<PAGE>
As filed with the Securities and Exchange Commission on December 4, 1995
File No. 33- 59861
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. 3 ( X )
Post-effective Amendment No. ______ ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. 3 ( X )
(Check appropriate box or boxes)
____________________________________
ANNUITY INVESTORS(SERVICEMARK) 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
<PAGE>
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
<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 . . . . . . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . 40
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
Annuity Transfer Formula . . . . . . . . . . . . . . . . . . . 43
Settlement Options . . . . . . . . . . . . . . . . . . . . . . 44
Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . 45
Settlement Option Tables . . . . . . . . . . . . . . . . . . . 45
<PAGE>
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 45
Non-participating . . . . . . . . . . . . . . . . . . . . . . . 45
Misstatement of Age . . . . . . . . . . . . . . . . . . . . . . 45
Proof of Existence and Age . . . . . . . . . . . . . . . . . . 46
Facility of Payment . . . . . . . . . . . . . . . . . . . . . . 46
Transfer and Assignment . . . . . . . . . . . . . . . . . . . . 46
Annuity Data . . . . . . . . . . . . . . . . . . . . . . . . . 46
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . 46
Incontestability . . . . . . . . . . . . . . . . . . . . . . . 46
Entire Contract . . . . . . . . . . . . . . . . . . . . . . . . 47
Changes in the Contract . . . . . . . . . . . . . . . . . . . . 47
Waiver of the Certificate Maintenance Fee . . . . . . . . . . . 47
Notices and Directions . . . . . . . . . . . . . . . . . . . . 48
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 48
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 48
Taxation of Annuities In General . . . . . . . . . . . . . . . 49
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 . . . . . . . . . . . . . . . 51
Qualified Pension and Profit Sharing Plans and H.R. 10 Plans . 51
Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Possible Changes in Taxation . . . . . . . . . . . . . . . . . 51
Other Tax Consequences . . . . . . . . . . . . . . . . . . . . 52
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
DISTRIBUTION OF THE CONTRACT . . . . . . . . . . . . . . . . . . . . 52
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 53
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 54
STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . 55
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
<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
<TABLE>
<CAPTION>
PART A
------
Item of Form N-4 Prospectus Caption
---------------- ------------------
<S> <C> <C>
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 Premium Payments . . . . . . Enrollment and Purchase 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
(b) Texas ORP . . . . . . . . . . . . . . . . . . . . Texas Optional Retirement Program
<PAGE>
(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 Statement of Additional Information
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 Registrant . . . . . . . . . (Prospectus) Summary of Expenses
(b) Management Contracts . . . . . . . . . . . . . . Not Applicable
(c) Custodian . . . . . . . . . . . . . . . . . . . . Not Applicable
Independent Auditors . . . . . . . . . . . . . . Experts
(d) Assets of Registrant . . . . . . . . . . . . . . Not Applicable
(e) Affiliated Person . . . . . . . . . . . . . . . . Not Applicable
<PAGE>
(f) Principal Underwriter . . . . . . . . . . . . . . Not Applicable
19. Purchase of Securities Being Offered . . . . . . . . . (Prospectus) Distribution of 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 Accounts . . . . . . . . Money Market Sub-Account Yield 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 Exhibits . . . . . . . . . . . Financial Statements and Exhibits
(a) Financial Statements . . . . . . . . . . . . . . Financial Statements
(b) Exhibits . . . . . . . . . . . . . . . . . . . . Exhibits
25. Directors and Officers of the Depositor . . . . . . . . Directors and Officers of Annuity Investors
Life Insurance Company
26. Persons Controlled By or Under Common Control With the Persons Controlled By Or Under Common Control
Registrant . . . . . . . . . . . . . . . . . . . . . . With the Depositor or Registrant
27. Number of Contract Owners . . . . . . . . . . . . . . . Number of Certificate Owners
<PAGE>
28. Indemnification . . . . . . . . . . . . . . . . . . . . Indemnification
29. Principal Underwriters . . . . . . . . . . . . . . . . Principal Underwriter
30. Location of Accounts and Location of Accounts and Records
Records . . . . . . . . . . . . . . . . . . . . . . . .
31. Management Services . . . . . . . . . . . . . . . . . . Management Services
32. Undertakings . . . . . . . . . . . . . . . . . . . . . Undertakings
Signature Page . . . . . . . . . . . . . . . . . . . . Signature Page
</TABLE>
<PAGE>
Subject To Completion: Dated [December 7], 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, annuity 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
from the Company's general account will be 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.
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.
<PAGE>
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, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
* * *
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 [December 7], 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.
2
<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.
3
<PAGE>
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
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.
4
<PAGE>
Variable Account Value: The value of a Participant's interest in all
Sub-Accounts.
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.
5
<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.
6
<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 be subject to a 10% premature distribution penalty tax if
made before the Participant reaches age 59 1/2. Surrenders may further be
subject to federal, state or local income tax. (See "Federal Tax Matters,"
page ___.)
7
<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.
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. In connection with certain Contracts that allow the
Company to reduce administrative expenses, the Company will offer an
Enhanced Contract with a Mortality and Expense Risk Charge at an effective
annual rate of 0.95% 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 ___.)
8
<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 __.)
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 ____.)
9
<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
$25
Transfer Fee 1/
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.
10
<PAGE>
<TABLE>
<CAPTION>
Dreyfus
V.I.F.
Janus A.S. Janus A.S. Janus A.S. Capital
Separate Account Annual Expenses (as Aggressive Worldwide Janus A.S. Short-Term Appre-
a percentage of average Separate Growth Growth Balanced Bond -ciation
Account assets) ---------- ---------- --------- --------- ----------
<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
(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>
11
<PAGE>
<TABLE>
<CAPTION>
Merrill
Merrill Merrill Lynch Merrill
Dreyfus Lynch Lynch V.S.F. V.S.F. Lynch V.S.F.
Separate Account Annual Socially Dreyfus V.S.F. Global High Domestic
Expenses Responsible Stock Basic Value Strategy Current Money
(as a percentage of average Growth Index Focus Focus Income Market
Separate Account assets) ----------- ------- -------- -------- ------- --------
<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>
________________
2/ Annual expenses are anticipated to be the same for each Sub-Account.
These expenses are based on estimated amounts for the current fiscal year.
3/ Information regarding each underlying Fund has been provided to the
Company by each Fund, and the Company has not independently verified such
information. Data for each Fund are 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
12
<PAGE>
Appreciation Portfolio and the Dreyfus Socially Responsible Growth Fund as
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.
13
<PAGE>
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
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.
Examples4/
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:
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 91 117
Focus
Merrill Lynch V.S.F. Global Strategy
Focus 92 119
4/ 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.
14
<PAGE>
Sub-Account 1 Year 3 Years
----------- ------ -------
Merrill Lynch V.S.F. High Current 90 114
Income
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:
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 21 65
Focus
Merrill Lynch V.S.F. Global Strategy 22 69
Focus
Merrill Lynch V.S.F. High Current 20 64
Income Focus
Merrill Lynch V.S.F. Money Market 19 60
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.
15
<PAGE>
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
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
objective(s) and policies):
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. The
Portfolio may invest in debt securities, including junk bonds.
Worldwide Growth Portfolio. A diversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks
of foreign and domestic companies. The Portfolio may invest in debt
securities, including junk bonds.
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. The
Portfolio may invest in junk bonds.
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. The
Portfolio may invest in junk bonds.
Janus Capital Corporation serves as the investment adviser to each of
these Funds.
16
<PAGE>
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.
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
17
<PAGE>
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, including junk bonds.
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.
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.
18
<PAGE>
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.
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.
19
<PAGE>
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.
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.
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ANNUITY INVESTORS(SERVICEMARK) 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.
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.
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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.
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.
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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.
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.
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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
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.
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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
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
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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.
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
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(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
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.
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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.
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.
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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.
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.
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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
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 be subject to a 10% premature distribution penalty tax
if made before the Participant reaches age 59 1/2, and may further be
subject to federal, state or local income tax. (See "Federal Tax
Matters," page___.)
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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.
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.
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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
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
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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 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
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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
are described in the prospectus and statement of additional information
for each Fund.
Contingent Deferred Sales Charge ("CDSC")
No deduction for front-end 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.
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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, 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 ("ERISA"), and regulations thereunder, or
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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.
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
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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%. There will be no Administration Charge imposed unless
administrative expenses exceed revenues received from the Certificate
Maintenance Fee and any Transfer Fee.
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.
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. The
Company's decision to offer an Enhanced Contract to a particular group
will be based primarily on whether the Company is designated as a
preferred variable annuity contract provider by the employer or by the
trustee of the employee benefit plan. Where the Company is so designated,
the Company anticipates that it will recognize administrative expense
savings from various economies of scale and routine operations. 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.
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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
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.
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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.
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.
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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
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.
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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.
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
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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.
(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.
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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 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
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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. In such a
situation, the Company may be designated as a preferred variable annuity
contract provider by the employer or trustee or the employee benefit plan.
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
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the present federal income tax laws as they are currently interpreted by
the Internal Revenue Service. No representation is made as to the
likelihood of the continuation of the present federal income tax laws or
of the current interpretation by the Internal Revenue Service. Moreover,
no attempt has been made to consider any applicable state or other tax
laws.
The 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.
48
<PAGE>
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.
49
<PAGE>
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.
50
<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.
51
<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 Commissiony, located at 450 Fifth Street,
N.W., Washington, D.C.
52
<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
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
53
<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: __________________________________________________
54
<PAGE>
APPENDIX A
----------
Settlement Option Tables
The Settlement Option Tables show the guaranteed dollar amount, based
on unisex rates, of the monthly payments under various Settlement options
for each $1,000 applied.
<TABLE>
<CAPTION>
OPTION 1 TABLES -- LIFE ANNUITY
With Payments For At Least A Fixed Period
60 Months 120 Months 180 Months 240 Months
Age
<S> <C> <C> <C> <C>
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
55
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
OPTION 2 TABLE - LIFE ANNUITY
60 Months 120 Months 180 Months 240 Months
Age Age Age Age
<S> <C> <C> <C> <C> <C> <C> <C>
55 $4.65 60 $5.14 65 $5.95 70 $7.08
56 4.67 61 5.28 66 6.14 71 7.36
57 4.77 62 5.43 67 6.35 72 7.66
58 4.89 63 5.59 68 6.58 73 7.98
59 5.01 64 5.76 69 6.82 74 8.33
</TABLE>
<TABLE>
<CAPTION>
OPTION 3 TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named.*
Secondary Age
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
</TABLE>
* Payments after the death of the Primary Payee will be one-half of the
amount shown.
56
<PAGE>
<TABLE>
<CAPTION>
OPTION 4 TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
Terms
of
Paymen Semi- Terms of Semi-
ts Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C><C>
6 183.42 92.61 46.53 15.56 $109.76 $55.42 $27.84 $9.3111
7 160.20 80.89 40.64 13.59 12 102.45 51.73 25.99 8.69
8 142.82 72.11 36.23 12.12 13 96.29 48.62 24.43 8.17
9 129.32 65.29 32.81 10.97 14 91.03 45.96 23.09 7.72
10 118.55 59.86 30.07 10.06 15 86.48 43.66 21.94 7.34
Terms of Semi-
Payments Annual Annual Quarterly Monthly
Years
16 $82.52 $41.66 $20.93 $7.00
17 79.04 39.91 20.05 6.71
18 75.96 38.35 19.27 6.44
19 73.21 36.95 18.57 6.21
20 70.75 35.72 17.95 6.00
</TABLE>
Rates for monthly payments for ages or fixed periods not shown in the
above 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.
57
<PAGE>
Subject to Completion: Dated [December 7], 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 [December 7], 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.
[December 7], 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 STATEMENT
OF ADDITIONAL INFORMATION 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, SOLICITATION 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
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
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 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.
Experts
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:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)(365/7)] - 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:
YIELD = 2[(a-b + 1)(6) - 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.
Accrued expenses will include all recurring fees that are charged to all
- 3 -
<PAGE>
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:
P(1 + T)(n) = 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
the Fund, with a level of Contract charges currently in effect. The Fund
- 4 -
<PAGE>
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.
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
- 5 -
<PAGE>
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.
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
- 6 -
<PAGE>
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
Separate Account (with respect to some or all Contracts) in order to set
aside provisions to pay such taxes.
- 7 -
<PAGE>
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
The Company's interim unaudited financial statements as of June 30,
1995 and audited financial statements 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>
Annuity Investors Life Insurance Company
===========================
LIFE AND ACCIDENT AND HEALTH COMPANIES -- ASSOCIATION EDITION
QUARTERLY STATEMENT
AS OF JUNE 30, 1995
OF THE CONDITION AND AFFAIRS OF THE
Annuity Investors Life Insurance Company
<TABLE>
<CAPTION>
<S> <C> <C>
NAIC Group Code 0084 NAIC Company Code 93661 Employer's ID Number 31-1021738
-------- --------- ---------------
Organized under the Laws of the State of ____Ohio____,
using ___________________ as the Port of Entry, made to the
INSURANCE DEPARTMENT OF THE STATE OF OHIO
PURSUANT TO THE LAWS THEREOF
Incorporated _______November 13, 1981_______ Commenced Business ________December 21, 1981_________
Statutory Home Office ________250 East Fifth Street____________, ____________Cincinnati, Ohio 45202____________
(Street and Number) (City or Town, State and Zip Code)
Main Administrative Office_______________________________250 East Fifth Street__________________________________
(Street and Number)
__________________Cincinnati, Ohio 45202______________ _____________________513-333-5300____________________
(City or Town, State and Zip Code) (Area Code)(Telephone No.)
Mail Address________________P.O. Box 120_______________, __________Cincinnati, Ohio 45201____________________
(Street and Number or P.O. Box) (City or Town, State and Zip Code)
Primary Location of Books and Records________________________________250 East Fifth Street______________________
(Street and Number)
__________________Cincinnati, Ohio 45202______________, _____________________513-333-5300____________________
(City or Town, State and Zip Code) (Area Code)(Telephone No.)
Quarterly Statement Contact_______________Lynn E. Laswell______________________513-333-6281_____________________
(Name) (Area Code)(Telephone No.)(Extension)
OFFICERS
President ____Robert Allen Adams____ Secretary _________Mark Francis Muething_________
- 9 -
<PAGE>
Treasurer____Robert Eugene Allen____ Actuary ________Michael Joseph O'Connor________
VICE PRESIDENTS
_______Robert Eugene Allen__________ _____Arthur Ronald Greene III_____ ________Betty Marie Kasprowicz________
_______Thomas Kevin Liguzinski______ _____James Michael Mortensen______ ________Mark Francis Muething_________
_______Michael Joseph O'Connor______ __________________________________ ______________________________________
DIRECTORS OR TRUSTEES
_______Robert Allen Adams___________ _____Stephen Craig Lindner________ ________William Jack Maney II_________
_______James Michael Mortensen______ _____Mark Francis Muething________ ________Jeffrey Scott Tate____________
State of __________Ohio___________
SS
County of ________Hamilton________
MICHAEL JOSEPH O'CONNOR, Actuary, BETTY MARIE KASPROWICZ, Secretary, ROBERT EUGENE ALLEN, Treasurer of the
Annuity Investors Life Insurance Company being duly sworn, each deposes and says that they are the above described
officers of the said insurer, and that on the THIRTIETH day of JUNE, 1995, all of the herein described assets were the
absolute property of the said insurer, free and clear from any liens or claims thereon, except as herein stated, and
that this statement is a full and true statement of all the assets and liabilities and of the condition and affairs of
the said insurer as of the THIRTIETH day of JUNE, 1995, and of its income and deductions therefrom for the SIX months
ended on that date, and have been completed in accordance with the NAIC annual statement instructions and accounting
practices and procedures manuals except to the extent that: (1) state law may differ; or (2) that state rules or
regulations require differences in reporting not related to accounting practices and procedures, according to the best
of their information, knowledge and belief, respectively.
