations before net realized
capital losses.......................................... 44,714,696 28,473,836
Net realized capital losses net of taxes.................... (2,799,506) (477,559)
NET INCOME.............................................. $ 41,915,190 $ 27,996,277
=============== ====================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
STATEMENT OF POLICYOWNERS' SURPLUS
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
Policyowners' surplus, beginning of year...................... $ 50,294,754 $ 228,730,815
Add (deduct):
Net income.................................................. 41,915,190 27,996,277
Change in statement value of investments.................... 1,938,555 (3,504,915)
Change in contingent liability for reinsurance.............. 487,753 1,966,134
Change in asset valuation reserve........................... (1,264,074) (1,131,669)
Other....................................................... (4,008,357) (3,761,888)
---------- ----------
Policyowners' surplus, end of year............................ $ 289,363,821 $ 250,294,754
=============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
10
<TABLE>
<CAPTION>
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
STATEMENT OF CASH FLOWS
================================================================================
<S> <C> <C>
December 31,
------------
1995 1994
---- ----
CASH FROM OPERATIONS:
Premiums and other policy considerations.................... $ 840,800,579 $ 755,594,547
Investment income........................................... 451,918,023 425,976,111
----------- -----------
1,292,718,602 1,181,570,658
Benefits.................................................... 859,631,292 702,526,336
Commissions and general expenses............................ 176,222,502 122,334,264
Federal income taxes........................................ 13,786,561 23,674,736
Increase (decrease) in policy loans......................... 2,574,234 5,733,167
Dividends to policyowners................................... 21,802,118 18,715,837
---------- ----------
1,074,016,707 872,984,340
NET CASH FROM OPERATIONS 218,701,895 308,586,318
Proceeds from investments sold, redeemed or matured:
Bonds....................................................... 409,344,079 525,799,172
Stocks...................................................... 14,694,984 4,073,265
Mortgage loans.............................................. 112,116,067 131,105,341
Real estate................................................. 3,433,133 605,533
Other invested assets....................................... 66,355 79,704
Tax on capital gains, including amounts in asset
and interest maintenance reserves.......................... (3,833,936) (4,551,265)
Other sources............................................... 7,384,150 26,156,329
--------- ----------
TOTAL CASH PROVIDED 761,906,727 991,854,397
Cost of investments acquired:
Bonds....................................................... 572,352,611 801,182,111
Stocks...................................................... 972,093 759,415
Mortgage loans.............................................. 155,180,674 111,872,905
Real estate................................................. 4,597,372 2,391,763
Other uses.................................................... 34,893,200 28,856,549
---------- ----------
TOTAL CASH APPLIED 767,995,950 945,062,743
----------- -----------
Net change in cash and short-term investments................. (6,089,223) 46,791,654
Cash and short-term investments, beginning of year............ 78,298,745 31,507,091
Cash and short-term investments, end of year.................. $ 72,209,522 $ 78,298,745
=============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
11
NOTES TO FINANCIAL STATEMENTS
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
================================================================================
1. NATURE OF OPERATIONS:
American United Life Insurance Company(R) (AUL) is an Indiana-domiciled
mutual life insurance company founded in 1877 with headquarters in
Indianapolis. It is currently licensed to sell business in 46 states and
the District of Columbia. AUL offers individual life insurance and
annuities, group life and disability insurance, pension products, and
reinsurance services.
2. ACCOUNTING POLICIES:
a. BASIS OF PRESENTATION: The financial statements have been prepared on
the basis of accounting practices prescribed or permitted by the Insurance
Department of the State of Indiana, which practices are regarded as generally
accepted accounting principles (GAAP) for mutual life insurance companies.
In January 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 120, Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts. This Statement, effective for
fiscal years beginning after December 15, 1995, extends the requirements of SFAS
Nos. 60, 97, and 113 to mutual life insurance companies. It also defers the
effective date of Interpretation 40, previously issued by the FASB in 1993, for
fiscal years beginning after December 15, 1995. Interpretation 40 indicated that
financial statements of mutual life insurance companies prepared on a statutory
basis will no longer be considered in conformity with GAAP. In addition, the
American Institute of Certified Public Accountants has issued Statement of
Position (SOP) 95-1, Accounting for Certain Insurance Activities of Mutual Life
Insurance Enterprises, which is also effective for fiscal years beginning after
December 15, 1995. This SOP establishes accounting for certain participating
life insurance contracts.
b. INVESTMENTS: Bonds, mortgage loans, and other invested assets are
reported principally at amortized cost; preferred stocks are reported at cost
(market value was $4,224,000 and $3,251,000 at December 31, 1995 and 1994,
respectively); common stocks are reported at market (cost was $12,041,000 and
$25,269,000 at December 31, 1995 and 1994, respectively); short-term investments
include investments with maturities of one year or less and are reported at
cost, which approximates market; policy loans are reported at unpaid balances
and real estate is reported at cost less allowances for depreciation.
Depreciation is provided over the estimated useful lives of the related assets
using the straight-line method.
Market values of bonds, common stocks, and preferred stocks, that are
publicly traded, are determined based on published market values. For bonds not
publicly traded, the market value is based on discounted cash flows using
current yields of comparable publicly traded securities.
Realized gains and losses on sale or maturity of investments are determined
on the basis of specific identification. Unrealized gains and losses are
reported as a component of surplus without recognizing the effect of related
income taxes. Realized gains, including those deferred in the interest
maintenance reserve, were reduced by federal taxes of approximately $3,834,000
and $4,551,000 in 1995 and 1994, respectively.
c. ASSET VALUATION AND INTEREST MAINTENANCE RESERVE: The asset valuation
reserve is provided from policyowners' surplus in accordance with statutory
accounting requirements. The interest maintenance reserve, reduced by federal
income taxes, defers the recognition of net gains realized on the sale of fixed
maturity investments, resulting from changes in interest rates. Such gains are
amortized to income over the remaining lives of the assets sold.
d. SEPARATE ACCOUNTS: The assets of the Separate Accounts shown in the
balance sheet are based on market value and represent funds which are segregated
primarily for variable annuity contracts and equity-based pension and profit
sharing plans. Separate Account income is offset by payments and provisions for
benefits and services, thus having no effect on net income or policyowners'
surplus.
Claim liabilities include provisions for reported claims and estimates
based on historical experience, for claims incurred but not reported. Claim
liabilities have been reduced at December 31, 1995 and 1994 by approximately
$40,072,000 and $32,055,000, respectively, for reinsurance ceded.
The Company received written approval from the Insurance Department of the
State of Indiana to record a "Separate Account Transfer Credit" for the
difference between reserves maintained in the General Account and reserves
maintained in the Separate Account after the transfer of funds. As of December
31, 1995 and 1994, that permitted transaction increased statutory surplus by
approximately $22,500,000 and $14,000,000, respectively.
f. FEDERAL INCOME TAXES: Generally, no provision is made for deferred
income taxes due to timing differences that may exist between financial
reporting and taxable income.
<PAGE>
12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2.
g. REVENUES AND EXPENSES: Premium income is recognized over the premium
paying period. Costs of acquiring new business are expensed when incurred and
credit is not taken, other than by statutory reserve modification methods
applicable to some policies, for the expectation that such costs will be
recovered from future premium income. Policyowner dividends are determined by
crediting each participating policy with its share of the surplus as apportioned
by the Company.
h. RETIREMENT PLANS: Annual provisions for employees' and agents'
retirement plans are computed actuarially and include amortization of past
service cost over approximately 20 years.
i. ESTIMATES: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
j. RECLASSIFICATIONS: Certain amounts in the 1994 financial statements have
been reclassified to conform to the 1995 presentation.
3. INVESTMENTS:
The admitted values (principally amortized cost) and estimated market
values of investments in bonds and short-term investments at December 31,
1995 and 1994 are as follows:
<TABLE>
December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Gross Estimated
Admitted Unrealized Unrealized Market
Value Gains Losses Value
----- ----- ------ -----
U.S. Treasury securities and obligations
of U.S. government agencies
and corporations $ 41,793,493 $ 4,247,221 $ 50,398 $ 45,990,316
Obligations of states and
political subdivisions 49,232,212 2,627,925 108,799 51,751,338
Debt securities issued by
foreign governments 60,007,780 4,141,435 162,798 63,986,417
Corporate securities 2,680,567,616 226,636,579 3,370,216 2,903,833,979
Mortgage-backed securities 1,495,947,068 130,038,900 368,652 1,625,617,316
------------- ----------- ------- -------------
$ 4,327,548,169 $ 367,692,060 $ 4,060,863 $ 4,691,179,366
=============== ============== =============== ===============
December 31, 1994
-----------------
<S> <C> <C> <C> <C>
Gross Gross Estimated
Admitted Unrealized Unrealized Market
Value Gains Losses Value
----- ----- ------ -----
U.S. Treasury securities and obligations
of U.S. government agencies
and corporations $ 52,764,874 $ 19,491 $ 1,833,537 $ 50,950,828
Obligations of states and
political subdivisions 101,141,851 500,600 2,496,531 99,145,919
Debt securities issued by
foreign governments 87,740,434 931,396 5,796,978 82,874,852
Corporate securities 2,537,870,822 44,908,139 112,059,750 2,470,719,212
Mortgage-backed securities 1,372,311,893 20,531,761 64,300,906 1,328,542,748
------------- ---------- ---------- -------------
$ 4,151,829,874 $ 66,891,387 $ 186,487,702 $ 4,032,233,559
=============== ============== =============== ===============
Issues of various public utilities account for approximately 19% of the admitted value of the Company's corporate securities.
</TABLE>
<PAGE>
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
3. INVESTMENTS (CONTINUED):
The admitted value and estimated market value of bonds and short-term
investments at December 31, 1995, by contractual average maturity, are
shown below. Actual maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<S> <C> <C>
Estimated
Admitted Market
Value Value
----- -----
Due in one year or less $ 111,679,502 $ 111,912,745
Due after one year through five years 918,343,831 958,694,535
Due after five years through ten years 1,183,641,359 1,285,402,290
Due after ten years 617,936,409 709,552,480
----------- -----------
2,831,601,101 3,065,562,050
Mortgage-backed securities 1,495,947,068 1,625,617,316
------------- -------------
$ 4,327,548,169 $ 4,691,179,366
================= ==================
</TABLE>
Proceeds from sales, maturities, or calls of investments in bonds during
1995 were approximately $409,344,000. Gross gains of $8,849,000 and gross losses
of $2,554,0000 were realized. Capital gains of approximately $6,282,000 were
transferred to the Interest Maintenance Reserve (IMR).
