<PAGE>
As filed with the Securities and Exchange Commission on August 30, 1995
File No. 33-39861
File No. 811-07299
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. 1 ( X )
Post-effective Amendment No. ______ ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. 1 ( X )
(Check appropriate box or boxes)
_______________________________________
ANNUITY INVESTORS(SERVICE MARK) VARIABLE ACCOUNT A
(Exact Name of Registrant)
ANNUITY INVESTORS(SERVICEMARK) LIFE INSURANCE COMPANY
(Name of Depositor)
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 789-6771
_________________________________________________________________
Mark F. Muething, Esq.
Senior Vice President, Secretary and General Counsel
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Name and Address of Agent for Service)
Copy to:
Catherine S. Bardsley, Esq.
Kirkpatrick & Lockhart LLP
1800 M Street, N.W.
South Lobby - Suite 900
Washington, D.C. 20036
____________________________________________________________________
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of the Registration Statement
DECLARATION REQUIRED BY RULE 24f-2 (a) (1)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that an indefinite number of its securities is being
registered under the Securities Act of 1933. Fee $500.00
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page . . . . . . . . . Cover Page
2. Definitions . . . . . . . . . Definitions
3. Synopsis . . . . . . . . . . Highlights
4. Condensed Financial
Information
(a) Accumulation Unit Values Not Applicable
(b) Performance Data . . . Not Applicable
(c) Financial Statements . Financial Statements for the
Company
5. General Description of
Registrant, Depositor and
Portfolio Companies
(a) Depositor . . . . . . . Annuity Investors Life
Insurance Company
(b) Registrant . . . . . . The Separate Account
(c) Portfolio Company . . . The Funds
(d) Fund Prospectus . . . . The Funds
(e) Voting Rights . . . . . Voting Rights
6. Deductions and Expenses
(a) General . . . . . . . . Charges and Deductions
(b) Sales Load % . . . . . Contingent Deferred Sales
Charge
<PAGE>
(c) Special Purchase Plan . Contingent Deferred Sales
Charge; Reduction or
Elimination of Contract and
Certificate Charges
(d) Commissions . . . . . . Distribution of the Contract
(e) Fund Expenses . . . . . The Funds
(f) Operating Expenses . . Summary of Expenses
7. Contracts
(a) Persons with Rights . . The Contract; Surrenders;
Contract Loans; Death Benefit;
Voting Rights
(b) (i) Allocation of Enrollment and Purchase
Premium Payments Payments
(ii) Transfers . . . . Transfers
(iii) Exchanges . . . . Additions, Deletions or
Substitutions
(c) Changes . . . . . . . . Not Applicable
(d) Inquiries . . . . . . Contacting the Company
8. Annuity Period . . . . . . . Settlement Options
9. Death Benefit . . . . . . . . Death Benefit
10. Purchases and Contract Values
(a) Purchases . . . . . . . Enrollment and Purchase
Payments
(b) Valuation . . . . . . . Fixed Account Value; Variable
Account Value
(c) Daily Calculation . . . Accumulation Unit Value; Net
Investment Factor
(d) Underwriter . . . . . . Distribution of the Contract
11. Redemptions
(a) By Contract Owners . . Surrender Value; Systematic
Withdrawal Option
By Annuitant . . . . . Not Applicable
<PAGE>
(b) Texas ORP . . . . . . . Texas Optional Retirement
Program
(c) Check Delay . . . . . . Suspension or Delay in Payment
of Surrender Value
(d) Free Look . . . . . . . Not Applicable
12. Taxes . . . . . . . . . . . . Federal Tax Matters
13. Legal Proceedings . . . . . . Legal Proceedings
14. Table of Contents for the
Statement of Additional
Information . . . . . . . . . Statement of Additional
Information
PART B
Statement of Additional
Item of Form N-4 Information Caption
15. Cover Page . . . . . . . . . Cover Page
16. Table of Contents . . . . . . Table of Contents
17. General Information and General Information and
History . . . . . . . . . . . History
18. Services
(a) Fees and Expenses of (Prospectus) Summary of
Registrant . . . . . . Expenses
(b) Management Contracts . Not Applicable
(c) Custodian . . . . . . . Not Applicable
Independent Auditors . Independent Auditors
(d) Assets of Registrant . Not Applicable
(e) Affiliated Person . . . Not Applicable
(f) Principal Underwriter . Not Applicable
<PAGE>
19. Purchase of Securities Being (Prospectus) Distribution of
Offered . . . . . . . . . . . the Contract
Offering Sales Load . . . . . (Prospectus) Contingent
Deferred Sales Charge
20. Underwriters . . . . . . . . Distribution of the Contract
21. Calculation of Performance
Data
(a) Money Market Funded Sub Money Market Sub-Account Yield
Accounts . . . . . . . Calculation
(b) Other Sub-Accounts . . Other Sub-Account Yield
Calculation
22. Annuity Payments . . . . . . (Prospectus) Fixed Dollar
Annuity Benefit; Variable
Dollar Annuity Benefit
23. Financial Statements . . . . Financial Statements
PART C - Other Information
Item of Form N-4 Part C Caption
24. Financial Statements and Financial Statements and
Exhibits . . . . . . . . . . Exhibits
(a) Financial Statements . Financial Statements
(b) Exhibits . . . . . . . Exhibits
25. Directors and Officers of the Directors and Officers of
Depositor . . . . . . . . . . Annuity Investors Life
Insurance Company
26. Persons Controlled By or Under Persons Controlled By Or Under
Common Control With the Common Control With the
Registrant . . . . . . . . . Depositor or Registrant
27. Number of Contract Owners . . Number of Certificate Owners
28. Indemnification . . . . . . . Indemnification
29. Principal Underwriters . . . Principal Underwriter
30. Location of Accounts and Location of Accounts and
Records . . . . . . . . . . . Records
31. Management Services . . . . . Management Services
<PAGE>
32. Undertakings . . . . . . . . Undertakings
Signature Page . . . . . . . Signature Page
<PAGE>
SUBJECT TO COMPLETION: DATED , 1995
ANNUITY INVESTORS VARIABLE ACCOUNT A
of
ANNUITY INVESTORS LIFE INSURANCE COMPANY
PROSPECTUS
for the
Commodore Nauticus
Group Flexible Premium Deferred Annuity
Issued by
ANNUITY INVESTORS LIFE INSURANCE COMPANY
P.O. Box 5423, Cincinnati, Ohio 45201-5423, (800) 789-6771
This Prospectus describes the Commodore Nauticus, a Group Flexible
Premium Deferred Annuity Contract (the "Contract") issued by Annuity
Investors Life Insurance Company (the "Company") and the Certificates of
Participation under the Contract ("Certificates").
A Certificate provides for the accumulation of an Account Value on a
fixed or variable basis, or a combination of both. The Certificate also
provides for the payment of periodic annuity payments on a fixed or
variable basis, or a combination of both. If the variable basis is
chosen, Certificate values will be held in Annuity Investors Variable
Account A (the "Separate Account") and will vary according to the
investment performance of the mutual funds in which the Sub-Accounts of
the Separate Account invest. If the fixed basis is chosen, periodic
annuity payments are fixed and will not vary.
The Separate Account is divided into Sub-Accounts. Each Sub-Account
uses its assets to purchase, at their net asset value, shares of a
designated registered investment company or portfolio thereof (each, a
"Fund"). The Funds available for investment in the Separate Account under
the Contract are as follows: from Janus Aspen Series, (1) the Aggressive
Growth Portfolio, (2) the Worldwide Growth Portfolio, (3) the Balanced
Portfolio, and (4) the Short-Term Bond Portfolio; (5) Dreyfus Variable
Investment Fund's Capital Appreciation Portfolio; (6) Dreyfus Socially
Responsible Growth Fund; (7) Dreyfus Stock Index Fund; and from Merrill
Lynch Variable Series Funds, Inc., (8) the Basic Value Focus Fund, (9) the
Global Strategy Focus Fund, (10) the High Current Income Fund and (11) the
Domestic Money Market Fund.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUFY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
This Prospectus sets forth the basic information that a prospective
investor should know before investing. A "Statement of Additional
Information" containing more detailed information about the Contract is
available free of charge by writing to the Company's Administrative Office
at P.O. Box 5423, Cincinnati, Ohio 45201-5423. The Statement of
Additional Information, which has the same date as this Prospectus, as it
may be supplemented from time to time, has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. The
table of contents of the Statement of Additional Information is included
at the end of this Prospectus.
* * *
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES REGULATORY AUTHORITIES
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Please Read this Prospectus Carefully and
Retain It for Future Reference.
The Date of this Prospectus is _______, 1995.
__________________________________________________________________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR
OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
__________________________________________________________________________
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED
OR GUARANTEED BY, ANY FINANCIAL INSTITUTION, NOR ARE THEY FEDERALLY
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
INVESTMENT.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS
FOR EACH UNDERLYING FUND. BOTH THIS PROSPECTUS AND THE UNDERLYING FUND
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
Page
----
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 3
HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Contract and Certificates . . . . . . . . . . . . . 6
The Separate Account . . . . . . . . . . . . . . . . . 6
The Fixed Account . . . . . . . . . . . . . . . . . . . 7
Transfers Before the Annuity Commencement
Date . . . . . . . . . . . . . . . . . . . . . . 7
Surrenders . . . . . . . . . . . . . . . . . . . . . . 7
Contingent Deferred Sales Charge ("CDSC") . . . . . . . 8
Other Charges and Deductions . . . . . . . . . . . . . 8
Annuity Benefits . . . . . . . . . . . . . . . . . . . 8
Death Benefit . . . . . . . . . . . . . . . . . . . . . 8
Federal Income Tax Consequences . . . . . . . . . . . . 9
Contacting the Company . . . . . . . . . . . . . . . . 9
SUMMARY OF EXPENSES . . . . . . . . . . . . . . . . . . . . . 10
Examples . . . . . . . . . . . . . . . . . . . . . . . 13
FINANCIAL STATEMENTS FOR THE COMPANY . . . . . . . . . . . . 14
THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 15
Janus Aspen Series . . . . . . . . . . . . . . . . . . 15
Aggressive Growth Portfolio . . . . . . . . . . . 15
Worldwide Growth Portfolio . . . . . . . . . . . 15
Balanced Portfolio . . . . . . . . . . . . . . . 15
Short-Term Bond Portfolio . . . . . . . . . . . . 15
Dreyfus Funds . . . . . . . . . . . . . . . . . . . . . 16
Capital Appreciation Portfolio
(Dreyfus Variable Investment Fund) . . . . . . 16
Socially Responsible Growth Fund . . . . . . . . 16
Stock Index Fund . . . . . . . . . . . . . . . . 16
Merrill Lynch Variable Series Funds, Inc. . . . . . . . 16
Basic Value Focus Fund . . . . . . . . . . . . . 16
Global Strategy Focus Fund . . . . . . . . . . . 17
High Current Income Fund . . . . . . . . . . . . 17
Domestic Money Market Fund . . . . . . . . . . . 17
Additions, Deletions, or Substitutions . . . . . . . . 18
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . 19
Yield Data . . . . . . . . . . . . . . . . . . . . . . 19
Total Return Data . . . . . . . . . . . . . . . . . . . 19
ANNUITY INVESTORS(SERVICEMARK) LIFE INSURANCE
COMPANY AND THE SEPARATE ACCOUNT . . . . . . . . . . . . . 20
Annuity Investors Life Insurance Company . . . . . . . 20
Published Ratings . . . . . . . . . . . . . . . . . . . 20
The Separate Account . . . . . . . . . . . . . . 21
<PAGE>
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . 22
Fixed Account Options . . . . . . . . . . . . . . . . . 22
Renewal of Fixed Account Options . . . . . . . . . . . 23
THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . 23
ENROLLMENT AND PURCHASE PAYMENTS . . . . . . . . . . . . . . 24
Purchase Payments . . . . . . . . . . . . . . . . . . . 24
Allocation of Purchase Payments . . . . . . . . . . . . 24
ACCOUNT VALUE . . . . . . . . . . . . . . . . . . . . . . . . 24
Fixed Account Value . . . . . . . . . . . . . . . . . . 24
Variable Account Value . . . . . . . . . . . . . . . . 25
Accumulation Unit Value . . . . . . . . . . . . . . . . 26
Net Investment Factor . . . . . . . . . . . . . . . . . 26
TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . 27
Telephone Transfers . . . . . . . . . . . . . . . . . . 27
Dollar Cost Averaging . . . . . . . . . . . . . . . . . 28
Portfolio Rebalancing . . . . . . . . . . . . . . . . . 29
Interest Sweep . . . . . . . . . . . . . . . . . . . . 29
SURRENDERS . . . . . . . . . . . . . . . . . . . . . . . . . 30
Surrender Value . . . . . . . . . . . . . . . . . . . . 30
Suspension or Delay in Payment of
Surrender Value . . . . . . . . . . . . . . . . . 31
Systematic Withdrawal Option . . . . . . . . . . . . . 32
CONTRACT LOANS . . . . . . . . . . . . . . . . . . . . . . . 32
DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . 33
Death of Participant . . . . . . . . . . . . . . . . . 33
Death Benefit . . . . . . . . . . . . . . . . . . . . . 33
Beneficiary . . . . . . . . . . . . . . . . . . . . . . 34
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . 34
Contingent Deferred Sales Charge . . . . . . . . . . . 35
Maintenance and Administrative
Charges . . . . . . . . . . . . . . . . . . . . . . . . 37
Mortality and Expense Risk Charge . . . . . . . . . . . 38
Premium Taxes . . . . . . . . . . . . . . . . . . . . . 39
Transfer Fee . . . . . . . . . . . . . . . . . . . . . 39
Fund Expenses . . . . . . . . . . . . . . . . . . . . . 39
Reduction or Elimination of Contract and
Certificate Charges . . . . . . . . . . . . . . . . 40
SETTLEMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . 40
Annuity Commencement Date . . . . . . . . . . . . . . . 40
Election of Settlement Option . . . . . . . . . . . . . 40
Annuity Benefit . . . . . . . . . . . . . . . . . . . . 41
Fixed Dollar Annuity Benefit . . . . . . . . . . . . . 41
Variable Dollar Annuity Benefit . . . . . . . . . . . . 41
Transfers After the Annuity Commencement
Date . . . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
Annuity Transfer Formula . . . . . . . . . . . . . . . 42
Settlement Options . . . . . . . . . . . . . . . . . . 43
Minimum Amounts . . . . . . . . . . . . . . . . . . . . 44
Settlement Option Tables . . . . . . . . . . . . . . . 45
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 45
Non-participating . . . . . . . . . . . . . . . . . . . 45
Misstatement of Age . . . . . . . . . . . . . . . . . . 45
Proof of Existence and Age . . . . . . . . . . . . . . 45
Facility of Payment . . . . . . . . . . . . . . . . . . 45
Transfer and Assignment . . . . . . . . . . . . . . . . 46
Annuity Data . . . . . . . . . . . . . . . . . . . . . 46
Annual Report . . . . . . . . . . . . . . . . . . . . . 46
Incontestability . . . . . . . . . . . . . . . . . . . 46
Entire Contract . . . . . . . . . . . . . . . . . . . . 46
Changes in the Contract . . . . . . . . . . . . . . . . 47
Waiver of the Certificate Maintenance Fee . . . . . . . 47
Notices and Directions . . . . . . . . . . . . . . . . 47
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 47
Introduction . . . . . . . . . . . . . . . . . . . . . 47
Taxation of Annuities In General . . . . . . . . . . . 48
Surrenders . . . . . . . . . . . . . . . . . . . . . . 49
Annuity Payments . . . . . . . . . . . . . . . . . . . 49
Penalty Tax . . . . . . . . . . . . . . . . . . . . . . 50
Taxation of Death Benefit
Proceeds . . . . . . . . . . . . . . . . . . . . . . . 50
Transfers, Assignments, or Exchanges of
the Contract . . . . . . . . . . . . . . . . . . 50
Texas Optional Retirement Program . . . . . . . . . . . 50
Qualified Pension and Profit Sharing Plans
and H.R. 10 Plans . . . . . . . . . . . . . . . . . 50
Withholding . . . . . . . . . . . . . . . . . . . . . . 51
Possible Changes in Taxation . . . . . . . . . . . . . 51
Other Tax Consequences . . . . . . . . . . . . . . . . 51
General . . . . . . . . . . . . . . . . . . . . . . . . 51
DISTRIBUTION OF THE CONTRACT . . . . . . . . . . . . . . . . 52
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 53
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 53
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . 54
STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . . . . . . 55
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . 57
<PAGE>
DEFINITIONS
Account(s): The Sub-Account(s) and/or the Fixed Account options.
Account Value: The aggregate value of the Participant's interest in the
Sub-Account(s) and the Fixed Account options as of the end of any
Valuation Period.
Accumulation Period: The period prior to the Annuity Commencement Date
during which the Participant is eligible for benefits under the Contract.
Accumulation Unit: The unit of measurement used to calculate the value of
the Sub-Account(s) prior to the Annuity Commencement Date.
Administrative Office: The home office of the Company or any other office
the Company may designate for administration.
Age: Age as of most recent birthday.
Annuitant: The Annuitant is the Participant and is the person on whose
life Annuity Benefit payments are based.
Annuity Benefit: Periodic payments made by the Company under a Settlement
Option, which payments commence after the Annuity Commencement Date and
continue during the Annuity Payment Period, for the life of a person or
for a specific period. A Variable Dollar Annuity Benefit will provide
payments that vary in amount. Fixed Dollar Annuity Benefit payments
remain constant.
Annuity Commencement Date: The date on which Annuity Benefits are to
begin.
Annuity Payment Period: The period commencing with the Annuity
Commencement Date, during which Annuity Benefits are payable under the
Contract with respect to a Participant's participation interest.
Annuity Unit: The unit of measurement used to determine the value of any
Variable Dollar Annuity Benefit payments after the first Annuity Benefit
payment is made by the Company.
Beneficiary: The person or persons entitled to receive the Death Benefit
if the Participant dies prior to the Annuity Commencement Date.
Certificate Anniversary: An annual anniversary of the Certificate
Effective Date.
Certificate Effective Date: The date shown on the Certificate
Specifications page.
Certificate Year: Any period of twelve months commencing on the
Certificate Effective Date and on each Certificate Anniversary thereafter.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
<PAGE>
Contract Owner: The person or company identified as such in the
application for the Contract or other such form as may be designated by
the Company.