____________________________________ __________________________________ ______________________________________
Actuary Secretary Treasurer
______________________________________
Actuary
Subscribed and sworn to before me this
______ day of ________________, 1995
______________________________________
</TABLE>
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<PAGE>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY
INVESTORS LIFE INSURANCE COMPANY
ASSETS
<TABLE>
<CAPTION>
4 5
2 3 Net Admitted Previous Year
1 Non-Ledger Assets Not Assets Ending
Ledger Assets Assets Admitted (Cols. 1+2-3) December 31, 1994
<S> <C> <C> <C> <C> <C>
1. Bonds 8,233,356 8,233,356 8,291,079
2. Stocks:
2.1 Preferred stocks 0
2.2 Common stocks 0
3. Mortgage loans on real estate:
3.1 First liens 0
3.2 Other than first liens 0
4. Real estate:
4.1 Properties occupied by the
company (less ________$0
encumbrances) 0
4.2 Properties acquired in
satisfaction of debt (less
__________$0 encumbrances) 0
4.3 Investment real estate (less
______$0 encumbrances) 0
5. Policy loans 0
6. Premium notes, including ________$0
for first year premiums 0
7. Collateral loans 0
8.1 Cash on hand and on deposit:
- 11 -
<PAGE>
4 5
2 3 Net Admitted Previous Year
1 Non-Ledger Assets Not Assets Ending
Ledger Assets Assets Admitted (Cols. 1+2-3) December 31, 1994
a. Cash in company's office 0
b. Cash on deposit 104,865 104,865 79,862
8.2 Short-term investments 599,617 599,617 425,660
9. Other invested assets 0
10. Aggregate write-ins for invested 0 0 0 0 0
assets --------- --------- --------- --------- ---------
10A Subtotals, cash and invested assets
(lines 1 to 10) 8,937,838 0 0 (a) 8,937,838 8,796,601
11. Reinsurance ceded:
11.1 Amounts recoverable from
reinsurers 0
11.2 Commissions and expense
allowances due 0
11.3 Experience rating and other
refunds due 0
12. Electronic data processing
equipment 0
13. Federal income tax recoverable 11,219 11,219 23,181
14. Life insurance premiums and annuity
considerations deferred and
uncollected on in force at the end
of the period (less premiums on
reinsurance ceded and less
_________$0 loading) 0
15. Accident and health premiums due
and unpaid 0
16. Investment income due and accrued 151,281 151,281 150,193
17. Net adjustment in assets and
liabilities due to foreign exchange
rates 0
- 12 -
<PAGE>
4 5
2 3 Net Admitted Previous Year
1 Non-Ledger Assets Not Assets Ending
Ledger Assets Assets Admitted (Cols. 1+2-3) December 31, 1994
18. Receivable from parent,
subsidiaries and affiliates 17,700 17,700
19. Amounts receivable relating to
uninsured accident and health plans 0
20. Other assets:
20.1 Agents' balances (gross debit
_________$0 less _________$0
for doubtful ______ accounts
less ______$0 credit
balances) XXX XXX
20.2 Bills receivable XXX XXX
20.3 Furniture and equipment XXX XXX
20.4 Cash advanced to or in hands
of officers or agents XXX XXX
20.5 Loans on personal security,
endorsed or not XXX XXX
21. Aggregate write-ins for other than 0 0 0 0 0
invested assets --------- --------- --------- --------- ---------
22. Total assets excluding Separate
Accounts Business (Lines 10A to 21) 8,955,538 162,500 0 9,118,038 8,969,975
23. From Separate Accounts Statement
24. Total (Lines 22 and 23) 9,118,038 8,969,975
DETAILS OF WRITE-INS
1001. 0
1002. 0
1003. 0
1098. Summary of remaining write-ins for
Line 10 from overflow page 0 0 0 0 0
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<PAGE>
4 5
2 3 Net Admitted Previous Year
1 Non-Ledger Assets Not Assets Ending
Ledger Assets Assets Admitted (Cols. 1+2-3) December 31, 1994
1099. Totals (Lines 1001 thru 1003 plus
1098) (Line 10 above) 0 0 0 0 0
2101. 0
2102. 0
2103. 0 0 0 0 0
2198. Summary of remaining write-ins for
Line 21 from overflow page 0 0 0 0 0
2199. Totals (Lines 2101 thru 2103 plus
2198) (Line 21 above) 0 0 0 0 0
</TABLE>
(a) Includes ______________ $0 investments in parent,
subsidiaries, and affiliates.
- 14 -
<PAGE>
LIABILITIES, SURPLUS AND OTHER FUNDS
<TABLE>
<CAPTION>
1 2
Current Period Previous Year
Ending
December 31, 1994
<S> <C> <C>
1. Aggregate reserve for life policies and contracts ______$0__ less _______$0 __ 2,745,853 2,684,376
included in Line 7.3
2. Aggregate reserve for accident and health policies
3. Supplementary contracts without life contingencies
4. Policy and contract claims:
4.1 Life
4.2 Accident and health
5. Policyholders' dividend and coupon accumulations
6. Policyholders' dividends _____$0__ and coupons _____$0__ due and unpaid
7. Provision for policyholders' dividends and coupons payable in following
calendar year - estimated amounts:
7.1 Dividends apportioned for payment to ______________, 19__
7.2 Dividends not yet apportioned
7.3 Coupons and similar benefits
8. Amount provisionally held for deferred dividend policies not included in Line 7
9. Premiums and annuity considerations received in advance less _____$0__
discount; including _____$0__ accident and health premiums
10. Liability for premium and other deposit funds:
10.1 Policyholder premiums, including _____$0__ deferred annuity liability
10.2 Guaranteed interest contracts, including _____$0__ deferred annuity
liability
10.3 Other contract deposit funds, including _____$0__ deferred annuity
liability
11. Policy and contract liabilities not included elsewhere:
11.1 Surrender values on canceled policies
11.2 Provision for experience rating refunds, including _____$0__ accident and
health experience rating re funds
11.3 Other amounts payable on reinsurance assumed
11.4 Interest maintenance reserve
12. Commissions to agents due or accrued-life and annuity _____$0__ accident and
health _____$0__
12A. Commissions and expense allowances payable on reinsurance assumed
13. General expenses due or accrued 3,445
13A. Transfers to Separate Accounts due or accrued (net)
14. Taxes, licenses and fees due or accrued, excluding federal income taxes
14A. Federal income taxes due or accrued, including _____$0__ on capital gains
(excluding deferred taxes)
- 15 -
<PAGE>
1 2
Current Period Previous Year
Ending
December 31, 1994
15. "Cost of collection" on premiums and annuity considerations deferred and
uncollected in excess of total loading thereon
16. Unearned investment income
17. Amounts withheld or retained by company as agent or trustee
18. Amounts held for agents' account, including _____$0__ agents' credit balances
19. Remittance and items not allocated
20. Net adjustment in assets and liabilities due to foreign exchange rates
21. Liability for benefits for employees and agents if not included above
22. Borrowed money _____$0__ and interest thereon _____$0__
23. Dividends to stockholders declared and unpaid
24. Miscellaneous liabilities:
24.1 Asset valuation reserve
24.2 Reinsurance in unauthorized companies
24.3 Funds held under reinsurance treaties with unauthorized reinsurers
24.4 Payable to parent, subsidiaries and affiliates 53,427 11,264
24.5 Drafts outstanding
24.6 Liability for amounts held under uninsured accident and health plans
25. Aggregate write-ins for liabilities 0 0
_______ ______
26. Total Liabilities excluding Separate Accounts business (Lines 1 to 25) 2,799,280 2,699,085
27. From Separate Accounts Statement
28. Total Liabilities (Lines 26 and 27) 2,799,280 2,699,085
29. Common capital stock 2,000,000 2,000,000
30. Preferred capital stock
31. Aggregate write-ins for other than special surplus funds 0 0
32. Surplus Notes
33. Gross paid in and contributed surplus 3,350,000 3,350,000
34. Aggregate write-ins for special surplus funds 0 0
35. Unassigned funds (surplus) 968,758 920,890
36. Less treasury stock, at cost:
(1) _____0_ shares common (value included in Line 29 _____$0)
(2) _____0_ shares preferred (value included in Line 30 _____$0)
37. Surplus (total Lines 31 + 32 + 33 + 34 + 35 - 36) 4,318,758 4,270,890
38. Total of Lines 29, 30 and 37 6,318,758 6,270,890
39. Totals of Lines 28 and 38 9,118,038 8,969,975
DETAILS OF WRITE-INS
2501.
2502.
2503.
2598. Summary of remaining write-ins for Line 25 from overflow page 0 0
- 16 -
<PAGE>
1 2
Current Period Previous Year
Ending
December 31, 1994
2599. Totals (Lines 2501 thru 2503 plus 2598) (Line 25 above) 0 0
3101.
3102.
3103.
3198. Summary of remaining write-ins for Line 31 from overflow page 0 0
3199. Totals (Lines 3101 thru 3103 plus 3198) (Line 31 above) 0 0
3401.
3402.
3403.
3498. Summary of remaining write-ins for Line 34 from overflow page 0 0
3499. Totals (Lines 3401 thru 3403 plus 3498) (Line 34 above) 0 0
</TABLE>
- 17 -
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses)
_______________________________________________________________________________________________________________
3
Previous Year
1 2 Ending
Current Year Previous Year December 31,
to Date to Date 1994
<S> <C> <C> <C>
1. Premiums and annuity considerations 30,140 155,441 219,308
1A. Deposit -- type funds
2. Consideration for supplementary contracts with
life contingencies
3. Consideration for supplementary contracts without
life contingencies and dividend accumulations
3A. Coupons left to accumulate at interest
4. Net investment income (includes _____$0_ equity 235,921 218,130 432,932
in undistributed income or loss of subsidiaries)
4A. Amortization of interest maintenance reserve
(IMR)
5. Commissions and expense allowances on reinsurance
ceded
5A. Reserve adjustments on reinsurance ceded
6. Aggregate write-ins for miscellaneous income 0 0 0
7. Totals (Lines 1 to 6) 266,061 373,571 652,240
8. Death benefits
9. Matured endowments (excluding guaranteed annual
pure endowments)
10. Annuity benefits
- 18 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses)
_______________________________________________________________________________________________________________
3
Previous Year
1 2 Ending
Current Year Previous Year December 31,
to Date to Date 1994
11. Disability benefits and benefits under accident
and health policies
11A. Coupons, guaranteed annual pure endowments and
similar benefits
12. Surrender benefits and other fund withdrawals 61,037 180,364 280,517
13. Group conversions
14. Interest on policy or contract funds
15. Payments on supplementary contracts with life
contingencies
16. Payments on supplementary contracts without life
contingencies and of dividend accumulations
16A. Accumulated coupon payments
17. Increase in aggregate reserves for life and 61,477 44,662 61,627
accident and health policies and contracts
17A. Increase in liability for premium and other
deposit funds
18. Increase in reserve for supplementary contracts
without life contingencies and for dividend and
coupon accumulations
19. Totals (Lines 8 to 18) 122,514 225,026 342,144
20. Commissions on premiums and annuity
considerations (direct business only)
21. Commissions and expense allowances on reinsurance 24,042 23,282 47,023
assumed
22. General insurance expenses 14,954 13,222 25,630
- 19 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses)
_______________________________________________________________________________________________________________
3
Previous Year
1 2 Ending
Current Year Previous Year December 31,
to Date to Date 1994
23. Insurance taxes, licenses and fees, excluding 30,908 32,146 38,951
federal income taxes
24. Increase in loading on and cost of collection in
excess of loading on deferred and uncollected
premiums
24A. Net transfers to or (from) Separate Accounts
25. Aggregate write-ins for deductions 0 0 0
-------- -------- --------
26. Totals (Lines 19 to 25) 192,418 293,676 453,748
27. Net gain from operations before dividends to 73,643 79,895 198,492
policyholders and before federal income taxes
(Line 7 minus Line 26)
28. Dividends to policyholders ________ ________ ________
29. Net gain from operations after dividends to 73,643 79,895 198,492
policyholders and before federal income taxes
(Line 27 minus Line 28)
30. Federal income taxes incurred (excluding tax on 25,775 28,000 69,000
capital gains) ________ ________ ________
31. Net gain from operations after dividends to 47,868 51,895 129,492
policyholders and federal income taxes and before
realized capital gains or (losses) (Line 29 minus
Line 30)
32. Net realized capital gains or (losses) less
capital gains tax of _____$0_ (excluding _____$0_
transferred to IMR)
33. Net income (Line 31 plus Line 32) 47,868 51,895 129,492
- 20 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses)
_______________________________________________________________________________________________________________
3
Previous Year
1 2 Ending
Current Year Previous Year December 31,
to Date to Date 1994
CAPITAL AND SURPLUS ACCOUNT
34. Capital and surplus, December 31, previous year 6,270,890 6,141,398 6,141,398
35. Net income (Line 33) 47,868 51,895 129,492
36. Change in net unrealized capital gains or
(losses)
37. Change in non-admitted assets and related items
38. Change in liability for reinsurance in
unauthorized companies
39. Change in reserve on account of change in
valuation basis, (increase) or decrease
40. Change in asset valuation reserve
41. Change in treasury stock
42. Change in surplus in Separate Accounts Statement
43. Capital changes:
a. Paid in
b. Transferred from surplus (Stock Dividend)
c. Transferred to surplus
44. Surplus adjustments:
a. Paid in
b. Transferred to capital (Stock Dividend)
c. Transferred from capital
45. Dividends to stockholders
46. Aggregate write-ins for gains and losses in 0 0 0
surplus -------- --------- --------
47. Net change in capital and surplus for the year 47,868 51,895 129,492
(Lines 35 through 46) -------- --------- ---------
- 21 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses)
_______________________________________________________________________________________________________________
3
Previous Year
1 2 Ending
Current Year Previous Year December 31,
to Date to Date 1994
48. Capital and surplus, as of statement date (Lines 6,318,758 6,193,293 6,270,890
34 + 47)
DETAILS OF WRITE-INS
0601.
0602.
0603.
0698. Summary of remaining write-ins for Line 6 0 0 0
from overflow page
0699. Totals (Lines 0601 thru 0603 plus 0698) 0 0 0
(Line 6 above)
2501.
2502.
2503.
2598. Summary of remaining write-ins for Line 25 0 0 0
from overflow page
2599. Totals (Lines 2501 thru 2503 plus 2598) 0 0 0
(Line 25 above)
4601.
4602.
4603.