Proceeds from sales, maturities, or calls of investments in bonds during
1994 were approximately $525,799,000. Gross gains of $10,353,000 and gross
losses of $3,025,000 were realized. Capital gains of approximately $7,538,000
were transferred to IMR.
Net investment income consists of the following:
<TABLE>
<S> <C> <C>
1995 1994
Interest $ 462,588,923 $ 434,173,570
Dividends 2,604,911 1,831,811
Rents 13,408,632 13,431,856
Other 4,487,817 4,275,265
--------- ---------
483,090,283 453,712,502
Less investment expenses 20,614,971 19,510,181
---------- ----------
Net investment income $ 462,475,312 $ 434,202,321
================= ================
</TABLE>
At December 31, 1995, the preferred stock unrealized depreciation of
approximately $100,000 has not been reflected in the financial statements. The
change in the unrealized depreciation of preferred stocks amounted to
approximately $39,000 of appreciation and $24,000 of depreciation in 1995 and
1994, respectively. At December 31, 1995, the common stock unrealized
appreciation of approximately $2,629,000 is comprised of $2,633,000 of
unrealized gains and $4,000 of unrealized losses and has been reflected directly
in policyowners' surplus. The change in the unrealized appreciation of common
stocks amounted to approximately $1,136,000 and $1,512,000 of depreciation in
1995 and 1994, respectively.
The Company maintains a diversified mortgage loan portfolio and exercises
internal limits on concentrations of loans by geographic area, industry, use and
individual mortgagor. Mortgage loans on various properties in nine states
(California, Florida, North Carolina, Indiana, Texas, Illinois, Georgia,
Kentucky and Ohio) account for approximately 62% of the total amortized cost of
the Company's mortgage loans. The remaining mortgage loans relate to properties
located throughout the United States. A total of approximately $158,306,000 of
mortgage loans have been issued on approximately 100 geographically diversified
properties of eight large retailers. The fair value of the aggregate mortgage
loan portfolio approximates $1,184,000,000 and was estimated by discounting the
future cash flows using current rates at which similar loans would be made to
borrowers with similar credit ratings for similar maturities.
The Company has outstanding mortgage loan commitments at December 31, 1995
of approximately $90,731,000. The Company has made no financial guarantees other
than those described in Note 10.
4. REAL ESTATE:
The Company owns its home office and occupies approximately 36% of the
complex; the remaining space is available for lease to third parties. Real
estate is recorded net of accumulated depreciation of $26,923,113 and
$24,474,746 for investment properties and $11,855,147 and $10,633,240 for home
office at December 31, 1995 and 1994, respectively. Depreciation expense on real
estate amounted to $3,606,104 and $4,488,377 in 1995 and 1994, respectively.
<PAGE>
14
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. POLICY RESERVES
Reserves for life policies are computed principally by the net level and
modified preliminary term methods on the basis of interest rates (21 1/42% to
6%) and mortality assumptions (1941, 1958 and 1980 CSO Tables) prescribed by
state regulatory authorities. Reserves for annuities and deposit administration
contacts are computed on the basis of interest rates ranging from 21 1/42% to
10%. At December 31, 1995 and 1994 these reserves consisted of the following:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Individual, group and credit life policies $ 763,291,221 $ 719,787,943
Annuities and deposit administration funds 4,352,392,299 4,199,320,853
Accident and health and other reserves 190,271,181 166,873,578
Less reinsurance ceded (125,806,762) (91,100,070)
------------ -----------
$ 5,180,147,939 $ 4,994,882,304
================ ================
</TABLE>
The statement values of the reserves for annuities and deposit
administration funds approximate the estimated fair values at December 31, 1995.
The estimated fair values of the reserves approximate the statement values
because interest rates credited to account balances approximate current rates
paid on similar investments and are not generally guaranteed beyond one year.
Fair values for other insurance reserves are not required to be disclosed.
However, the estimated fair values of liabilities for all insurance liabilities
are taken into consideration in the Company's overall management of interest
rate risk.
6. EMPLOYEES' AND AGENTS' BENEFIT PLANS:
The Company has a noncontributory defined benefit pension plan covering
substantially all employees. Company contributions to the employee plan are made
annually in an amount between the minimum ERISA required contribution and the
maximum tax-deductible contribution. Such amounts are expensed as contributed.
Contributions made to the plan were $2,230,000 in 1995 and $2,215,000 in 1994.
The following benefit information for the employees' defined benefit plan was
determined by outside actuaries as of January 1, 1995 and 1994, respectively,
the most recent actuarial valuation dates:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Actuarial present value of
accumulated benefits for the
employees' defined benefit plan:
Vested................................... $ 18,186,000 $ 17,138,000
Nonvested................................. 1,747,000 291,000
--------- -------
$ 19,933,000 $ 17,429,000
================ =============
Related net assets available for
plan benefits $ 25,111,000 $ 23,595,000
================ =============
</TABLE>
The Company has a defined contribution plan covering employees who have
completed one full calendar year of service. Annual contributions are made by
the Company in amounts based upon the Company's financial results. Company
contributions to the plan during 1995 and 1994 were $1,165,000 and $1,265,000,
respectively.
The Company has entered into deferred compensation agreements with several
directors, key management employees, agents and general agents. These deferred
amounts are payable according to the terms and subject to the conditions of said
agreements.
The Company also has a defined contribution pension plan and a 401(k) plan
covering substantially all of the agents, except general agents. Contributions
of 3% of defined commissions (plus 3% for commissions over the Social Security
wage base) are made to the pension plan. An additional contribution of 3% of
defined commissions are made to a 401(k) plan. Company contributions expensed
for these plans for 1995 and 1994 are as follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Agents' pension plan $ 334,000 $ 349,000
Agents' 401(k) plan 272,000 262,000
------- -------
$ 606,000 $ 611,000
============== ===========
</TABLE>
The funds for all plans are held by the Company under deposit
administration and group annuity contracts.
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits (postretirement benefits) for retired
employees and certain agents (retirees). Substantially all employees and agents
may become eligible for such benefits if they reach retirement age while working
for the Company.
<PAGE>
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
6. EMPLOYEES' AND AGENTS' BENEFIT PLANS (CONTINUED):
Net periodic postretirement benefit costs for the year ended December 31,
1995 and 1994 were as follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Service cost $ 253,000 $ 252,000
Interest cost 688,000 594,000
Amortization of unrecognized loss 45,000 42,000
------ ------
Net postretirement benefit cost $ 986,000 $ 888,000
=========== ===========
</TABLE>
Company-paid premiums in 1995 were $788,000. Claims incurred in 1995 for
benefits was not significantly different than the above provision. Accrued
postretirement benefits as of December 31, 1995 were as follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Accumulated postretirement benefit obligation (APBO):
Retirees and their dependents $ 5,606,000 $ 5,620,000
Active employees fully eligible to retire and
receive benefits 2,439,000 2,523,000
Active employees not fully eligible 1,288,000 843,000
Unrecognized loss (1,523,000) (1,374,000)
---------- ----------
Total APBO $ 7,810,000 $ 7,612,000
=========== ===========
</TABLE>
The assumed discount rate used in determining the accumulated
postretirement benefit was 7.25% and the assumed health care cost trend rate was
10% graded to 6% over 50 years. Compensation rates were assumed to increase 6%
at each year end. The health coverage for retirees age 65 and over is capped in
the year 2000.
The health care cost trend rate assumption has a significant effect on the
amounts reported. An increase in the assumed health care cost trend rates by one
percentage point would increase the accumulated postretirement benefit
obligation as of December 31, 1995 by $296,000 and increase the net periodic
postretirement benefit cost for 1995 by $77,000.
7. FEDERAL INCOME TAXES:
Following is a reconciliation between the amount of tax computed at the
federal statutory rate of 35% in 1995 and 1994, respectively, and the federal
income tax provision reflected in the statement of operations:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Income tax computed at statutory rate........... $ 23,254,262 $ 19,436,453
Increases (decreases) in taxes resulting from:
Bond discount accrual......................... (1,789,195) (917,099)
Reserve adjustments........................... 278,993 476,495
Tax-exempt income............................. (1,963,294) (1,990,012)
Accelerated depreciation...................... (960,499) (822,622)
Policyowner dividends......................... 356,271 1,006,132
Deferred acquisition costs.................... 66,703 4,160,043
Change in mortality and morbidity fluctuation
reserve..................................... (2,065,764) 518,468
Change in discounting of accident and health
reserves.................................... 43,030 (131,267)
Change in interest maintenance reserve........ (757,607) (897,837)
Mutual company differential earnings amount,
Current year................................ 3,163,669 10,295,733
Changes in prior period estimates............. 114,143 (4,263,100)
Other......................................... 1,985,341 187,501
--------- -------
Federal income taxes............................ $ 21,726,053 $ 27,058,888
============ =============
</TABLE>
<PAGE>
16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
8. REINSURANCE:
The Company is a party to various reinsurance contracts under which it
receives premiums as a reinsurer and reimburses the ceding companies for
portions of the claims incurred. At December 31, 1995 and 1994, life reinsurance
assumed was approximately 65% and 62%, respectively, of life insurance in force.
Premiums on life reinsurance assumed were approximately 44% and 43% of life
insurance premium income in 1995 and 1994, respectively. Premiums on accident
and health reinsurance assumed were approximately 57% and 53% of accident and
health premium income in 1995 and 1994, respectively.