Due Proof of Death: Any of (1) a certified copy of a death certificate;
(2) a certified copy of a decree of a court of competent jurisdiction as
to the finding of death; (3) a written statement by a medical doctor who
attended the deceased; or (4) any other proof satisfactory to the Company.
Fixed Account: An account which is part of the Company's general account,
the values of which are not dependent upon the investment performance of
the Sub-Accounts.
Fixed Account Value: The value of a Participant's interest in all Fixed
Account options.
Fund: A management investment company or a portfolio thereof, registered
under the Investment Company Act of 1940, in which a Sub-Account of the
Separate Account invests.
Net Asset Value: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of
the Securities and Exchange Commission.
Participant: The person identified on the Certificate Specifications
page, who participates in the benefits of the Contract.
Purchase Payment: A contribution after the deduction of premium tax, if
any, made to the Company in consideration for the Participant's
participation under the Contract.
Separate Account: Annuity Investors(SERVICEMARK) Variable Account A (also
referred to as the "Variable Account") which has been established by the
Company pursuant to the laws of the State of Ohio.
Settlement Option: The option elected by the Participant for the payment
of Annuity Benefits.
Sub-Account: The Separate Account is divided into Sub-Accounts, each of
which invests in the shares of a designated Fund.
Surrender Value: The amount payable under a Certificate if the
Certificate is surrendered.
Valuation Period: The period commencing at the close of regular trading
on the New York Stock Exchange on any Valuation Date and ending at the
close of trading on the next succeeding Valuation Date. "Valuation Date"
means each day on which the New York Stock Exchange is open for business.
Variable Account Value: The value of a Participant's interest in all
Sub-Accounts.
- 2 -
<PAGE>
Written Request: Information provided, or a request made, that is
complete and satisfactory to the Company and in writing, that is sent to
the Company on the Company's form or in a form satisfactory to the
Company, and that is received by the Company at the Administrative Office.
A Written Request is subject to any payment made or any action the Company
takes before the Written Request is acknowledged by the Company. A
Participant may be required to return his or her Certificate to the
Company in connection with a Written Request.
- 3 -
<PAGE>
HIGHLIGHTS
The Contract and Certificates
The Group Flexible Premium Deferred Annuity Contract described in
this Prospectus is designed for use in connection with certain retirement
arrangements that qualify for favorable tax treatment under Sections 401,
403, or 457 of the Code.
The Contract Owner is the employer or the trustee for the employer's
retirement plan, as shown on the Application for the Contract, the
Participant Enrollment Form and Certificate Specifications page. The
Contract is held by the Contract Owner for the benefit of Participants and
Beneficiaries. Each participant for whom Purchase Payment(s) are made
will participate in the Contract as a Participant. A Participant account
will be established for each Participant. Subject to the terms of a
Certificate, the Account Value, after certain adjustments, will be applied
to the payment of an Annuity Benefit under the Settlement Option elected
by the Participant.
The Account Value will depend on the investment experience of the
amounts allocated to each Sub-Account of the Separate Account elected by
the Participant and/or interest credited on amounts allocated to the Fixed
Account option(s) elected. All Annuity Benefits and other values provided
under the Certificate when based on the investment experience of the
Separate Account are variable and are not guaranteed as to dollar amount.
Therefore, prior to the Annuity Commencement Date the Participant bears
the entire investment risk with respect to amounts allocated to the
Separate Account under the Certificate.
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE WITH RESPECT TO
AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT, SO THE PROCEEDS OF A SURRENDER
COULD BE LESS THAN THE TOTAL PURCHASE PAYMENTS.
The Separate Account
Annuity Investors(SERVICEMARK) Variable Account A is a separate
account of the Company that is divided into Sub-Accounts (See "The
Separate Account," page ___.) Each Sub-Account uses its assets to
purchase, at their Net Asset Value, shares of a Fund. The Funds available
for investment in the Separate Account under the Contract are as follows:
from Janus Aspen Series, (1) the Aggressive Growth Portfolio, (2) the
Worldwide Growth Portfolio, (3) the Balanced Portfolio, and (4) the
Short-Term Bond Portfolio; (5) Dreyfus Variable Investment Fund's Capital
Appreciation Portfolio; (6) Dreyfus Socially Responsible Growth Fund; (7)
Dreyfus Stock Index Fund; and from Merrill Lynch Variable Series Funds
Inc., (8) the Basic Value Focus Fund, (9) the Global Strategy Focus Fund,
(10) the High Current Income Fund and (11) the Domestic Money Market Fund.
Each Fund has distinct investment objectives and policies which are
described in the accompanying prospectus for the Fund.
- 4 -
<PAGE>
Each Fund pays its investment adviser and other service providers
certain fees charged against the assets of the Fund. The Account Value of
a Certificate and the amount of any Annuity Benefits will vary to reflect
the investment performance of all the Sub-Accounts elected by the
Participant and the deduction of the charges described under "Charges and
Deductions," page ___. For more information about the Funds, see "The
Funds," page __, and the accompanying Funds' prospectuses.
The Fixed Account
The Fixed Account is an account within the Company's general
account. There are currently four Fixed Account options available under
the Fixed Account: a Fixed Accumulation Account option and three
fixed-term options. Purchase Payments allocated or amounts transferred to
the Fixed Account options are credited with interest at a rate declared by
the Company's Board of Directors, but in any event at a minimum guaranteed
annual rate of 3.0% corresponding to a daily rate of 0.0081%. (See "The
Fixed Account," page ___.)
Transfers Before the Annuity Commencement Date
Prior to the Annuity Commencement Date, the Participant may transfer
values between the Separate Account and the Fixed Account, within the
Fixed Account and between the Sub-Accounts, by Written Request to the
Company or by telephone in accordance with the Company's telephone
transfer rules. (See "Transfers," page___.)
The Company currently charges a fee of $25 for each transfer
("Transfer Fee") in excess of twelve made during the same Certificate
Year. (See "Transfers," page __.)
For transfers after the Annuity Commencement Date, see "After the
Annuity Commencement Date," page __.
Surrenders
All or part of the Surrender Value of a Certificate may be
surrendered by the Participant on or before the Annuity Commencement Date
by Written Request to the Company. Amounts surrendered may be subject to
a Contingent Deferred Sales Charge ("CDSC") depending upon how long the
Purchase Payments to be withdrawn have been held under the Certificate.
Amounts withdrawn also may be subject to a premium tax or similar tax,
depending upon the jurisdiction in which the Participant lives.
Surrenders may further be subject to federal, state or local income tax,
and subject to a penalty tax. (See "Federal Tax Matters," page ___.)
Contingent Deferred Sales Charge ("CDSC")
A CDSC may be imposed on surrenders. The maximum CDSC is 7% of
Purchase Payments withdrawn during the first year after that Purchase
Payment is received, decreasing by 1% annually to 0% after year seven.
- 5 -
<PAGE>
The CDSC may be waived under certain circumstances. (See "Charges and
Deductions," page ___.)
Other Charges and Deductions
The Company deducts a daily charge ("Mortality and Expense Risk
Charge") at an effective annual rate of 1.25% of the daily Net Asset Value
of each Sub-Account.
The Company deducts a Certificate maintenance charge each year
("Certificate Maintenance Fee"). This Fee is currently $25 and is
deducted from a Participant's Variable Account Value on each Certificate
Anniversary. The Certificate Maintenance Fee may be waived under certain
circumstances, at the Company's discretion.
The Company does not currently intend to deduct a charge to help
cover the costs of administering the Contract, the Certificates and the
Separate Account ("Administration Charge"); however, the Company reserves
the right to impose an Administration Charge at a future date. Any such
Administration Charge is guaranteed not to exceed a maximum effective
annual rate of .20% of the daily Net Asset Value of each Sub-Account.
Charges for premium taxes may be imposed in some jurisdictions.
Depending on the applicability of such taxes, the charges may be deducted
from Purchase Payments, from surrenders, and from other payments made
under the Certificate. (See "Charges and Deductions," page ___.)
Annuity Benefits
Annuity Benefits are paid on a fixed or variable basis, or a
combination of both. (See "Annuity Benefits," page __.)
Death Benefit
The Certificate provides for the payment of a death benefit if the
Participant dies prior to the Annuity Commencement Date. The death
benefit may be paid as either a lump sum or pursuant to one of the
Settlement Options offered under the Certificate. (See "Death Benefit,"
page ___.)
Federal Income Tax Consequences
A Participant generally should not be taxed on increases in the
Account Value until a distribution under the Certificate occurs (e.g., a
surrender or Annuity Benefit) or is deemed to occur (e.g., a loan).
Generally, a portion (up to 100%) of any distribution or deemed
distribution is taxable as ordinary income. The taxable portion of
distributions is generally subject to income tax withholding unless the
recipient elects otherwise. In addition, a federal penalty tax may apply
to certain distributions. (See "Federal Tax Matters," page __.)
- 6 -
<PAGE>
Contacting the Company
All Written Requests and any questions or inquiries should be
directed to the Company's Administrative Office, P.O. Box 5423,
Cincinnati, Ohio 45201-5423, (800) 789-6771. All inquiries should
include the Certificate Number and the Participant's name.
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE ACCOMPANYING
PROSPECTUSES FOR THE FUNDS WHICH SHOULD BE REFERRED TO FOR MORE DETAILED
INFORMATION. THE REQUIREMENTS OF A PARTICULAR RETIREMENT PLAN, AN
ENDORSEMENT TO THE CONTRACT OR CERTIFICATE, OR LIMITATIONS OR PENALTIES
IMPOSED BY THE CODE OR THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, MAY IMPOSE ADDITIONAL LIMITS OR RESTRICTIONS ON PURCHASE
PAYMENTS, SURRENDERS, DISTRIBUTIONS, OR BENEFITS, OR ON OTHER PROVISIONS
OF THE CONTRACT OR THE CERTIFICATES THEREUNDER. THIS PROSPECTUS DOES NOT
DESCRIBE SUCH LIMITATIONS OR RESTRICTIONS. (SEE "FEDERAL TAX MATTERS,"
PAGE ____.)
- 7 -
<PAGE>
SUMMARY OF EXPENSES
Participant Transaction Expenses
Sales Load Imposed on Purchase Payments None
Contingent Deferred Sales Charge (as a
percentage of Purchase Payments withdrawn)
Certificate Years since Purchase
Payment Receipt
less than 1 year 7%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 4%
4 years but less than 5 years 3%
5 years but less than 6 years 2%
6 years but less than 7 years 1%
7 years or more 0%
Surrender Fees None
Transfer Fee 1/ $25
Annual Certificate Maintenance Fee $25
____________________________________
1/ The first twelve transfers in a Certificate Year are free. Thereafter,
a $25 fee will be charged on each subsequent transfer.
- 8 -
<PAGE>
<TABLE>
<CAPTION>
Separate Account Annual Expenses 2/ Janus A.S. Janus A.S. Janus A.S. Dreyfus V.I.F.
(as a percentage of average Aggressive Worldwide Janus A.S. Short-Term Capital
Separate Account assets) Growth Growth Balanced Bond Appreciation
---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Mortality and Expense 1.25% 1.25% 1.25% 1.25% 1.25%
Risk Charge
Administration Charge 0.00% 0.00% 0.00% 0.00% 0.00%
Other Fees and 0.00% 0.00% 0.00% 0.00% 0.00%
Expenses of the
Separate Account
Total Separate Account 1.25% 1.25% 1.25% 1.25% 1.25%
Annual Expenses
Fund Annual Expenses 3/
(as a percentage of Fund average
net assets after fee waiver and/or
expense reimbursement)
Management Fees 0.77% 0.69% 0.83% 0.00% 0.75%
Other Expenses 0.28% 0.49% 0.74% 0.65% 0.36%
Total Fund Annual 1.05% 1.18% 1.57% 0.65% 1.11%
Expenses
</TABLE>
__________________________
1/ Annual expenses are anticipated to be the same for each Sub-Account.
These expenses are based on estimated amounts for the current fiscal year.
2/ Information regarding each Fund has been provided by the Fund. While
the Company has no reason to doubt the accuracy of these figures, the
Company does not guarantee their accuracy, does not represent they are
true and complete, and disclaims all responsibility for these figures.
Data for each Fund is for its fiscal year ended December 31, 1994. Actual
expenses in future years may be higher or lower.
Fund expenses are net of management fees and other expenses waived
and/or reimbursed (except those shown for the Dreyfus V.I.F. Capital
Appreciation Portfolio and the Dreyfus Socially Responsible Growth Fund as
- 9 -
<PAGE>
noted below). In the absence of such fee waivers and/or expense
reimbursements, Management Fees, Other Expenses and Total Portfolio
Expenses would have been as follows for the fiscal year ended December 31,
1994: 1.00%, 0.28% and 1.28%, respectively, for the Janus A.S. Aggressive
Growth Portfolio; 1.00%, 0.49% and 1.49%, respectively, for the Janus A.S.
Worldwide Growth Portfolio; 1.00%, 0.74% and 1.74%, respectively, for the
Janus A.S. Balanced Portfolio; and 0.65%, 0.75% and 1.40%, respectively,
for the Janus A.S. Short-Term Bond Portfolio; 0.15%, 0.41% and 0.56%,
respectively, for the Dreyfus Stock Index Fund; and 0.50%, 0.07% and
0.57%, respectively, for the Merrill Lynch V.S.F. Domestic Money Market
Fund.
Fees and expenses for the Dreyfus V.I.F. Capital Appreciation Portfolio
and the Dreyfus Socially Responsible Growth Fund are based on 1994 fees
and expenses but do not take into account management fee waivers and
expense reimbursements that were in effect during that year because they
are no longer in effect.
- 10 -
<PAGE>
<TABLE>
<CAPTION>
Merrill
Merrill Merrill Lynch
Separate Account Annual Dreyfus Lynch Lynch V.S.F. V.S.F. Merrill
Expenses Socially Dreyfus V.S.F. Global High Lynch V.S.F.
(as a percentage of average Responsible Stock Basic Value Strategy Current Domestic
Separate Account assets) Growth Index Focus Focus Income Money Market
----------- ------- ----------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mortality and 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Expense Risk
Charge
Administration 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Charge
Other Fees and 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Expenses of the
Separate Account
Total Separate 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Account Annual
Expenses
Fund Annual Expenses (as a
percentage of Fund average
net assets after fee waiver
and/or expense
reimbursement)
Management Fees 0.75% 0.14% 0.60% 0.65% 0.52% 0.50%
Other Expenses 2.10% 0.26% 0.12% 0.12% 0.09% 0.00%
Total Fund Annual 2.85% 0.40% 0.72% 0.77% 0.61% 0.50%
Expenses
</TABLE>
The purpose of this table is to assist a Participant in understanding the
various costs and expenses that the Participant will bear directly and
indirectly with respect to investment in the Separate Account. The table
reflects expenses of each Sub-Account as well as of the Fund in which the
Sub-Account invests. See "Charges and Deductions" on page _____ of this
Prospectus and the accompanying prospectus for the applicable Fund for a
- 11 -
<PAGE>
more complete description of the various costs and expenses. In addition
to the expenses listed above, premium taxes may be applicable. The dollar
figures should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. The
$25 Contract Maintenance Charge is included in the Examples as $1.
Examples 1/
If you surrender your Certificate at the end of the applicable time
period, you would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
___________________________
1/ The examples assume the reinvestment of all dividends and
distributions, no transfers among Sub-Accounts or between Accounts, and a
5% annual rate of return as mandated by Securities and Exchange Commission
regulations. Annual Certificate Maintenance Fees are based on an
estimated amount for the Separate Account's current fiscal year.
Sub-Account 1 Year 3 Years
----------- ------- -------
Janus A.S. Aggressive Growth $95 $128
Janus A.S. Worldwide Growth 96 132
Janus A.S. Balanced 100 144
Janus A.S. Short-Term Bond 91 115
Dreyfus V.I.F. Capital Appreciation 95 130
Dreyfus Socially Responsible Growth 113 184
Dreyfus Stock Index 88 107
Merrill Lynch V.S.F. Basic Value Focus 91 117
Merrill Lynch V.S.F. Global Strategy Focus 92 119
Merrill Lynch V.S.F. High Current Income 90 114
Merrill Lynch V.S.F. Money Market 89 110
If you do not surrender your Certificate, or if you annuitize it, you
would pay the following expenses on a $1,000 investment at the end of the
applicable time period, assuming a 5% annual return on assets:
- 12 -
<PAGE>
Sub-Account 1 Year 3 Years
----------- ------- ------
Janus A.S. Aggressive Growth $25 $78
Janus A.S. Worldwide Growth 26 82
Janus A.S. Balanced 30 94
Janus A.S. Short-Term Bond 21 67
Dreyfus V.I.F. Capital Appreciation 25 80
Dreyfus Socially Responsible Growth 43 134
Dreyfus Stock Index 18 57
Merrill Lynch V.S.F. Basic Value Focus 21 65
Merrill Lynch V.S.F. Global Strategy Focus 22 69
Merrill Lynch V.S.F. High Current Income 20 64
Focus
Merrill Lynch V.S.F. Money Market 19 65
The examples should not be considered a representation of past or future
expenses or annual rates of return of any Fund. Actual expenses and
annual rates of return may be more or less than those assumed for the
purpose of the examples.
The fee table and examples do not include charges to Participants for
premium taxes.
FINANCIAL STATEMENTS FOR THE COMPANY
The financial statements and report of independent public accountants
for the Company are contained in the Statement of Additional Information.
Because the Contracts and Certificates registered by this Prospectus have
not yet been issued, no financial information for the Separate Account is
provided.
THE FUNDS
The Separate Account currently has eleven Funds that are available for
investment under a Certificate. Each Fund has separate investment
objectives and policies. As a result, each Fund operates as a separate
investment portfolio and the investment performance of one Fund has no
- 13 -
<PAGE>
effect on the investment performance of any other Fund. There is no
assurance that any of these Funds will achieve their stated objectives.
The Securities and Exchange Commission does not supervise the management
or the investment practices and/or policies of any of the Funds.
The Separate Account invests exclusively in shares of the Funds listed
below (followed by a brief overview of each Fund's investment emphasis):
Janus Aspen Series:
Aggressive Growth Portfolio. A nondiversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks.
The common stocks held by this Fund will normally have an average
market capitalization between $1 billion and $5 billion.
Worldwide Growth Portfolio. A diversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks of
foreign and domestic companies.