4698. Summary of remaining write-ins for Line 46 0 0 0
from overflow page
4699. Totals (Lines 4601 thru 4603 plus 4698) 0 0 0
(Line 46 above)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
CASH FLOW
_________________________________________________________________________________________________________
1 2
Current Year Previous Year Ending
to Date December 31, 1994
<S> <C> <C>
1. Premiums and annuity considerations 14,769 219,308
2. Deposit-type funds
3. Other premiums, considerations and deposits
4. Allowances and reserve adjustments received on reinsurance
ceded
5. Investment income received (excluding realized gains/losses 261,693 398,729
and net of investment expenses)
6. Other income received
-------- --------
7. Total (Lines 1 to 6) 276,462 618,037
8. Life and accident and health claims paid
9. Surrender benefits and other fund withdrawals paid 42,329 280,517
10. Other benefits to policyholders paid
-------- --------
11. Total (Lines 8 to 10) 42,329 280,517
12. Commissions, other expenses and taxes paid (excluding FIT) 79,881 111,604
13. Net transfers to or (from) Separate Accounts (operational
lines only)
--------- ---------
14. Total (Lines 12 to 13) 79,881 111,604
- 23 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
CASH FLOW
15. Dividends to policyholders paid
16. Federal income taxes paid (excluding tax as capital gains) 76,483
17. Net increase or (decrease) in policy loans and premium rates
18. Other operating expenses paid
--------- ---------
19. Total (Lines 15 to 18) 0 76,483
--------- ---------
20. Net cash from operations (Line 7 minus Line 11 minus Line 14 154,252 149,433
minus Line 19)
--------- ---------
21. Proceeds from investments sold, matured or repaid:
21.1 Bonds 1,160,000
21.2 Stocks
21.3 Mortgage loans
21.4 Real estate
21.5 Collateral loans
21.6 Other invested assets
21.7 Net gains or (losses) on cash and short-term investments
21.8 Miscellaneous proceeds
--------- ---------
21.9 Total investment proceeds (Lines 21.1 to 21.8) 1,160,000 0
22. Tax on capital gains
--------- ---------
23. Total (Line 21.9 minus Line 22) 1,160,000 0
- 24 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
CASH FLOW
24. Other cash provided:
24.1 Capital and surplus paid in
24.2 Borrowed money _______ $0 less amounts repaid _____ $0
24.3 Other sources 1,927
--------- ---------
24.4 Total other cash provided (Lines 24.1 to 24.3) 1,927 0
--------- ---------
25. Total (Line 20 plus Line 23 plus Line 24.4) 1,316,179 149,433
--------- ---------
26. Cost of investments acquired (long-term only):
26.1 Bonds 1,117,219 2,637,891
26.2 Stocks
26.3 Mortgage loans
26.4 Real estate
26.5 Collateral loans
26.6 Other invested assets
26.7 Miscellaneous applications
--------- ---------
26.8 Total investments acquired (Lines 26.1 to 26.7) 1,117,219 2,637,891
27. Other cash applied:
27.1 Dividends to stockholders paid
27.2 Other applications (net) 29,837
--------- ---------
27.3 Total other cash applied (Lines 27.1 and 27.2) 0 29,837
- 25 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
CASH FLOW
--------- ---------
28. Total (Lines 26.8 and 27.3) 1,117,219 2,667,728
--------- ---------
29. Net change in cash and short-term investments (Line 25 minus 198,960 (2,518,295)
Line 28)
RECONCILIATION --------- ---------
30. Cash and short-term investments:
30.1 Beginning of year 505,522 3,023,817
30.2 End of period (Line 29 plus Line 30.1) 704,482 505,522
</TABLE>
[/R]
- 26 -
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
RECONCILIATION OF LEDGER ASSETS
____________________________________________________________________________________________________________
<S> <C> <C>
1 2
Current Previous Year Ending
Period December 31, 1994
INCREASES IN LEDGER ASSETS
1. Premiums on life policies and annuity considerations 14,769 219,308
1A. Deposit-type funds
2. Accident and health cash premiums, including _______ $0
policy, membership and other fees
3. Considerations for supplementary contracts with life
contingencies
4. Considerations for supplementary contracts without life
contingencies, including ________ $0 disability
5. Dividends left with the company to accumulate at interest
5A. Coupons left with the company to accumulate at interest
6. Gross investment income 248,686 387,715
7. Increase in capital and paid in or contributed surplus
8. Borrowed money gross _______ $0 less amount repaid
__________ $0
9. Commissions and expense allowances on reinsurance ceded
9A. Reserve adjustments on reinsurance ceded
10. From sale or maturity of ledger assets 2,571,815
11. By adjustment in book value of ledger assets 0 0
- 27 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
RECONCILIATION OF LEDGER ASSETS
12. Aggregate write-ins for increases in ledger assets 19,627 0
---------- ----------
13. Total increases in Ledger Assets (Lines 1 thru 12) 2,854,897 607,023
---------- ----------
DECREASES IN LEDGER ASSETS
14. Policy and contract claims:
14.1 Life
14.2 Accident and health
15. For annuities with life contingencies, excluding payments on
supplementary contracts (including cash refund payments)
16. Premium notes and liens voided by lapse, less ______ $0
restorations
17. Surrender benefits and other fund withdrawals 42,329 280,517
17A. Group conversions
17B. Interest on policy or contract funds
18. Dividends to policyholders:
18.1 Life insurance and annuities
18.2 Accident and health
18A. Coupons, guaranteed annual pure endowments and similar
benefits
---------- ----------
19. Total Paid Policyholders 42,329 280,517
20. Paid for claims on supplementary contracts:
20.1 With life contingencies
- 28 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
RECONCILIATION OF LEDGER ASSETS
20.2 Without life contingencies
---------- ----------
20.3 Total paid for claims on supplementary contracts (Lines
20.1 plus 20.2) 0 0
21. Dividends and interest thereon held on deposit disbursed
during the year
21A. Coupons and interest thereon held on deposit disbursed
during the year
22. Commissions to agents (direct business only):
22.1 Life insurance and annuities, including ________ $0
commuted commissions
22.2 Accident and health, including ________ $0 commuted
commissions
22.3 Policy, membership and other fees retained by agents
---------- ----------
22.4 Total commissions to agents (Lines 22.1 thru 22.3) 0 0
22A. Commissions and expense allowances on reinsurance assumed 12,011 47,023
23. General expenses 41,789 41,235
23.1 Taxes, licenses and fees, excluding federal income taxes 20,557 38,951
23.2 Federal income taxes, including ________ $0 on capital gains 76,483
24. Decrease in capital and paid in or contributed surplus
25. Paid stockholders for dividends (cash ________ $0
stock ________ $0)
26. Borrowed money repaid gross ________ $0 less amount
borrowed ________ $0
27. Interest on borrowed money
- 29 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
RECONCILIATION OF LEDGER ASSETS
27A. Net transfers to or (from) Separate Accounts
28. From sale or maturity of ledger assets 2,579,274
29. By adjustment in book value of ledger assests
30. Aggregate write-ins for decreases in ledger assets 0 29,837
---------- ----------
31. Total Decreases in Ledger Assets (Sum of Lines 19, 20.3, 21,
21A, and 22.4 through 30) 2,695,960 514,046
RECONCILIATION
32. Amount of ledger assets December 31st of previous year 8,796,601 8,703,624
---------- ----------
33. Increase or (decrease) in ledger assets during the year
(Line 13 minus Line 31) 158,937 92,977
---------- ----------
34. Total = Ledger Assets as of statement date 8,955,538 8,796,601
DETAILS OF WRITE-INS
1201. Miscellaneous cash receipts 1,927
1202. Receivable from parent 17,700
1203.
1298. Summary of remaining write-ins for Line 12 from
overflow page 0 0
1299. Totals (Lines 1201 thru 1203 plus 1298) (Line 12 above) 19,627 0
---------- ----------
- 30 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses
RECONCILIATION OF LEDGER ASSETS
3001. Decrease in payable to parent, subsidiaries, and
affiliates 29,837
3002.
3003.
3098. Summary of remaining write-ins for Line 30 from
overflow page 0 0
3099. Totals (Lines 3001 thru 3003 plus 3098) (Line 30 above) 0 29,837
</TABLE>
- 31 -
<PAGE>
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses)
EXHIBIT 1
NONE
SCHEDULE A - PART 1
NONE
SCHEDULE A - PART 2
NONE
SCHEDULE A - VERIFICATION
NONE
SCHEDULE B - PART 1 - SECTION 1
NONE
SCHEDULE B - PART 2 - ALL SECTIONS
NONE
SCHEDULE BA - ALL PARTS
NONE
SCHEDULE C - ALL PARTS
NONE
- 32 -
<PAGE>
<TABLE>
(CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE D - PART 3
Show all Long-Term Bonds and Stocks Acquired by the Company During the Current Period
______________________________________________________________________________________________________
1
Number
Date Name of of Shares
CUSIP Description Acquired Vendor of Stock
<S> <C> <C> <C> <C>
361582AE9 GEICO CORPORATION NOTE 7.50% DUE 04/17/1995 SALOMON BROTHERS
4-15-2005 . . . . . . . . . 6331
78355HGA1 RYDER SYSTEMS, INC. MEDIUM-TERM 04/28/1995
NOTE, SERIES 12 7.30% DUE 5-01- SALOMON BROTHERS
2000 . . . . . . . . . . . 7513
743315AD5 THE PROGRESSIVE CORPORATION 05/01/1995 GOLDMAN SACHS & CO
SUBORDINATED NOTE 10.125% DUE 12-
15-2000 . . . . . . . . . . 6331
096650AD8 BOATMEN'S BANKSHARES, INC. 05/22/1995 WHEAT FIRST
SUBORDINATED NOTE 7.625% DUE 10- SECURITIES INC.
01-2004 . . . . . . . . . . 6021
40074PAA9 GUARANTEED EXPORT TRUST-PDVSA 06/07/1995 UNION BANK OF
1995-A SERIES 1994-A CERTIFICATE SWITZERLAND
6.28% DUE 6-15-2004 . . . . 2911
071813AF6 BAXTER INTERNATIONAL INC. NOTE 06/14/1995 DONALDSON LUFKIN &
8.125% DUE 11-15-2001 . . . 2835 JENRETTE INC.
0699999 BONDS -- INDUSTRIAL AND MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0999998 BONDS -- PART 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0999999 BONDS -- PART 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1099999 TOTAL -- BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1599998 PREFERRED STOCKS -- PART 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1599999 PREFERRED STOCKS -- PART 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 33 -
<PAGE>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE D - PART 3
Show all Long-Term Bonds and Stocks Acquired by the Company During the Current Period
______________________________________________________________________________________________________
1699999 TOTAL -- PREFERRED STOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2199998 COMMON STOCKS -- PART 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2199999 COMMON STOCKS -- PART 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2299999 TOTAL -- COMMON STOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2399999 TOTAL -- PREFERRED AND COMMON STOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2499999 TOTAL -- BONDS, PREFERRED AND COMMON STOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) For all common stock bearing the NAIC designation "U" provide: the number of such issues ________ 0.
</TABLE>
- 34 -
<PAGE>
<TABLE>
(CAPTION>
2 3 4 5
Paid
Actual Par for NAIC
CUSIP Description Cost Value Accrued Desig-
Interest nation
and (a)
Dividends
<C> <C> <C> <C>
361582AE9 GEICO CORPORATION NOTE 7.50% 149,65 150,00 1
DUE 4-15-2005 . . . . . . . . . . . . . . . . 6331 2 0
78355HGA1 RYDER SYSTEMS, INC. MEDIUM-TERM NOTE, 99,469 100,00 81 1
SERIES 12 7.30% DUE 5-01-2000 . . . . . . . . 7513 0
743315AD5 THE PROGRESSIVE CORPORATION SUBORDINATED 111,35 100,00 4,022 2
NOTE 10.125% DUE 12-15-2000 . . . . . . . . . 6331 7 0
096650AD8 BOATMEN'S BANKSHARES, INC. SUBORDINATED 152,79 150,00 1,874 1
NOTE 7.625% DUE 10-01-2004 . . . . . . . . . 6021 9 0
40074PAA9 GUARANTEED EXPORT TRUST-PDVSA 1995-A 150,00 150,00 1
SERIES 1994-A CERTIFICATE 6.28% DUE 0 0
6-15-2004 . . . . . . . . . . . . . . . . . . 2911
071813AF6 BASTER INTERNATIONAL INC. NOTE 8.125% 161,37 150,00 1,151 1
DUE 11-15-2001 . . . . . . . . . . . . . . . 2835 3 0
0699999 BONDS -- INDUSTRIAL AND MISCELLANEOUS . . . . . . . . . . . . . 824,65 800,00 7,128 X X X
0 0
0999998 BONDS -- PART 3 . . . . . . . . . . . . . . . . . . . . . . . . 824,65 800,00 7,128 X X X
0 0
0999999 BONDS -- PART 5 . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 X X X
1099999 TOTAL -- BONDS . . . . . . . . . . . . . . . . . . . . . . . . 824,65 800,00 7,128 X X X
0 0
1599998 PREFERRED STOCKS -- PART 3 . . . . . . . . . . . . . . . . . . 0 0 0 X X X
1599999 PREFERRED STOCKS -- PART 5 . . . . . . . . . . . . . . . . . . 0 0 0 X X X
1699999 TOTAL -- PREFERRED STOCKS . . . . . . . . . . . . . . . . . . . 0 0 0 X X X
2199998 COMMON STOCKS -- PART 3 . . . . . . . . . . . . . . . . . . . . 0 0 0 X X X
2199999 COMMON STOCKS -- PART 5 . . . . . . . . . . . . . . . . . . . . 0 0 0 X X X
- 35 -
<PAGE>
2 3 4 5
Paid
Actual Par for NAIC
Cost Value Accrued Desig-
Interest nation
and (a)
Dividends
2299999 TOTAL -- COMMON STOCKS . . . . . . . . . . . . . . . . . . . . 0 0 0 X X X
2399999 TOTAL -- PREFERRED AND COMMON STOCKS . . . . . . . . . . . . . 0 0 0 X X X
2499999 TOTAL -- BONDS, PREFERRED AND COMMON STOCKS . . . . . . . . . . 824,65 800,00 7,128 X X X
0 0
</TABLE>
[/R]
(a) For all common stock bearing the NAIC designation "U" provide: the
number of such issues ________ 0.
- 36 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE D - PART 4
Show all Long-Term Bonds and Stocks Sold, Redeemed or Otherwise Disposed of by the Company During the
Current Period
______________________________________________________________________________________________________
1 2 3 4
CUSIP Description Disposal Name of Number Consideration Par Actual
Date Purchaser of Shares Value Cost
of Stock
<S> <C> <C> <C> <C> <C> <C> <C>
0999998 BONDS -- PART 4 0 0 0
0999999 BONDS -- PART 5 0 0 0
1099999 TOTAL -- BONDS 0 0 0
1599998 PREFERRED STOCKS -- PART 4 0 0 0
- 37 -
<PAGE>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE D - PART 4
Show all Long-Term Bonds and Stocks Sold, Redeemed or Otherwise Disposed of by the Company During the
Current Period
______________________________________________________________________________________________________
1 2 3 4
CUSIP Description Disposal Name of Number Consideration Par Actual
Date Purchaser of Shares Value Cost
of Stock
1599999 PREFERRED STOCKS -- PART 5 0 0 0
1699999 TOTAL -- PREFERRED STOCKS 0 0 0
2199998 COMMON STOCKS -- PART 4 0 0 0
2199999 COMMON STOCKS -- PART 5 0 0 0
2299999 TOTAL -- COMMON STOCKS 0 0 0
2399999 TOTAL -- PREFERRED AND COMMON STOCKS 0 0 0
2499999 TOTALS 0 0 0
</TABLE>
(a) For all common stock bearing the NAIC designation "U" provide: the
number of such issues ________ 0.