The Company cedes that portion of the total risk on an individual life in
excess of $1,000,000. For accident and health and disability policies, the
Company has established various limits of coverage it will retain on any one
policyowner and cedes the remainder of such coverage. Certain statistical data
with respect to reinsurance ceded follows:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Reinsurance ceded on ordinary life in force..... $ 8,615,497,000 $ 6,248,499,000
Reinsurance ceded on group and credit
life in force................................. 1,457,917,000 1,631,068,000
Life reinsurance premiums ceded................. 29,776,000 26,562,000
Accident and health reinsurance premiums ceded.. 69,468,000 71,318,000
</TABLE>
The Company accounts for all reinsurance agreements as transfers of risk.
Premiums for policies reinsured with other companies have been reported as a
reduction of premium income and amounts applicable to reinsurance ceded for
policy reserves and claim liabilities have been reported as reductions of these
items. If companies to which reinsurance has been ceded are unable to meet
obligations under the reinsurance agreements, the Company would remain liable.
Changes in such contingent liabilities are reflected directly to policyowners'
surplus.
Six reinsurers account for approximately 71% of the Company's December 31,
1995 ceded reserves for life and accident and health insurance. The remainder of
such ceded reserves is spread among numerous reinsurers.
9. CONTINGENCY:
Various lawsuits have arisen in the ordinary course of the Company's
business. In each of the matters, the Company believes its defenses are
meritorious and that the eventual outcome will not have a material effect on the
Company's financial position.
10. STRATEGIC ALLIANCE:
In September 1994, the Company and State Life Insurance Company (State
Life) entered into a strategic alliance (the alliance). The Company and State
Life will remain separate entities, in that each will retain its own assets,
liabilities, surplus, policies, and policyowners. There will also be separate
but common boards of directors.
In accordance with the alliance, the Company has guaranteed the insurance
liabilities of State Life to its policyholders, including present policyholders
and those acquired during the period of the alliance (initially ten years), in
the event State Life becomes unable to honor such insurance liabilities. As of
December 31, 1995, the Company has not recorded any liabilities relating to this
guarantee.
11. SUBSEQUENT EVENT:
On February 16, 1996, the Company issued $75 million of 7.75% Surplus
Notes, due March 30, 2026.
<PAGE>
17
================================================================================
No dealer, salesman or any other person is authorized by the AUL American
Unit Trust to give any information or to make any representation other than as
contained in this Statement of Additional Information in connection with the
offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, with respect to the
offering herein described. For further information with respect to the AUL
American Unit Trust, AUL and its variable annuities, reference is made thereto
and the exhibits filed therewith or incorporated therein, which include all
contracts or documents referred to herein.
================================================================================
AUL AMERICAN UNIT TRUST
Group Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46204
STATEMENT OF ADDITIONAL INFORMATION
Dated: May 1, 1996
================================================================================
<PAGE>
1
Part C: Other Information
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
1. Included in Prospectus (Part A):
Condensed Financial Information
2. Included in Statement of Additional Information (Part B):
a) Financial Statements of American United Life Insurance Company(R)
Report of Independent Accountants
Balance Sheet - Assets, Liabilities and Policyowners' Surplus as of
December 31, 1995 and 1994
Statement of Operations for the years ended December 31, 1995 and 1994
Statement of Policyowner's Surplus for the years ended December 31,
1995 and 1994
Statement of Cash Flows for the years ended December 31, 1995 and 1994
Notes to Financial Statements
(b) Financial Statements of AUL American Unit Trust
1. Registrant's Annual Report for the year ended December 31, 1995
is incorporated by reference thereto and contains the following
Financial Statements:
Report of Independent Accountants
Statement of Net Assets as of December 31, 1995
Statement of Operations and Changes in Net Assets for the years
ended December 31, 1995 and 1994
Notes to Financial Statements
(b) Exhibits
1. Resolution of Executive Committee of American United Life Insurance
Company(R) ("AUL") establishing AUL American Unit Trust(1)
2. Not applicable
3. Not applicable
4. (a) Group Annuity Contract Forms
(1) TDA Multiple-Fund Group Variable Annuity Contract(2)
(2) DCP Multiple-Fund Group Variable Annuity Contract(2)
(3) IRA Multiple-Fund Group Variable Annuity Contract(4)
(4) Employer Sponsored TDA Multiple-Fund Group Variable
Annuity Contract(4)
(5) TDA Multiple-Fund Group Variable Annuity Contract
(Custodial version)(5)
(6) IRA Multiple-Fund Group Variable Annuity Contract
(Custodial version)(5)
(7) TDA Multiple-Fund Group Variable Annuity Contract
(Single Contribution Rollover version)(6)
(8) IRA Multiple-Fund Group Variable Annuity Contract
(Single Contribution Rollover version)(6)
(9) TDA Multiple-Fund Group Variable Annuity Contract
(Other Single Contribution version)(6)
(10) IRA Multiple-Fund Group Variable Annuity Contract
(Other Single Contribution version)(6)
(11) Employer Sponsored TDA Multiple-Fund Group Variable
Annuity Contract (Benefit Responsive version)(6)
(12) Combined Employee Benefit Plan and Employer Sponsored 403(b)
Multiple-Fund Group Variable Annuity Contract(7)
(b) Participant Certificate Forms
(1) TDA Multiple-Fund Group Variable Annuity Participant's
Certificate(3)
(2) DCP Multiple-Fund Group Variable Annuity Participant's
Certificate(3)
(3) IRA Multiple-Fund Group Variable Annuity Participant's
Certificate(3)
(4) Employer Sponsored TDA Multiple-Fund Group Variable Annuity
Participant's Certificate(4)
(5) TDA Multiple-Fund Group Variable Annuity Participant's
Certificate (Custodial version)(5)
(6) IRA Multiple-Fund Group Variable Annuity Participant's
Certificate (Custodial version)(5)
(7) TDA Multiple-Fund Group Variable Annuity Participant's
Certificate (Single Contribution Rollover version)(6)
(8) IRA Multiple-Fund Group Variable Annuity Participant's
Certificate (Single Contribution Rollover version)(6)
(9) TDA Multiple-Fund Group Variable Annuity Participant's
Certificate (Other Single Contribution version)(6)
(10) IRA Multiple-Fund Group Variable Annuity Participant's
Certificate (Other Single Contribution version)(6)
(11) Employer Sponsored TDA Multiple-Fund Group Variable Annuity
Participant's Certificate (Benefit Responsive version)(6)
(12) Combined Employee Benefit Plan and Employer Sponsored 403(b)
Multiple-Fund Group Variable Annuity Certificate(7)
<PAGE>
2
Item 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED)
5. Application forms and other forms:
(a) Application form for IRA, TDA, and Employer Sponsored TDA
Multiple-Fund Group Variable Annuity Contracts(4)
(b) Application form for DCP Multiple-Fund Group Variable Annuity
Contract(4)
(c) Enrollment form for IRA, TDA, and DCP Multiple-Fund Group Variable
Annuity Contracts(8)
(d) Enrollment form for Employer Sponsored TDA Multiple-Fund Group
Variable Annuity Contracts(8)
6. Copies of AUL's certificate of incorporation and by-laws(1)
7. Not applicable
8. (a) Form of Participation Agreement with Variable Insurance Products
Fund and Variable Insurance Products Fund II(7)
(b) Form of Participation Agreement with Dreyfus Variable Investment
Fund and Dreyfus Socially Responsible Growth Fund, Inc.(8)
(c) Form of Participation Agreement with Twentieth Century Investors,
Inc. and Twentieth Century World Investors, Inc.(8)
(d) Copies of Participation Agreement with Alger American Fund, Acacia
Capital Corporation, Invesco Dynamics Funds, Inc., PBHG Funds, Inc.,
T. Rowe Price Equity Series, Inc., Vanguard Explorer Fund, Inc.,
and Vanguard Fixed Income Securities Fund, Inc.(9)
9. Opinion and Consent of Senior Counsel of AUL as to the legality of
Contracts being registered(2)
10. (a) Consent of Independent Accountants (11)
(b) Consent of Dechert Price & Rhoads(2)
(c) Powers of Attorney(1) (3) (4) (5) (8) (9) (11)
11. Financial Statements of AUL American Unit Trust (11)
12. Not applicable
13. Schedule for computation of performance quotations(11)
14. Financial Data Schedules (11)
(1) Filed with the Registrant's Registration Statement
(File No. 33-31375) on October 10, 1989, and incorporated by
reference herein.
(2) Filed with Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement, and incorporated by reference herein.
(3) Filed with Post-Effective Amendment No. 1 to the Registrant's
Registration Statement and incorporated by reference herein.
(4) Filed with Post-Effective Amendment No. 2 to the Registrant's
Registration Statement and incorporated by reference herein.
(5) Filed with Post-Effective Amendment No. 3 to the Registrant's
Registration Statement and incorporated by reference herein.
(6) Filed with Post-Effective Amendment No. 4 to the Registrant's
Registration Statement and incorporated by reference herein.
(7) Filed with Post-Effective Amendment No. 6 to the Registrant's
Registration Statement and incorporated by reference herein.
(8) Filed with Post-Effective Amendment No. 7 to the Registrant's
Registration Statement and incorporated by reference herein.
(9) Filed with Post-Effective Amendment No. 10 to the Registrant's
Registration Statement and incorporated by reference herein.
(10) Filed with Post-Effective Amendment No. 11 to the Registrant's
Registration Statement and incorporated by reference herein.
(11) Filed with Post-Effective Amendment No. 13 to the Registrant's
Registration Statement and incorporated by reference herein.
Item 25. DIRECTORS AND OFFICERS OF AUL
Name and Address Positions and Offices with AUL
- ---------------- ------------------------------
John H. Barbre* Senior Vice President
Steven C. Beering M.D. Director
Purdue University
West Lafayette, Indiana
William R. Brown* General Counsel and Secretary
Secretary, State Life Insurance Co.