Balanced Portfolio. A diversified portfolio that seeks long-term
growth of capital balanced by current income. The Fund normally
invests 40-60% of its assets in equity securities selected for their
growth potential and 40-60% in fixed-income securities.
Short-Term Bond Portfolio. A diversified portfolio that seeks a high
level of current income while minimizing interest rate risk by
investing in shorter term fixed-income securities. Its
average-weighted maturity is normally less than three years.
Janus Capital Corporation serves as the investment adviser to each of
these Funds.
Dreyfus Funds:
Capital Appreciation Portfolio (Dreyfus Variable Investment Fund).
The Capital Appreciation Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital, current income is a secondary goal. It seeks to achieve its
goals by investing in common stocks of domestic and foreign issuers.
The Dreyfus Corporation serves as the investment adviser and Fayez
Sarofim & Company serves as the investment sub-adviser to this Fund.
Socially Responsible Growth Fund. The Socially Responsible Fund's
primary goal is to provide capital growth. It seeks to achieve this
goal by investing principally in common stocks, or securities
convertible into common stock, of companies which, in the opinion of
the Fund's management, not only meet traditional investments standards,
but also show evidence that they conduct their business in a manner
that contributes to the enhancement of the quality of life in America.
Current income is a secondary goal.
- 14 -
<PAGE>
The Dreyfus Corporation serves as the investment adviser and NCM
Capital Management Group, Inc. serves as the investment sub-adviser to
this Fund.
Stock Index Fund. The Stock Index Fund's investment objective is to
provide investment results that correspond to the price and yield
performance of publicly traded common stocks in the aggregate, as
represented by the Standard & Poor's 500 Composite Stock Price Index.
The Stock Index Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
Wells Fargo Nikko Investment Advisors serves as this Fund's investment
adviser.
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund. The investment objective of the Fund is to
seek capital appreciation and, secondarily, income by investing in
securities, primarily equities, that management of the Fund believes
are undervalued. The Fund seeks special opportunities in securities
that are selling at a discount, either from book value or historical
price-earnings ratios, or seem capable of recovering from temporarily
out-of-favor considerations. Particular emphasis is placed on
securities that provide an above-average dividend return and sell at a
below-average price-earnings ratio.
Global Strategy Focus Fund. The investment objective of the Fund is to
seek high total investment return by investing primarily in a portfolio
of equity and fixed income securities, including convertible
securities, of U.S. and foreign issuers. The Fund seeks to achieve its
objective by investing primarily in securities of issuers located in
the U.S., Canada, Western Europe and the Far East. The Fund may
allocate investments without prescribed limits among capital markets
and types and maturities of securities on the basis of various
considerations which may affect total anticipated return from
investments.
High Current Income Fund. The investment objective of the Fund is to
obtain as high a level of current income as is consistent with prudent
investment management, and capital appreciation to the extent
consistent with the foregoing objective, by investing principally in
fixed-income securities that are rated in the lower rating categories
of the established rating services or in unrated securities of
comparable quality.
Domestic Money Market Fund. The investment objectives of the Fund are
to seek preservation of capital, maintain liquidity and achieve the
highest possible current income consistent with the foregoing
objectives by investing in short-term money market securities.
Merrill Lynch Asset Management, L.P. serves as the investment adviser to
these Funds.
- 15 -
<PAGE>
Meeting Fund objectives depends on various factors including, but not
limited to, how well portfolio managers anticipate changing economic and
market conditions.
THERE IS NO ASSURANCE THAT ANY OF THESE FUNDS WILL ACHIEVE THEIR STATED
OBJECTIVES.
INVESTMENTS IN THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER ENTITY OR PERSON.
Since each of the Funds is available to separate accounts offering
variable annuity and variable life products of other insurance companies
and certain Funds may be available to qualified pension and retirement
plans, there is a possibility that a material conflict may arise between
the interests of the Separate Account and one or more other separate
accounts or plans investing in the Fund. In the event of a material
conflict, the affected insurance companies will take any necessary steps
to resolve the matter, including stopping their separate accounts from
investing in the particular Fund. See the Funds' prospectuses for greater
detail.
Additional information concerning the investment objectives and
policies of each Fund, the investment advisory services and administrative
services and charges can be found in the current prospectus for the Fund
which accompanies this Prospectus. THE APPROPRIATE FUNDS' PROSPECTUSES
SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE
ALLOCATION OF PURCHASE PAYMENTS TO, OR TRANSFERS AMONG, THE SUB-ACCOUNTS.
Additions, Deletions, or Substitutions
The Company does not control the Funds and cannot guarantee that any of
the Sub-Accounts or any of the Funds will always be available for
allocation of Purchase Payments or transfers. The Company retains the
right to make changes in the Separate Account and its investments.
The Company reserves the right to eliminate the shares of any Fund held
by a Sub-Account and to substitute shares of another investment company
for the shares of any Fund, if the shares of that Fund are no longer
available for investment or if, in the Company's judgment, investment in
any Fund would be inappropriate in view of the purposes of the Separate
Account. To the extent required by the Investment Company Act of 1940, as
amended ("1940 Act"), or other applicable law, a substitution of shares
attributable to the Participant's interest in a Sub-Account will not be
made without prior notice to the Participant and the prior approval of the
Securities and Exchange Commission. Nothing contained herein shall
prevent the Separate Account from purchasing other securities for other
series or classes of variable annuity policies, or from effecting an
exchange between series or classes of variable policies on the basis of
requests made by Participants.
- 16 -
<PAGE>
New Sub-Accounts may be established when, in the sole discretion of the
Company, marketing, tax, investment or other conditions so warrant. Any
new Sub-Accounts will be made available to existing Participants on a
basis to be determined by the Company. Each additional Sub-Account will
purchase shares in a Fund or in another mutual fund or investment vehicle.
The Company may also eliminate one or more Sub-Accounts, if in its sole
discretion, marketing, tax, investment or other conditions so warrant. In
the event any Sub-Account is eliminated, the Company will notify
Participants and request a re-allocation of the amounts invested in the
eliminated Sub-Account.
In the event of any substitution or change, the Company may make such
changes in the Contract and Certificate as may be necessary or appropriate
to reflect such substitution or change. Furthermore, if deemed to be in
the best interests of persons having voting rights under the Certificates,
the Separate Account may be operated as a management company under the
1940 Act or any other form permitted by law, may be de-registered under
such Act in the event such registration is no longer required, or may be
combined with one or more separate accounts.
PERFORMANCE INFORMATION
From time to time, the Company may advertise yields and/or total
returns for the Sub-Accounts. THESE FIGURES ARE BASED ON HISTORICAL
INFORMATION AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. For a
description of the methods used to determine yield and total return, see
the Statement of Additional Information.
Yield Data
The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in that Sub-Account over a specified
seven-day period. The Company may also advertise the effective yield of
the Money Market Sub-Account which is calculated similarly but, when
annualized, the income earned by an investment in that Sub-Account is
assumed to be reinvested. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed
reinvestment.
The yield of a Sub-Account other than the Money Market Sub-Account
refers to the annualized income generated by an investment in the
Sub-Account over a specified 30-day period.
The yield calculations do not reflect the effect of any CDSC or premium
taxes that may be applicable to a particular Certificate which would
reduce the yield of that Certificate.
- 17 -
<PAGE>
Total Return Data
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for
various periods of time including, but not limited to, a period measured
from the date the Sub-Account commenced operations. When a Sub-Account
has been in operation for one, five and ten years, respectively, the
average annual total return presented will be presented for these periods,
although other periods may also be provided. The average annual total
return quotations reflect the deduction of all applicable charges except
for premium taxes. In addition to average annual total return for a
Sub-Account, the Company may provide cumulative total return and/or other
non-standardized total return for the Sub-Account.
Reports and promotional literature may contain the ranking of any
Sub-Account derived from rankings of variable annuity separate accounts or
their investment products tracked by Lipper Analytical Services, Inc.,
VARDS, IBC/Donoghue's Money Fund Report, Financial Planning Magazine,
Money Magazine, Bank Rate Monitor, Standard & Poor's Indices, Dow Jones
Industrial Average, and other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on
overall performance or other criteria. The Company may compare the
performance of a Sub-Account with applicable indices and/or industry
averages. Performance information may present the effects of tax-deferred
compounding on Sub-Account investment returns, or returns in general,
which may be illustrated by graphs, charts, or otherwise, and which may
include comparisons of investment return on a tax-deferred basis with
currently taxable investment return.
The Company may also advertise performance figures for the Sub-Accounts
based on the performance of a Fund prior to the time the Separate Account
commenced operations.
ANNUITY INVESTORS(SERVICE MARK) LIFE INSURANCE COMPANY AND THE SEPARATE
ACCOUNT
Annuity Investors Life Insurance Company
Annuity Investors Life Insurance Company (the "Company"), formerly
known as Carillon Life Insurance Company, is a stock life insurance
company incorporated under the laws of the State of Ohio in 1981. The
Company is principally engaged in the sale of fixed and variable annuity
policies.
The Company is a wholly-owned subsidiary of American Annuity Group,
Inc., a publicly traded insurance holding company, which in turn is
indirectly controlled by American Financial Group, Inc., a publicly traded
holding company.
The home office of the Company is located at 250 East Fifth Street,
Cincinnati, Ohio 45202.
- 18 -
<PAGE>
Published Ratings
The Company may from time to time publish in advertisements, sales
literature and reports to Contract Owners and Participants, the ratings
and other information assigned to it by one or more independent rating
organizations such as A.M. Best Company, Standard & Poor's, and Duff &
Phelps. The purpose of the ratings is to reflect the financial strength
and/or claims-paying ability of the Company and should not be considered
as reflecting on the investment performance of assets held in the Separate
Account. Each year the A.M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect their current opinion of the relative financial
strength and operating performance of an insurance company in comparison
to the norms of the life/health insurance industry. In addition, the
claims-paying ability of the Company as measured by Standard & Poor's or
Duff & Phelps may be referred to in advertisements or sales literature or
in reports to Contract Owners and Participants. These ratings are
opinions of those agencies as to an operating insurance company's
financial capacity to meet the obligations of its insurance and annuity
policies in accordance with their terms. Such ratings do not reflect the
investment performance of the Separate Account or the degree of risk
associated with an investment in the Separate Account.
The Separate Account
Annuity Investors(SERVICEMARK) Variable Account A was established by
the Company as an insurance company separate account under the laws of the
State of Ohio on May 26, 1995, pursuant to resolutions of the Company's
Board of Directors. The Separate Account is registered with the
Securities and Exchange Commission under the 1940 Act as a unit investment
trust. However, the Securities and Exchange Commission does not supervise
the management or the investment practices or policies of the Separate
Account.
The assets of the Separate Account are owned by the Company but they
are held separately from the other assets of the Company. The Ohio
Revised Code provides that the assets of a separate account are not
chargeable with liabilities incurred in any other business operation of
the Company. Income, gains and losses incurred on the assets in the
Separate Account, whether or not realized, are credited to or charged
against the Separate Account, without regard to other income, gains or
losses of the Company. Therefore, the investment performance of the
Separate Account is entirely independent of the investment performance of
the Company's general account assets or any other separate account
maintained by the Company.
Under Ohio law, the assets of the Separate Account will be held for the
exclusive benefit of Contract Owners and Participants under the Contracts
offered by this Prospectus and under all other contracts which provide for
accumulated values or dollar amount payments to reflect investment results
of the Separate Account. The obligations arising under the Contract and
Certificates are obligations of the Company.
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The Separate Account has eleven Sub-Accounts, each of which invests
solely in a specific corresponding Fund. (See "The Funds," page .)
Changes to the Sub-Accounts may be made at the discretion of the Company.
(See "Additions, Deletions, or Substitutions," page .)
THE FIXED ACCOUNT
The Fixed Account is a part of the Company's general account. Because
of exemptive and exclusionary provisions, interests in the general account
have not been registered under the Securities Act of 1933, nor is the
general account registered as an investment company under the 1940 Act.
Accordingly, neither the general account nor any interest therein is
generally subject to the provisions of these Acts, and the staff of the
Securities and Exchange Commission does not generally review the
disclosures in the prospectus relating to the Fixed Account. Disclosures
regarding the Fixed Account and the general account may, however, be
subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements
made in the prospectus.
The Company has sole discretion to invest the assets of the Fixed
Account, subject to applicable law. Allocation of any amounts to the
Fixed Account does not entitle Participants to share directly in the
investment experience of these assets. The Company assumes the risk of
investment gain or loss on the portion of the Account Value allocated to
the Fixed Account. All assets held in the general account are subject to
the Company's general liabilities from business operations.
Fixed Account Options
There are currently four options under the Fixed Account: the Fixed
Accumulation Account option; and the guarantee period options referred to
in the Certificate as the Fixed Account options One-Year, Three-Year and
Five-Year Fixed, respectively. Additional Fixed Account options may be
offered by the Company at any time. Purchase Payments allocated and
amounts transferred to the Fixed Account options accumulate interest at
the applicable current interest rate declared by the Company's Board of
Directors, and if applicable, for the duration of the guarantee period
selected.
The Company guarantees a minimum rate of interest for the Fixed Account
options. The guaranteed rate is 3% per year. For any Fixed Account
option, the Company's Board of Directors may declare and pay current
interest higher than the guaranteed rate at any time. Once declared, such
rate will be paid until changed by the Company for new allocations to that
Fixed Account option, but such change will not be applicable with respect
to amounts previously allocated to such Fixed Account option.
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Renewal of Fixed Account Options
The following provisions apply to all Fixed Account Options except the
Fixed Accumulation Account option.
At the end of a guarantee period, and for the thirty days immediately
preceding the end of such guarantee period, the Participant may elect a
new option to replace the Fixed Account option that is then expiring. The
entire amount maturing may be reallocated to any of the then current
options under the Certificate (including the various Sub-Accounts within
the Separate Account), except that a Fixed Account option with a guarantee
period that would extend past the Annuity Commencement Date may not be
selected. In particular, in the case of renewals occurring within one
year of the Annuity Commencement Date, the only Fixed Account option
available is the Fixed Accumulation Account.
If the Participant does not specify a new option in accordance with the
preceding paragraph, the Participant will be deemed to have elected the
same Fixed Account option, so long as the guarantee period of such option
does not extend beyond the Annuity Commencement Date. In the event that
such a period would extend beyond the Annuity Commencement Date, the
Participant will be deemed to have selected the Fixed Account option with
the longest available guarantee period that expires prior to the Annuity
Commencement Date.
THE CONTRACT
The Contract is a group flexible premium deferred annuity. The rights
and benefits are described below and in the Certificate and the Contract.
The Company reserves the right to make any modification to conform the
Contract and Certificates thereunder to, or give the Participant the
benefit of, any applicable law. The obligations under the Contract and
Certificates are obligations of the Company.
For each Certificate, a different Account will be established and Fixed
Account Values, Variable Account Values, and benefits and charges will be
calculated separately. The various administrative rules described below
will apply separately to each Certificate, unless otherwise noted. The
Company reserves the right to terminate any Certificate for which the
Account Value is less than $500 and no Purchase Payment has been received
for at least two years.
ENROLLMENT AND PURCHASE PAYMENTS
Purchase Payments
All Purchase Payments must be received at the Administrative Office.
Each Purchase Payment will be applied by the Company to the credit of a
Participant's Account. If the Participant Enrollment Form is in good
order, the Company will apply the initial Purchase Payment to an account
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for the Participant within two business days of receipt of the Purchase
Payment at the Administrative Office. If the Enrollment Form is not in
good order, the Company will attempt to get the Enrollment Form in good
order within five business days. If the Enrollment Form is not in good
order at the end of this period, the Company will inform the Contract
Owner of the reason for the delay and that the Purchase Payment will be
returned immediately unless he or she specifically consents to the Company
keeping the Purchase Payment until the Enrollment Form is in good order.
Once the Enrollment Form is in good order, the Purchase Payment will be
applied to the Participant's Account within two business days.
Additional Purchase Payments may be made at any time prior to the
Annuity Commencement Date, as long as the Participant is living. Each
additional Purchase Payment is credited to a Certificate as of the next
valuation following the receipt of such additional Purchase Payment.
No Purchase Payment for any Certificate may exceed $500,000 without
prior approval of the Company.
Allocation of Purchase Payments
Purchase Payments will be allocated to the Fixed Account and/or to the
Sub-Accounts according to the instructions in the Participant Enrollment
Form or subsequent Written Request. Allocations are made in percentages,
and whole percentages must be used.
ACCOUNT VALUE
Before the Annuity Commencement Date, the Account Value is equal to the
Fixed Account Value plus the Variable Account Value.
Fixed Account Value
The Fixed Account Value at any time is equal to (a) the Purchase
Payment(s) allocated to the Fixed Account; plus (b) amounts transferred to
the Fixed Account; plus (c) interest credited to the Fixed Account; less
(d) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made in accordance with the provisions
of the Contract.
Variable Account Value
The Variable Account Value for the Certificate at any time is the sum
of the value of each Sub-Account ("Sub-Account Value") selected by the
Participant for the Certificate on the Valuation Date most recently
completed.
Purchase Payments may be allocated among, and Account Values may be
transferred to, the various Sub-Accounts within the Separate Account,
subject to the provisions of the Contract governing transfers. For each
Sub-Account, the Purchase Payment(s) or amounts transferred are converted
into Accumulation Units. The number of Accumulation Units credited is
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determined by dividing the dollar amount directed to each Sub-Account by
the Accumulation Unit Value for that Sub-Account at the end of the
Valuation Period on which the Purchase Payment(s) or transferred amount is
received.
The following events will result in the cancellation of an appropriate
number of Accumulation Units of a Sub-Account:
(1) transfer from a Sub-Account;
(2) full or partial surrender of a Participant's Variable Account
Value;
(3) payment of a Death Benefit;
(4) application of a Participant's Variable Account Value to a
Settlement Option;
(5) deduction of the Certificate Maintenance Fee; or
(6) deduction of a Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation
Period during which the Company received a Written Request regarding the
event giving rise to such cancellation, or Due Proof of Death and a
Written Request regarding payment of the Death Benefit, or the Valuation
Period on which the Certificate Maintenance Fee is due, as the case may
be.
The Variable Account Value for a Certificate at any time is equal to
the sum of the number of Accumulation Units attributable to that
Certificate for each Sub-Account multiplied by the Accumulation Unit value
("Accumulation Unit Value") for each Sub-Account at the end of the
Valuation Period.