- 38 -
<PAGE>
<TABLE>
<CAPTION>
__________________________________________________________________________________________
5 6 7 8 9
CUSIP Descrip- Book Profit Loss Interest NAIC
tion Value at on on and Designation (a)
Date of Disposal Disposal Dividends
Disposal Received
<S> <C> <C> <C> <C> <C> <C>
0999998 BONDS -- PART 4 0 0 0 0 X X X
0999999 BONDS -- PART 5 0 0 0 0 X X X
1099999 TOTAL -- BONDS 0 0 0 0 X X X
1599998 -- PART 4 0 0 0 0 X X X
PREFERRED
STOCKS
1599999 -- PART 5 0 0 0 0 X X X
PREFERRED
STOCKS
- 39 -
<PAGE>
__________________________________________________________________________________________
5 6 7 8 9
CUSIP Descrip- Book Profit Loss Interest NAIC
tion Value at on on and Designation (a)
Date of Disposal Disposal Dividends
Disposal Received
1699999 TOTAL-- PRE- 0 0 0 0 X X X
FERRED
STOCKS
2199998 -- PART 4 0 0 0 0 X X X
COMMON STOCKS
2199999 -- PART 5 0 0 0 0 X X X
COMMON STOCKS
2299999 TOTAL-- COMMON 0 0 0 0 X X X
STOCKS
2399999 TOTAL-- PREFERRED 0 0 0 0 X X X
AND
COMMON
STOCKS
2499999 0 0 0 0 X X X
TOTALS
</TABLE>
(a) For all common stock bearing the NAIC designation "U" provide: the
number of such issues ________ 0.
- 40-
<PAGE>
<TABLE>
(CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE DA - PART 1
Short-Term Investments Owned End of Current Period
_________________________________________________________________________________________________________________
5
1 2 3 4 Amount of 6
Interest
Received Paid for
Book Statement Cost to Current Accrued
Value Par Value Value Company Period Interest
<S> <C> <C> <C> <C> <C> <C>
5199999 Totals 599,617 XXX 599,617 599,617 20,943 0
</TABLE>
<TABLE>
<CAPTION>
- 41 -
<PAGE>
SCHEDULE DA - PART 2 - Verification
Short-Term Investments Owned
1 2 3 4
Previous Year
Current Year Current Year Current Year Ending
as of 3/31 as of 6/30 as of 9/30 12/31
<S> <C> <C> <C> <C>
1. Book value of short-term investments, 425,660 1,668,306 3,012,908
end of previous period
2. Cost of short-term investments acquired 1,242,646 414,876
3. Increase by adjustment in book value
4. Profit on disposal of short-term
investments
5. Subtotals (Sum of Lines 2 through 4) 1,242,646 0 0 414,876
6. Consideration received on disposal of 1,068,689 3,002,124
short-term investments
7. Decrease by adjustment in book value
8. Loss on disposal of short-term
investments
9. Subtotals (Sum of Lines 6 through 8) 0 1,068,689 0 3,002,124
10. Book value of short-term investments, 1,668,306 599,617 0 425,660
end of period
11. Income collected current period 6,349 20,943 17,084
</TABLE>
- 42 -
<PAGE>
STATEMENT AS OF JUNE 30, 1995 OF THE
ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE DB - PART A - SECTION 1
NONE
SCHEDULE DB - PART B - SECTION 1
NONE
SCHEDULE DB - PART C - SECTION 1
NONE
SCHEDULE DB - PART D - SECTION 1
NONE
- 43 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE E - CASH
Month End Depository Balances
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
1 2 3 4
Amount of Amount of Book Balance at End of Each
Interest Interest Month During Current Quarter
Depository Rate of Received Accrued
Interest During During 5 6 7
Current Current First Month Second Month Third Month
Quarter Quarter
OPEN DEPOSITORIES
The Provident Bank, Cincinnati,
Ohio 0 0 0 172,664 179,321 79,865
The First National Bank of
Boston, Canton, Massachusetts 0 0 0 0 0 0
Wachovia Bank, Atlanta, Georgia 0 0 0 25,000 25,000 25,000
0199998 Deposits in ..........
depositories which do
not exceed the
allowable limit in any
one depository (see
Instructions)
- Open Depositories XXX 0 0 0 0 0
0199999 OPEN DEPOSITORIES XXX 0 0 197,664 204,321 104,865
- 44 -
<PAGE>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE E - CASH
Month End Depository Balances
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
1 2 3 4
Amount of Amount of Book Balance at End of Each
Interest Interest Month During Current Quarter
Depository Rate of Received Accrued
Interest During During 5 6 7
Current Current First Month Second Month Third Month
Quarter Quarter
SUSPENDED DEPOSITORIES
0299998 Deposits in ..........
depositories which do
not exceed the
allowable limit in any
one depository (see
Instructions)
- Suspended Depositories XXX 0 0 0 0 0
0299999 SUSPENDED DEPOSITORIES XXX 0 0 0 0 0
0399999 TOTALS 0 0 197,664 204,321 104,865
</TABLE>
[/R]
- 45 -
<PAGE>
[/R]
<TABLE>
<CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE D - PART 1B
Showing the Acquisitions, Dispositions and Non-Trading Activity
During the Current Period for all Bonds and Preferred Stock by Rating Class
1 2 3 4
Statement
Value
Beginning of Non-Trading
Period Acquisitions Dispositions Activity
<S> <C> <C> <C> <C>
BONDS
1. Class 1 7,445,218 713,293 25,000 (11,235)
2. Class 2 0 111,357 (277)
3. Class 3 0
4. Class 4 0
5. Class 5 0
6. Class 6 0
7. Total Bonds 7,445,218 824,650 25,000 (11,512)
PREFERRED STOCK
8. Class 1 0
9. Class 2 0
10. Class 3 0
11. Class 4 0
12. Class 5 0
13. Class 6 0
- 46 -
<PAGE>
1 2 3 4
Statement
Value
Beginning of Non-Trading
Period Acquisitions Dispositions Activity
14. Total Preferred stock 0 0 0 0
15. Total Bonds and 7,445,218 824,650 25,000 (11,512)
Preferred stock
</TABLE>
- 47 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE D - PART 1B
Showing the Acquisitions, Dispositions and Non-Trading Activity
During the Current Period for all Bonds and Preferred Stock by Rating Class
5 6 7 8
Statement Statement Statement Statement
Value Value Value Value
End of First End of Second End of Third End of
Quarter Quarter Quarter Previous Year
<S> <C> <C> <C> <C>
BONDS
1. Class 1 7,445,218 8,122,276 0 8,291,079
2. Class 2 0 111,080 0
3. Class 3 0 0 0
4. Class 4 0 0 0
5. Class 5 0 0 0
6. Class 6 0 0 0
7. Total Bonds 7,445,218 8,233,356 0 8,291,079
PREFERRED STOCK
8. Class 1 0 0 0
9. Class 2 0 0 0
10. Class 3 0 0 0
11. Class 4 0 0 0
12. Class 5 0 0 0
13. Class 6 0 0 0
14. Total Preferred stock 0 0 0 0
- 48 -
<PAGE>
5 6 7 8
Statement Statement Statement Statement
Value Value Value Value
End of First End of Second End of Third End of
Quarter Quarter Quarter Previous Year
15. Total Bonds and Preferred 7,445,218 8,233,356 0 8,291,079
stock
</TABLE>
- 49 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE S - CEDED REINSURANCE
Showing all new reinsurers since the most recent annual statement.
1 2 3 4 5
NAIC Federal Is insurer
Company ID authorized?
Code Number Name of Reinsurer Location (Yes or No)
<S> <C> <C> <C> <C>
AFFILIATES
US INSURERS
- 50 -
<PAGE>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE S - CEDED REINSURANCE
Showing all new reinsurers since the most recent annual statement.
POOLS AND ASSOCIATIONS
- 51 -
<PAGE>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE S - CEDED REINSURANCE
Showing all new reinsurers since the most recent annual statement.
ALL OTHER INSURERS
</TABLE>
- 52 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE ANNUITY INVESTORS LIFE INSURANCE COMPANY
SCHEDULE T - PREMIUMS AND ANNUITY CONSIDERATIONS
During Current Year to Date Allocated by States and Territories
Direct Business Only
2 3 4 5
Is Insurer Accident and Health 6
Licensed? Life Annuity Insurance Premiums, Deposit-
1 (Yes or Insurance Consideratio Including Policy type
States, Etc. No) Premiums ns Membership and Other Fees Funds
<S> <C> <C> <C> <C> <C>
1. Alabama AL. Yes
2. Alaska AK. Yes
3. Arizona AZ. Yes
4. Arkansas AR. Yes
5. California CA. Yes
6. Colorado CO. Yes
7. Connecticut CT. Yes
8. Delaware DE. Yes
9. Dist Columbia DC. Yes
10. Florida FL. Yes
11. Georgia GA. Yes
12. Hawaii HI. Yes
13. Idaho ID. Yes
14. Illinois IL. Yes
15. Indiana IN. Yes
16. Iowa IA. No
- 53 -
<PAGE>
Direct Business Only
2 3 4 5
Is Insurer Accident and Health 6
Licensed? Life Annuity Insurance Premiums, Deposit-
1 (Yes or Insurance Consideratio Including Policy type
States, Etc. No) Premiums ns Membership and Other Fees Funds
17. Kansas KS. Yes
18. Kentucky KY. Yes
19. Louisiana LA. Yes
20. Maine ME. No
21. Maryland MD. Yes
22. Massachusetts MA. No
23. Michigan MI. Yes
24. Minnesota MN. Yes
25. Mississippi MS. Yes
26. Missouri MO. Yes
27. Montana MT. Yes
28. Nebraska NE. Yes
29. Nevada NV. Yes
30. New Hampshire NH. No
31. New Jersey NJ. No
32. New Mexico NM. Yes
33. New York NY. No
34. North Carolina NC. No
35. North Dakota ND. Yes
36. Ohio OH. Yes
37. Oklahoma OK. Yes
- 54 -
<PAGE>
Direct Business Only
2 3 4 5
Is Insurer Accident and Health 6
Licensed? Life Annuity Insurance Premiums, Deposit-
1 (Yes or Insurance Consideratio Including Policy type
States, Etc. No) Premiums ns Membership and Other Fees Funds
38. Oregon OR. Yes
39. Pennsylvania PA. No
40. Rhode Island RI. Yes
41. South Carolina SC. Yes
42. South Dakota SD. Yes
43. Tennessee TN. Yes
44. Texas TX. Yes
45. Utah UT. Yes
46. Vermont VT. No
47. Virginia VA. Yes
48. Washington WA. Yes
49. West Virginia WV. Yes
50. Wisconsin WI. Yes
51. Wyoming WY. Yes
52. American Samoa AS. No
53. Guam GU. No
54. Puerto Rico PR. No
55. US Virgin Islands VI. No
56. Canada CN. No
57. Aggregate Other
Alien OT. XXX 0 0 0 0
58. Subtotal XXX 0 0 0 0
- 55 -
<PAGE>
Direct Business Only
2 3 4 5
Is Insurer Accident and Health 6
Licensed? Life Annuity Insurance Premiums, Deposit-
1 (Yes or Insurance Consideratio Including Policy type
States, Etc. No) Premiums ns Membership and Other Fees Funds
90. Company contributions for
employee benefit plans XXX
91. Dividends applied to purchase
paid-up additions and
annuities XXX
92. Dividends applied to shorten
endowment or premium paying
period XXX
93. Premium or annuity
considerations waived under
disability or other contract
provisions XXX
93A. Aggregate of other amounts not
allocable by State XXX 0 0 0 0
94. Totals (Direct Business) XXX 0 0 0 0
95. Plus Reinsurance Assumed 30,140
96. Totals (All Business) XXX 0 30,140 0 0
97. Less Reinsurance Ceded XXX
98. Totals (All Business) less
Reinsurance Ceded (a) 42 0 30,140 0 0
DETAILS OF WRITE-INS
5701. XXX
5702. XXX
5703. XXX
5798. Summary of remaining write-
ins for Line 57 from
overflow page XXX 0 0 0 0
- 56 -
<PAGE>
Direct Business Only
2 3 4 5
Is Insurer Accident and Health 6
Licensed? Life Annuity Insurance Premiums, Deposit-
1 (Yes or Insurance Consideratio Including Policy type
States, Etc. No) Premiums ns Membership and Other Fees Funds
5799. Total (Lines 5701 thru 5703
plus 5798)
(Line 57 above) XXX 0 0 0 0
93A01. XXX
93A02. XXX
93A03. XXX
93A98. Summary of remaining
write-ins for Line 93A
from overflow page XXX 0 0 0 0
93A99. Total (Lines 93A01 thru
93A03 plus 93A98)
(Line 93A above) XXX 0 0 0 0
</TABLE>
(a) Insert the number of yes responses except for Canada and Other
Alien.
- 57 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENT AS OF JUNE 30, 1995 OF THE
ANNUITY INVESTORS LIFE INSURANCE COMPANY
GENERAL INTERROGATORIES
<S> <C> <C>
(Responses to these interrogatories should be based on changes that have
occurred since prior year end)
1. a. Did the Company implement any significant accounting policy changes
which would require disclosure in the Notes to the Financial Yes [ ] No [ X ]
Statements?
b. If "yes," explain: ___________________________________________________________________
2. a. Did the Company experience any material transactions requiring the
filing of Disclosure of Material Transactions with the State of
Domicile, as required by the Model Act? Yes [ ] No [ X ]
b. If "yes," explain: _________________________________________________________________
3. a. In all cases where the Company has assumed accident and health
risks from another company, provisions should be made in this
statement on account of such reinsurances for a reserve equal to
that which the original company would have been required to
establish had it retained the risks. Yes [ X ] No [ ]
Has this been done?
b. If "no," explain:_________________________________________________________________
4. a. Has there been any change in the company's own preferred or common
stock? Yes [ ] No [ X ]
b. If "yes," explain:_________________________________________________________________
5. a. State as of what date the latest financial examination of the
company was made or is being made. 12/31/1992
b. State the as of date of the latest financial examination report
that is available from either the state of domicile or the Company.
This date should be the date of the examined balance sheet and not
the date the report was completed or released. 12/31/1992
- 58 -
<PAGE>
c. State as of what date the latest financial examination report
became available to other states or the public from either the
state of domicile or the Company. This is the release date or
completion date of the examination report and not the date of the
examination (balance sheet date). 08/02/1993
d. By what department or departments? OHIO
---------------------------------
6. a. Has any change been made during the year of this statement in the
charter, by-laws, articles of incorporation, or deed of settlement
of the company? Yes [ ] No [ X ]
b. If "yes," date of change: _____________________
If not previously filed, furnish herewith a certified copy of the
instrument as amended.
7. a. Have there been any substantial changes in the organizational chart Yes [ X ] No [ ]
since year end?
b. If "yes," attach an organizational chart.
8. a. If the company is subject to a management agreement, including
third-party administrator(s), managing general agent(s), attorney-
in-fact, or similar agreement, have there been any significant
changes regarding the terms of the agreement or principals
involved? Yes [ ] No [ X ]
b. If "yes," attach an explanation.
9. a. Were any of the stocks, bonds, or other assets of the Company
loaned, placed under option agreement, or otherwise made available
for use by another person? (Exclude securities under securities
lending agreements.) Yes [ ] No [ X ]
b. If "yes," give full and complete information
relating thereto:
__________________________________________________________________
10. Amount of real estate and mortgages held in other invested assets in
Schedule BA: $0
11. Amount of real estate and mortgages held in short-term investments: $0
- 59 -
<PAGE>
SUPPLEMENTAL EXHIBITS AND SCHEDULES INTERROGATORIES
1. The SVO Compliance Certification is a required filing for all
companies. Will the SVO Compliance Certification be filed with this
Department with this statement? Yes [ X ] No [ ]
If no, please explain:
__________________________________________________________________
_______________________________________________________________________
2. a. Is your company a U.S. Branch of an alien insurer? Yes [ ] No [ X ]
b. Will the Trusteed Surplus Statement be filed with this Department
with this statement? Yes [ ] No [ X ]
If first response is yes and second response is no, please explain:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
</TABLE>
- 60 -
<PAGE>
Statutory Financial Statements
ANNUITY INVESTORS LIFE INSURANCE COMPANY
(formerly Carillon Life Insurance Company)
Years ended December 31, 1994 and 1993
- 61 -
<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
- 62 -
<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
(market value: $7,545,390 and $5,702,563) $8,291,079 $5,679,807
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 surplus $8,969,975 $8,807,786
========== ==========
See notes to statutory financial statements.