Arthur L. Bryant Director
P.O. Box 406
Indianapolis, Indiana
James E. Cornelius Director
P.O. Box 44906
Indianapolis, Indiana
- ----------------------------------------------
*One American Square, Indianapolis, Indiana
<PAGE>
3
Item 25. DIRECTORS AND OFFICERS OF AUL (CONTINUED)
Name and Address Positions and Offices with AUL
- ---------------- ------------------------------
James E. Dora Director
P.O. Box 42908
Indianapolis, Indiana
Otto N. Frenzel III Director and Chairman of the Audit Committee
101 W. Washington St.
Suite 400E
Indianapolis, Indiana
David W. Goodrich Director
Box 82055
Indianapolis, Indiana
William P. Johnson Director
P.O. Box 517
Goshen, Indiana
Charles D. Lineback* Senior Vice President
James T. Morris Director
1220 Waterway Boulevard
Indianapolis, Indiana
James W. Murphy* Senior Vice President
Jerry L. Plummer* Senior Vice President
R. Stephen Radcliffe* Director and Executive Vice President
Jack E. Reich* Emeritus Chairman of the Board
Thomas E. Reilly Jr. Director
300 N. Meridian St.
Suite 1500
Indianapolis, Indiana
William R. Riggs* Director
G. David Sapp* Senior Vice President
Leonard D Schutt Director and Chairman of the Finance Committee
5853 Wycombe Lane
Indianapolis, Indiana
Jerry D. Semler* Chairman of the Board, President, Chief
Executive Officer and Chairman of the Executive
Committee,AUL; Chairman of the Board, Chief
Executive Officer, State Life Insurance Co.
Yvonne H. Shaheen Director
1310 S. Franklin Road
Indianapolis, Indiana
James P. Shanahan* Senior Vice President
Frank D. Walker Director
P.O. Box 80432
Indianapolis, Indiana
Gerald T. Walker* Senior Vice President
James R. Zapapas Director
5025 Plantation Drive
Indianapolis, Indiana
- ----------------------------------------------
*One American Square, Indianapolis, Indiana
<PAGE>
4
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
American United Life Insurance Company(R) ("AUL") is a mutual life insurance
company organized under the laws of the State of Indiana. As a mutual company,
AUL has no shareholders and therefore no one individual controls as much as 10%
of AUL. In accordance with current law, it is anticipated that AUL will request
voting instructions from owners or participants of any Contracts that are funded
by separate accounts that are registered investment companies under the
Investment Company Act of 1940 and will vote shares in any such separate account
attributable to the Contracts in proportion to the voting instructions received.
AUL may vote shares of any Portfolio, if any, that it owns beneficially in its
own discretion.
AUL may also be deemed to control State Life Insurance Company(R) ("State Life")
since a majority of AUL's Directors also serve as Directors of State Life. By
virtue of an agreement between AUL and State Life, AUL provides investment and
other support services for State Life on a contractual basis.
AUL Equity Sales Corporation ("ESC") is a wholly-owned subsidiary of AUL
organized under the laws of the State of Indiana in 1969 for the purpose of the
sale of mutual funds on an application-way basis only.
Registrant and AUL American Individual Unit Trust are separate accounts of AUL,
organized for the purpose of the sale of group and individual variable annuity
contracts, respectively.
AUL American Series Fund, Inc. (the "Fund") was incorporated under the laws of
Maryland on July 26, 1989 and is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940. As a
"series" type of mutual fund, the "Fund" issues shares of common stock relating
to separate investment portfolios. Substantially all of the "Fund's" shares were
originally purchased by AUL in connection with the initial capitalization of the
"Fund." As a result of providing the initial capital for the Portfolios, on
December 31, 1995, AUL owned 12.5% of the outstanding shares of the Fund's
Equity Portfolio, 25.2% of the Fund's Bond Portfolio, 6.1% of the Fund's Managed
Portfolio, 0.0% of the Fund's Money Market Portfolio and 45.8% of the Fund's
Tactical Asset Allocation Portfolio. Therefore, AUL may be able to control the
outcome of any issue submitted generally to the vote of Fund shareholders and
would be able to control the outcome of any issue submitted to the vote of
shareholders of the Tactical Asset Allocation Portfolio.
American United Life Pooled Equity Fund B is a separate account of AUL organized
for the purpose of the sale of group variable annuity contracts.
Item 27. NUMBER OF CONTRACTHOLDERS
As of December 31, 1995, AUL has issued 1,103 qualified contracts with
Participants who have invested funds in the Contracts.
Item 28. INDEMNIFICATION
Article IX, Section 1 of the by-laws of AUL provides as follows:
The corporation shall indemnify any director or officer or former director
or officer of the corporation against expenses actually and reasonably
incurred by him (and for which he is not covered by insurance) in
connection with the defense of any action, suit or proceeding (unless such
action, suit or proceeding is settled) in which he is made a party by
reason of being or having been such director or officer, except in relation
to matters as to which he shall be adjudged in such action, suit or
proceeding, to be liable for negligence or misconduct in the performance of
his duties. The corporation may also reimburse any director or officer or
former director or officer of the corporation for the reasonable costs of
settlement of any such action, suit or proceeding, if it shall be found by
a majority of the directors not involved in the matter in controversy
(whether or not a quorum) that it was to the interest of the corporation
that such settlement be made and that such director or officer was not
guilty of negligence or misconduct. Such rights of indemnification and
reimbursement shall not be exclusive of any other rights to which such
director or officer may be entitled under any By-law, agreement, vote of
members or otherwise.
Item 29. PRINCIPAL UNDERWRITERS
(a) AUL acts as Investment Adviser to American United Life Pooled Equity
Fund B (2-27832) and to AUL American Series Fund, Inc. (33-30156).
(b) For information regarding AUL's Officers and Directors, see Item 25
above.
(c) Not applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the investment Company Act of 1940 and the rules
under that section will be maintained at One American Square, Indianapolis, IN
46204.
<PAGE>
5
Item 31. MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Part A or
Part B.
Item 32. UNDERTAKINGS
The registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in this registration statement are never more than 16
months old for so long as payments under the variable annuity
contracts may be accepted, unless otherwise permitted.
(b) to include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a post
card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.
Additional Representations:
(a) The Registrant and its Depositor are relying upon Rule 6c-7 under the
Investment Company Act of 1940 (17 CFR 270.6c-7), Exemptions from
Certain Provisions of Sections 22(e) and 27 for Registered Separate
Accounts Offering Variable Annuity Contracts to Participants in the
Texas Optional Retirement Program, and the provisions of paragraphs
(a) through (d) of this rule have been complied with.
(b) The Registrant and its Depositor are relying upon American Council of
Life Insurance, SEC No-Action Letter, SEC Ref. No. IP-6-88 (November
28, 1988) with respect to annuity contracts offered as funding
vehicles for retirement plans meeting the requirements of Section
403(b) of the Internal Revenue Code, and the provisions of paragraphs
(1)-(4) of this letter have been complied with.
<PAGE>
6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) of the Securities Act of 1933 and
has duly caused this Post-Effective Amendment to the Registration Statement
(Form N-4) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis and the State of Indiana on the 26th
day of day of April, 1996.
AUL AMERICAN UNIT TRUST (Registrant)
By: American United Life Insurance Company(R)
------------------------------------------------
By: Jerry D. Semler*, Chairman of the
Board, President, and Chief Executive Officer
/s/ Richard A. Wacker
- -------------------------------------------
*By:Richard A. Wacker as Attorney-in-fact
Date: April 26, 1996
Pursuant to the requirements of the Securities Act of 1933, this Post Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
_______________________________ Director April ___, 1996
Steven C. Beering M.D.*
_______________________________ Director April ___, 1996
Arthur L. Bryant*
_______________________________ Director April ___, 1996
James E. Cornelius*
_______________________________ Director April ___, 1996
James E. Dora*
_______________________________ Director April ___, 1996
Otto N. Frenzel III*
_______________________________ Director April ___, 1996
David W. Goodrich*
_______________________________ Director April ___, 1996
William P. Johnson*
_______________________________ Director April ___, 1996
James T. Morris*
<PAGE>
7
Signature Title Date
- --------- ----- ----
______________________________ Principal Financial April ___, 1996
James W. Murphy* and Accounting Officer
______________________________ Director April ___, 1996
R. Stephen Radcliffe*
______________________________ Emeritus Chairman April ___, 1996
Jack E. Reich* of the Board
______________________________ Director April ___, 1996
Thomas E. Reilly Jr*
______________________________ Director April ___, 1996
William R. Riggs*
______________________________ Director April ___, 1996
Leonard D Schutt*
______________________________ Director April ___, 1996
Yvonne H. Shaheen*
______________________________ Director April ___, 1996
Frank D. Walker*
______________________________ Director April ___, 1996
James R. Zapapas*
/s/ Richard A. Wacker
- -------------------------------------------
*By: Richard A. Wacker as Attorney-in-fact
Date: April 26, 1996
<PAGE>
8
EXHIBIT LIST
Exhibit Number Name of Exhibit
- -------------- ---------------
10(a) Consent of Independent Accountants
10(c) Power of Attorney
11 Annual Report of AUL American Unit Trust
for Period Ended December 31, 1995
13 Computation of Performance Quotations
14 Financial Data Schedules
<PAGE>
1
EXHIBIT 10(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
American United Life Insurance Company(R)
Indianapolis, Indiana
We consent to the incorporation by reference in Post Effective Amendment
No. 13 to the Registration Statement of the AUL American Unit Trust (the
"Trust") on Form N-4 (File No. 33-31375) of our report dated January 27, 1996,
on our audit of the financial statements of the "Trust", for the year ended
December 31, 1995 and for the two years in the period then ended which report is
included in the Annual Report for the "Trust".
We also consent to the inclusion in Part B of the Registration Statement of
our report dated February 19, 1996, on our audits of the financial statements of
American United Life Insurance Company(R) ("AUL") as of December 31, 1995 and
1994 and for the two years then ended..
We also consent to the reference to our Firm as the independent accountants
for the "Trust" and as the independent accountants for "AUL".