Accumulation Unit Value
The initial Accumulation Unit Value for each Sub-Account, with the
exception of the Money Market Sub-Account, was set at $10 when the
Sub-Account was created. The initial Accumulation Unit Value for the
Money Market Sub-Account was set at $1.00. Thereafter, the Accumulation
Unit Value at the end of each Valuation Period is the Accumulation Unit
Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor, as described below.
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Net Investment Factor
The Accumulation Unit Value for each Sub-Account for any Valuation
Period is determined by the Net Investment Factor. The Net Investment
Factor is a factor applied to measure the investment performance of a
Sub-Account from one Valuation Period to the next. Each Sub-Account has a
Net Investment Factor for each Valuation Period which may be greater or
less than one. Therefore, the value of an Accumulation Unit may increase
or decrease. The Net Investment Factor for any Sub-Account for any
Valuation Period is determined by dividing (1) by (2) and subtracting (3)
from the result, where:
(1) is equal to:
a. the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the current
Valuation Period; plus
b. the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account,
if the "ex-dividend" date occurs during the current
Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for,
which is determined by the Company to have resulted from
the investment operations of the Sub-Account;
(2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the most recent
Valuation Period; and
(3) is the factor representing the Mortality and Expense Risk
Charge and the Administration Charge deducted from the
Sub-Account for the number of days in the Valuation Period.
TRANSFERS
By Written Request prior to the Annuity Commencement Date, the
Participant may transfer amounts in a Sub-Account to a different
Sub-Account and/or one or more of the Fixed Account options. The minimum
transfer amount is $500. If the Sub-Account balance is less than $500 at
the time of the transfer, the entire amount of the Sub-Account balance
must be transferred. The Participant may also transfer amounts from any
Fixed Account options to any different Fixed Account option and/or one or
more of the Sub-Accounts. If a transfer is being made from a Fixed
Account option pursuant to the "Renewal" provision of the "FIXED ACCOUNT"
section of this Prospectus, then the entire amount of that Fixed Account
option may be transferred to any one or more of the Sub-Accounts. In any
other case, transfers from any Fixed Account options are subject to a
cumulative limit during each Certificate Year of 20% of the most recent
Certificate Year-end values of that Fixed Account option, and are not
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permitted during the first Certificate Year. However, if the Account
Value of the Fixed Account option being transferred is less than $500 at
the time of the transfer, then the entire balance will be transferred.
The Company may from time to time change the amount available for transfer
from the Fixed Accumulation Account. Amounts previously transferred from
Fixed Account options to the Sub-Accounts may not be transferred back to
the Fixed Account options for a period of at least six months from the
date of transfer.
The Company charges a Transfer Fee of $25 for each transfer in
excess of twelve during the same Certificate Year.
The Company reserves the right, in the Company's sole discretion and
at any time without prior notice, to terminate, suspend or modify the
transfer privileges described above.
See "Transfers After the Annuity Commencement Date," page ____.
Telephone Transfers
A Participant also may place a request for all or part of the
Account Value to be transferred by telephone. All transfers must be in
accordance with the terms of the Certificate. Transfer instructions are
currently accepted on each Valuation Date between 9:30 a.m. and 4:00 p.m.
Eastern Time at (800) 789-6771. Once instructions have been accepted,
they may not be rescinded; however, new telephone instructions may be
given the following day.
The Company will not be liable for complying with telephone
instructions the Company reasonably believes to be genuine or for any
loss, damage, cost or expense in acting on such telephone instructions.
The Participant will bear the risk of such loss. The Company will employ
reasonable procedures to determine that telephone instructions are
genuine. If the Company does not employ such procedures, the Company may
be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, tape recording telephone
instructions.
Dollar Cost Averaging
Prior to the Annuity Commencement Date, the Participant may
establish automatic transfers from the Money Market Sub-Account to any of
the other Sub-Accounts, on a monthly or quarterly basis, by submitting to
the Administrative Office a Dollar Cost Averaging Enrollment Form. No
Dollar Cost Averaging transfers may be made to any of the Fixed Account
options. The transfers will begin within 30 days of the receipt of such
Enrollment Form.
In order to be eligible for Dollar Cost Averaging the value of the
Money Market Sub-Account must be at least $10,000 and the minimum amount
that can be transferred is $500 per month.
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<PAGE>
Dollar Cost Averaging will automatically terminate if any Dollar
Cost Averaging transfer would cause the balance of the Money Market
Sub-Account to fall below $500. At that time, the Company will then
transfer the balance of the Money Market Sub-Account to the other
Sub-Accounts in the same percentage distribution as directed in the Dollar
Cost Averaging Enrollment Form.
Dollar Cost Averaging transfers will not count toward the twelve
transfers permitted under the Certificate without charge.
Before electing Dollar Cost Averaging, a Participant should consider
the risks involved in switching between investments available under the
Certificate. Dollar Cost Averaging requires regular investments
regardless of fluctuating price levels and does not guarantee profits or
prevent losses in a declining market. A Participant should consider his
or her financial ability to continue Dollar Cost Averaging transfers
through periods of changing price levels.
The Participant may terminate Dollar Cost Averaging services, at any
time, by Written Request to the Company. In addition, the Company
reserves the right to terminate, modify or suspend the Dollar Cost
Averaging option at any time. Currently, the Company does not charge a
fee for Dollar Cost Averaging services. However, the Company reserves the
right to impose an annual fee not to exceed $25 for each Dollar Cost
Averaging service performed by the Company.
Portfolio Rebalancing
In connection with the allocation of Purchase Payments to the
Sub-Accounts and/or the Fixed Accumulation Account, the Participant may
elect to have the Company perform Portfolio Rebalancing services. The
election of Portfolio Rebalancing instructs the Company to automatically
transfer amounts between the Sub-Accounts and the Fixed Accumulation
Account in percentage allocations selected by the Participant.
The Participant may elect Portfolio Rebalancing in the Participant
Enrollment Form or by subsequent Written Request. In order to elect
Portfolio Rebalancing after the Certificate has been issued, the
Participant must submit a Written Request for Portfolio Rebalancing to the
Company and the Participant must have a minimum Account Value of $10,000.
Portfolio Rebalancing will be performed on a quarterly basis.
The Participant may terminate Portfolio Rebalancing services, at any
time, by Written Request to the Company. In addition, the Company
reserves the right to terminate, modify or suspend the Portfolio
Rebalancing option at any time. Currently, the Company does not charge a
fee for Portfolio Rebalancing services. However, the Company reserves the
right to impose an annual fee not to exceed $25 for each Portfolio
Rebalancing service performed by the Company.
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Interest Sweep
Prior to the Annuity Commencement Date, the Participant may
establish automatic transfers of the income from each Fixed Account option
selected on the Interest Sweep Enrollment Form to the Sub-Accounts, on a
quarterly basis. Transfers will begin on the next quarterly Interest
Sweep date that is at least 30 days after receipt of such Enrollment Form
at the Administrative Office. The Company may, at its sole discretion,
set the quarterly interest Sweep date.
In order to be eligible for the Interest Sweep option the value of
each Fixed Account option selected on the Interest Sweep Enrollment Form
must be at least $5,000 and the maximum amount that can be transferred
from each Fixed Account option so selected is 20% of such Fixed Account
option's value per year.
Interest Sweep transfers will not count toward the twelve transfers
permitted under the Certificate without charge.
The Participant may terminate participation in the Interest Sweep
option, at any time, by Written Request to the Company. In addition, the
Company reserves the right to terminate, modify or suspend the Interest
Sweep option at any time. Currently, the Company does not charge a fee
for Interest Sweep services. However, the Company reserves the right to
impose an annual fee not to exceed $25 for each Interest Sweep service
performed by the Company.
The Company reserves the right, at any time, to terminate, suspend
or modify the transfer privileges described above without prior notice to
Participants, as permitted by applicable law.
SURRENDERS
Surrender Value
The Participant may surrender all or part of the Surrender Value of
a Certificate. Full or partial surrenders of the Surrender Value may be
made by Written Request at any time prior to the Annuity Commencement
Date; the Surrender Value will be the Surrender Value at the end of the
Valuation Period in which the Written Request is received. The Surrender
Value at any time is equal to the Account Value as of that Valuation
Period less any applicable Contingent Deferred Sales Charge ("CDSC"), less
any outstanding loans and less any applicable premium tax not previously
deducted. On full surrender, an annual Certificate Maintenance Fee also
will be deducted as part of the calculation of the Surrender Value. A
full or partial surrender prior to the Annuity Commencement Date may be
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subject to a CDSC as set forth in this prospectus, except that such charge
will not apply to: (1) any portion of the Account Value in excess of total
Purchase Payments; (2) any portion of the Account Value attributable to
Purchase Payment(s) that are no longer subject to the charge; or (3)
payment of the Death Benefit.
The CDSC is calculated separately for each Purchase Payment.
Surrenders will be deemed to be withdrawn first from the portion of the
Account Value in excess of total Purchase Payments and then from Purchase
Payments. For this purpose, Purchase Payment(s) are deemed to be
withdrawn on a "first-in, first-out" (FIFO) basis. Surrenders will result
in the cancellation of Accumulation Units from each applicable
Sub-Account(s) and/or a reduction of the Participant's Fixed Account
Value. In the case of a full surrender, the Participant's participation
interest under the Contract and the Certificate will be canceled. The
CDSC may be waived in whole or in part under certain circumstances.
The Company reserves the right to terminate a Certificate if a
partial surrender would reduce a Participant's Account Value to less than
the $500 minimum balance and no Purchase Payments have been received by
the Company for at least two years.
The Certificate Maintenance Fee, unless waived, will be deducted
from a full surrender before the application of any CDSC. (See "Charges
and Deductions," page __.)
Surrenders may have tax consequences. (See "Federal Tax Matters,"
page___.)
Suspension or Delay in Payment of Surrender Value
The Company may suspend or delay the date of payment of a partial or
full surrender of the Variable Account Value for any period if:
(1) the New York Stock Exchange ("NYSE") is closed or trading on
the NYSE is restricted;
(2) an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which (a) the disposal of
securities in the Separate Account is not reasonably
practicable; or (b) it is not reasonably practicable to
determine fairly the value of the net assets in the Separate
Account; or
(3) the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of any
partial or full surrender of the Fixed Account Value for up to six months.
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A surrender request will be effective when all appropriate surrender
request forms are received. Payments of any amounts derived from a
Purchase Payment paid by check may be delayed until the check has cleared.
SINCE THE PARTICIPANT ASSUMES THE INVESTMENT RISK AND BECAUSE
CERTAIN SURRENDERS ARE SUBJECT TO A CDSC, THE TOTAL AMOUNT PAID UPON
SURRENDER OF THE CERTIFICATE (TAKING INTO ACCOUNT ANY PRIOR SURRENDERS)
MAY BE MORE OR LESS THAN THE TOTAL PURCHASE PAYMENTS.
Since the qualified contracts offered by this Prospectus will be
issued in connection with retirement plans which meet the requirements of
Sections 401, 403 or 457 of the Code, as applicable, reference should be
made to the terms of the particular plans for any additional limitations
or restrictions on surrenders.
Systematic Withdrawal Option
Prior to the Annuity Commencement Date, the Participant, by Written
Request to the Administrative Office, may elect to automatically withdraw
money from the Fixed Account and/or the Sub-Accounts. To be eligible for
the Systematic Withdrawal Option, the Account Value must be at least
$10,000 at the time of election. The minimum monthly amount that can be
withdrawn is $100. Systematic withdrawals will be subject to the CDSC to
the extent the amount withdrawn exceeds the Free Withdrawal Allowance (See
"Charges and Deductions," page __.) The Company reserves the right to
discontinue offering systematic withdrawals or to assess a processing fee
not to exceed $25 per service performed upon 30 days' written notice to
Contract Owners and Participants. The Participant may begin or
discontinue systematic withdrawals at any time by Written Request to the
Company, but at least 30 days' notice must be given to change any
systematic withdrawal instructions that are currently in place.
Systematic withdrawals may have tax consequences. (See "Federal Tax
Matters," page ___.)
CONTRACT LOANS
Certain Contracts may contain a loan provision issued in connection
with certain qualified plans. Participants under such Contracts may
obtain loans using their interest under such Contract as the only security
for the loan. Loans are subject to provisions of the Code and to
applicable retirement program rules. Tax advisers and retirement plan
fiduciaries should be consulted prior to exercising loan privileges. Loan
provisions are described in the loan endorsement.
The amount of any loan will be deducted from the minimum death
benefit. In addition, a loan, whether or not repaid, will have a
permanent effect on the Account Value because the investment results of
the investment options will only apply to the unborrowed portion of the
Account Value. The longer the loan is outstanding, the greater the effect
is likely to be. The effect could be favorable or unfavorable. If the
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investment results are greater than the rate being credited on amounts
held in the loan account while the loan is outstanding, the Account Value
will not increase as rapidly as it would if no loan were outstanding. If
investment results are below that rate, the Account Value will be higher
than it would have been if no loan had been outstanding.
DEATH BENEFIT
Death of Participant
If a Participant dies before the Annuity Commencement Date, a death
benefit will be paid to the primary Beneficiary(ies) then living at the
time of the Participant's death. If no primary Beneficiary is living at
the time of the Participant's death or if the primary Beneficiary dies
within 30 days after the Participant's death and no death benefit has been
paid, the death benefit will be paid to the person(s) named as contingent
Beneficiary(ies). If no primary or contingent Beneficiary is living at
the time of the Participant's death, the death benefit will be paid to the
Participant's estate. No death benefit is payable on or after the Annuity
Commencement Date. Only one death benefit is payable with respect to a
Participant's participation interest under the Contract.
Death Benefit
The Death Benefit will be determined as of the Death Benefit
Valuation Date. The Death Benefit Valuation Date is the Valuation Period
during which the Company receives both Due Proof of Death of the
Participant and a Written Request regarding payment of the Death Benefit.
If both documents are not received at the same time, the Death Benefit
Valuation Date is the Valuation Period during which the Company receives
the latter of Due Proof of Death or a Written Request regarding payment of
the Death Benefit.
If a Participant dies before attaining age 75 and before the
Annuity Commencement Date, the death benefit is an amount equal to the
greatest of:
(1) the Account Value on the Death Benefit Valuation Date, less
any applicable premium tax not previously deducted, and less
any outstanding loans;
(2) the total Purchase Payments, less any applicable premium tax
not previously deducted, less any partial surrenders, and less
any outstanding loans; or
(3) the largest death benefit amount on any Certificate
Anniversary prior to death that is an exact multiple of five
and occurs prior to the Death Benefit Valuation Date, less
any applicable premium tax not previously deducted, less any
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partial surrenders after such death benefit was determined and
less any outstanding loans.
If the Participant dies after attaining age 75 and before the
Annuity Commencement Date, the death benefit is an amount equal to the
greatest of:
(1) the Account Value on the Death Benefit Valuation Date, less
any applicable premium tax not previously deducted, and less
any outstanding loans;
(2) the total Purchase Payments, less any applicable premium tax
not previously deducted, less any partial surrenders, and less
any outstanding loans; or
(3) the largest death benefit amount on any Certificate
Anniversary prior to death that is both an exact multiple of
five and occurs prior to the date on which the Participant
attained age 75, less any applicable premium tax not
previously deducted, less any partial surrenders after such
death benefit was determined and less any outstanding loans.
Payment of the death benefit is not subject to a CDSC.
Beneficiary
The primary Beneficiary(ies) and contingent Beneficiary(ies) are
named on the Participant Enrollment Form. The Beneficiaries may be
changed at any time prior to the Participant's death. The Company must
receive a Written Request to change a Beneficiary. Any such change will
relate back to and take effect on the date the Written Request was signed.
The Company will not be liable for any payment it makes before such
Written Request has been received and acknowledged at the Administrative
Office.
In determining the identity or non-existence of any Beneficiary not
identified by name, the Company may rely on an affidavit by any person
whom the Company reasonably believes to be a reliable source for that
information.
CHARGES AND DEDUCTIONS
There are two types of charges and deductions. First, there are
charges assessed under the Certificate. These charges include the CDSC,
the Administration Charge, the Mortality and Expense Risk Charge, Premium
Taxes and Transfer Fees. All of these charges are described below and
some may not be applicable to every Certificate. Second, there are Fund
expenses for fund management fees and administration expenses. These fees
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are described in the prospectus and statement of additional information
for each Fund.
Contingent Deferred Sales Charge ("CDSC")
No deduction for sales charges is made from Purchase Payments.
However, the Company may deduct a CDSC of up to 7% of Purchase Payments on
certain surrenders to partially cover certain expenses incurred by the
Company relating to the sale of the Contract, including commissions paid,
the costs of preparation of sales literature and other promotional costs
and acquisition expenses.
The CDSC percentage varies according to the number of full years
elapsed between the date of receipt of a Purchase Payment and the date a
Written Request for surrender is made. The amount of the CDSC is
determined by multiplying the amount withdrawn subject to the CDSC by the
CDSC percentage in accordance with the following table. Surrenders will
be applied first to accumulated earnings (which may be surrendered without
charge) and then to Purchase Payments on a first-in, first-out basis;
surrenders will be made from the oldest Purchase Payment first.
Number of Full Years
Elapsed Between Date Contingent Deferred
of Receipt of Purchase Sales Charge as a
Payment and Date Percentage of
Written Request for Associated Purchase
Surrender Received Payment Surrendered
---------------------- -------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
In no event shall the CDSC assessed against the Certificate exceed
7% of the aggregate Purchase Payment(s).
Any Purchase Payments that have been held by the Company for at
least seven years may be surrendered free of any CDSC. In addition,
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during any Certificate Year after the first Certificate Year for
Certificates qualified under Section 403(b) of the Code, the CDSC will not
be imposed on the surrender of up to 10% of the Account Value as of the
last day of the previous Certificate Year ("Free Withdrawal Allowance").
If the Free Withdrawal Allowance is not withdrawn during a Certificate
Year, it does not carry over to the next Certificate Year.
No CDSC is assessed upon payment of the death benefit. Any
applicable CDSC will be deducted from the amount requested for partial and
full surrenders.
The CDSC arising from a surrender of the Certificate will be waived
in all cases if: (i) all or part of the Account Value is applied to the
purchase of an annuity from the Company for life or for a non-commutable
period of five years or more; or (ii) the Participant is "disabled" as
that term is defined in the Social Security Act of 1935, as amended.