</TABLE>
- 63 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
SUMMARY OF OPERATIONS
STATUTORY BASIS
<TABLE>
<CAPTION>
Year ended 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 assumed - (2,281,572)
--------- ----------
435,748 166,768
--------- ----------
Income from operations before federal income taxes 198,492 209,062
Provision for federal incomes 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 transfer (net of tax) - 46,737
--------- ---------
- 119,727
--------- ---------
Net income $129,492 $ 312,008
========= ==========
See notes to statutory financial statements.
</TABLE>
- 64 -
<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 period $2,000,000 $2,000,000
========== ==========
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
========== ==========
See notes to statutory financial statements.
</TABLE>
- 65 -
<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 398,729 274,075
Life claims paid - (25,000)
Surrender benefits paid (280,517) (711,857)
Other benefits to policyholders paid - (6,615)
Commissions, expenses and premium and
other taxes paid (111,604) (100,385)
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 short-
term investments (2,518,295) 2,883,550
Cash and short-term investments at beginning
of year 3,023,817 140,267
---------- ---------
Cash and short-term investments at end of
year $ 505,522 $3,023,817
========= ==========
See notes to statutory financial statements.
</TABLE>
- 66 -
<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.
- 67 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
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.
- 68 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
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.
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:
- 69 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
<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 balance $2,684,376 $2,622,749
========== ==========
(A) All bonds were rated NAIC "1" at December 31, 1994 and 1993.
- 70 -
<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
========== ==========
</TABLE>
- 71 -
<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.
- 72 -
<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.*
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and AAG
Securities, Inc.
(b) Form of Selling Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company, AAG
Securities, Inc. and another Broker-Dealer.
(4) Group Contract Form, Certificate Form, and Endorsements.
(a) Group Contract Forms and Endorsements.
(i) Form of Group Flexible Premium Deferred Annuity
Contract.*
(ii) Form of Enhanced Group Flexible Premium
Deferred Annuity Contract.*
(iii) Form of Loan Endorsement to Group Contract.*
(iv) Form of Employer Plan Endorsement to Group
Contract.*
(v) Form of Tax Sheltered Annuity Endorsement to
Group Contract.*
_______________________
* Filed with Pre-Effective Amendment No. 2 to Form N-4 on
November 8, 1995.
- 73 -
<PAGE>
(vi) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract.*
(vii) Form of Long-Term Care Waiver Rider to Group
Contract.*
(b) Certificate of Participation Form and Endorsements.
(i) Form of Certificate of Participation.*
(ii) Form of Certificate of Participation under
Enhanced Contract.*
(iii) Form of Loan Endorsement to Certificate.*
(iv) Form of Employer Plan Endorsement to
Certificate.*
(v) Form of Tax Sheltered Annuity Endorsement to
Certificate.*
(vi) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Certificate.*
(vii) Form of Long-Term Care Waiver Rider to
Certificate.*
(5) (a) Form of Application for Group Flexible Premium
Deferred Annuity Contract.*
(b) Form of Participant Enrollment Form under Group
Flexible Premium Deferred Annuity Contract (ERISA).*
(c) Form of Participant Enrollment Form under Group
Flexible Premium Deferred Annuity Contract (Non-
ERISA).*
(6) (a) Articles of Incorporation of Annuity
Investors(SERVICEMARK) Life Insurance Company.**
(b) Code of Regulations of Annuity Investors(SERVICEMARK)
Life Insurance Company.**
________________________
** Filed with Form N-4 on June 2, 1995.
- 74 -
<PAGE>
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and
Dreyfus Variable Investment Fund.
(b) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and
Dreyfus Stock Index Fund.
(c) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and
Dreyfus Socially Responsible Fund.
(d) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and
Janus Aspen Series.
(e) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and
Merrill Lynch Variable Series Funds, Inc.
(f) Service Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and
American Annuity Group, Inc.
(g) Agreement between AAG Securities, Inc. and AAG
Insurance Agency, Inc.
(h) Investment Service Agreement between Annuity
Investors(SERVICEMARK) Life Insurance Company and
American Annuity Group, Inc.
(9) Opinion and Consent of Counsel.*
(10) (a) Report of Independent Auditors.**
(b) Consent of Independent Auditors.
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
- 75 -
<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.
The following chart indicates the persons controlled by or under
common control with the Company.
- 76 -
<PAGE>
<TABLE>
<CAPTION>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
<S> <C> <C> <C> <C>
American Financial Corporation Ohio 11/15/55 100 Holding Company
American Barge & Towing Company Ohio 03/25/82 100 Inactive
Spartan Transportation Corporation Ohio 07/19/83 100 Mgmt-River
Transportation Equipment
American Financial Corporation Ohio 08/27/63 100 Inactive
American Money Management Corporation Ohio 03/01/73 100 Investment Management
American Money Management International, Netherland Antilles 05/10/85 100 Securities Management
N.V.
Chiquita Brands International, Inc. (and New Jersey 03/30/99 44.86(2) Production/Processing/
subsidiaries) Distribution of Food
Products
Citicasters Inc. Florida 06/18/80 37.47(2) Holding Company
FMI Pennsylvania, Inc. Pennsylvania 11/19/75 100 Holding Company
GACC-340, Inc. Delaware 06/09/88 100 Co-Owner Corporate
Aircraft
GACC-N26LB, Inc. Delaware 02/02/88 100 Co-Owner Corporate
Aircraft
Citicasters Corp. Delaware 12/18/90 100 Holding Company
Citicasters Co. Ohio 12/22/83 100 Operation of
Television/Radio
Stations
Taft-TCI Satellite Services, Inc. Colorado 12/17/81 100 Satellite Communications
Great American Television California 03/19/81 100 Television Program
Productions, Inc. Development
Cine Films, Inc. California 05/15/75 100 Prod./Motion
Picture/Television Films
Cine Guarantors, Inc. California 01/06/71 100 Financial Bonding
Cine Guarantors II, Inc. California 09/04/75 100 Inactive
Great American Merchandising Group, New York 09/04/81 100 Inactive
Inc.
Location Productions, Inc. California 08/07/68 100 Prod./Motion
Picture/Television Films
Location Productions II, Inc. California 05/15/75 100 Prod./Motion
Picture/Television Films
The Sy Fisher Company Agency, Inc. California 07/31/72 100 Inactive
VTTV Productions California 01/30/78 100 Inactive
Dixie Terminal Corporation Ohio 04/23/70 100 Commercial Leasing
Fairmont Holdings, Inc. Ohio 12/15/83 100 Holding Company
Fairmont Pa. Holdings, Inc. Pennsylvania 08/18/83 100 Holding Company
FWC Corporation Ohio 03/16/83 100 Financial Services
- 77 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
Great American Holding Corporation Ohio 11/30/77 100 Holding Company
Great American Insurance Company Ohio 3/7/1872 100 Property/Casualty
Insurance
A B I Group, Inc. Minnesota 07/27/78 100 Inactive
American Business Risk Services, Minnesota 04/19/78 100 Inactive
Inc.
American Insurance Management Minnesota 11/16/82 100 Inactive
Agency, Inc.
Consolidated Underwriters, Inc. Texas 10/14/80 100 Inactive
Agricultural Excess and Surplus Delaware 02/28/79 100 Excess & Surplus Lines
Insurance Company Insurance
Agricultural Insurance Company Ohio 03/23/05 100 Property/Casualty
Insurance
American Alliance Insurance Company Arizona 09/11/45 100 Property/Casualty
Insurance
American Annuity Group, Inc. Delaware 05/15/87 81.43(2) Holding Company
AAG Insurance Agency, Inc. Kentucky 12/06/94 100 Life Insurance Agency
AAG Securities, Inc. Ohio 12/10/93 100 Broker-Dealer
Annuity Investors Life Insurance Ohio 11/31/81 100 Life Insurance Company
Company
GALIC Disbursing Company Ohio 05/31/94 100 Payroll Servicer
Great American Life Insurance Ohio 12/15/59 100 Life Insurance
Company
CHATBAR, Inc. Massachusetts 11/02/93 100 Hotel Operator
GALIC Brothers, Inc. Ohio 11/12/93 80 Real Estate Management
Western Pacific Life Insurance California 08/10/67 100 Life Insurance Company
Company
Lifestyle Financial Investments, Ohio 12/29/93 100 Marketing Services
Inc.
Lifestyle Financial Investments Ohio 03/07/94 beneficial Life Insurance Agency
Agency of Ohio, Inc. interest
Lifestyle Financial Investments Indiana 02/24/94 100 Life Insurance Agency
of Indiana, Inc.
Lifestyle Financial Investments Kentucky 10/03/94 100 Insurance Agency
of Kentucky, Inc.
Lifestyle Financial Investments Minnesota 06/10/85 100 Insurance Agency
of the Northwest, Inc.
Lifestyle Financial Investments North Carolina 07/13/94 100 Insurance Agency
of the Southeast, Inc.
Retirement Resources Group, Inc. Indiana 02/07/95 100 Insurance Agency
SPELCO (UK) Ltd. United Kingdom 00/00/00 99 Inactive
SWTC, Inc. Delaware 00/00/00 100 Inactive
Electromag N.V. Belgium 00/00/00 100 Manf. & Sells Electronic
Components
- 78 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
SWTC Hong Kong Ltd. Hong Kong 00/00/00 100 Inactive
Technomil Ltd. Delaware 00/00/00 100 Inactive
American Custom Insurance Services Ohio 07/27/83 100 Management Holding
Holding Company Company
American Custom Insurance Services California 05/18/92 100 Insurance Agency &
California, Inc. Brokerage
Eden Park Insurance Brokers, Inc. California 02/13/90 100 Wholesale Brokerage for
Surplus Lines
Professional Risk Brokers, Inc. Illinois 03/01/90 100 Insurance Agency
Professional Risk Brokers Insurance, Massachusetts 04/19/94 100 Surplus Lines Brokerage
Inc.
Professional Risk Brokers of Connecticut 07/09/92 100 Insurance Agency &
Connecticut, Inc. Brokerage
Utility Insurance Services, Inc. Texas 04/06/95 100 (2) Texas Local Recording
Agency
Utility Management Services, Inc. Texas 09/07/65 100 Texas Managing General
Agency
American Custom Insurance Services Illinois 07/08/92 100 Underwriting Office
Illinois, Inc.
American Empire Surplus Lines Delaware 07/15/77 100 Excess & Surplus Lines
Insurance Company Insurance
American Empire Insurance Company Ohio 11/26/79 100 Property/Casualty
Insurance
Stonewall Underwriters, Inc. Texas 05/19/75 100 Insurance Agency
Fidelity Environmental Insurance New Jersey 06/30/87 100 Property/Casualty
Company Insurance
American Financial Enterprises, Inc. Connecticut 1871 82.62(2) Closed End Investment
Company
American Insurance Agency, Inc. Kentucky 07/27/67 100 Insurance Agency
American National Fire Insurance New York 08/22/47 100 Property/Casualty
Company Insurance
American Special Risk, Inc. Illinois 12/29/81 100 Insurance
Broker/Managing General
Agency
ABI Special Risk of Arizona, Inc. Arizona 02/06/90 100 Inactive
American Spirit Insurance Company Indiana 04/05/88 100 Property/Casualty
Insurance
OBGC Corporation Florida 11/23/77 80 Real Estate Development
Brothers Property Corporation Ohio 09/08/87 80 Real Estate Investment
Brothers Barrington Corporation Oklahoma 03/18/94 100 Real Estate Holding
Corporation
Brothers Cincinnatian Corporation Ohio 01/25/94 100 Hotel Manager
Brothers Columbine Corporation Oklahoma 03/18/94 100 Real Estate Holding
Corporation
- 79 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
Brothers Landing Corporation Louisiana 02/24/94 100 Real Estate Holding
Corporation
Brothers Pennsylvanian Corporation Pennsylvania 12/23/94 100 Real Estate Holding
Corporation
Brothers Port Richey Corporation Florida 12/06/93 100 Apartment Manager
Brothers Property Management Ohio 09/25/87 100 Real Estate Management
Corporation
Brothers Railyard Corporation Texas 12/14/93 100 Apartment Manager
Crop Managers Insurance Agency, Inc. Kansas 08/09/89 100 Insurance Agency
Dempsey & Siders Agency, Inc. Ohio 05/09/56 100 Insurance Agency
Eagle American Insurance Company Ohio 07/01/87 100 Property/Casualty
Insurance
Eden Park Insurance Company Indiana 01/08/90 100 Special Risk Surplus
Lines
FCIA Management Company, Inc. New York 09/17/91 79 Servicing Agent
GAI-340, Inc. Delaware 06/09/88 100 Co-Owner Corporate
Aircraft
GAI-N26LB, Inc. Delaware 02/02/88 100 Co-Owner Corporate
Aircraft
The Gains Group, Inc. Ohio 01/26/82 100 Marketing of Advertising
Great American Lloyd's, Inc. Texas 08/02/83 100 Attorney-in-Fact--Texas
Lloyd's Company
Great American Lloyd's Insurance Texas 10/09/79 beneficial Lloyd's Plan Insurer
Company interest
Great American Management Services, Ohio 12/05/74 100 Data Processing and
Inc. Equipment Leasing
American Payroll Services, Inc. Ohio 02/20/87 100 Payroll Services
Great American Re Inc. Delaware 05/14/71 100 Reinsurance Intermediary
Great American Risk Management, Inc. Ohio 04/21/80 100 Insurance Risk
Management
Great American--Midwest, Inc. Ohio 12/17/86 100 Management Holding
Company
Great Texas County Mutual Insurance Texas 04/29/54 beneficial Property/Casualty
Company interest Insurance
Grizzly Golf Center, Inc. Ohio 11/08/93 100 Operate Golf Courses
Homestead Snacks Inc. California 03/02/79 100 (2) Meat Snack Distribution
Giant Snacks, Inc. Delaware 07/06/89 100 Meat Snack Distribution
Key Largo Group, Inc. Florida 07/28/81 100 Land Developer & Resort
Operator
The Real Estate, Ltd. Company at Florida 08/20/85 100 Property Sales
Ocean Reef
Key Largo Group Solid Waste, Inc. Florida 12/01/86 100 Trash Removal
Key Largo Group Utility Company Florida 11/26/84 100 Water & Sewer Utility
- 80 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
Mid-Continent Casualty Company Oklahoma 02/26/47 100 Property/Casualty
Insurance
Mid-Continent Insurance Company Oklahoma 08/13/92 100 Property/Casualty
Insurance
Oklahoma Surety Company Oklahoma 08/05/68 100 Property/Casualty
Insurance
National Interstate Corporation Ohio 01/26/89 51 Holding Company
American Highways Insurance Agency California 05/05/94 100 Insurance Agency
National Interstate Insurance Agency Texas 06/07/89 beneficial Insurance Agency
of Texas, Inc. interest
National Interstate Insurance Ohio 02/13/89 100 Insurance Agency
Agency, Inc.