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
April 23, 1996
<PAGE>
1
EXHIBIT 10(c)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Wacker and William R. Brown, and each of them his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity contracts of American United Life Insurance Company(R) and any
Amendments or supplements thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
Dated: February 15, 1996
/s/ James M. Cornelius
- -----------------------
Printed: James M. Cornelius
<PAGE>
1
EXHIBIT 11
ANNUAL REPORT OF AUL AMERICAN UNIT TRUST
FOR THE PERIOD ENDED DECEMBER 31, 1995
AUL American Unit Trust
Annual Report
December 31, 1995
AUL(R)
This report may be used as sales literature only when accompanied or
preceded by effective prospectuses of AUL American Series Fund, Inc. and AUL
American Unit Trust, which relate sales expense and other pertinent information.
A Message From The Chairman of the Board and President of AUL American
Series Fund, Inc.
To Participants in AUL American Unit Trust
Last year was a spectacular year for the equity and bond markets. Domestic
stocks were driven by modest economic growth, low inflation, declining interest
rates and profit expansion. Meanwhile, baby boomers helped contribute to the
market surge by investing in retirement products. Near the end of 1995, the
stock market cheered as the Federal Reserve lowered short-term interest rates,
thereby providing an extra boost to the economy during 1996.
Although 1995 was an impressive year for equities, the stock market became
highly rotational as investors shifted rapidly from one sector to another during
the year. This meant that if an investor did not keep rotating from sector to
sector with perfect timing, his or her performance would have lagged the overall
market.
The bond market also enjoyed a solid performance in 1995 following one of
the worst years ever in 1994. Yields declined dramatically at every point on the
yield curve resulting in double digit returns for most bond funds. Aggressive
buying by bond investors in 1995 was fueled by prospects for a reduction in the
federal deficit, signs of economic weakness, moderate inflation, and the
likelihood of more easing by the Federal Reserve.
Now in the fifth year of an economic expansion, economists are projecting
this trend will continue into 1996. The Federal Reserve has been successful at
keeping inflationary pressures in check during this prolonged expansion.
Interest rates could decline during 1996, but the move will be much smaller than
in 1995. Corporate profits should continue to expand, but the rate of earnings
growth is expected to decline.
After experiencing such a phenomenal year in 1995, equity investors have
become complacent with above average returns. However, it is not likely that
1996 will be a repeat of 1995's banner year. Achieving double digit bond
performance may also be difficult given today's much lower level of interest
rates. Yet bonds could still perform well if this low inflation, low growth, low
interest rate scenario persists throughout 1996.
James W. Murphy
Chairman of the Board of Directors and President
Indianapolis, Indiana
January 19, 1996
<PAGE>
2
(This page is intentionally blank.)
<PAGE>
3
Report of Independent Accountants
================================================================================
The Contract Owners and Board of Directors
American United Life Insurance Company(R)
We have audited the accompanying statement of net assets of AUL American
Unit Trust as of December 31, 1995, and the related statement of operations and
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Trust'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. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 AUL American Unit Trust as
of December 31, 1995, and the results of its operations and changes in net
assets for each of the two years then ended, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
January 27, 1996
<PAGE>
4
<TABLE>
<CAPTION>
AUL American Unit Trust
STATEMENT OF NET ASSETS
December 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Series Fund Fidelity
Equity Money Market Bond Managed High Income Growth
------ ------------ ---- ------- ----------- ------
Assets:
Investment at
market value $ 16,792,178 $ 2,457,387 $ 5,780,313 $ 15,384,723 $ 6,063,352 $ 22,533,118
Receivable for units
sold, net --- --- ---- --- --- ---
Liabilities:
Payable for units
redeemed, net 79,436 --- --- --- --- ---
------ ------- ------- ------- ------- ------
Net Assets $ 16,712,742 $ 2,457,387 $ 5,780,313 $ 15,384,723 $ 6,063,352 $ 22,533,118
============ =========== =========== ============ =========== ============
Units outstanding 9,332,222 2,066,493 3,613,483 9,242,020 4,719,928 14,966,606
========= ========= ========= ========= ========= ==========
Net Asset Value per unit $ 1.79 $ 1.19 $ 1.60 $ 1.66 $ 1.28 $ 1.51
=========== =========== =========== ============ =========== ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
AUL American Unit Trust
STATEMENT OF NET ASSETS (continued)
December 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Fidelity TCI
Overseas Asset Manager Index 500 Equity-Income Contrafund Growth
-------- ------------- --------- ------------- ---------- ------
Assets:
Investment at market
value $ 7,901,597 $ 27,724,302 $ 5,717,034 $ 932,218 $ 875,740 $ 969,741
Receivable for units
sold, net --- --- --- --- --- ---
Liabilities:
Payable for units
redeemed, net --- --- --- --- --- ---
Net Assets $ 7,901,597 $ 27,724,302 $ 5,717,034 $ 932,218 $ 875,740 $969,741
============ ============ =========== ========= ========= ========
Units outstanding 6,385,519 22,931,563 3,976,682 762,132 691,978 747,779
========= ========== ========= ======= ======= =======
Net Asset Value per unit $ 1.24 $ 1.21 $ 1.44 $ 1.22 $ 1.27 $ 1.30
============ ============ =========== ========= ========= ========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AUL American Unit Trust
STATEMENT OF NET ASSETS (continued)
December 31, 1995
Alger Calvert
American Capital T.Rowe Price
Growth Accumulation Equity Income
------ ------------ -------------
Assets:
Investment at market value $ 1,217,172 $ 89,922 $ 478,071
Receivable for units sold, net 78,201 --- ---
Liabilities:
Payable for units redeemed, net --- --- ---
--------- ------- ------
Net Assets $ 1,295,373 $ 89,922 $ 478,071
=========== ======== =========
Units outstanding 1,028,839 71,033 388,732
========= ====== =======
Net Asset Value per unit $ 1.26 $ 1.27 $ 1.23
=========== ======== =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
AUL American Unit Trust
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
for the two years ended December 31, 1995 and 1994
<S> <C> <C> <C> <C> <C> <C>
Series Fund
-----------
Equity Money Market Bond
------ ------------ ----
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Operations:
Dividend income $ 484,382 $ 631,246 $ 90,815 $ 32,715 $ 295,780 $ 189,470
Mortality & expense
charges 180,862 113,710 21,626 11,097 56,947 37,625
------- ------- ------ ------ ------ ------
Net Investment Income
(Expense) 303,520 517,536 69,189 21,618 238,833 151,845
------- ------- ------ ------ ------- -------
Gain (Loss) on Investments:
Net realized gain (loss) 340,866 193,546 --- --- (41,640) (36,336)
Net unrealized gain (loss) 1,723,846 (600,001) --- --- 478,688 (246,365)
--------- -------- ------- --------
Net Gain (Loss) 2,064,712 (406,455) --- --- 437,048 (282,701)
--------- -------- ------- --------
Increase (Decrease) 2,368,232 111,081 69,189 21,618 675,881 (130,856)
--------- ------- ------ ------ ------- --------
Contract Owner Transactions:
Proceeds from units sold 5,109,255 5,402,074 6,141,734 2,529,829 2,165,809 2,230,383
Cost of units redeemed (2,106,682) (1,127,603) (4,993,063) (1,774,447) (693,221) (643,942)
---------- ---------- ---------- ---------- -------- --------
Increase 3,002,573 4,274,471 1,148,671 755,382 1,472,588 1,586,441
--------- --------- --------- ------- --------- ---------
Net increase 5,370,805 4,385,552 1,217,860 777,000 2,148,469 1,455,585
Net Assets, beginning 11,341,937 6,956,385 1,239,527 462,527 3,631,844 2,176,259
---------- --------- --------- ------- --------- ---------
Net Assets, ending $ 16,712,742 $11,341,937 $ 2,457,387 $ 1,239,527 $ 5,780,313 $ 3,631,844
============ =========== =========== =========== =========== ===========
Units sold 3,111,938 3,569,318 5,234,868 2,239,882 1,429,982 1,595,083
Units redeemed (1,250,871) (743,137) (4,252,203) (1,569,571) (457,399) (461,194)
---------- -------- ---------- ---------- -------- --------
Net increase 1,861,067 2,826,181 982,665 670,311 972,583 1,133,889
Units outstanding, beginning 7,471,155 4,644,974 1,083,828 413,517 2,640,900 1,507,011
--------- --------- --------- ------- --------- ---------
Units outstanding, ending 9,332,222 7,471,155 2,066,493 1,083,828 3,613,483 2,640,900
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
AUL American Unit Trust
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (continued)
for the two years ended December 31, 1995 and 1994
<S> <C> <C> <C> <C> <C> <C>
Series Fund Fidelity Fidelity
Managed High Income Growth
------- ----------- ------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Operations:
Dividend income $ 761,412 $ 616,959 $ 245,640 $ 108,344 $ 61,007 $ 196,573
Mortality & expense
charges 168,071 122,919 57,956 27,209 210,009 81,522
------- ------- ------ ------ ------- ------
Net Investment Income
(Expense) 593,341 494,040 187,684 81,135 (149,002) 115,051
------- ------- ------- ------ -------- -------
Gain (Loss) on Investments:
Net realized gain (loss) 87,452 71,648 (33,043) (29,008) 1,311,129 (127,135)
Net unrealized gain (loss) 1,471,188 (778,483) 608,211 (131,039) 3,092,171 103,896
--------- -------- ------- -------- --------- -------
Net Gain (Loss) 1,558,640 (706,835) 575,168 (160,047) 4,403,300 (23,239)
--------- -------- ------- -------- --------- -------
Increase (Decrease) 2,151,981 (212,795) 762,852 (78,912) 4,254,298 91,812
--------- -------- ------- ------- --------- ------
Contract Owner Transactions:
Proceeds from units sold 3,348,132 5,995,772 2,876,963 2,959,579 13,359,280 9,114,490
Cost of units redeemed (1,642,119) (1,040,691) (826,487) (293,513) (5,494,211) (1,127,343)
---------- ---------- -------- -------- ---------- ----------