The CDSC arising from a surrender of the Certificate will be waived
for Certificates held by Participants in plans qualified under Section
403(b) of the Code that are subject to the Employee Retirement Income
Security Act of 1974, as amended, and regulations thereunder ("ERISA"), or
qualified under Section 401 of the Code, if the Participant incurs a
separation from service.
The CDSC arising from a surrender of the Certificate will be waived
for Certificates held by Participants in plans qualified under Section
403(b) of the Code that are not subject to ERISA if: (i) the Participant
incurs a separation from service, has attained age 55 and has held the
Certificate for at least seven years, provided the Account Value is not
transferred on a tax-free basis to another insurance carrier; or (ii) the
Participant has held the Certificate for fifteen years or more.
The CDSC also will be waived in all cases if the Participant is
confined in a licensed Hospital or Long-Term Care Facility, as those terms
are defined in the Long Term-Care Waiver Rider, for at least 90 days
beginning on or after the first Certificate Anniversary. This Rider may
not be available in all jurisdictions.
The Company may reduce or eliminate the CDSC under the Contract and
Certificates when certain sales of the Contract and Certificates result in
savings or reduction of sales expenses. The entitlement to such a
reduction in the CDSC will be based on: (i) the size and type of the
group to which sales are to be made; (ii) the anticipated total amount of
Purchase Payments to be received; and/or (iii) any prior or existing
relationship with the Company. There may be other circumstances, of which
the Company is not presently aware, which could result in reduced sales
expenses. In no event will reduction or elimination of the CDSC be
permitted where such reduction or elimination will be unfairly
discriminatory to any purchaser.
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The Company reserves the right to terminate, suspend or modify
waivers of the CDSC, without prior notice to Participants, as permitted by
applicable law.
Maintenance and Administrative Charges
On each Certificate Anniversary, the Company deducts an annual
Certificate Maintenance Fee as partial compensation for expenses relating
to the issue and maintenance of the Certificate, and the Separate Account.
The annual Certificate Maintenance Fee is $25. The Company reserves the
right to increase the Certificate Maintenance Fee and guarantees that the
Certificate Maintenance Fee will not exceed $40. Any increase in the
Certificate Maintenance Fee will apply only to deductions after the
effective date of the change. If the Certificate is surrendered on any
day other than on the Certificate Anniversary, the Certificate Maintenance
Fee will be deducted in full at the time of such surrender. Before the
Annuity Commencement Date and after the Annuity Commencement Date, if a
Variable Annuity Benefit is elected, the Certificate Maintenance Fee will
be deducted on a pro rata basis from each Sub-Account in which the
Participant's Account is invested.
The Certificate Maintenance Fee may be waived for sales of Contracts
to a trustee, employer or similar entity representing a group where the
Company determines that such sales result in savings of sales and/or
administrative expenses.
Currently, the Company imposes no Administration Charge to reimburse
the Company for those administrative expenses attributable to the
Certificate and the Separate Account which exceed the revenues received
from the Certificate Maintenance Fee and any Transfer Fee. However, the
Company reserves the right to impose an Administration Charge to be
deducted at the end of each Valuation Period (both before and after the
Annuity Commencement Date) from the Net Asset Value of each Sub-Account of
the Separate Account at an effective annual rate guaranteed not to exceed
0.20%
The Company will provide 30 days written notice in advance of any
change in fees. The Company has not imposed an Administration Charge and
has set the Certificate Maintenance Fee at a level such that the Company
will recover no more than the anticipated and estimated costs associated
with administering the Certificate and Separate Account. The Company does
not expect to make a profit from the actual administrative costs of a
particular Certificate. The Company does not expect to make a profit from
the Certificate Maintenance Fee.
Mortality and Expense Risk Charge
The Company imposes a Mortality and Expense Risk Charge as
compensation for bearing certain mortality and expense risks under the
Certificate. For assuming these risks, the Company makes a daily charge
equal to .003403% corresponding to an effective annual rate of 1.25% of
the daily Net Asset Value of each Sub-Account in the Separate Account.
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The approximate portion of this charge estimated to be attributable to
mortality risks is 0.75%; the approximate portion of this charge
attributable to expense risks is 0.50%. In connection with certain
Contracts that allow the Company to reduce administrative expenses, the
Company will issue an Enhanced Contract with a Mortality and Expense Risk
Charge equal to an effective annual rate of 0.95%. This is equal to a
daily charge of 0.002590%. The Company estimates that 0.20% is for
administrative expenses and 0.75% is for mortality and expense risks.
This charge is imposed before the Annuity Commencement Date and after the
Annuity Commencement Date if a Variable Annuity Benefit is selected. The
Company guarantees that the applicable charge will never increase for a
Contract. The Mortality and Expense Risk Charge is reflected in the
Accumulation Unit values for each Sub-Account.
The mortality risks assumed by the Company arise from its
contractual obligations to make annuity payments (determined in accordance
with the annuity tables and other provisions contained in the Certificate)
and to pay death benefits prior to the Annuity Commencement Date.
The Company also bears substantial risk in connection with the Death
Benefit before the Annuity Commencement Date, since in connection with the
death of a Participant who dies prior to attaining age 75, the Company
will pay a Death Benefit at least equal to the greatest of: (i) the
Account Value on the Death Benefit Valuation Date, less any applicable
premium tax not previously deducted, and less any outstanding loans; (ii)
the total Purchase Payments, less any applicable premium tax not
previously deducted, less any partial surrenders, and less any outstanding
loans; or (iii) the largest Death Benefit on any Certificate Anniversary
prior to death that is an exact multiple of five and occurs prior to the
Death Benefit Valuation Date, less any applicable premium tax not
previously deducted, less any partial surrenders after the Death Benefit
was determined, and less any outstanding loans. In connection with the
death of a Participant who dies after attaining age 75, the Company will
pay a Death Benefit at least equal to the greatest of: (i) the Account
Value on the Death Benefit Valuation Date, less any applicable premium
tax not previously deducted, and less any outstanding loans; (ii) the
total Purchase Payments, less any applicable premium tax not previously
deducted, less any partial surrenders, and less any outstanding loans; or
(iii) the largest Death Benefit on any Certificate Anniversary prior to
death that is both an exact multiple of five and occurs prior to the date
on which the Participant attained age 75, less any applicable premium tax
not previously deducted, less any partial surrenders after the Death
Benefit was determined, and less any outstanding loans.
The expense risk assumed by the Company is the risk that the
Company's actual expenses in administering the Certificates and the
Separate Account will exceed the amount recovered through the Certificate
Maintenance Fees and Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to cover
actual costs and risks assumed, the loss will fall on the Company.
Conversely, if this charge is more than sufficient, any excess will be
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profit to the Company. Currently, the Company expects a profit from this
charge.
The Company recognizes that the CDSC may not generate sufficient
funds to pay the cost of distributing the Contracts and Certificates
thereunder. To the extent that the CDSC is insufficient to cover the
actual cost of Contract and Certificate distribution, the deficiency will
be met from the Company's general corporate assets which may include
amounts, if any, derived from the Mortality and Expense Risk Charge.
Premium Taxes
Certain state and local governments impose premium taxes. These
taxes currently range up to 5.0% depending upon the jurisdiction. The
Company, in its sole discretion and in compliance with any applicable
state law, will determine the method used to recover premium tax expenses
incurred. The Company will deduct any applicable premium taxes from the
Account Value either upon death, surrender, annuitization, or at the time
Purchase Payments are made to the Certificate, but no earlier than when
the Company has a tax liability under state law.
Transfer Fee
The Company currently imposes a $25 fee for each transfer in excess
of twelve in a single Certificate Year. The Company will deduct the
charge from the amount transferred.
Fund Expenses
The value of the assets in the Separate Account reflects the value
of Fund shares and therefore the fees and expenses paid by each Fund. A
complete description of the fees, expenses, and deductions from the Funds
are found in the respective prospectuses for the Funds. (See "The Funds"
page __.)
Reduction or Elimination of Contract and Certificate Charges
The CDSC and the administrative charges under the Contract and
Certificates may be reduced or eliminated when certain sales of the
Contract and Certificates result in savings or reduction of sales
expenses. The entitlement to such a reduction in the CDSC or the
administrative charges will be based on the following: (1) the size and
type of the group to which sales are to be made; (2) the total amount of
Purchase Payments to be received; and (3) any prior or existing
relationship with the Company. There may be other circumstances, of which
the Company is not presently aware, which could result in fewer sales
expenses. In no event will reduction or elimination of the CDSC or the
administrative charge be permitted where such reduction or elimination
will be unfairly discriminatory to any person.
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SETTLEMENT OPTIONS
Annuity Commencement Date
Unless otherwise specified, the Annuity Commencement Date will be
the Participant's 70th birthday. The Annuity Commencement Date may be
changed by the Participant or by the Contract Owner by Written Request at
least 30 days prior to the then-current Annuity Commencement Date. The
Annuity Commencement Date may be changed to any date not later than such
date as may be required or permitted by law or by any applicable
retirement plan.
Election of Settlement Option
If the Participant is alive on the Annuity Commencement Date and
unless otherwise directed, the Company will apply the Account Value, less
premium taxes, if any, according to the Settlement Option elected.
If no election has been made on the Annuity Commencement Date and if
the Participant is living and has a spouse, the Company will begin
payments based on the life of the Participant as primary payee and the
spouse as secondary payee, in accordance with Settlement Option 3 (Joint
and One Half Survivor Annuity) described below. If no election has been
made on the Annuity Commencement Date and if the Participant is living and
does not have a spouse, the Company will begin payments based on the life
of the Participant in accordance with Settlement Option 1 (Life Annuity
with Payments for at Least a Fixed Period), described below, with a fixed
period of 120 monthly payments assured.
Annuity Benefit
The Annuity Benefit may be calculated and paid: (1) as a Fixed
Dollar Annuity Benefit; (2) as a Variable Dollar Annuity Benefit; or (3)
as a combination of both.
If a Fixed Dollar Annuity Benefit only is elected, the Company will
transfer all of the Separate Account Value to the Fixed Account prior to
the Annuity Commencement Date. Similarly, if a Variable Dollar Annuity
Benefit only is elected, the Company will transfer all of the Fixed
Account Value to the Sub-Accounts prior to the Annuity Commencement Date.
The Company will allocate the amount transferred among the Sub-Accounts in
accordance with a Written Request. No transfers between the Fixed Dollar
Annuity Benefit and the Variable Dollar Annuity Benefit will be allowed
after the Annuity Commencement Date. However, after the Variable Dollar
Annuity Benefit has been paid for at least twelve months, the Participant
may, no more than once each twelve months, transfer all or part of the
Annuity Units upon which the Variable Dollar Annuity Benefit is based from
the Sub-Account(s) held to Annuity Units in different Sub-Accounts.
If a Variable Dollar Annuity Benefit is elected, the amount applied
under that benefit is the Variable Account Value as of the end of the
Valuation Period immediately preceding the Annuity Commencement Date. If
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a Fixed Dollar Annuity Benefit is elected, the amount applied under that
benefit is the Fixed Account Value as of the Annuity Commencement Date.
Fixed Dollar Annuity Benefit
Fixed Dollar Annuity Benefits are determined by multiplying the
Fixed Account Value (expressed in thousands of dollars and after deduction
of any premium taxes not previously deducted) by the amount of the monthly
payment per $1,000 of value obtained from the Settlement Option Table for
the Annuity Benefit elected. The Fixed Dollar Annuity Benefit will remain
level for the duration of the Annuity.
Variable Dollar Annuity Benefit
The first monthly Variable Dollar Annuity Benefit payment is equal
to the Variable Account Value as of the end of the Valuation Period
immediately preceding the Annuity Commencement Date (expressed in
thousands of dollars and after deduction of any premium taxes not
previously deducted) multiplied by the amount of the monthly payment per
$1,000 of value obtained from the Settlement Option Table for the Annuity
Benefit elected less the pro rata portion of the Certificate Maintenance
Fee. The dollar amount of the first monthly Variable Dollar Annuity
Benefit from each Sub-Account is determined in the same manner.
The dollar amount of the second and subsequent monthly Variable
Dollar Annuity Benefit payments is equal to the sum of the number of
Annuity Units for each Sub-Account in which amounts are held by the
Participant, multiplied by the value of an Annuity Unit ("Annuity Unit
Value") for that Sub-Account as of the fifth Valuation Date preceding the
due date of the payment. A pro rata portion of the Certificate
Maintenance Fee is deducted from the total to arrive at the actual
payment.
The number of Annuity Units in each Sub-Account held by a
Participant is determined by dividing the dollar amount of the first
monthly Variable Dollar Annuity Benefit from each Sub-Account by the
Annuity Unit Value for that Sub-Account as of the Participant's Annuity
Commencement Date. The number of Annuity Units remains fixed during the
Annuity Payment Period, except as a result of any transfers among
Sub-Accounts after the Annuity Commencement Date.
The Annuity Unit Value for each Sub-Account was originally
established in the same manner as Accumulation Unit values. Thereafter,
the Annuity Unit Value for a Sub-Account is determined by multiplying the
Annuity Unit Value as of the end of the preceding Valuation Period by the
Net Investment Factor, determined as set forth above under "Accumulation
Unit Value," for the Valuation Period just ended. The product is then
multiplied by the assumed daily investment factor (0.99991781), for the
number of days in the Valuation Period. The factor is based on the
assumed net investment rate of three percent (3%) that is reflected in the
Settlement Option Tables.
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The Annuitant receives an amount equal to the value of a fixed
number of Annuity Units each month. Such value will reflect the
investment performance of the Sub-Accounts selected and the amount of each
annuity payment will vary accordingly.
Transfers After the Annuity Commencement Date
After the Annuity Commencement Date, no transfers between the Fixed
Account and the Separate Account are permitted. However, after a Variable
Dollar Annuity Benefit has been paid for at least twelve months, the
Participant may, by Written Request to the Administrative Office, transfer
Annuity Units between Sub-Accounts no more than once during a twelve month
period.
Annuity Transfer Formula
Transfers after the Annuity Commencement Date are implemented
according to the following formulas:
(1) Determine the number of units to be transferred from the
Sub-Account as follows:
= AT/AUV1
(2) Determine the number of Variable Annuity Units remaining in
such Sub-Account (after the transfer):
= UNIT1 - AT/AUV1
(3) Determine the number of Variable Annuity Units in the
transferee Sub-Account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent Variable Dollar Annuity Benefit payments will
reflect the changes in Variable Annuity Units in each
Sub-Account as of the next Variable Dollar Annuity Benefit
payment's due date.
Where:
(AUV1) is the value of a Variable Annuity Unit ("Variable Annuity
Unit Value") of the Sub-Account that the transfer is being made from
as of the end of the Valuation Period in which the transfer request
was received.
(AUV2) is the Variable Annuity Unit Value of the Sub-Account that
the transfer is being made to as of the end of the Valuation Period
in which the transfer request was received.
(UNIT1) is the number of Variable Annuity Units in the Sub-Account
that the transfer is being made from, before the transfer.
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(UNIT2) is the number of Variable Annuity Units in the Sub-Account
that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the Sub-Account.
Settlement Options
Option 1: Life Annuity with Payments for at Least a Fixed Period.
The Company will make a monthly payment for at least a
fixed period. If the Annuitant lives longer than the
fixed period, then the Company will make payments until
the Annuitant's death. The fixed periods available are
reflected in Annuity Table 1.
If, at the death of the Annuitant, payments have been
made for less than the fixed period elected, the Company
will continue to make payments: (i) to the contingent
payee designated on the Settlement Option election form;
and (ii) during the remainder of the fixed period.
Option 2: Life Annuity. The Company will make annuity payments
until the Annuitant's death. Annuity Table 2 applies to
this Option.
Option 3: Joint and One-Half Survivor Annuity. The Company will
provide a monthly payment to an Annuitant during his/her
lifetime; thereafter, upon the death of the Annuitant and
receipt by the Company of Due Proof of Death, one-half of
the monthly payments will continue to a designated
survivor, if living, and until his/her death. Annuity
Table 3 applies to this Option.
Option 4: Income for a Fixed Period. The Company will make
payments for a fixed period. Payment intervals and
amounts are shown in Annuity Table 4 and are based on a
3% guaranteed interest rate.
If, at the death of the Annuitant, payments have been
made for less than the fixed period elected, the Company
will continue to make payments: (i) to the contingent
payee designated on the Settlement Option election form;
and (ii) during the remainder of the fixed period.
Option 5: Any Other Form. The Company will make payments in the
form of any other annuity which is acceptable to the
Company.
Minimum Amounts
If the Participant's Account Value is less than $5,000 on the
Annuity Commencement Date, the Company reserves the right to pay that
amount in one lump sum. If monthly payments under a Settlement Option
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would be less than $100, the Company may make payments quarterly,
semi-annually or annually at its discretion.
All elected Settlement Options must comply with current applicable
laws, regulations and rulings issued by any governmental agency. If at
the time a Fixed Dollar Annuity Benefit is elected, the Company has
available options or rates on a more favorable basis than those
guaranteed, the higher benefits shall be applied and guaranteed for as
long as that election remains in force.
To the extent applicable, all factors, values, benefits and reserves
will not be less than those required by the law of the state in which the
Contract is delivered.
Settlement Option Tables
The Settlement Option Tables in Appendix A reflect the dollar amount
of the monthly payments for each $1,000 applied.
Rates for monthly payments for ages or fixed periods not shown in
the Settlement Option Tables will be calculated on the same basis as those
shown and may be obtained from the Company. Fixed periods shorter than
five years are not available.
GENERAL PROVISIONS
Non-participating
The Contract and the Certificates thereunder are non-participating.
Neither the Contract nor the Certificates thereunder are eligible to share
in the profits or surplus earnings of the Company's general account and
will not receive dividends from the general account.
Misstatement of Age
If the age of the Participant has been misstated in the Certificate
Application, Annuity Benefit payments under the Certificate will be
whatever the Account Value on the Annuity Commencement Date would purchase
on the basis of the correct age of the Participant. If the Company has
made underpayments based on any misstatement, the Company shall promptly
pay the amount of any underpayment, with interest, in one lump sum. Any
overpayments made shall be charged, with interest, against the next
Annuity Benefit payment or succeeding Annuity Benefit payments due under
the Certificate. The interest rate used will not be less than 3% per
year.
Proof of Existence and Age
The Company may require proof of age of the Annuitant and, if
applicable, any joint payee, before any Annuity Benefit involving lifetime
payments will be made.