National Interstate Insurance Ohio 02/10/89 100 Property/Casualty
Company Insurance
North America Livestock, Inc. Florida 12/03/82 100 Managing General Agency
Penn Central Reinsurance Company Ohio 12/22/88 100 Property/Casualty
Reinsurance
Pointe Apartments, Inc. Minnesota 06/24/93 100 Real Estate Holding
Corporation
Seven Hills Insurance Company New York 06/30/32 100 Property/Casualty
Reinsurance
Stonewall Insurance Company Alabama 02/18/66 100 Property/Casualty
Insurance
Stonewall Surplus Lines Insurance Delaware 01/12/82 100 Excess & Surplus Lines
Company Insurance
Tamarack American, Inc. Delaware 06/10/86 100 Management Holding
Company
Transport Insurance Company Ohio 05/25/76 100 Property/Casualty
Insurance
American Commonwealth Development Texas 07/23/63 100 Real Estate Development
Company
ACDC Holdings Corporation Texas 05/04/81 100 Real Estate Development
Spring Park Development Company Texas 03/31/71 50 Real Estate Holding Co.
(Jt. Venture)
Instech Corporation Texas 09/02/75 100 Claim & Claim Adjustment
Services
TICO Insurance Company Ohio 06/03/80 100 Property/Casualty
Insurance
Transport Managing General Agency, Texas 05/19/89 100 Managing General Agency
Inc.
Transport Insurance Agency, Inc. Texas 08/21/89 beneficial Insurance Agency
interest
Transport Underwriters Association California 05/11/45 100 Holding Company/Agency
One East Fourth, Inc. Ohio 02/03/64 100 Commercial Leasing
- 81 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
Pioneer Carpet Mills, Inc. Ohio 04/29/76 100 Carpet Manufacturing
Provident Travel Corporation Ohio 07/09/84 100 Travel Agency
TEJ Holdings, Inc. Ohio 12/04/84 100 Real Estate Holdings
TEJ II, Inc. Delaware 10/28/94 100 General Partner
American Financial Warrant Holding Delaware 10/28/94 partnership Securities Holder
Limited Partnership interest
Three East Fourth, Inc. Ohio 08/10/66 100 Commercial Leasing
American Premier Underwriters, Inc. Pennsylvania 1846 100 Diversified
Pennsylvania Company Delaware 12/05/58 100 Holding Company
Atlanta Casualty Company Illinois 06/13/72 100 (2) Property/Casualty
Insurance
American Premier Insurance Company Indiana 11/30/89 100 Property/Casualty
Insurance
Atlanta Specialty Insurance Company Iowa 02/06/74 100 Property/Casualty
Insurance
Mr. Agency of Georgia, Inc. Georgia 04/01/77 100 Insurance Agency
Atlanta Casualty General Agency, Texas 03/15/61 100 Managing General Agency
Inc.
Atlanta Insurance Brokers, Inc. Georgia 02/06/71 100 Insurance Agency
Treaty House, Ltd. (d/b/a Mr. Nevada 11/02/71 100 Insurance Premium
Budget) Finance
Buckeye Management Company Delaware 09/18/86 100 General Partner/Manager
of Pipeline l.p.
Buckeye Pipe Line Company Delaware 09/19/86 100 Pipeline Manager
Great Southwest Corporation Delaware 10/25/78 100 Real Estate Developer
World Houston, Inc. Delaware 08/17/77 100 Real Estate Developer
Infinity Insurance Company Florida 07/09/55 100 Property/Casualty
Insurance
Infinity Agency of Texas, Inc. Texas 07/15/92 100 Managing General Agency
The Infinity Group, Inc. Indiana 07/22/92 100 Insurance Holding
Company
Infinity Select Insurance Company Indiana 06/11/91 100 Property/Casualty
Insurance
Infinity Southern Insurance Alabama 08/05/92 100 Property/Casualty
Corporation Insurance
Leader National Insurance Company Ohio 03/20/63 100 Property/Casualty
Insurance
Budget Insurance Premiums, Inc. Ohio 02/14/64 100 Premium Finance Company
Leader National Agency, Inc. Ohio 04/05/63 100 Brokering Agent
Leader National Agency of Texas, Texas 01/25/94 100 Managing General Agency
Inc.
Leader National Insurance Agency of Arizona 12/05/73 100 Brokering Agent
Arizona
- 82 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
Leader Preferred Insurance Company Ohio 11/07/94 100 Property/Casualty
Insurance
Leader Specialty Insurance Company Indiana 03/10/94 100 Property/Casualty
Insurance
PCC Hotel, Inc. Delaware 07/22/83 100 Inactive
PCC-N26LB, Inc. Delaware 02/02/88 100 Co-Owner Corporate
Aircraft
PCC Technical Industries, Inc. California 03/07/55 100 Holding Company
ESC, Inc. California 11/02/62 100 Connector Accessories
Marathon Manufacturing Companies, Inc. Delaware 11/18/83 100 Holding Company
Marathon Battery Company Delaware 08/18/69 100 Inactive
Marathon Manufacturing Company Delaware 12/07/79 100 Inactive
Marathon Flite-Tronics Company Delaware 06/01/81 100 Inactive
Old MPT Company Delaware 11/18/83 100 Inactive
PCC Maryland Realty Corp. Maryland 08/18/93 100 Real Estate Holding
Company
Penn Camarillo Realty Corp. California 11/24/92 100 Real Estate Holding
Company
PCC-340, Inc. Delaware 06/09/88 100 Co-Owner Corporate
Aircraft
Penn Central UK Limited United Kingdom 10/28/92 100 Insurance Holding
Company
Insurance (GB) Limited United Kingdom 05/13/92 100 Property/Casualty
Insurance
Putnam Holdings, Inc. Delaware 06/06/84 100 Inactive
Putnam Sub, Inc. Delaware 01/03/72 100 Inactive
Republic Indemnity Company of America California 12/05/72 100 Workers' Compensation
Insurance
Republic Indemnity Company of California 10/13/82 100 Workers' Compensation
California Insurance
Risico Management Corporation Delaware 01/10/89 100 Risk Management
Telsta Network Services, Inc. Delaware 10/12/84 100 Inactive
Windsor Insurance Company Indiana 11/05/87 100 (2) Property/Casualty
Insurance
American Deposit Insurance Company Oklahoma 12/28/66 100 Property/Casualty
Insurance
Granite Finance Co., Inc. Texas 11/09/65 100 Premium Financing
Coventry Insurance Company Ohio 09/05/89 100 Property/Casualty
Insurance
El Aguila Compania de Seguros, S.A. de Mexico 11/24/94 100 (2) Property/Casualty
C.V. Insurance
Moore Group Inc. Georgia 12/19/62 100 Insurance Holding
Company/Agency
Casualty Underwriters, Inc. Georgia 10/01/54 51 Insurance Agency
- 83 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
Dudley L. Moore Insurance, Inc. Louisiana 03/30/78 beneficial Insurance Agency
interest
Hallmark General Insurance Agency, Oklahoma 06/16/72 beneficial Insurance Agency
Inc. interest
Middle Tennessee Underwriters, Inc. Tennessee 11/14/69 100 Insurance Agency
Insurance Finance Company Tennessee 01/03/62 100 Premium Financing
Windsor Group, Inc. Georgia 05/23/91 100 Insurance Holding
Company
Regal Insurance Company Indiana 11/05/87 100 Property/Casualty
Insurance
Texas Windsor Group, Inc. Texas 06/23/88 100 Insurance Agency
PCC Real Estate, Inc. New York 12/15/86 100 Holding Company
PCC Billboard Realty Corp. New York 12/15/86 100 Real Estate Developer
PCC Chicago Realty Corp. New York 12/23/86 100 Real Estate Developer
PCC Fordham Realty Corp. New York 10/16/86 100 Real Estate Developer
PCC Gun Hill Realty Corp. New York 12/18/85 100 Real Estate Developer
PCC Irvington Realty Corp. New York 10/15/85 100 Real Estate Developer
PCC Michigan Realty, Inc. Michigan 11/09/87 100 Real Estate Developer
PCC Scarsdale Realty Corp. New York 06/01/86 100 Real Estate Developer
Scarsdale Depot Associates, L.P. Delaware 05/05/89 80 Real Estate Developer
PCC Tuckahoe Realty Corp. New York 02/24/86 100 Real Estate Developer
Penn Central Energy Management Company Delaware 05/11/87 100 Energy Operations
Manager
The Ann Arbor Railroad Company Michigan 1895 99 Inactive
The Associates of the Jersey Company New Jersey 1804 100 Inactive
Delbay Corporation Delaware 12/27/62 100 Inactive
The Indianapolis Union Railway Company Indiana 1872 100 Inactive
Lehigh Valley Railroad Company Pennsylvania 1846 100 Inactive
The New York and Harlem Railroad Company New York 1831 97 Inactive
The Owasco River Railway, Inc. New York 1881 100 Inactive
Penn Central Properties, Inc. Pennsylvania 12/27/82 100 Pennsylvania Real Estate
Penn Towers, Inc. Pennsylvania 04/27/59 100 Inactive
Terminal Realty Penn Co. District of 09/23/68 100 Inactive
Timberglen Limited United Kingdom 10/28/92 100 Investments
United Railroad Corp. Delaware 11/25/81 100 Inactive
Waynesburg Southern Railroad Company Pennsylvania 09/01/66 100 Inactive
The Michigan Central Railroad Company Michigan 12/30/01 100 Inactive
Detroit Manufacturers Railroad Company Michigan 01/30/02 82 Inactive
Pennsylvania-Reading Seashore Line New Jersey 06/14/01 66.67 Inactive
Pittsburgh and Cross Creek Railroad Company Pennsylvania 08/14/70 83 Inactive
- 84 -
<PAGE>
% OF STOCK
OWNED (1)
STATE OF DATE OF BY IMMEDIATE
DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
AMERICAN FINANCIAL GROUP, INC. ---------- -------- -------------- --------------------
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other affiliated
company(ies).
</TABLE>
- 85 -
<PAGE>
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.
- 86 -
<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
- 87 -
<PAGE>
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a 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.
- 88 -
<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. 3 to its Registration Statement to be signed on
its behalf by the undersigned in the City of Cincinnati, State of Ohio on
the 4th day of December, 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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Robert Allen Adams
---------------------------- -------------------------- December 4, 1995
Robert Allen Adams Principal Executive
Officer, Director
/s/ Robert Eugene Allen
----------------------------- -------------------------- December 4, 1995
Robert Eugene Allen Principal Financial
Officer
- 89 -
<PAGE>
/s/ Lynn Edward Laswell
---------------------------- -------------------------- December 4, 1995
Lynn Edward Laswell Principal Accounting
Officer
/s/ Stephen Craig Lindner
---------------------------- -------------------------- December 4, 1995
Stephen Craig Lindner Director
/s/ William Jack Maney, II
---------------------------- -------------------------- December 4, 1995
William Jack Maney, II Director
/s/ James Michael Mortensen
---------------------------- -------------------------- December 4, 1995
James Michael Mortensen Director
/s/ Mark Francis Muething
---------------------------- -------------------------- December 4, 1995
Mark Francis Muething Director
/s/ Jeffrey Scott Tate
---------------------------- -------------------------- December 4, 1995
Jeffrey Scott Tate Director
</TABLE>
- 90 -
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
(1) Resolution of the Board of Directors of
Annuity Investors(SERVICEMARK) Life
Insurance Company authorizing establishment
of Annuity Investors(SERVICEMARK) Variable
Account A*
(3)(a) Distribution Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company and AAG Securities, Inc.
(3)(c)
(3)(b) Form of Selling Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company, AAG Securities, Inc. and another
Broker-Dealer
(4)(a)(i) Form of Group Flexible Premium Deferred
Annuity Contract*
(4)(a)(ii) Form of Enhanced Group Flexible Premium
Deferred Annuity Contract*
(4)(a)(iii) Form of Loan Endorsement to Group Contract*
(4)(a)(iv) Form of Employer Plan Endorsement to Group
Contract*
(4)(a)(v) Form of Tax Sheltered Annuity Endorsement
to Group Contract*
(4)(a)(vi) Form of Qualified Pension, Profit Sharing
and Annuity Plan Endorsement to Group
Contract*
(4)(a)(vii) Form of Long-Term Care Waiver Rider to
Group Contract*
(4)(b)(i) Form of Certificate of Participation*
(4)(b)(ii) Form of Certificate of Participation under
Enhanced Contract*
(4)(b)(iii) Form of Loan Endorsement to Certificate*
- i -
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
(4)(b)(iv) Form of Employer Plan Endorsement to
Certificate*
(4)(b)(v) Form of Tax Sheltered Annuity Endorsement
to Certificate*
(4)(b)(vi) Form of Qualified Pension, Profit Sharing
and Annuity Plan Endorsement to
Certificate*
(4)(b)(vii) Form of Long-Term Care Waiver Rider to
Certificate*
(5)(a) Form of Application for Group Flexible
Premium Deferred Annuity Contract*
(5)(b) Form of Participant Enrollment Form under
Group Flexible Premium Deferred Annuity
Contract (ERISA)*
(5)(c) Form of Participant Enrollment Form under
Group Flexible Premium Deferred Annuity
Contract (Non-ERISA)*
(6)(a) Articles of Incorporation of Annuity
Investors(SERVICEMARK) Life Insurance
Company**
(6)(b) Code of Regulations of Annuity
Investors(SERVICEMARK) Life Insurance
Company**
(8)(a) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company and Dreyfus Variable Investment
Fund
(8)(b) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company and Dreyfus Stock Index Fund
(8)(c) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company and Dreyfus Socially Responsible
Fund
- ii -
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
(8)(d) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company and Janus Aspen Series
(8)(e) Participation Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company and Merrill Lynch Variable Series
Funds, Inc.
(8)(f) Service Agreement between Annuity
Investors(SERVICEMARK) Life Insurance
Company and American Annuity Group, Inc.
(8)(g) Agreement between AAG Securities Inc. and
AAG Insurance Agency, Inc.
(8)(h) Investment Service Agreement between
Annuity Investors(SERVICEMARK) Life
Insurance Company and American Annuity
Group, Inc.
(9) Opinion and Consent of Counsel*
(10)(a) Report of Independent Auditors**
(10)(b) Consent of Independent Auditors
________________
* Filed with Pre-Effective Amendment No. 2 to Form N-4 on November 8,
1995.
** Filed with Form N-4 on June 2, 1995.
** Filed with Form N-4 on June 2, 1995.
- iii -
<PAGE>
<PAGE>
EXHIBIT (3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT dated as of December 1, 1995, by and between ANNUITY
INVESTORS LIFE INSURANCE COMPANY ("AILIC"), an Ohio insurance company, and
AAG SECURITIES, INC. ("AAGS"), an Ohio corporation.
WITNESSETH:
WHEREAS, AAGS is a broker-dealer that engages in the distribution
of investment products; and
WHEREAS, AAGS, together with AAG INSURANCE AGENCY, INC. and
certain affiliated insurance agencies ("AAGI"), an insurance agency that
is affiliated with AAGS, desires to distribute variable annuity contracts
and variable life insurance contracts (collectively, "variable insurance
products") offered by AILIC; and
WHEREAS, AILIC desires to issue certain variable insurance
products described more fully below to the public through AAGS acting as
the principal underwriter and AAGI acting as the principal insurance agent
for such products;
NOW, THEREFORE, in consideration of their mutual promises, AILIC
and AAGS hereby agree as follows:
1. ADDITIONAL DEFINITIONS.
a. Contracts -- The class or classes of variable annuity
contracts set forth on Schedule 1 to this Agreement as in
effect at the time this Agreement is executed, and such
other classes of variable insurance products that may be
added to Schedule 1 from time to time in accordance with
Section 14.b of this Agreement, and including any riders
to such contracts and any other contracts offered in
connection therewith. For this purpose and under this
Agreement generally, a "class of Contracts" shall mean
those Contracts issued by AILIC on the same policy form
or forms and covered by the same Registration Statement.
b. Registration Statement -- At any time that this Agreement
is in effect, each currently effective registration
statement, or currently effective post-effective amend-
ment thereto, relating to a class of Contracts, including
financial statements included in, and all exhibits to,
such registration statement or post-effective amendment.