Increase 1,706,013 4,955,081 2,050,476 2,666,066 7,865,069 7,987,147
--------- --------- --------- --------- --------- ---------
Net increase 3,857,994 4,742,286 2,813,328 2,587,154 12,119,367 8,078,959
Net Assets, beginning 11,526,729 6,784,443 3,250,024 662,870 10,413,751 2,334,792
---------- --------- --------- ------- ---------- ---------
Net Assets, ending $ 15,384,723 $11,526,729 $ 6,063,352 $ 3,250,024 $22,533,118 $10,413,751
============ =========== =========== =========== =========== ===========
Units sold 2,173,072 4,190,534 2,385,562 2,680,955 9,441,745 8,232,596
Units redeemed (1,078,007) (734,865) (679,096) (265,544) (3,722,429) (1,036,818)
---------- -------- -------- -------- ---------- ----------
Net increase 1,095,065 3,455,669 1,706,466 2,415,411 5,719,316 7,195,778
Units outstanding, beginning 8,146,955 4,691,286 3,013,462 598,051 9,247,290 2,051,512
--------- --------- --------- ------- --------- ---------
Units outstanding, ending 9,242,020 8,146,955 4,719,928 3,013,462 14,966,606 9,247,290
========= ========= ========= ========= ========== =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
AUL American Unit Trust
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (continued)
for the two years ended December 31, 1995 and 1994
<S> <C> <C> <C> <C> <C> <C>
Fidelity
Overseas Asset Manager Index 500
-------- ------------- ---------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Operations:
Dividend income $ 42,737 $ 8,118 $ 447,091 $ 449,113 $ 42,513 $ 1,510
Mortality & expense
charges 81,781 43,127 302,886 192,036 45,078 16,881
------ ------ ------- ------- ------ ------
Net Investment Income
(Expense) (39,044) (35,009) 144,205 257,077 (2,565) (15,371)
------- ------- ------- ------- ------ -------
Gain (Loss) on Investments:
Net realized gain (loss) 45,929 67,540 (258,733) (99,460) 229,280 (3,479)
Net unrealized gain (loss) 552,120 (154,567) 3,680,015 (1,334,665) 813,537 16,406
------- -------- --------- ---------- ------- ------
Net Gain (Loss) 598,049 (87,027) 3,421,282 (1,434,125) 1,042,817 12,927
------- ------- --------- ---------- --------- ------
Increase (Decrease) 559,005 (122,036) 3,565,487 (1,177,048) 1,040,252 (2,444)
------- -------- --------- ---------- --------- ------
Contract Owner Transactions:
Proceeds from units sold 5,043,833 4,791,590 8,354,917 17,106,981 3,753,742 1,619,615
Cost of units redeemed (3,125,876) (235,643) (4,648,335) (2,095,783) (1,163,778) (72,191)
---------- -------- ---------- ---------- ---------- -------
Increase 1,917,957 4,555,947 3,706,582 15,011,198 2,589,964 1,547,424
--------- --------- --------- ---------- --------- ---------
Net increase 2,476,962 4,433,911 7,272,069 13,834,150 3,630,216 1,544,980
Net Assets, beginning 5,424,635 990,724 20,452,233 6,618,083 2,086,818 541,838
--------- ------- ---------- --------- --------- -------
Net Assets, ending $ 7,901,597 $ 5,424,635 $ 27,724,302 $ 20,452,233 $ 5,717,034 $ 2,086,818
=========== ============ ============= ============ =========== ===========
Units sold 4,294,825 4,077,597 7,530,175 15,624,376 2,896,935 1,528,425
Units redeemed (2,657,590) (201,561) (4,138,988) (1,943,607) (887,069) (68,805)
---------- -------- ---------- ---------- -------- -------
Net increase 1,637,235 3,876,036 3,391,187 13,680,769 2,009,866 1,459,620
Units outstanding, beginning 4,748,284 872,248 19,540,376 5,859,607 1,966,816 507,196
--------- ------- ---------- --------- --------- -------
Units outstanding, ending 6,385,519 4,748,284 22,931,563 19,540,376 3,976,682 1,966,816
========= ========= ========== ========== ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
10
<TABLE>
<CAPTION>
AUL American Unit Trust
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (continued)
for the two years ended December 31, 1995 and 1994
<S> <C> <C> <C> <C> <C> <C>
Alger Calvert
Fidelity TCI American Capital
Equity-Income Contrafund Growth Growth Accumulation
------------- ---------- ------ ------ ------------
1995(1) 1995(1) 1995 1994(2) 1995(1) 1995(1)
------- ------- ---- ------- ------- -------
Operations:
Dividend income $ 4,945 $ 9,771 $ 294 $ --- $ 1 $ 4,737
Mortality & expense
charges 1,815 1,740 6,369 837 2,385 168
----- ----- ----- --- ----- ---
Net Investment Income
(Expense) 3,130 8,031 (6,075) (837) (2,384) 4,569
----- ----- ------ ---- ------ -----
Gain (Loss) on Investments:
Net realized gain (loss) 6,939 330 30,332 (487) (2,334) 311
Net unrealized gain (loss) 31,816 2,967 83,561 2,366 (7,041) (3,357)
------ ----- ------ ----- ------ ------
Net Gain (Loss) 38,755 3,297 113,893 1,879 (9,375) (3,046)
------ ----- ------- ----- ------ ------
Increase (Decrease) 41,885 11,328 107,818 1,042 (11,759) 1,523
------ ------ ------- ----- ------- -----
Contract Owner Transactions:
Proceeds from units sold 895,659 902,616 712,144 254,203 1,405,304 101,227
Cost of units redeemed (5,326) (38,204) (104,945) (521) (98,172) (12,828)
------ ------- -------- ---- ------- -------
Increase 890,333 864,412 607,199 253,682 1,307,132 88,399
------- ------- ------- ------- --------- ------
Net increase 932,218 875,740 715,017 254,724 1,295,373 89,922
Net Assets, beginning --- --- 254,724 --- --- ---
-------
Net Assets, ending $ 932,218 $ 875,740 $ 969,741 $ 254,724 $ 1,295,373 $ 89,922
========== ========= ========== ========= =========== =========
Units sold 766,531 722,789 573,128 254,843 1,105,533 80,855
Units redeemed (4,399) (30,811) (79,665) (527) (76,694) (9,822)
------ ------- ------- ---- ------- ------
Net increase 762,132 691,978 493,463 254,316 1,028,839 71,033
Units outstanding, beginning --- --- 254,316 --- --- ---
-------
Units outstanding, ending 762,132 691,978 747,779 254,316 1,028,839 71,033
======= ======= ======= ======= ========= ======
<FN>
(1) for the period from March 31, 1995 through December 31, 1995
(2) for the period from March 31, 1994 through December 31, 1994
The accompanying notes are an integral part of the financial statements
</FN>
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
AUL American Unit Trust
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (continued)
for the two years ended December 31, 1995 and 1994
<S> <C>
T. Rowe Price
Equity Income
-------------
1995(1)
-------
Operations:
Dividend income $ 4,044
Mortality & expense
charges 915
-----
Net Investment Income
(Expense) 3,129
-----
Gain (Loss) on Investments:
Net realized gain (loss) 7,310
Net unrealized gain (loss) 13,332
------
Net Gain (Loss) 20,642
------
Increase (Decrease) 23,771
------
Contract Owner Transactions:
Proceeds from units sold 465,993
Cost of units redeemed (11,693)
------
Increase 454,300
-------
Net increase 478,071
Net Assets, beginning ---
-------
Net Assets, ending $ 478,071
==========
Units sold 399,244
Units redeemed (10,512)
------
Net increase 388,732
Units outstanding, beginning ---
-------
Units outstanding, ending 388,732
=======
<FN>
(1) for the period from March 31, 1995 through December 31, 1995
The accompanying notes are an integral part of the financial statements
</FN>
</TABLE>
<PAGE>
12
(This page left intentionally blank.
<PAGE>
13
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The AUL American Unit Trust (Variable Account) was established by American
United Life Insurance Company(R) (AUL) on August 17, 1989, under procedures
established by Indiana law and is registered as a unit investment trust under
the Investment Company Act of 1940, as amended. The Variable Account is a
segregated investment account for AUL and invests exclusively in shares of
mutual fund portfolios offered by the AUL American Series Fund, Inc. (Series
Fund), Fidelity Investments Variable Insurance Products Fund and Variable
Insurance Products Fund II (Fidelity), Twentieth Century (TCI), Alger American
Fund (Alger), Calvert Group (Calvert), and T. Rowe Price.
SECURITY VALUATION TRANSACTIONS AND RELATED INVESTMENT INCOME
The market value of investments is based on the closing bid prices at
December 29, 1995. Investment transactions are accounted for on the trade date
and dividend income is recorded on the ex-dividend date.
MORTALITY AND EXPENSE RISKS CHARGES
AUL deducts a daily charge as compensation for the mortality and expense
risks assumed by AUL. The charge is equal on an annual basis to 1.25% of the
average daily net assets of each investment account. AUL guarantees that the
mortality and expense charge shall not increase. The charges incurred during the
years ended December 31, 1995 and 1994, were $1,138,607 and $646,962,
respectively.
TAXES
Operations of the Variable Account are part of, and are taxed with, the
operations of AUL, which is taxed as a life insurance company under the Internal
Revenue Code. Under current law, investment income, including realized and
unrealized capital gains of the investment accounts, is not taxed to AUL to the
extent it is applied to increase reserves under the contracts. The Variable
Account has not been charged for federal and state income taxes since none have
been imposed.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. ACCOUNT CHARGES
AUL may assess a premium tax charge based on premium taxes incurred.
Premium taxes currently range between 0% and 3.5%, but are subject to change by
governmental entities.
AUL deducts an annual administrative charge from each participants account
which may not exceed to the lesser of 0.5% of the participants account value or
$7.50 per quarter. The charge is assessed every quarter on a participant account
if it is in effect on the quarterly contract anniversary, and the charge is
assessed only during the accumulation period. The charges incurred during the
years ended December 31, 1995 and 1994, were $147,379 and $94,292, respectively.
AUL may assess a withdrawal charge on withdrawals that exceed 10% of the
participants account value as of the last contract anniversary preceding the
request for the withdrawal. The amount of the charge depends upon the number of
account years the participants account has been in existence, as follows:
Account Year Withdrawal Charge
------------ -----------------
1 - 5 8%
6 - 10 4%
11 or more 0%
The aggregrate withdrawal charges will not exceed 9% of the contributions
made by or on behalf of a participant under a contract. The charges incurred
during the years ended December 31, 1995 and 1994, were $96,562 and $40,115,
respectively.