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Facility of Payment
If any person receiving payments under a Certificate is incapable of
giving valid receipt of payment, the Company may make such payment to the
person who has legally assumed responsibility for his or her care and
principal support. Any such payment shall fully discharge the Company to
the extent of that payment.
Transfer and Assignment
Neither any one Participant nor the Contract Owner may transfer,
sell, assign, pledge, charge, encumber or in any way alienate his or her
interest under a Certificate or the Contract, respectively. To the extent
permitted by law, no benefits payable under the Contract or a Certificate
will be subject to the claims of creditors.
Annuity Data
The Company will not be liable for obligations which depend on the
Company receiving information from a Participant until such information is
received by the Company in a satisfactory form.
Annual Report
At least once each Certificate Year prior to the Annuity
Commencement Date, the Participant will be given a report of the current
Account Value allocated to each Sub-Account, and each Fixed Account
option. This report will also include any other information required by
law or regulation, including all transactions which have occurred during
the accounting period shown in the report.
Incontestability
Each Certificate shall not be contestable by the Company.
Entire Contract
The Company issues the Certificate in consideration and acceptance
of the payment of the initial Purchase Payment and, where state law
requires, the Participant Enrollment Form. In those states that require a
written application, a copy of the Enrollment Form will be attached to and
become part of the Certificate and along with the Certificate constitutes
the entire Certificate. All statements made by the Participant will be
considered representations and not warranties. The Company will not use
any statement in defense of a claim unless it is made in the Participant
Enrollment Form (or other application form) and a copy of the Participant
Enrollment Form (or other application form) is attached to the Certificate
when issued.
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Changes in the Contract
Only the Company's President, Vice President and Secretary have the
authority to bind the Company or to make any change in the Contract or the
Certificates thereunder and then only in writing. The Company will not be
bound by any promise or representation made by any other persons.
The Company may not change or amend the Contract or Certificates
thereunder, except as expressly provided therein, without the
Participant's consent. However, the Company may change or amend the
Contract or Certificates thereunder if such change or amendment is
necessary for the Contract or Certificates thereunder to comply with any
state or federal law, rule or regulation.
Waiver of the Certificate Maintenance Fee
The Company may waive the Certificate Maintenance Fee in certain
situations where the Company expects to realize significant economies of
scale with respect to sales of Contracts and Certificates. This is
possible because sales costs do not increase in proportion to the Purchase
Payments under the Contracts and Certificates sold; for example, the per
dollar transaction cost for a sale of a Contract and Certificates with
$500,000 of Purchase Payments is generally much higher than the per dollar
cost for a sale of a Contract and Certificates with $1,000,000 of Purchase
Payments. Thus, the applicable sales costs decline as a percentage of the
Purchase Payments as the amount of Purchase Payments increases.
Notices and Directions
The Company will not be bound by any authorization, election or
notice which is not in writing and received at the Company's
Administrative Office.
Any written notice requirement by the Company to the Participant
will be satisfied by the mailing of any such required written notice, by
first-class mail, to the Participant's last known address as shown on the
Company's records.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the Contract and is not intended as tax advice.
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may
receive a distribution under the Contract. Any person concerned about tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon the Company's understanding of
the present federal income tax laws as they are currently interpreted by
the Internal Revenue Service. No representation is made as to the
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likelihood of the continuation of the present federal income tax laws or
of the current interpretation by the Internal Revenue Service. Moreover,
no attempt has been made to consider any applicable state or other tax
laws.
The ultimate effect of federal income taxes on the amounts held
under a Contract, on Annuity Payments, and on the economic benefit to the
Participant or the Beneficiary may depend on the type of retirement plan,
and on the tax status of the individual concerned. Certain requirements
must be satisfied in purchasing a Contract for a qualified plan and
receiving distributions from such a Contract in order to continue to
receive favorable tax treatment. The Company makes no attempt to provide
more than general information about use of the Contracts with the various
types of retirement plans. Participants under retirement plans and
Beneficiaries are cautioned that the rights of any person to any benefits
may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the Contract issued in
connection with such a plan. Some retirement plans are subject to
distribution and other requirements that are not incorporated in the
administration of the Contracts. Participants are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts satisfy applicable law. Therefore, purchasers of
Contracts should seek competent legal and tax advice regarding the
suitability of the Contract for their situation, the applicable
requirements, and the tax treatment of the rights and benefits of the
Contract. The following discussion assumes that a Contract is purchased
with proceeds from and/or contributions under retirement plans that
qualify for the intended special federal income tax treatment ("Qualified
Contracts").
The following discussion also is based on the assumption that the
Contract qualifies as an annuity contract for federal income tax purposes.
The Statement of Additional Information discusses the requirements for
qualifying as an annuity.
Taxation of Annuities In General
Section 72 of the Code governs taxation of annuities in general.
The Company believes that the Participant who is a natural person
generally is not taxed on increases in the value of an Account until
distribution occurs by withdrawing all or part of the Account Value
(e.g., surrenders or annuity payments under the Settlement Option
elected). For this purpose, the assignment, pledge, or agreement to
assign or pledge any portion of the Account Value or any portion of an
interest in the qualified plan generally will be treated as a
distribution. The taxable portion of a distribution (in the form of a
single sum payment or an annuity) is generally taxable as ordinary income.
The following discussion generally applies to a Certificate owned
by a natural person under a group Contract.
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Surrenders
In the case of a surrender under a Qualified Contract, including
withdrawals under the Systematic Withdrawal Option, a ratable portion of
the amount received is taxable, generally based on the ratio of the
"investment in the contract" to the individual's total accrued benefit
under the retirement plan. The "investment in the contract" generally
equals the amount of any non-deductible Purchase Payments paid by or on
behalf of any individual. For a Contract issued in connection with
qualified plans, the "investment in the contract" is often zero. Special
tax rules may be available for certain distributions from a Qualified
Contract.
Annuity Payments
Although the tax consequences may vary depending on the Annuity
Payment and Settlement Option elected under the Contract, in general, only
the portion of the Annuity Payment that represents the amount by which the
Account Value exceeds the "investment in the contract" will be taxed;
after the "investment in the contract" is recovered, the full amount of
any additional Annuity Payments is taxable. For Variable Dollar Annuity
Payments, the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each payment that is not taxed.
The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the
entire distribution will be taxable once the recipient has recovered the
dollar amount of his or her "investment in the contract." For Fixed
Dollar Annuity Payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the
contract" bears to the total expected value of the Annuity Payments for
the term of the payments; however, the remainder of each Annuity Payment
is taxable. Once the "investment in the contract" has been fully
recovered, the full amount of any additional Annuity Payments is taxable.
If Annuity Payments cease as a result of a Participant's death before full
recovery of the "investment in the contract," consult a competent tax
adviser regarding deductibility of the unrecovered amount.
Penalty Tax
In general, a 10% premature distribution penalty tax applies to
distributions unless: (1) made on or after the date on which the
Participant attains age 59 1/2; (2) made as a result of death or
disability of the Participant; (3) received in substantially equal
periodic payments as a life annuity or a joint and one-half survivor
annuity for the lives or life expectancies of the Participant and a
"designated beneficiary;" (4) made to the Participant after separation
from service and attainment of age 55; (5) made under a qualified domestic
relations order; or (6) to the extent they do not exceed the Participant's
allowable deduction for medical care for that year. Other tax penalties
may apply to certain distributions under a qualified plan.
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Taxation of Death Benefit Proceeds
Amounts may be distributed from the Account because of the death of
a Participant. Generally such amounts are includible in the income of the
recipient as follows: (1) if distributed in a lump sum, they are taxed in
the same manner as a full surrender as described above, or (2) if
distributed under a Settlement Option, they are taxed in the same manner
as Annuity Payments, as described above.
Transfers, Assignments, or Exchanges of the Contract
A transfer of ownership of a Contract, the designation of a
Beneficiary who is not also the Participant, or the exchange of a Contract
may result in certain tax consequences to the Participant that are not
discussed herein.
Texas Optional Retirement Program
Section 36.105 of the Texas Educational Code permits participants in
the Texas Optional Retirement Program ("ORP") to withdraw their interests
in a variable annuity policy issued under the ORP only upon: (1)
termination of employment in the Texas public institutions of higher
education; (2) retirement; or (3) death. Accordingly, a participant in
the ORP (or the participant's estate if the participant has died) will be
required to obtain a certificate of termination from the employer or a
certificate of death before all or part of the Account Value can be
withdrawn.
Qualified Pension and Profit Sharing Plans and H.R. 10 Plans
Code section 401(a) permits employers to establish various types of
retirement plans for employees, and permit self-employed individuals to
establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the Contracts to accumulate
retirement savings under the plans.
Purchasers of a Contract for use with such plans should seek
competent advice regarding the suitability of the proposed plan documents
and the Contract to their specific needs.
Withholding
Pension and annuity distributions generally are subject to
withholding for the recipient's federal income tax liability at rates that
vary according to the type of distribution and the recipient's tax status.
Federal withholding at a flat 20% of the taxable part of the distribution
is required if the distribution is eligible for rollover and the
distribution is not paid as a direct rollover. In other cases, recipients
generally are provided the opportunity to elect not to have tax withheld
from distributions.
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Possible Changes in Taxation
Although as of the date of this prospectus, Congress is not actively
considering any legislation regarding the taxation of annuities issued in
connection with a qualified plan, there is always the possibility that the
tax treatment of such annuities could change by legislation or other means
(such as IRS regulations, revenue rulings, judicial decisions, etc.).
Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect
to other tax situations not discussed in this Prospectus. Further, the
federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate tax
consequences and state and local estate, inheritance, and other tax
consequences of ownership or receipt of distributions under the Contract
depend on the individual circumstances of each Participant or recipient of
the distribution. A competent tax adviser should be consulted for further
information.
General
At the time the initial Purchase Payment is paid, a prospective
purchaser must specify whether the purchase is a Qualified Contract. If
the initial purchase payment is derived from an exchange or surrender of
another annuity contract, the Company may require that the prospective
purchaser provide information with regard to the federal income tax status
of the previous annuity contract. The Company will require that persons
purchase separate Contracts if they desire to invest monies qualifying for
different annuity tax treatment under the Code. Each such separate
Contract would require the minimum initial Purchase Payment stated above.
Additional Purchase Payments under a Contract must qualify for the same
federal income tax treatment as the Initial Purchase Payment under the
Contract; the Company will not accept an additional Purchase Payment under
a Contract if the federal income tax treatment of such Purchase Payment
would be different from that of the Initial Purchase Payment.
DISTRIBUTION OF THE CONTRACT
AAG Securities, Inc. ("AAG Securities") is the principal underwriter
and distributor of the Contracts. AAG Securities may also serve as an
underwriter and distributor of other contracts issued through the Separate
Account and certain other Separate Accounts of the Company and any
affiliates of the Company. AAG Securities is a wholly-owned subsidiary of
American Annuity Group, Inc., a publicly-traded company which is an
indirect subsidiary of American Financial Group, Inc. AAG Securities is
registered with the Securities and Exchange Commission as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
- 47 -
<PAGE>
("NASD"). Its principal offices are located at 250 East Fifth Street,
Cincinnati, Ohio 45202. The Company pays AAG Securities for acting as
underwriter under a distribution agreement.
AAG Securities has entered into sales agreements with other
broker-dealers to solicit applications for the Contracts through
registered representatives who are licensed to sell securities and
variable insurance products. These agreements provide that applications
for the Contracts may be solicited by registered representatives of the
broker-dealers appointed by the Company to sell its variable life
insurance and variable annuities. These broker-dealers are registered
with the Securities and Exchange Commission and are members of the NASD.
The registered representatives are authorized under applicable state
regulations to sell variable annuities.
Under the agreements, Contracts will be sold by registered
representatives which will receive commissions from AAG Securities of up
to 8% of any Purchase Payments. From time to time the Company may pay or
permit other promotional incentives, in cash or credit or other
compensation.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate
Account or AAG Securities. The Company is involved in various kinds of
routine litigation which, in management's judgment, are not of material
importance to the Company's assets or the Separate Account.
VOTING RIGHTS
To the extent required by applicable law, all Fund shares held in
the Separate Account will be voted by the Company at regular and special
shareholder meetings of the respective Funds in accordance with
instructions received from persons having voting interests in the
corresponding Sub-Account. If, however, the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof
should change, or if the Company determines that it is allowed to vote all
shares in its own right, the Company may elect to do so.
The person with the voting interest is the Participant. The number
of votes which are available to a Participant will be calculated
separately for each Sub-Account. Before the Annuity Commencement Date,
that number will be determined by applying his or her percentage interest,
if any, in a particular Sub-Account to the total number of votes
attributable to that Sub-Account. The Participant holds a voting interest
in each Sub-Account to which the Account Value is allocated. After the
Annuity Commencement Date, the number of votes decreases as Annuity
Payments are made and as the number of Accumulation Units for a
Certificate decreases.
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<PAGE>
The number of votes of a Fund will be determined as of the date
coincident with the date established by that Fund for shareholders
eligible to vote at the meeting of the Fund. Voting instructions will be
solicited by written communication prior to such meeting in accordance
with procedures established by the respective Funds.
Shares as to which no timely instructions are received and shares
held by the Company as to which Participants have no beneficial interest
will be voted in proportion to the voting instructions which are received
with respect to all Certificates participating in the Sub-Account. Voting
instructions to abstain on any item will be applied on a pro rata basis to
reduce the votes eligible to be cast.
Each person or entity having a voting interest in a Sub-Account will
receive proxy material, reports and other material relating to the
appropriate Fund.
It should be noted that the Funds are not required to hold annual or
other regular meetings of shareholders.
AVAILABLE INFORMATION
The Company has filed a registration statement (the Registration
Statement) with the Securities and Exchange Commission under the
Securities Act of 1933 relating to the Contract and Certificates
thereunder offered by this Prospectus. This Prospectus has been filed as
a part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement and exhibits thereto,
and reference is hereby made to such Registration Statement and exhibits
for further information relating to the Company, the Contract and the
Certificates. Statements contained in this Prospectus, as to the content
of the Contract, the Certificates and other legal instruments, are
summaries. For a complete statement of the terms thereof, reference is
made to the instruments filed as exhibits to the Registration Statement.
The Registration Statement and the exhibits thereto may be inspected and
copied at the office of the Commission, located at 450 Fifth Street, N.W.,
Washington, D.C.
- 49 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains
more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
Page
ANNUITY INVESTORS(SERVICEMARK) LIFE INSURANCE COMPANY . . . 1
General Information and History . . . . . . . . . . . 1
State Regulation . . . . . . . . . . . . . . . . . . 1
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . 1
Safekeeping of Separate Account Assets . . . . . . . 1
Records and Reports . . . . . . . . . . . . . . . . . 2
Independent Auditors . . . . . . . . . . . . . . . . 2
DISTRIBUTION OF THE CONTRACTS . . . . . . . . . . . . . . . 2
CALCULATION OF PERFORMANCE INFORMATION . . . . . . . . . . 2
Money Market Sub-Account Yield
Calculation . . . . . . . . . . . . . . . . . . . . . . 2
Other Sub-Account Yield Calculation . . . . . . . . . 3
Standardized Total Return Calculation . . . . . . . . 4
Hypothetical Performance Data . . . . . . . . . . . . 5
Other Performance Data . . . . . . . . . . . . . . . 5
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . 7
Taxation of the Company . . . . . . . . . . . . . . . 8
Tax Status of the Contract . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 9
- 50 -
<PAGE>
---------------------------------------------------
Copies of the Statement of Additional Information dated
__________________, 1995 are available without charge. To request a copy,
please clip this coupon on the dotted line above, enter your name and
address in the spaces provided below, and mail to: Annuity
Investors(SERVICEMARK) Life Insurance Company, P.O. Box 5423, Cincinnati,
Ohio 45201-5423.
Name: __________________________________
Address: __________________________________
City: __________________________________
State: __________________________________
Zip Code: __________________________________
- 51 -
<PAGE>
APPENDIX A
- 52 -
<PAGE>
SUBJECT TO COMPLETION: DATED , 1995
ANNUITY INVESTORS(SERVICEMARK) VARIABLE ACCOUNT A
of
ANNUITY INVESTORS(SERVICEMARK) LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
for the
Commodore Nauticus
Group Flexible Premium Deferred Annuity
Issued by
ANNUITY INVESTORS(SERVICEMARK) LIFE INSURANCE COMPANY
P.O. Box 5423, Cincinnati, Ohio 45201-5423, (800) 789-6771
The Statement of Additional Information expands upon subjects
discussed in the current Prospectus for the Commodore Nauticus, a Group
Flexible Premium Deferred Annuity Contract ("Contract") offered by
Annuity Investors(SERVICEMARK) Life Insurance Company and the Certificates
of Participation under the Contract ("Certificates"). A copy of the
Prospectus dated _________________, 1995, as supplemented from time to
time, may be obtained free of charge by writing to Annuity
Investors(SERVICEMARK) Life Insurance Company, Administrative Office,
P.O. Box 5423, Cincinnati, Ohio 45201-5423. Terms used in the current
Prospectus for the Contract are incorporated in this Statement of
Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
______________, 1995
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATIONS OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
TABLE OF CONTENTS
Page
ANNUITY INVESTORS(SERVICEMARK) LIFE INSURANCE COMPANY . . . 1
General Information and History . . . . . . . . . 1
State Regulation . . . . . . . . . . . . . . . . . . 1
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . 1
Safekeeping of Separate Account Assets . . . . . . 1
Records and Reports . . . . . . . . . . . . . . . 2
Independent Auditors . . . . . . . . . . . . . . 2
DISTRIBUTION OF THE CONTRACTS . . . . . . . . . . . . . . . 2
CALCULATION OF PERFORMANCE INFORMATION . . . . . . . . . . 2
Money Market Sub-Account Yield Calculation . . . . 2
Other Sub-Account Yield Calculation . . . . . . . 3
Standardized Total Return Calculation . . . . . . 4
Hypothetical Performance Data . . . . . . . . . . 5
Other Performance Data . . . . . . . . . . . . . . 5
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . 7
Taxation of the Company . . . . . . . . . . . . 8
Tax Status of the Contract . . . . . . . . . . . 8
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 9
i
<PAGE>
The following information supplements the information in the
Prospectus about the Contract and Certificates. Terms used in this
Statement of Additional Information have the same meaning as in the
Prospectus.