For purposes of Section 12 of this Agreement, the term
"Registration Statement" means any document which is or
at any time was a Registration Statement within the
meaning of this Section 1.b.
c. Prospectus -- The prospectus and statement of additional
information, if any, included within a Registration
<PAGE>
Statement, except that, if the most recently filed
prospectus and statement of additional information filed
pursuant to Rule 497 under the 1933 Act subsequent to the
date on which a Registration Statement became effective
differs from the prospectus and statement of additional
information included within such Registration Statement
at the time it became effective, the term "Prospectus"
shall refer to the most recently filed prospectus and
statement of additional information filed under Rule 497
under the 1933 Act, from and after the date on which they
each shall have been filed. For purposes of Section 12
of this Agreement, the term "any Prospectus" means any
document which is or at any time was a Prospectus within
the meaning of this Section 1.c.
d. Fund -- An investment company which is included in the
Variable Account and is an investment alternative under a
Contract.
e. Variable Account -- A separate account supporting a class
or classes of Contracts and specified on Schedule 2 as in
effect at the time this Agreement is executed, or as it
may be amended from time to time in accordance with
Section 14.b of this Agreement.
f. 1933 Act -- The Securities Act of 1933, as amended.
g. 1934 Act -- The Securities Exchange Act of 1934, as
amended.
h. 1940 Act -- The Investment Company Act of 1940, as
amended.
i. SEC -- The Securities and Exchange Commission.
j. NASD -- The National Association of Securities Dealers,
Inc.
k. Regulations -- The rules and regulations promulgated by
the SEC under the 1933 Act, the 1934 Act and the 1940 Act
as in effect at the time this Agreement is executed or
thereafter promulgated.
l. Distributor -- A person registered as a broker-dealer and
licensed as a life insurance agent or affiliated with a
person so licensed, and authorized to distribute the
Contracts pursuant to a sales agreement as provided for
in Section 2 of this Agreement.
m. Intermediary Distributor -- A Distributor authorized to
recruit other persons to become Distributors pursuant to
a sales agreement as provided for in Section 2 of this
Agreement.
<PAGE>
n. Affiliate -- With respect to a person, any other person
controlling, controlled by, or under common control with,
such person.
o. Representative -- When used with reference to AAGS, AAGI,
a Distributor or AILIC, an individual who is an associat-
ed person, as that term is defined in the 1934 Act,
thereof.
p. Application -- An application for a Contract.
q. Premium -- A payment made under a Contract by an appli-
cant or purchaser to purchase benefits under the Con-
tract.
r. Customer Service Center -- AILIC Annuity Service Center,
250 East Fifth Street, Cincinnati, Ohio 45202, or such
other location as may be designated in writing from time
to time by AILIC.
s. Agent's Manual -- The Agent's Manual attached hereto as
Exhibit B.
2. DISTRIBUTION ACTIVITIES
a. Authority
AILIC authorizes AAGS on an exclusive basis, and AAGS
accepts such authority, subject to the registration requirements
of the 1933 Act and the 1940 Act and the provisions of the 1934
Act, to be the distributor and principal underwriter of the
Contracts.
AILIC hereby authorizes AAGS to solicit Applications and
Premiums directly from customers and prospective customers and to
select all persons who will be authorized to engage in
solicitation activities with respect to the Contracts, such
selection activity to include the recruitment and appointment of
third parties as Distributors which in turn may be authorized as
Intermediary Distributors to engage in solicitation activities
involving the solicitation of Applications and Premiums directly
from customers and prospective customers and/or as Intermediary
Distributors to recruit other third parties to act as
Distributors, in each case as AAGS and AAGI may in their sole
discretion so provide or limit. AAGS shall enter into separate
written sales agreements with such Distributors. Such sales
agreements shall be substantially in the form attached to this
Agreement as Exhibit A, but may include such additional or
alternative terms and conditions that are not otherwise
inconsistent with this Agreement, subject to AILIC's review and
prior written consent, which consent shall not be unreasonably
withheld.
<PAGE>
AAGS is hereby vested with power and authority to select
and recommend AAGS Representatives, and to authorize a
Distributor to select and recommend Distributor Representatives,
for appointment as agents of AILIC, and only Representatives so
recommended by AAGS or a Distributor shall become agents of AILIC
with authority to engage in solicitation activities with respect
to the Contracts. AAGS shall be solely responsible for
background investigations of the AAGS Representatives to
determine their qualifications, good character, and moral fitness
to sell the Contracts. AILIC shall appoint in the appropriate
states or jurisdictions such selected and recommended agents,
provided that AILIC reserves the right, which right shall not be
exercised unreasonably, to refuse to appoint as agent any AAGS
Representative or Distributor Representative, or, once appointed,
to terminate the same at any time with or without cause. No
other individuals, persons or entities shall have authority to
engage in solicitation activities with respect to the Contracts,
unless expressly approved in writing by AAGS, in its sole
discretion, except to the extent permitted by the following
paragraph.
AAGS shall use its best efforts to market the Contracts
actively, directly or through Distributors, subject to applicable
material market and regulatory conditions.
AAGS and AAGS Representatives shall not have authority,
and shall not grant authority to Distributors or Distributor
Representatives, on behalf of AILIC: to make, alter or discharge
any Contract or other contract entered into pursuant to a
Contract; to waive any Contract forfeiture provision; to extend
the time of paying any Premium; or to receive any monies or
Premiums (except for the sole purpose of forwarding monies or
Premiums to AILIC). AAGS shall not expend, nor contract for the
expenditure of, the funds of AILIC. AAGS shall not possess or
exercise any authority on behalf of AILIC other than that
expressly conferred on AAGS by this Agreement.
b. Solicitation Activities, Applications and Premiums
Solicitation activities shall be subject to applicable
laws and regulations, the Agent's Manual, and the rules set forth
herein.
(1) AILIC shall forward to AAGS Applications and
other materials for use by AAGS and the
Distributors in their solicitation activities
with respect to the Contracts. AILIC shall
notify AAGS in writing of those states or
jurisdictions which require delivery of a
statement of additional information with a
prospectus to a prospective purchaser.
(2) AAGS shall require that AAGS Representatives ap-
pointed by AILIC as agents not make
<PAGE>
recommendations to an applicant to purchase a
Contract in the absence of reasonable grounds to
believe that the purchase of the Contract is
suitable for the applicant. While not limited to
the following, a determination of suitability
shall be based on information supplied to an AAGS
Representative after a reasonable inquiry
concerning the applicant's insurance and
investment objectives and financial situation and
needs.
(3) All Premiums paid by check or money order that
are collected by AAGS or any AAGS Representative
shall be remitted promptly in full, together with
any Applications, forms and any other required
documentation, to the Customer Service Center.
Checks or money orders in payment of Premiums
shall be drawn to the order of "Annuity Investors
Life Insurance Company." Premiums may be
transmitted by wire order from AAGS to the
Customer Service Center in accordance with the
procedures set forth in the Agent's Manual. If
any Premium is held at any time by AAGS, AAGS
shall hold such Premium in a fiduciary capacity
and such Premium shall be remitted promptly to
AILIC. All such Premiums, whether by check,
money order or wire, shall be the property of
AILIC.
(4) AAGS acknowledges that AILIC shall have the
unconditional right to reject, in whole or in
part, any Application. In the event an
Application is rejected, any Premium submitted
therewith shall be returned by AILIC to the
applicant. AILIC shall notify AAGS and, if
applicable, the Distributor who submitted the
Application, of such action. In the event that a
purchaser exercises his right to cancel under his
Contract, any amount to be refunded as provided
in such Contract shall be so refunded to the
purchaser by AILIC. AILIC shall notify AAGS and,
if applicable, the Distributor who solicited the
Contract, of such action.
(5) AAGS shall not encourage a prospective applicant
to surrender or exchange an insurance contract in
order to purchase a Contract, nor shall AAGS en-
courage any Contractholder to surrender or
exchange a Contract in order to purchase another
insurance contract. AAGS shall require, through
all sales agreements entered into pursuant to
Section 2.a of this Agreement, that each
Distributor likewise agree not to encourage a
prospective applicant to surrender or exchange
<PAGE>
any insurance contract in order to purchase a
Contract, nor to encourage a Contractholder to
surrender or exchange a Contract in order to
purchase another insurance contract.
c. Independent Contractor
AAGS shall act as an independent contractor in the
performance of its duties and obligations under this Agreement
and nothing herein contained shall constitute AAGS or AAGS
Representatives or employees or the Distributors or their
respective Representatives or employees as employees of AILIC in
connection with the distribution of the Contracts.
d. Supervision and 1934 Act Compliance
AAGS shall train, supervise and be solely responsible for
the conduct of AAGS Representatives in their solicitation of
Applications and Premiums, and shall supervise their compliance
with applicable rules and regulations of any securities
regulatory agencies that have jurisdiction over variable
insurance product activities. AAGS understands and acknowledges
that neither it nor its Representatives is authorized by AILIC to
give any information or make any representation in regard to a
class of Contracts in connection with the offer or sale of such
class of Contracts that is not in accordance with the then-
currently effective Prospectus or for such class of Contracts or
in the then-currently effective prospectus or statement of
additional information for the Funds, or in current advertising
materials for such class of Contracts authorized by AILIC.
AILIC, as agent for AAGS, shall confirm to each applicant
for and purchaser of a Contract in accordance with Rule 10b-10
under the 1934 Act acceptance of Premiums and such other
transactions as are required by Rule 10b-10 or administrative
interpretations thereunder. AILIC shall maintain and preserve
such books and records with respect to such confirmations in
conformity with the requirements of Rules 17a-3 and 17a-4 under
the 1934 Act to the extent such requirements apply. AILIC shall
maintain all such books and records and hold such books and
records on behalf of and as agent for AAGS whose property they
are and shall remain, and acknowledges that such books and
records are at all times subject to inspection by the SEC in
accordance with Section 17(a) of the 1934 Act, the NASD and any
state agency which has jurisdiction.
3. MARKETING MATERIALS
AILIC shall be primarily responsible for the design and
preparation of all promotional, sales and advertising material
relating to the Contracts. It is understood that as a general
matter AILIC shall initiate and design all forms of promotional,
sales and advertising material for the Contracts. Prior to any
<PAGE>
use with members of the public, the following procedures shall be
observed:
a. AILIC shall provide to AAGS copies of all promotional,
sales and advertising material developed by AILIC for
AAGS' review and written approval, and AAGS shall be
given a reasonable amount of time to complete its review.
b. If any such promotional, sales or advertising material
names a Fund or a Fund's investment adviser, AILIC shall
then furnish such material to such Fund or such Fund's
distributor, and approval shall be obtained from such
Fund or such Fund's distributor before use.
c. The parties shall respond on a prompt and timely basis in
approving any such material and shall act reasonably in
connection therewith.
d. AAGS shall be responsible for filing such material it
develops, as required, with the NASD and any state
securities regulatory authorities.
e. AILIC shall be responsible for filing all promotional,
sales or advertising material, as required, with any
state insurance regulatory authorities.
f. The parties shall notify each other expeditiously of any
comments provided by the NASD or any securities or
insurance regulatory authority on such material, and will
cooperate expeditiously in resolving and implementing any
comments, as applicable.
4. COMPENSATION AND EXPENSES
a. AILIC shall pay commissions to AAGS on Premiums paid
under Contracts sold pursuant to this Agreement and any
sales agreements entered into pursuant to Section 2 of
this Agreement in the amounts set forth on Schedule 2.
AAGS shall be responsible for all tax reporting informa-
tion which AAGS is required to provide under applicable
tax law to its agents, Representatives or employees with
respect to the Contracts.
b. With respect to this Agreement, AILIC shall be obligated
to pay all expenses in connection with:
(1) the preparation and filing of each Registration
Statement (including each pre-effective and post-
effective amendment thereto) and the preparation
and filing of each Prospectus (including any pre-
liminary and each definitive Prospectus);
(2) the preparation, underwriting, issuance and
administration of the Contracts;
<PAGE>
(3) any registration, qualification or approval of
the Contracts for offer and sale required under
the securities, blue-sky laws or insurance laws
of the states and other jurisdictions in the
Territory;
(4) the expenses of printing the Prospectuses and the
Contracts and the Funds (any supplements thereto)
for distribution to prospective customers;
(5) all registration fees for the Contracts payable
to the SEC and the NASD;
(6) the printing of definitive Prospectuses for the
Contracts and any supplements thereto for
distribution to existing Contractowners;
c. AAGS shall be obligated to pay the following expenses
related to its distribution of the Contracts:
(1) the compensation of AAGS Representatives and em-
ployees and any Distributors;
(2) expenses associated with the initial licensing
and training of AAGS Representatives and other
employees involved in the distribution of the
Contracts;
(3) the costs of any promotional, sales and
advertising material that AAGS develops for its
use in connection with the sale of the Contracts;
and
(4) any other expenses incurred by AAGS or its Repre-
sentatives or employees for the purpose of
carrying out the obligations of AAGS hereunder.
d. Other than as specifically provided in this Agreement,
AILIC shall pay all expenses that it incurs in connection
with this Agreement and AAGS shall pay all expenses that
it incurs in connection with this Agreement; it being
understood that neither AAGS nor AAGI shall be responsi-
ble for any expenses relating to the Contracts or the
processing of Contracts, Premiums or Applications,
including without limitation any expenses incurred in
connection with the return of Premiums solicited by
Distributors for Applications rejected or not timely
received by AILIC, or relating to any of the matters or
acts contemplated by this Agreement, except to the extent
expressly set forth herein.
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF AILIC
AILIC represents and warrants to AAGS, on the effective
date of each Registration Statement for the Contracts (or for
each class of Contracts) and at each time that AAGS sells a
Contract and, with respect to Sections 5.g., 5.i., and 5.j.
below, also on the date of this Agreement, as follows:
a. Such Registration Statement has been declared effective
by the SEC or has become effective in accordance with the
Regulations.
b. Such Registration Statement and the related Prospectus
comply in all material respects with the provisions of
the 1933 Act and the 1940 Act and the Regulations, and
neither the Registration Statement nor the Prospectus
contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading,
in light of the circumstances in which they were made;
provided, however, that none of the representations and
warranties in this Section 5.b. shall apply to statements
or omissions from a Registration Statement or Prospectus
made in reliance upon and in conformity with information
furnished to AILIC in writing by AAGS expressly for use
in such Registration Statement.
c. AILIC has not received any notice from the SEC with
respect to such Registration Statement pursuant to
Section 8(e) of the 1940 Act and no stop order under the
1933 Act has been issued and no proceeding therefor has
been instituted or threatened by the SEC.
d. The auditors who certified the financial statements
included in such Registration Statement and the related
Prospectus are independent public auditors as required by
the 1933 Act and the Regulations.
e. The financial statements included in such Registration
Statement present fairly the respective financial
positions of AILIC and the Variable Account (as applica-
ble) at the dates indicated; and such financial state-
ments have been prepared in conformity with generally
accepted accounting principles in the United States
applied on a consistent basis.
f. Subsequent to the respective dates as of which informa-
tion is given in such Registration Statement or the
related Prospectus, there has not been any material
adverse change in the condition, financial or otherwise,
of AILIC or the Variable Account (as applicable) which
would cause such information to be materially misleading.