<PAGE>
14
NOTES TO FINANCIAL STATEMENTS (continued)
3. Net Asset Value per Unit
The change in the Net Asset Value per unit for the year ended December 31,
1995, or from commencement of operations, March 31, 1995, through December 31,
1995, is:
12/31/95 12/31/94 Change
-------- -------- ------
Series Fund:
Equity $ 1.790413 $ 1.517747 18.0%
Money Market 1.188967 1.143602 4.0%
Bond 1.599503 1.375142 16.3%
Managed 1.664334 1.414657 17.6%
Fidelity:
High Income 1.284533 1.078494 19.1%
Growth 1.505375 1.126078 33.7%
Overseas 1.237371 1.142408 8.3%
Asset Manager 1.208903 1.046650 15.5%
Index 500 1.437483 1.060991 35.5%
TCI:
Growth 1.296724 1.001591 29.5%
12/31/95 3/31/95 Change
-------- ------- ------
Fidelity:
Equity-Income $ 1.223147 $ 1.000000 22.3%
Contrafund 1.265540 1.000000 26.6%
Alger:
American Growth 1.259033 1.000000 25.9%
Calvert:
Capital Accumulation 1.265873 1.000000 26.6%
T. Rowe Price:
Equity Income 1.229793 1.000000 23.0%
<PAGE>
15
NOTES TO FINANCIAL STATEMENTS (continued)
4. Cost of Investments
Series Fund: TCI:
Equity $ 15,200,881 Growth $ 883,813
Money Market 2,457,387
Bond 5,575,611 Alger:
Managed 14,493,727 American Growth 1,224,213
Fidelity: Calvert:
High Income 5,567,215 Capital Accumulation 93,279
Growth 19,297,874
Overseas 7,458,364 T.Rowe Price:
Asset Manager 25,129,765 Equity Income 464,739
Index 500 4,893,458
Equity-Income 900,403
Contrafund 872,773
<TABLE>
<CAPTION>
5. Net Assets
Series Fund Fidelity
----------- --------
Equity Money Market Bond Managed High Income Growth
<S> <C> <C> <C> <C> <C> <C>
------ ------------ ---- ------- ----------- ------
Proceeds from units sold $ 18,021,034 $ 9,644,916 $ 6,702,598 $ 16,243,484 $ 6,535,081 $ 24,819,847
Cost of units redeemed (4,666,271) (7,284,306) (1,602,290) (3,394,067) (1,174,912) (6,675,523)
Net investment income
(expense) 1,160,414 96,777 538,578 1,437,325 267,121 (38,587)
Net realized gain (loss) 606,268 --- (63,275) 206,985 (60,075) 1,192,137
Unrealized gain (loss) 1,591,297 --- 204,702 890,996 496,137 3,235,244
--------- ------- ------- ------- ---------
$ 16,712,742 $ 2,457,387 $ 5,780,313 $ 15,384,723 $ 6,063,352 $ 22,533,118
============ =========== =========== ============ =========== ============
Fidelity TCI
Overseas Asset Manager Index 500 Equity-Income Contra Growth
-------- ------------- --------- ------------- ------ ------
Proceeds from units sold $ 0,843,982 $32,147,586 $ 5,908,266 $ 895,659 $ 902,616 $ 966,347
Cost of units redeemed (3,437,241) (7,073,321) (1,236,983) (5,325) (38,204) (105,466)
Net investment income
(expense) (76,954) 388,639 (4,124) 3,130 8,031 (6,913)
Net realized gain (loss) 128,577 (333,139) 226,299 6,939 330 29,845
Unrealized gain (loss) 443,233 2,594,537 823,576 31,815 2,967 85,928
------- --------- ------- ------ ----- ------
$ 7,901,597 $27,724,302 $ 5,717,034 $ 932,218 $ 875,740 $ 969,741
============ =========== =========== ============ =========== ============
Alger Calvert
American Capital T. Rowe Price
Growth Accumulation Equity Income
------ ------------ -------------
Proceeds from units sold $ 1,405,304 $ 101,227 $ 465,992
Cost of units redeemed (98,172) (12,828) (11,693)
Net investment income
(expense) (2,384) 4,569 3,130
Net realized gain (loss) (2,334) 311 7,310
Unrealized gain (loss) (7,041) (3,357) 13,332
------ ------ ------
$ 1,295,373 $ 89,922 $ 478,071
============ ========== ===========
</TABLE>
EXHIBIT 13
COMPUTATION OF PERFORMANCE QUOTATIONS
Computation of Performance Quotations
1. Current Yield for the Money Market Investment Account:
As stated in the Statement of Additional Information, current yield for the
Money Market Investment Account will be based on the seven day period
ending December 31, 1995, and is computed by determining the net change in
the value of a hypothetical investment (exclusive of capital charges) of a
pre-existing account having a balance of one Accumulation Unit at the
beginning of the period [.00122658], subtracting a hypothetical charge
reflecting deductions from contractowner accounts [.00026033], and dividing
the difference by the value of the account at the beginning of the base
period [$1.188087] to obtain the base period return [.0008132822], and then
multiplying the base period return by (365/7) with the resulting yield
figure carried to at least the nearest hundredth of one percent [.000813 x
365/7] = .04240 or 4.24%.
2. Effective Yield for the Money Market Investment Account is based on the
seven day period ending December 31, 1995, carried to at least the nearest
hundredth of one percent, computed by determining the net change, exclusive
of capital charges, in the value of a hypothetical pre-existing account
having a balance of one Accumulation Unit at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from contractowner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding "1," raising the sum to a
power equal to 365 divided by 7, and subtracting "1" from the result,
pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)365/7] -1
Effective Yield = [(.000813 + 1)365/7] -1
Effective Yield = [(1.000813)365/7] -1
Effective Yield = 1.043301 - 1 = .04330 or 4.33%
3. Yield Calculations
(a) For the Equity Investment Account:
For the year ending December 31, 1995, yield is based on a 30 day period
ending December 31, 1995, and is computed by dividing the net investment
income per Accumulation Unit earned during the period by the maximum
offering price per unit on December 31, 1995, according to the following
formula:
Yield = 2[(a-b/cd +1)6 -1]
where "a" = net investment income earned during the period attributable to
shares owned by the Investment Account; "b" = expenses accrued for the
period (net of reimbursements); "c" = the average daily number of
Accumulation Units outstanding during the period; and "d" = the maximum
offering price per Accumulation Unit on December 31, 1995.
For the Equity Investment Account:
According to the formula stated above, where:
"a" = $25,531.11 "b" = $17,815.77 "c" = 9,342,629.100 and "d" = $1.790413
Yield = 2[(7,715.34/16,727,164.59 + 1)6 -1]
Yield = 2[(1.00046124613)6 -1]
Yield = 2[.00277066999] = 0.00554133997 or 0.55%
(b) For the Bond Investment Account:
According to the formula stated in 3(a) above, where:
"a" = $27,197.09 "b" = $5,794.67 "c" = 3,515,703.320 and "d" = $1.599503
Yield = 2[(21,402.42/5,623,378.01 + 1)6 -1]
Yield = 2[(1.00380597155)6 -1]
Yield = 2[.02305421635] = 0.46108 or 4.61%
(c) For the Managed Investment Account:
According to the formula stated in 3(a) above, where:
"a" = $43,174.00 "b" = $16,203.12 "c" = 9,204,223.110 and "d" = $1.664334
Yield = 2[(26,970.88/15,318,901.47 + 1)6 -1]
Yield = 2[(1.00176062755)6 -1]
Yield = 2[.01061037175] = .021221 or 2.12%
<PAGE>
2
4. Quotations of average annual total return for an Investment Account will
be expressed in terms of the compounded rate of return of a hypothetical
investment in the Investment Account for periods of one, five, and ten years, or
since the Fund's inception, if less. The average annual total return for an
Investment Account will be calculated pursuant to the following formula: P (1 +
T)**n = ERV (where P = a hypothetical initial payment of $1,000, T = the total
return, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period.) All total
return figures reflect the deduction of a proportional share of Investment
Account expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid. For the Investment Accounts that have
not been in existence for the time periods indicated, the average annual total
return 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.
FOR THE YEAR ENDING DECEMBER 31, 1995
(a) For the AUL American Equity Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,082; and n = 1
ERV = $1,000(1 + T)**1
T = 0.0820 or 8.20%
(b) For the AUL American Bond Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,067; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.0669 or 6.69%
(c) For the AUL American Money Market Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $954; and n = 1
ERV = $1,000 (1 + T)**1
T = -0.0464 or (4.64%)
(d) For the AUL American Managed Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,079; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0791 or 7.91%
(e) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,235; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2353 or 23.53%
(f) For the Calvert Capital Accumulation Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,264; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2639 or 26.39%
(g) For the Invesco Dynamics Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,244; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.2443 or 24.43%
(h) For the PBHG Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,362; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.3618 or 36.18%
(i) For the TCI Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,188; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.1875 or 18.75%
(j) For the T. Rowe Price Equity Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,221; and n = 1
ERV =$1,000 (1 + T)**1
T = 0.2207 or 22.07%
<PAGE>
3
(k) For the Twentieth Century Select Investors Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,113; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1133 or 11.33%
(l) For the Twentieth Century Ultra Investors Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $1,249; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2493 or 24.93%
(m) For the Twentieth Century International Equity Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,014; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0135 or 1.35%
(n) For the Vanguard Explorer Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,147; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.1467 or 14.67%
(o) For the Vanguard Short Term Federal Bond Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $1,010; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0105 or 1.05%
(p) For the VIP Equity-Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,224; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.2236 or 22.36%
(q) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,226; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.2262 or 22.62%
(r) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,093; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.0925 or 9.25%
(s) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $994; and n = 1
ERV = $1,000 (1 + T)**1
T = -0.0065 or (0.65%)
(t) For the VIP II Asset Manger Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,059; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0594 or 5.94%
(u) For the VIP II Contrafund Investment Account, the data is not available
due to the fund's inception date occuring after the beginning of the time period
under consideration.