ANNUITY INVESTORS(SERVICEMARK) LIFE INSURANCE COMPANY
General Information and History
Annuity Investors(SERVICEMARK) Life Insurance Company (the
"Company"), formerly known as Carillon Life Insurance Company, is a stock
life insurance company incorporated under the laws of the State of Ohio in
1981. The name change occurred in the state of domicile on April 12,
1995. The Company is principally engaged in the sale of fixed and
variable annuity policies.
The Company was acquired in November, 1994, by American Annuity
Group, Inc. ("AAG") a Delaware corporation that is a publicly traded
insurance holding company. Great American Insurance Company ("GAIC"), an
Ohio corporation, owns 80% of the common stock of AAG. GAIC is a
multi-line insurance carrier and a wholly-owned subsidiary of Great
American Holding Company ("GAHC"), an Ohio corporation. GAHC is a
wholly-owned subsidiary of American Financial Corporation ("AFC"), an Ohio
corporation. AFC is a wholly-owned subsidiary of American Financial
Group, Inc. ("AFG"), an Ohio corporation. AFG is a publicly traded
holding company which is engaged, through its subsidiaries, in financial
businesses that include annuities, insurance and portfolio investing, and
non-financial businesses that include food products and television and
radio operations.
State Regulation
The Company is subject to the insurance laws and regulations of all
the jurisdictions where it is licensed to operate. The availability of
certain Contract rights and provisions depends on state approval and/or
filing and review processes in each such jurisdiction. Where required by
law or regulation, the Contract will be modified accordingly.
SERVICES
Safekeeping of Separate Account Assets
Title to assets of the Separate Account is held by the Company. The
Separate Account assets are kept separate and apart from the Company's
general account assets. Records are maintained of all purchases and
redemptions of Fund shares held by each of the Sub-Accounts.
Title to assets of the Fixed Account is held by the Company together
with the Company's general account assets.
<PAGE>
Records and Reports
All records and accounts relating to the Fixed Account and the
Separate Account will be maintained by the Company. As presently required
by the provisions of the Investment Company Act of 1940, as amended ("1940
Act"), and rules and regulations promulgated thereunder which pertain to
the Separate Account, reports containing such information as may be
required under the 1940 Act or by other applicable law or regulation will
be sent to each Participant semi-annually at the Participant's last known
address of record.
Independent Auditors
The statutory-basis financial statements of the Company included in
this Statement of Additional Information have been audited by Ernst &
Young LLP, independent auditors, to the extent indicated in their report
thereon also appearing elsewhere herein. Such statutory-basis financial
statements have been included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
DISTRIBUTION OF THE CONTRACTS
The offering of the Contracts is expected to be continuous, and the
Company does not anticipate discontinuing the offering of the Contracts.
However, the Company reserves the right to discontinue the offering of the
Contracts.
CALCULATION OF PERFORMANCE INFORMATION
Money Market Sub-Account Yield Calculation
In accordance with rules and regulations adopted by the Securities
and Exchange Commission, the Company computes the Money Market
Sub-Account's current annualized yield for a seven-day period in a manner
which does not take into consideration any realized or unrealized gains or
losses on shares of the Money Market Fund or on its portfolio securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) in the value of a hypothetical
account having a balance of one unit of the Money Market Sub-Account at
the beginning of such seven-day period, dividing such net change in the
value of the hypothetical account by the value of the hypothetical account
at the beginning of the period to determine the base period return and
annualizing this quotient on a 365-day basis. The net change in the value
of the hypothetical account reflects the deductions for the Mortality and
Expense Risk and Administration Charges and income and expenses accrued
during the period. Because of these deductions, the yield for the Money
Market Sub-Account of the Separate Account will be lower than the yield
for the Money Market Fund or any comparable substitute funding vehicle.
2
<PAGE>
The Securities and Exchange Commission also permits the Company to
disclose the effective yield of the Money Market Sub-Account for the same
seven-day period, determined on a compounded basis. The effective yield
is calculated according to the following formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] - 1
The yield on amounts held in the Money Market Sub-Account normally
will fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields.
The Money Market Sub-Account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of
the Money Market Fund or substitute funding vehicle, the types and quality
of portfolio securities held by the Money Market Fund or substitute
funding vehicle, and operating expenses. In addition, the yield figures
do not reflect the effect of any Contingent Deferred Sales Charge ("CDSC")
(of up to 7% of Purchase Payments) that may be applicable on surrender.
Other Sub-Account Yield Calculation
The Company may from time to time disclose the current annualized
yield of one or more of the Sub-Accounts (other than the Money Market
Sub-Account) for 30-day periods. The annualized yield of a Sub-Account
refers to the income generated by the Sub-Account over a specified 30-day
period. Because this yield is annualized, the yield generated by a
Sub-Account during the 30-day period is assumed to be generated each
30-day period. The yield is computed by dividing the net investment
income per Accumulation Unit earned during the period by the price per
unit on the last day of the period, according to the following formula:
6
YIELD = 2[(a-b + 1) - 1]
----
cd
Where:
a = net investment income earned during the period by the Portfolio
attributable to the shares owned by the Sub-Account.
b = expenses for the Sub-Account accrued for the period (net of
reimbursements).
c = the average daily number of Accumulation Units outstanding
during the period.
d = the maximum offering price per Accumulation Unit on the last day
of the period.
Net investment income will be determined in accordance with rules and
regulations established by the Securities and Exchange Commission.
3
<PAGE>
Accrued expenses will include all recurring fees that are charged to all
Contracts. The yield calculations do not reflect the effect of any CDSC
that may be applicable to a particular Contract. CDSCs range from 7% to
0% of the Purchase Payments withdrawn depending on the elapsed time since
the receipt of such Purchase Payments.
Because of the charges and deductions imposed by the Separate
Account, the yield for a Sub-Account will be lower than the yield for the
corresponding Fund. The yield on amounts held in a Sub-Account normally
will fluctuate over time. Therefore, the disclosed yield for any given
period is not an indication or representation of future yields or rates of
return. The Sub-Account's actual yield will be affected by the types and
quality of portfolio securities held by the Fund and its operating
expenses.
Standardized Total Return Calculation
The Company may from time to time also disclose average annual total
returns for one or more of the Sub-Accounts for various periods of time.
Average annual total return quotations are computed by finding the average
annual compounded rates of return over one, five and ten year periods that
would equal the initial amount invested to the ending redeemable value,
according to the following formula:
n
P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = "ending redeemable value" of a hypothetical $1,000 payment made
at the beginning of the one, five or ten-year period at the end
of the one, five, or ten-year period (or fractional portion
thereof).
All recurring fees that are charged to all Contracts are recognized
in the ending redeemable value. The average annual total return
calculations will reflect the effect of any CDSCs that may be applicable
to a particular period.
Hypothetical Performance Data
The Company may also disclose "hypothetical" performance data for a
Sub-Account, for periods before the Sub-Account commenced operations.
Such performance information for the Sub-Account will be calculated based
on the performance of the corresponding Fund and the assumption that the
Sub-Account was in existence for the same periods as those indicated for
4
<PAGE>
the Fund, with a level of Contract charges currently in effect. The Fund
used for these calculations will be the actual Fund in which the
Sub-Account invests.
This type of hypothetical performance data may be disclosed on both
an average annual total return and a cumulative total return basis.
Moreover, it may be disclosed assuming that the Contract is not
surrendered (i.e., with no deduction for a CDSC) or assuming that the
Contract is surrendered at the end of the applicable period (i.e.,
reflecting a deduction for any applicable CDSC).
Other Performance Data
The Company may from time to time disclose non-standardized total
return in conjunction with the standardized performance data described
above. Non-standardized data may reflect no CDSC or present performance
data for a period other than that required by the standardized format.
The Company may from time to time also disclose cumulative total
return calculated using the following formula assuming that the CDSC
percentage is 0%.
CTR = (ERV/P) - 1
Where:
CTR = the cumulative total return net of Sub-Account recurring
charges for the period.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of the one, five or ten-year period at the
end of the one, five or ten-year period (or fractional
portion thereof).
P = a hypothetical initial payment of $1,000.
All non-standardized performance data will be advertised only if the
requisite standardized performance data is also disclosed.
The Contracts may be compared in advertising materials to
Certificates of Deposit ("CDs") or other investments issued by banks or
other depository institutions. Variable annuities differ from bank
investments in several respects. For example, variable annuities may
offer higher potential returns than CDs. However, unless you have elected
to invest in only the Fixed Account Options, the Company does not
guarantee your return. Also, none of your investments under the Contract,
whether allocated to the Fixed Account or a Sub-Account, are FDIC-insured.
5
<PAGE>
Advertising materials for the Contracts may, from time to time,
address retirement needs and investing for retirement, the usefulness of a
tax-qualified retirement plan, saving for college, or other investment
goals. Advertising materials for the Contracts may discuss, generally,
the advantages of investing in a variable annuity and the Contract's
particular features and their desirability and may compare Contract
features with those of other variable annuities and investment products of
other issuers. Advertising materials may also include a discussion of the
balancing of risk and return in connection with the selection of
investment options under the Contract and investment alternatives
generally, as well as a discussion of the risks and attributes associated
with the investment options under the Contract. A description of the tax
advantages associated with the Contract, including the effects of
tax-deferral under a variable annuity or retirement plan generally, may be
included as well. Advertising materials for the Contracts may quote or
reprint financial or business publications and periodicals, including
model portfolios or allocations, as they relate to current economic and
political conditions, management and composition of the underlying Funds,
investment philosophy, investment techniques, the desirability of owning
the Contract and other products and services offered by the Company or AAG
Securities, Inc. ("AAG Securities").
The Company or AAG Securities may provide information designed to
help individuals understand their investment goals and explore various
financial strategies. Such information may include: information about
current economic, market and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance and goal setting; questionnaires designed
to help create a personal financial profile; worksheets used to project
savings needs based on assumed rates of inflation and hypothetical rates
of return; and alternative investment strategies and plans.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including
common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the Consumer Price Index), and
combinations of various capital markets. The performance of these capital
markets is based on the returns of different indices.
Advertising materials for the Contracts may use the performance of
these capital markets in order to demonstrate general risk-versus-reward
investment scenarios. Performance comparisons may also include the value
of a hypothetical investment in any of these capital markets. The risk
associated with the security types in any capital market may or may not
correspond directly to those of the Sub-Accounts and the Funds.
Advertising materials may also compare performance to that of other
compilations or indices that may be developed and made available in the
future.
6
<PAGE>
In addition, advertising materials may quote various measures of
volatility and benchmark correlations for the Sub-Accounts and the
respective Funds and compare these volatility measures and correlations
with those of other separate accounts and their underlying funds.
Measures of volatility seek to compare a sub-account's, or its underlying
fund's, historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
FEDERAL TAX MATTERS
The Contract and Certificates thereunder are designed for use by
individuals in retirement plans which qualify for special tax treatment
under Sections 401, 403, or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"). The ultimate effect of federal taxes on the Account
Value, on Annuity Benefits, and on the economic benefit to the Participant
or the Beneficiary may depend on the type of retirement plan for which the
Contract is purchased, on the tax and employment status of the individual
concerned and on the Company's tax status. THE FOLLOWING DISCUSSION IS
GENERAL AND IS NOT INTENDED AS TAX ADVICE. Any person concerned about tax
implications should consult a competent tax adviser. This discussion is
based upon the Company's understanding of the present federal income tax
laws as they are currently interpreted by the Internal Revenue Service.
No representation is made as to the likelihood of continuation of present
federal income tax laws or of the current interpretations by the Internal
Revenue Service. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
Taxation of the Company
The Company is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Separate Account is not an entity
separate from the Company, and its operations form a part of the Company,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized capital gains
are automatically applied to increase reserves under the Contracts. Under
existing federal income tax law, the Company believes that the Separate
Account investment income and realized net capital gains will not be taxed
to the extent that such income and gains are applied to increase the
reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any
federal income tax liability attributable to the Separate Account and,
therefore, the Company does not intend to make provisions for any such
taxes. However, if changes in the federal tax laws or interpretations
thereof result in the Company being taxed on income or gains attributable
to the Separate Account, then the Company may impose a charge against the
7
<PAGE>
Separate Account (with respect to some or all Contracts) in order to set
aside provisions to pay such taxes.
Tax Status of the Contract
In certain circumstances, participants under group variable annuity
contracts may be considered the owners, for federal income tax purposes,
of the assets of the separate accounts used to support their contracts.
In those circumstances, income and gains from the separate account assets
would be includible in the variable contract owner's gross income. The
Internal Revenue Service has stated in published rulings that a variable
contract owner will be considered the owner of separate account assets if
the contract owner possesses incidents of ownership in those assets, such
as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not
provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor
(i.e., the participant), rather than the insurance company, to be treated
as the owner of the assets in the account." This announcement also stated
that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets." As
of the date of this Statement of Additional Information, no guidance has
been issued.
The ownership rights under the Contract are similar to, but different
in certain respects from, those described by the Internal Revenue Service
in rulings in which it was determined that contract owners were not owners
of separate account assets. For example, the Participant has additional
flexibility in allocating Purchase Payments and Account Value. These
differences could result in a Participant's being treated as the owner of
a pro rata portion(s) of the assets of the Separate Account and/or Fixed
Account. In addition, the Company does not know what standards will be
set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves
the right to modify the Contract as necessary to attempt to prevent a
Participant from being considered the owner of a pro rata share of the
assets of the Separate Account.
FINANCIAL STATEMENTS
Audited financial statements of Annuity Investors(SERVICEMARK) Life
Insurance Company as of December 31, 1993 and December 31, 1994 are
included herein.
The financial statements of the Company included in this Statement of
Additional Information should be considered only as bearing on the ability
of the Company to meet its obligations under the Contract. They should
not be considered as bearing on the investment performance of the assets
held in the Separate Account.
8
<PAGE>
Statutory Financial Statements
ANNUITY INVESTORS LIFE INSURANCE COMPANY
(formerly Carillon Life Insurance Company)
Years ended December 31, 1994 and 1993
9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Annuity Investors Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Annuity
Investors Life Insurance Company (formerly Carillon Life Insurance
Company) as of December 31, 1994 and 1993, and the related statutory-basis
statements of operations, changes in capital and surplus, and cash flows
for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with the
accounting practices prescribed or permitted by the Insurance Department
of the State of Ohio. The variances between such practices and generally
accepted accounting principles and the effects on the accompanying
financial statements are described in Notes A and I.
In our opinion, because of the materiality of the effects of the variances
between generally accepted accounting principles and the accounting
practices referred to in the preceding paragraph, the financial statements
referred to above are not intended to and do not present fairly, in
conformity with generally accepted accounting principles, the financial
position of Annuity Investors Life Insurance Company at December 31, 1994
and 1993, or the results of its operations or its cash flows for the years
then ended. However, in our opinion, the supplementary information
included in Note I presents fairly, in all material respects, capital and
surplus at December 31, 1994 and 1993 and net income for the years then
ended in conformity with generally accepted accounting principles.
Also, in our opinion, the statutory-basis financial statements referred to
above present fairly, in all material respects, the financial position of
Annuity Investors Life Insurance Company at December 31, 1994 and 1993,
and the results of its operations and its cash flows for the years then
ended, in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of Ohio.
Ernst & Young LLP
March 13, 1995
10
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
STATUTORY BASIS
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
ASSETS
Cash and investments:
Bonds - principally at amortized cost $8,291,079 $5,679,807
(market value: $7,545,390 and
$5,702,563)
Certificate of deposit due 4/4/95 25,000 25,000
Dreyfus cash management fund 400,660 2,987,908
Cash 79,862 10,909
----------- ----------
Total cash and investments 8,796,601 8,703,624
Investment income due and accrued 150,193 88,464
Federal income tax recoverable 23,181 15,698
---------- ----------
Total assets $8,969,975 $8,807,786
LIABILITIES, CAPITAL AND SURPLUS
Annuity reserves 2,684,376 2,622,749
Payable to affiliate 11,264 41,101
General expenses due and accrued 3,445 2,538
--------- ----------
Total liabilities 2,699,085 2,666,388
Common stock, $100 par value:
25,000 shares authorized
20,000 shares issued and outstanding 2,000,000 2,000,000
Gross paid in and contributed surplus 3,350,000 3,350,000
Unassigned surplus 920,890 791,398
---------- ----------
Total capital and surplus 6,270,890 6,141,398
---------- ----------
Total liabilities, capital and $8,969,975 $8,807,786
surplus ----------- ----------
</TABLE>
See notes to statutory financial statements.
11
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
SUMMARY OF OPERATIONS
STATUTORY BASIS
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Revenues:
Premiums and annuity considerations $219,308 $ 111,136
Net investment income 432,932 264,694
--------- ---------
652,240 375,830
Benefits and expenses:
Increase in aggregate reserves 61,627 1,658,903
Policyholders' benefits 280,517 689,472
Operating expenses and commissions 72,653 68,518
Taxes, licenses and fees 38,951 31,447
Reserve adjustments on reinsurance - (2,281,572)
assumed ---------- ----------
453,748 166,768
Income from operations before federal 198,492 209,062
income taxes
Provision for federal income taxes 69,000 16,781
--------- ---------
Net income after federal income taxes
before net realized capital gains 129,492 192,281
--------- ----------
Net realized capital gains:
Pretax - 112,990
Capital gains tax - (40,000)
Interest maintenance reserve - 46,737
transfer (net of tax) -------- ---------
- 119,727
-------- -------
Net income $129,492 #312,008
</TABLE>
See notes to statutory financial statements.
12
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
STATUTORY BASIS
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993
<S> <C> <C>
Common stock:
Balance at beginning and end of $2,000,000 $2,000,000
period ---------- -----------
Gross paid-in and contributed surplus:
Balance at beginning of year $3,350,000 $3,350,000
----------- -----------
Unassigned funds:
Balance at beginning of year $ 791,398 $ 376,418
Net income 129,492 312,008
Change in asset valuation reserve - 102,972
--------- ---------
Balance at end of year $ 920,890 $ 791,398
Total capital and surplus $6,270,890 $6,141,398
----------- ----------
</TABLE>
See notes to statutory financial statements.