(v) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,243; and n = 1
ERV = $1,000 (1 +T)**1
T = 0.2427 or 24.27%
<PAGE>
4
FOR THE PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1995
(a) For the AUL American Equity Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,691, and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.0962 or 9.62%
(b) For the AUL American Bond Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,511; and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.0748 or 7.48%
(c) For the AUL American Money Market Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,122; and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.0204 or 2.04%
(d) For the AUL American Managed Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,572; and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.0823 or 8.23%
(e) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $2,920; and n = 6.9785
ERV = $1,000 (1 + T)**6.9785
T = 0.1660 or 16.60%
(f) For the Calvert Capital Accumulation Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,430; and n = 4.4597
ERV = $1,000 (1 + T)**4.4597
T = 0.0835 or 8.35%
(g) For the Invesco Dynamics Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $3,452; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1319 or 13.19%
(h) For the PBHG Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $6,391; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.2038 or 20.38%
(i) For the TCI Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,378; and n = 8.1139
ERV = $1,000 (1 + T)**8.1139
T = 0.1127 or 11.27%
(j) For the T. Rowe Price Equity-Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,158; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1582 or 15.82%
(k) For the Twentieth Century Select Investors Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $2,510; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0964 or 9.64%
(l) For the Twentieth Century Ultra Investors Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $5,025; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1752 or 17.52%
(m) For the Twentieth Century International Equity Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,481; and n = 4.6452
ERV = $1,000 (1 + T)**4.6452
T = 0.0882 or 8.82%
(n) For the Vanguard Explorer Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,228; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0834 or 8.34%
<PAGE>
5
(o) For the Vanguard Short Term Federal Bond Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $1,538; and n = 8.0000
ERV = $1,000 (1 + T)**8.0000
T = 0.0553 or 5.53%
(p) For the VIP Equity-Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,635; and n = 9.2285
ERV = $1,000 (1 + T)**9.2285
T = 0.1107 or 11.07%
(q) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $3,009; and n = 9.2285
ERV = $1,000 (1 + T)**9.2285
T = 0.1268 or 12.68%
(r) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,438; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0932 or 9.32%
(s) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,571; and n = 8.9274
ERV = $1,000 (1 + T)**8.9274
T = 0.0519 or 5.19%
(t) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,722; and n = 6.3167
ERV = $1,000 (1 + T)**6.3167
T = 0.0898 or 8.98%
(u) For the VIP II Contrafund Investment Account, the data is not available
due to the fund's inception date occuring after the beginning of the time period
under consideration.
(v) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,412; and n = 3.3468
ERV = $1,000 (1 + T)**3.3468
T = 0.1085 or 10.85%
5. Quotations of average annual total return for an Investment Accountant
will be expressed in terms of the compounded rate of return of a hypothetical
investment in the Investment Account for periods of one, five, and ten years, or
since the Fund's inception, if less. The average annual total return for an
Investment Account will be calculated pursuant to the following formula: P (1
+T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the total
return, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period, but not
including the surrender charge, which is a maximum of 8%.) All total return
figures reflect the deduction of a proportional share of Investment Account
expenses on an annual basis, and assume that all dividends and distributions are
reinvested when paid. For the Investment Accounts that have not been in
existence for the time periods indicated, the average annual total return
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.
FOR THE YEAR ENDING DECEMBER 31, 1995
(a) For the AUL American Equity Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,180; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1797 or 17.97%
(b) For the AUL American Bond Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,163; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1632 or 16.32%
<PAGE>
6
(c) For the AUL American Money Market Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,040; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0397 or 3.97%
(d) For the AUL American Managed Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,177; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1765 or 17.65%
(e) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,347; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3468 or 34.68%
(f) For the Calvert Capital Accumulation Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,378; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3779 or 37.79%
(g) For the Invesco Dynamics Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,357; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3566 or 35.66%
(h) For the PBHG Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,485; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.4846 or 48.46%
(i) For the TCI Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,295; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2947 or 29.47%
(j) For the T. Rowe Price Equity-Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,331; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3308 or 33.08%
(k) For the Twentieth Century Select Investors Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,214; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2137 or 21.37%
(l) For the Twentieth Century Ultra Investors Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $1,362; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3620 or 36.20%
(m) For the Twentieth Century International Equity Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,105; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1049 or 10.49%
(n) For the Vanguard Explorer Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,250; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2501 or 25.01%
(o) For the Vanguard Short Term Federal Bond Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $1,102; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1017 or 10.17%
(p) For the VIP Equity-Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,334; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3340 or 33.40%
<PAGE>
7
(q) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,337; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3368 or 33.68%
(r) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,191; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1910 or 19.10%
(s) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,083; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0831 or 8.31%
(t) For the VIP II Asset Manager Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,155; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1550 or 15.50%
(u) For the VIP II Contrafund Investment Account, the data is not available
due to the fund's inception date occuring after the beginning of the time period
under consideration.
(v) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,355; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.3548 or 35.48%
FOR THE PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1995
(a) For the AUL American Equity Investment Account, according to the
formula expressed above, where;
P = $1,000; ERV = $1,792; and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.1074 or 10.74%
(b) For the AUL American Bond Investment Account, according to the formula
expressed above; where:
P = $1,000; ERV = $1,601; and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.0858 or 8.58%
(c) For the AUL American Money Market Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,190; and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.0308 or 3.08%
(d) For the AUL American Managed Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,666; and n = 5.7194
ERV = $1,000 (1 + T)**5.7194
T = 0.0933 or 9.33%
(e) For the Alger American Growth Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $3,107; and n = 6.9785
ERV = $1,000 (1 + T)**6.9785
T = 0.1764 or 17.64%
(f) For the Calvert Capital Accumulation Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,577; and n = 4.4597
ERV = $1,000 (1 + T)**4.4597
T = 0.1076 or 10.76%
(g) For the Invesco Dynamics Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $3,704; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1399 or 13.99%
<PAGE>
8
(h) For the PBHG Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $6,862; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.2124 or 21.24%
(i) For the TCI Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,541; and n = 8.1139
ERV = $1,000 (1 + T)**8.1139
T = 0.1218 or 12.18%
(j) For the T. Rowe Price Equity-Income Investment Account, according to
the formula expressed above, where:
P = $1,000; ERV = $1,218; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.2183 or 21.83%
(k) For the Twentieth Century Select Investors Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $2,694; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1042 or 10.42%
(l) For the Twentieth Century Ultra Investors Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $5,396; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1836 or 18.36%
(m) For the Twentieth Century International Equity Investment Account,
according to the formula expressed above, where:
P = $1,000; ERV = $1,635; and n = 4.6452
ERV = $1,000 (1 + T)**4.6452
T = 0.1117 or 11.17%
(n) For the Vanguard Explorer Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,391; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.0911 or 9.11%
(o) For the Vanguard Short Term Federal Bond Investment Account, according
to the formula expressed above, where:
P = $1,000; ERV = $1,641; and n = 8.0000
ERV = $1,000 (1 + T)**8.0000
T = 0.0639 or 6.39%
(p) For the VIP Equity-Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,825; and n = 9.2285
ERV = $1,000 (1 + T)**9.2285
T = 0.1191 or 11.91%
(q) For the VIP Growth Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $3,225; and n = 9.2285
ERV = $1,000 (1 + T)**9.2285
T = 0.1353 or 13.53%
(r) For the VIP High Income Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $2,617; and n = 10
ERV = $1,000 (1 + T)**10
T = 0.1010 or 10.10%
(s) For the VIP Overseas Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,681; and n = 8.9274
ERV = $1,000 (1 + T)**8.9274
T = 0.0599 or 5.99%
(t) For the VIP II Asset Manger Investment Account, according to the
formula expressed above, where:
P = $1,000; ERV = $1,828; and n = 6.3167
ERV = $1,000 (1 + T)**6.3167
T = 0.1002 or 10.02%
(u) For the VIP II Contrafund Investment Account, the data is not available
due to the fund's inception date occuring after the beginning of the time period
under consideration.
(v) For the VIP II Index 500 Investment Account, according to the formula
expressed above, where:
P = $1,000; ERV = $1,551; and n = 3.3468
ERV = $1,000 (1 + T)**3.3468
T = 0.1402 or 14.02%
<TABLE> <S> <C>
<PAGE>
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<NAME> AUL AMERICAN UNIT TRUST
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<NAME> AUL AMERICAN EQUITY PORTFOLIO
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<NAME> TCI GROWTH
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<NAME> AUL AMERICAN UNIT TRUST
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<NAME> T. ROWE PRICE EQUITY INCOME
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<CIK> 0000856341
<NAME> AUL AMERICAN UNIT TRUST
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<NAME> FIDELITY EQUITY-INCOME
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<S> <C>
<PERIOD-TYPE> YEAR
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<CIK> 0000856341
<NAME> AUL AMERICAN UNIT TRUST
<SERIES>
<NUMBER> 6
<NAME> FIDELITY GROWTH
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<S> <C>
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<CIK> 0000856341
<NAME> AUL AMERICAN UNIT TRUST
<SERIES>
<NUMBER> 5
<NAME> FIDELITY HIGH INCOME
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<S> <C>
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<PAGE>
<ARTICLE> 6
<CIK> 0000856341
<NAME> AUL AMERICAN UNIT TRUST
<SERIES>
<NUMBER> 7
<NAME> FIDELITY OVERSEAS
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
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<PAGE>
<ARTICLE> 6
<CIK> 0000856341
<NAME> AUL AMERICAN UNIT TRUST
<SERIES>
<NUMBER> 8
<NAME> FIDELITY ASSET MANAGER
<MULTIPLIER> 1
<S> <C>
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<PAGE>
<ARTICLE> 6
<CIK> 0000856341
<NAME> AUL AMERICAN UNIT TRUST
<SERIES>
<NUMBER> 11
<NAME> FIDELITY CONTRAFUND
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
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<CIK> 0000856341
<NAME> AUL AMERICAN UNIT TRUST
<SERIES>
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<NAME> FIDELITY INDEX 500
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<S> <C>
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<NUMBER-OF-SHARES-REDEEMED> (887,069)
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</TABLE>