13
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
STATUTORY BASIS
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993
<S> <C> <C>
Operating activities:
Premiums and annuity considerations $ 219,308 $ 111,136
Funds received for assumption of reserves - 2,663,850
Net investment income 388,729 274,075
Life claims paid - (25,000)
Surrender benefits paid (280,517) (711,857)
Other benefits to policyholders paid - (6,615)
Commissions, expenses and premium and (111,604) (100,385)
other taxes paid
Federal income tax paid (76,483) (32,706)
Payments to affiliate (29,837) -
Other expenses paid - (294,169)
--------- ----------
119,596 1,878,329
Investing activities:
Sale, maturity or repayment of bonds - 5,380,219
Sale of stocks - 492,100
Purchase of bonds (2,637,891) (4,866,659)
Purchase of stocks - (439)
----------- ----------
(2,637,891) 1,005,221
----------- ----------
Net increase (decrease) in cash and (2,518,295) 2,883,550
short-term investments
Cash and short-term investments at 3,023,817 140,267
beginning of year ----------- -----------
Cash and short-term investments at $ 505,522 $3,023,817
end of year ----------- -----------
</TABLE>
See notes to statutory financial statements.
14
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
BASIS OF PRESENTATION Annuity Investors Life Insurance Company ("Annuity
Investors"), formerly Carillon Life Insurance Company, a life insurance
company domiciled in the State of Ohio, is a wholly owned subsidiary of
American Annuity Group, Inc., a publicly traded financial services holding
company of which American Financial Corporation ("AFC") owns 80%. On
November 29, 1994, Annuity Investors was purchased from Great American
Insurance Company, a wholly-owned subsidiary of AFC.
The accompanying financial statements have been prepared in conformity
with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and the Insurance
Department of the State of Ohio, which vary in some respects from
generally accepted accounting principles ("GAAP"). The more significant
of these differences are as follows: (a) annuity receipts are accounted
for as revenues versus liabilities; (b) an Interest Maintenance Reserve
("IMR") is provided whereby interest related realized gains and losses are
deferred and amortized into investment income over the life of the
security sold; (c) Asset Valuation Reserves are provided which reclassify
a portion of surplus to liabilities; and (d) investments in bonds
considered "available for sale" (as defined under GAAP) are generally
recorded at amortized cost versus market.
Certain reclassifications have been made to the prior year to conform to
the current year's presentation.
INVESTMENTS Asset values are generally stated as follows: bonds not
backed by loans, at amortized cost using the interest method; short-term
investments are carried at cost which approximates market.
As prescribed by the NAIC, the market value for investments in bonds is
determined by the values included in the Valuations of Securities manual
published by the NAIC's Security Valuation Office. Those values generally
represent quoted market value prices for securities traded in the public
marketplace or analytically determined values of the Securities Valuation
Office.
ANNUITY RESERVES Annuity reserves are developed by actuarial methods and
are determined based on published tables using statutorily specified
interest rates and valuation methods that will provide, in the aggregate,
reserves that are greater than or equal to the minimum amounts required by
law.
REINSURANCE Reinsurance premiums, benefits and expenses are accounted for
on a basis consistent with those used in accounting for the original
policies issued and the terms of the reinsurance contracts.
15
<PAGE>
B. INVESTMENTS
Bonds at December 31, 1994 and 1993, consisted entirely of publicly traded
U.S. Treasury bonds.
Gross unrealized gains and gross unrealized (losses) on bonds were
approximately $1,000 and ($746,000) in 1994 and $86,000 and ($63,000) in
1993.
There were no realized gains or losses in 1994. Gross realized gains and
gross realized (losses) on bonds were $272,700 and ($177,200) for 1993.
Securities (primarily U.S. Treasury Notes) with a carrying value of $2.1
million at December 31, 1994, were on deposit as required by the insurance
departments of various states.
C. FEDERAL INCOME TAXES
Annuity Investors' 1994 federal income tax expense was equal to the
enacted tax rate. In 1993, Annuity Investors' effective tax rate was
different from the enacted rate due principally to the exclusion of tax
exempt interest on federal income tax refunds received and interest
maintenance reserve adjustment.
Annuity Investors' amount of federal income taxes incurred for recoupment
in the event of future losses are approximately $69,000 in 1994, $57,000
in 1993 and $233,000 in 1992.
D. RELATED PARTY TRANSACTIONS
Certain investment, administrative, management, accounting and data
processing services are provided to Annuity Investors through the use of
shared facilities and personnel or under agreements between Annuity
Investors and affiliates.
On December 30, 1993, Annuity Investors entered into a reinsurance
agreement with Great American Life Insurance Company ("GALIC"), an
affiliated Ohio domiciled life and accident and health insurance company.
As a result of the transaction, Annuity Investors assumed $2.6 million in
deferred annuity reserves and received an equivalent amount of assets.
All premium income received in 1994 was assumed reinsurance from GALIC in
accordance with the agreement.
E. DIVIDEND RESTRICTIONS
The amount of dividends which can be paid by Annuity Investors without
prior approval of regulatory authorities is subject to restrictions
relating to capital and surplus and net income. Annuity Investors may pay
approximately $627,000 in dividends in 1995, based on capital and surplus,
without prior approval.
F. ANNUITY RESERVES
At December 31, 1994, all of Annuity Investors' annuity reserves were
subject to discretionary withdrawal without adjustment.
16
<PAGE>
G. CONTINGENT LIABILITIES
The increase in the number of insurance companies that are under
regulatory supervision has resulted, and is expected to continue to
result, in increased assessments by state guaranty funds to cover losses
to policyholders of insolvent or rehabilitated insurance companies. Those
mandatory assessments may be partially recovered through a reduction in
future premium taxes in certain states. GALIC is responsible for payment
of all assessments relating to premiums earned in accordance with the
reinsurance agreement discussed in Note D.
H. SELECTED FINANCIAL DATA
The following tables present selected statutory-basis financial data as of
December 31, 1994 and 1993 and for the years then ended for purposes of
complying with paragraph 9 of the Annual Audited Financial Reports in the
General section of the National Association of Insurance Commissioners'
Annual Statement Instructions and agrees to or is included in the amounts
reported in Annuity Investors' 1994 and 1993 Statutory Annual Statements
as filed with the insurance department of the State of Ohio:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Gross investment income earned:
Bonds $ 431,170 $ 244,280
Stocks - 8,165
Short-term investments 18,168 21,998
Aggregate write-ins for investment income 106 27,019
----------- -----------
$ 449,444 $ 301,462
---------- -----------
Bonds by class--statement value (A) $8,291,079 $5,679,807
---------- ----------
Total bonds publicly traded $8,291,079 $5,679,807
---------- ----------
Short-term investments (book value) $ 425,660 $3,012,908
----------- ----------
Cash on deposit $ 79,862 $ 10,909
----------- ----------
Group annuities not fully paid--account $2,684,376 $2,622,749
balance ---------- ----------
</TABLE>
(A) All bonds were rated NAIC "1" at December 31, 1994 and 1993.
17
<PAGE>
December 31, 1994
Carrying Market
Value Value
Bonds by maturity:
Due within 1 year or less $1,159,723 $1,157,100
Over 1 year through 5 years 2,229,938 2,071,249
Over 5 years through 10 years 4,901,418 4,317,041
---------- ----------
$8,291,079 $7,545,390
---------- ----------
18
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
I. VARIANCES FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These financial statements have been presented in conformity with the
accounting practices prescribed or permitted by the insurance department
of the State of Ohio. The following table summarizes the principal
differences between net income and surplus as determined in accordance
with statutory accounting practices and GAAP for the years ended December
31, 1994 and 1993:
<TABLE>
<CAPTION>
Net Income Capital and Surplus
1994 1993 1994 1993
<S> <C> <C> <C> <C>
As reported on a statutory basis $129,492 $312,008 $6,270,890 $6,141,398
IMR adjustment - (46,737) - -
Unrealized gain (loss) adjustment - - (485,000) 15,000
GAAP basis $129,492 $265,271 $5,785,890 $6,156,398
--------- --------- ----------- -----------
</TABLE>
J. SUBSEQUENT EVENT (UNAUDITED)
On April 3, 1995, American Premier Group, Inc. ("New American Premier")
acquired 100% of the common stock (79% of the voting stock) of American
Financial Corporation ("AFC"). In the transaction, shareholders of AFC
common stock received approximately 55% of New American Premier voting
common stock.
19
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Parts A or B of
this Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Annuity
Investors(SERVICEMARK) Life Insurance Company authorizing
establishment of Annuity Investors(SERVICEMARK) Variable Account
A. [To Be Supplied.]
(2) Not Applicable.
(3) (a) Master Agreement among Annuity Investors Life Insurance
Company, AAG Securities, Inc. and _______. [To Be
Supplied.]
(b) Principal Agency Agreement between Annuity Investors Life
Insurance Company and ______________. [To Be Supplied.]
(c) Distribution Agreement between Annuity Investors Life
Insurance Company and AAG Securities, Inc. [To Be
Supplied.]
(d) Form of Sales Agreement between AAG Securities, Inc. and
another Broker-Dealer. [To Be Supplied.]
(4) Group Contract Form, Certificate Form, and Endorsements. [To Be
Supplied.]
(a) Group Contract Forms and Endorsements. [To Be Supplied.]
(i) Form of Group Flexible Premium Deferred Annuity
Contract. [To Be Supplied.]
(ii) Form of Loan Endorsement to Group Contract. [To Be
Supplied.]
(iii) Form of Employer Plan Endorsement to Group Contract.
[To Be Supplied.]
(iv) Form of Tax Sheltered Annuity Endorsement to Group
Contract. [To Be Supplied.]
20
<PAGE>
(v) Form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Group Contract. [To Be Supplied.]
(vi) Form of Long-Term Care Waiver Rider to Group Contract.
[To Be Supplied.]
(b) Certificate of Participation Form and
Endorsements. [To Be Supplied.]
(i) Form of Certificate of Participation.
[To Be Supplied.]
(ii) Form of Loan Endorsement to
Certificate. [To Be Supplied.]
(iii) Form of Employer Plan Endorsement to
Certificate. [To Be Supplied.]
(iv) Form of Tax Sheltered Annuity
Endorsement to Certificate. [To Be
Supplied.]
(v) Form of Qualified Pension, Profit
Sharing and Annuity Plan Endorsement to
Certificate. [To Be Supplied.]
(vi) Form of Long-Term Care Waiver Rider to
Certificate. [To Be Supplied.]
(5) (a) Form of Application for Group Flexible Premium
Deferred Annuity Contract. [To Be Supplied.]
(b) Form of Participant Enrollment Form under Group
Flexible Premium Deferred Annuity Contract
(ERISA). [To Be Supplied.]
(c) Form of Participant Enrollment Form under Group
Flexible Premium Deferred Annuity Contract
(Non-ERISA). [To Be Supplied.]
(6) (a) Articles of Incorporation of Annuity
Investors(SERVICEMARK) Life Insurance
Company.*
* Filed with Form N-4 on June 2, 1995.
21
<PAGE>
(b) Code of Regulations of Annuity
Investors(SERVICEMARK) Life Insurance Company.*
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity
Investors Life Insurance Company and Dreyfus
Variable Investment Fund. [To Be Supplied.]
(b) Participation Agreement between Annuity
Investors Life Insurance Company and Dreyfus
Stock Index Fund. [To Be Supplied.]
(c) Participation Agreement between Annuity
Investors Life Insurance Company and Dreyfus
Socially Responsible Fund. [To Be Supplied.]
(d) Participation Agreement between Annuity
Investors Life Insurance Company and Janus Aspen
Series. [To Be Supplied.]
(e) Participation Agreement between Annuity
Investors Life Insurance Company and Merrill
Lynch Variable Series Funds, Inc. [To Be
Supplied.]
(f) Administrative Services Agreement between
Annuity Investors Life Insurance Company and
Great American Life Insurance Company. [To Be
Supplied.]
(9) Opinion and Consent of Counsel. [To Be Supplied.]
(10) (a) Report of Independent Auditors. [To Be
Supplied.]
(b) Consent of Independent Auditors. [To Be
Supplied.]
(11) No financial statements are omitted from item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
22
<PAGE>
Item 25. Directors and Officers of Annuity Investors(SERVICEMARK)
Life Insurance Company
<TABLE>
<CAPTION>
Principal Positions and Offices
Name Business Address With the Company
<S> <C> <C>
Robert Allen Adams (1) President, Director
Stephen Craig Lindner (1) Director
William Jack Maney, II (1) Assistant Treasurer and
Director
James Michael Mortensen (1) Executive Vice President,
Assistant Secretary and
Director
Mark Francis Muething (1) Senior Vice President, Secretary,
General Counsel and Director
Jeffrey Scott Tate (1) Director
Thomas Kevin Liguzinski (1) Senior Vice President
Charles Kent McManus (1) Senior Vice President
Robert Eugene Allen (1) Vice President and Treasurer
Arthur Ronald Greene, III (1) Vice President
Betty Marie Kasprowicz (1) Vice President and Assistant Secretary
Michael Joseph O'Connor (1) Vice President and Chief Actuary
Lynn Edward Laswell (1) Assistant Vice President and Assistant
Treasurer
</TABLE>
_______________________________
(1) P.O. Box 5423, Cincinnati, Ohio 45201-5423.
Item 26. Persons Controlled by or Under Common Control With the
Depositor or Registrant.
The Depositor, Annuity Investors(SERVICEMARK) Life Insurance
Company, is wholly owned by American Annuity Group, Inc. The Registrant,
Annuity Investors Separate Account A, is a segregated asset account of
Annuity Investors Life Insurance Company.
23
<PAGE>
The following chart indicates the persons controlled by or under
common control with the Company.
[To Be Supplied]
Item 27. Number of Certificate Owners
Not Applicable.
Item 28. Indemnification
(a) The Code of Regulations of Annuity Investors Life
Insurance Company provide in Article V follows:
The Corporations shall, to the full extent permitted by
the General Corporation Law of Ohio, indemnify any person
who is or was a director or officer of the Corporation
and whom it may indemnify pursuant thereto. The
Corporation may, within the sole discretion of the Board
of Directors, indemnify in whole or in part any other
persons whom it may indemnify pursuant thereto.
Insofar as indemnification for liability arising under the
Securities Act of 1933 ("1933 Act") may be permitted to directors,
officers and controlling person of the Depositor pursuant to the foregoing
provisions, or otherwise, the Depositor has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Depositor of expenses incurred
or paid by the director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Depositor will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
(b) The directors and officers of Annuity Investors(SERVICEMARK)
Life Insurance Company are covered under a Directors and Officers
Reimbursement Policy. Under the Reimbursement Policy, directors and
officers are indemnified for loss arising from any covered claim by reason
of any Wrongful Act in their capacities as directors or officers, except
to the extent the Company has indemnified them. In general, the term
"loss" means any amount which the directors or officers are legally
obligated to pay for a claim for Wrongful Acts. In general, the term
"Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement, omission or act by a director or officer while
acting individually or collectively in their capacity as such claimed
against them solely by reason of their being directors and officers. The
limit of liability under the program is $20,000,000 for the policy year
ending September 1, 1995. The primary policy under the program is with
National Union Fire Insurance Company of Pittsburgh, PA. in the name of
American Premier Underwriters, Inc.
24
<PAGE>
Item 29. Principal Underwriter
AAG Securities, Inc. is the underwriter and distributor of the
Contracts as defined in the Investment Company Act of 1940 ("1940 Act").
(a) AAG Securities, Inc. does not act as a principal
underwriter, depositor, sponsor or investment adviser for any investment
company other than Annuity Investors Variable Account A.
(b) Directors and Officers of AAG Securities, Inc.
Name and Principal Position with
Business Address AAG Securities, Inc.
------------------ --------------------
Thomas Kevin Liguzinski (1) Chief Executive Officer and
Director
Mark Francis Muething (1) Vice President, Secretary and
Director
William Jack Maney, II (1) Director
Jeffrey Scott Tate (1) Director
James Medford Tarkington (1) President
Andrew Conrad Bambeck, III (1) Vice President
William Claire Bair, Jr. (1) Treasurer
______________________________
(1) 250 East Fifth Street, Cincinnati, Ohio 45202
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section
31(a) of the 1940 Act and the rules under it are maintained by Lynn E.
Laswell, Assistant Vice President, of the Company at the Administrative
Office.
Item 31. Management Services
Not applicable.
Items 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as
necessary to ensure that the audited financial statements
in the registration statement are never more than 16
25
<PAGE>
months old for so long as payments under the variable
annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as
part of any application to purchase a Certificate offered
by the Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or
included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Prospectus and
Statement of Additional Information and any financial
statements required to be made available under this Form
promptly upon written or oral request to the Company at
the address or phone number listed in the Prospectus.
26
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has caused this
Pre-Effective Amendment No. 1 to its Registration Statement to be
signed on its behalf by the undersigned in the City of Cincinnati,
State of Ohio on the 30th day of August, 1995.
ANNUITY INVESTORS(SERVICEMARK) VARIABLE
ACCOUNT A (REGISTRANT)
By:/s/ Robert Allen Adams
-----------------------------
Robert Allen Adams
Chairman of the Board, President
and Director, Annuity Investors
Life Insurance Company
ANNUITY INVESTORS(SERVICEMARK) LIFE
INSURANCE COMPANY (DEPOSITOR)
By:/s/ Robert Allen Adams
--------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and
on the dates indicated.
/s/ Robert Allen Adams Augusst 30, 1995
------------------------- ------------------- ----------------
Robert Allen Adams Principal Executive [Date]
Officer, Director
/s/ Robert Eugene Allen August 30, 1995
------------------------- ------------------- ---------------
Robert Eugene Allen Principal Financial [Date]
Officer
/s/ Lynn Edward Laswell August 30, 1995
------------------------- -------------------- ---------------
Lynn Edward Laswell Principal Accounting [Date]
Officer
------------------------- -------------------- ---------------
Stephen Craig Lindner Director [Date]
27
<PAGE>
/s/ William Jack Maney, II August 30, 1995
------------------------- -------------------- ---------------
William Jack Maney, II Director [Date]
/s/ James Michael Mortenson August 30, 1995
------------------------- -------------------- ---------------
James Michael Mortenson Director [Date]
/s/ Mark Francis Muething August 30, 1995
------------------------- -------------------- ---------------
Mark Francis Muething Director [Date]
/s/ Jeffrey Scott Tate August 30, 1995
------------------------- -------------------- ---------------
Jeffrey Scott Tate Director [Date]
28
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
----------- ---------------------- ---------
(6) (a) Articles of Incorporation of
Annuity Investors(SERVICEMARK)
Life Insurance Company.*
(6) (b) Code of Regulations of Annuity
Investors(SERVICEMARK) Life
Insurance Company.*
* Filed with Form N-4 on June 2, 1995.
29