<PAGE>
g. AILIC has been duly organized and is validly existing as
a corporation in good standing under the laws of the
State of Ohio with full power and authority to own, lease
and operate its properties and conduct its business in
the manner described in such Registration Statement, is
duly qualified to transact the business of a life insur-
ance company, and is in good standing, in each state or
other jurisdiction in which the Contracts will be offered
for sale.
h. The form of the Contracts has been approved to the extent
required by the Ohio Insurance Commissioner and by the
governmental agency responsible for regulating insurance
companies in each other state or jurisdiction in which
the Contracts will be offered for sale.
i. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate action by
AILIC, and when so executed and delivered this Agreement
shall be the valid and binding obligation of AILIC
enforceable in accordance with its terms.
j. The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms of this
Agreement, shall not conflict with, result in any breach
of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default
under, the articles of incorporation or code of regula-
tions of AILIC, or any indenture, agreement, mortgage,
deed of trust, or other instrument to which AILIC is a
party or by which it is bound, or violate any law, or, to
the best of AILIC's knowledge, any order, rule or
regulation applicable to AILIC of any court or of any
federal or state regulatory body, administrative agency
or any other governmental instrumentality having juris-
diction over AILIC or any of its properties.
k. No consent, approval, authorization or order of any court
or governmental authority or agency is required for the
issuance or sale of the Contracts or for the consummation
of the transactions contemplated by this Agreement, that
has not been obtained.
l. AILIC has filed with the SEC all statements and other
documents required for registration under the provisions
of the 1940 Act and the Regulations thereunder, of the
Variable Account supporting the Contracts, and such
registration has been effected; further, there are no
contracts or documents of AILIC which are required to be
filed as exhibits to such Registration Statement by the
1933 Act, the 1940 Act or the Regulations which have not
been so filed.
<PAGE>
m. AILIC has obtained all exemptive or other orders of the
SEC necessary to make the public offering and consummate
the sale of such Contracts pursuant to this Agreement and
to permit the operation of the Variable Account support-
ing such Contracts as contemplated in the related
Prospectus.
n. Such class of Contracts has been duly authorized by AILIC
and conforms to the descriptions thereof in the Registra-
tion Statement for such class of Contracts and the
related Prospectus and, when issued as contemplated by
such Registration Statement, shall constitute legal,
validly issued and binding obligations of AILIC in
accordance with their terms.
6. UNDERTAKINGS OF AILIC
a. AILIC shall use its best efforts:
(1) to maintain the registration of the Contracts
with the SEC and any state securities commissions
of any state or other jurisdiction in which the
Contracts will be offered for sale where the
securities or blue-sky laws of such state or
other jurisdiction require registration of the
Contracts, including without limitation using its
best efforts to prevent a stop order from being
issued or if a stop order has been issued to
cause such stop order to be withdrawn;
(2) to gain approval of the Contract forms where re-
quired under the insurance laws and regulations
of each state or other jurisdiction in which the
Contracts will be offered for sale; and
(3) to keep such registrations and approvals in
effect thereafter so long as the Contracts are
outstanding.
b. AILIC shall take all action required to cause the
Contracts to comply, and to continue to comply, as
annuity contracts and as registered securities under
applicable laws and regulations, and to cause each
Registration Statement and each related Prospectus to
comply, and to continue to comply, with:
(1) all applicable federal laws and regulations; and
(2) all applicable laws and regulations of each state
and other jurisdiction in which the Contracts
will be offered for sale.
c. AILIC shall notify AAGS immediately or in any event as
soon as possible under the circumstances:
<PAGE>
(1) When a Registration Statement has become
effective or any post-effective amendment with
respect to a Registration Statement becomes
effective thereafter;
(2) Of any request by the SEC for any amendment to a
Registration Statement, for any supplement to a
Prospectus, or for additional information;
(3) Of any event which makes any material statement
made in a Registration Statement or a Prospectus
untrue in any material respect or results in a
material omission in a Registration Statement or
a Prospectus;
(4) Of the issuance by the SEC of any stop order with
respect to a Registration Statement or any amend-
ment thereto, or the initiation of any
proceedings for that purpose or for any other
purpose relating to the registration and/or
offering of the Contracts;
(5) In which states or jurisdictions registration of
the Contracts is required under the securities or
blue-sky laws, and when such registration(s) have
become effective;
(6) In which states or jurisdictions approval of the
Contract forms is required under the applicable
insurance laws and regulations, and when such
approvals have been obtained; and
(7) In what states or jurisdictions the Contracts may
not be lawfully sold.
d. AILIC shall furnish to AAGS without charge promptly after
filing five (5) complete copies of each Registration
Statement and any pre-effective or post-effective
amendment thereto, including financial statements and all
exhibits not incorporated therein by reference.
e. Schedule 3 attached to this Agreement is a list provided
by AILIC of all states and jurisdictions in which the
Contracts can lawfully be offered as of the date of this
Agreement. AILIC shall promptly notify AAGS of any
change on Schedule 3.
f. AILIC shall provide AAGS, without charge, with as many
copies of each Prospectus (and any amendments or supple-
ments to such Prospectus) as AAGS may reasonably request.
g. AILIC shall timely file all required reports, statements
and amendments required to be filed by or for AILIC and
each Variable Account under the 1933 Act, the 1934 Act,
<PAGE>
and/or the 1940 Act or the Regulations and under applica-
ble state insurance statutes and regulations.
h. AILIC shall deliver to AAGS, as soon as practicable after
it becomes available, the Quarterly Statements, Annual
Statement for AILIC and for each Variable Account in the
form filed with the State of Ohio.
i. AILIC shall provide AAGS access to such records, officers
and employees of AILIC at reasonable times as is neces-
sary to enable AAGS to fulfill its obligation, as the
underwriter under the 1933 Act for the Contracts, to
perform due diligence and to use reasonable care.
j. AILIC shall have the responsibility for maintaining the
appointment records of all agents appointed by AILIC to
distribute the Contracts.
7. CONDITIONS TO OBLIGATIONS OF AAGS
The obligations of AAGS hereunder are subject to the
accuracy of the representations and warranties of AILIC contained
in this Agreement, to the performance by AILIC of its obligations
hereunder, and to the condition that prior to the time that AAGS
begins offering the Contracts and each time, during the period in
which AAGS is offering the Contracts, that an amendment to a
Registration Statement becomes effective, AAGS shall have
received an officer's certificate executed by a senior executive
officer of AILIC to the effect that the representations and
warranties set forth in Section 5 of this Agreement are true and
correct;
8. REPRESENTATIONS AND WARRANTIES OF AAGS
AAGS represents and warrants to AILIC, on the date hereof
and at each time that AAGS sells a Contract, as follows:
a. AAGS has taken all actions including, without limitation,
those necessary under its articles of incorporation, code
of regulations and applicable state corporate law,
necessary to authorize the execution, delivery and
performance of this Agreement and all transactions
contemplated hereunder.
b. AAGS is and shall remain registered during the term of
this Agreement as a broker-dealer under the 1934 Act, is
a member with the NASD, and is duly registered under
applicable state securities laws.
c. AAGS shall solicit, and shall instruct Distributors to
solicit, sales of the Contracts only in those states or
jurisdictions listed on Schedule 3 as in effect at the
time of solicitation.
<PAGE>
d. AAGS is and shall remain during the term of this Agree-
ment in compliance with Section 9(a) of the 1940 Act.
9. UNDERTAKINGS OF AAGS
a. All solicitation and sales activities engaged in by AAGS
and the AAGS Representatives in regard to the Contracts
shall be in compliance with all applicable federal and
state securities laws and regulations, as well as all
applicable insurance laws and regulations. No AAGS
Representative shall solicit the sale of a Contract
unless at the time of such solicitation such individual
is:
(1) Properly licensed by the NASD and all other
applicable state insurance and securities
regulatory authorities; and
(2) Appointed as an insurance agent of AILIC except
as may be otherwise agreed to by AILIC.
b. Neither AAGS nor any AAGS Representative shall give any
information or make any representation in regard to a
class of Contracts in connection with the offer or sale
of such class of Contracts that is not in accordance with
the then-currently effective Prospectus for such class of
Contracts, or in the then-currently effective prospectus
or statement of additional information for a Fund, or in
current advertising materials for such class of Contracts
authorized by AILIC.
c. Neither AAGS nor any AAGS Representative shall offer,
attempt to offer, or solicit Applications for the
Contracts or deliver the Contracts, in any state or other
jurisdiction as to which AILIC has notified AAGS in
accordance with Section 6.c.(7) of this Agreement that
such Contracts may not legally be sold or offered for
sale.
10. RECORDS
AILIC and AAGS each shall maintain such accounts, books
and other documents as are required to be maintained by each of
them by applicable laws and regulations and shall preserve such
accounts, books and other documents for the periods prescribed by
such laws and regulations. The accounts, books and records of
AILIC, the Variable Account(s) and AAGS as to all transactions
hereunder shall be maintained so as to clearly and accurately
disclose the nature and details of the transactions, including
such accounting information as necessary to support the
reasonableness of the amounts paid by AILIC hereunder. Each
party or designee thereof shall have the right to inspect and
audit such accounts, books and records of the other party during
normal business hours upon reasonable written notice to the other
<PAGE>
party. Each party shall keep confidential all information
obtained pursuant to such an inspection or audit, and shall
disclose such information to third parties only upon receipt of
written authorization from the other party, except as required by
law.
11. EXAMINATIONS, INVESTIGATIONS AND PROCEEDINGS
a. Cooperation
AILIC and AAGS shall cooperate fully in any insurance
regulatory examination or investigation or proceeding or judicial
proceeding arising in connection with the offering, sale or
distribution of the Contracts distributed under this Agreement.
Further, AILIC and AAGS shall cooperate fully in any securities
regulatory investigation or proceeding or judicial proceeding
with respect to AILIC, AAGS, their Affiliates and their agents,
Representatives or employees to the extent that such
investigation or proceeding is in connection with the offering,
sale or distribution of the Contracts distributed under this
Agreement. Without limiting the foregoing, AILIC and AAGS shall
notify each other promptly of any customer complaint or notice of
any regulatory investigation or proceeding or judicial proceeding
received by either party with respect to AILIC, AAGS or any of
their Affiliates, agents, Representatives or employees or which
may affect AILIC's issuance of any Contract marketed under this
Agreement.
b. Customer Complaint
In the case of a customer complaint, AAGS and AILIC shall
cooperate in investigating such complaint and any response by
either party to such complaint shall be sent to the other party
for written approval not less than five business days prior to
its being sent to the customer or any regulatory authority,
except that if a more prompt response is required, the proposed
response shall be communicated by telephone or facsimile. In any
event, neither party shall release any such response without the
other party's prior written approval. AILIC shall maintain all
complaint records by applicable regulations and applicable
insurance laws and regulations. AAGS shall maintain all records
required by the rules and regulations of the NASD.
12. INDEMNIFICATION
a. By AILIC
AILIC shall indemnify and hold harmless AAGS and each
person who controls or is associated with AAGS within the meaning
of such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement
<PAGE>
of, any action, suit or proceeding or any claim asserted), to
which AAGS and/or any such person may become subject, under any
statute or regulation, any NASD rule or interpretation, at common
law or otherwise, insofar as such losses, claims, damages or
liabilities:
(1) arise out of or are based upon any untrue
statement or alleged untrue statement of a
material fact or omission or alleged omission to
state a material fact required to be stated
therein or necessary to make the statements
therein not misleading, in light of the
circumstances in which they were made, contained
in any (i) Registration Statement or in any
Prospectus; or (ii) blue-sky application or other
document executed by AILIC specifically for the
purpose of qualifying any or all of the Contracts
for sale under the securities laws of any
jurisdiction; provided that AILIC shall not be
liable in any such case to the extent that such
loss, claim, damage or liability arises out of,
or is based upon, an untrue statement or alleged
untrue statement or omission or alleged omission
made in reliance upon information furnished in
writing to AILIC by AAGS specifically for use in
the preparation of any such Registration
Statement or any such blue-sky application or any
amendment thereof or supplement thereto.
(2) result because of the terms of any Contract or
because of any breach by AILIC of any provision
of this Agreement or of any Contract or which
proximately result from any activities of AILIC's
officers, directors, employees or agents or their
failure to take any action in connection with the
sale, processing or administration of the
Contracts; or
(3) result from any breach of any representation or
warranty made by AILIC in this Agreement.
This indemnification agreement shall be in addition to any
liability that AILIC may otherwise have; provided, however, that
no person shall be entitled to indemnification pursuant to this
provision if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless
disregard of duty by the person seeking indemnification.
b. By AAGS
AAGS shall indemnify and hold harmless AILIC and each
person who controls or is associated with AILIC within the
meaning of such terms under the federal securities laws, and any
officer, director, employee or agent of the foregoing, against
<PAGE>
any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim
asserted), to which AILIC and/or any such person may become
subject under any statute or regulation, and NASD rule or
interpretation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities:
(1) arise out of or are based upon any untrue
statement or alleged untrue statement of a
material fact or omission or alleged omission to
state a material fact required to be stated
therein or necessary in order to make the
statements therein not misleading, in light of
the circumstances in which they were made,
contained in any (i) Registration Statement or in
any Prospectus (ii) blue-sky application or other
document executed by AILIC specifically for the
purpose of qualifying any or all of the Contracts
for sale under the securities laws of any
jurisdiction; in each case to the extent, but
only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged
omission made in reliance upon information fur-
nished in writing to AILIC by AAGS specifically
for use in the preparation of any such
Registration Statement or any such blue-sky
application or any amendment thereof or
supplement thereto.
(2) result because of any use by AAGS or any AAGS
Representative of promotional, sales or
advertising material not authorized by AILIC or
any verbal or written misrepresentations by AAGS
or any AAGS Representative or any unlawful sales
practices concerning the Contracts by AAGS or any
AAGS Representative under federal securities laws
or NASD regulations, but not including state
insurance laws compliance with which is a
responsibility of AILIC under this Agreement or
otherwise; or
(3) result from any claims by agents or
Representatives or employees of AAGS for
commissions or other compensation or remuneration
of any type; or
(4) result from any breach by AAGS or any AAGS Repre-
sentative of any provision of this Agreement or
any breach of any representation or warranty made
by AAGS in this Agreement.
<PAGE>
This indemnification shall be in addition to any liability that
AAGS may otherwise have; provided, however, that no person shall
be entitled to indemnification pursuant to this provision if such
loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of
duty by the person seeking indemnification.
c. General
After receipt by a party entitled to indemnification
("indemnified party") under this Section 12 of notice of the
commencement of any action, if a claim in respect thereof is to
be made against any person obligated to provide indemnification
under this Section 12 ("indemnifying party"), such indemnified
party shall notify the indemnifying party in writing of the
commencement thereof as soon as practicable thereafter, provided
that the omission to so notify the indemnifying party shall not
relieve the indemnifying party from the liability under this
Section 12, except to the extent that the omission results in a
failure of actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of this failure
to give such notice. The indemnifying party, upon the request of
the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any
such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (1) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (2) the named parties
to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent
but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party shall indemnify the
indemnified party from and against any loss or liability by
reason of such settlement or judgment.
The indemnification provisions contained in this Section
12 shall remain operative in full force and effect, regardless of
(1) any investigation made by or on behalf of AILIC or by or on
behalf of any controlling person thereof, (2) delivery of any
Contracts and Premiums therefor, and (3) any termination of this
Agreement. A successor by law of AILIC or AAGS, as the case may
be, shall be entitled to the benefits of the indemnification
provisions contained in this Section 11.
<PAGE>
13. TERMINATION
a. This Agreement shall be effective upon execution by the
parties hereto and will remain in effect unless terminat-
ed, as provided in this Section 13.
b. This Agreement shall terminate automatically if it is
assigned by a party without the prior written consent of
the other party.
c. This Agreement may be terminated at the option of either
party to this Agreement upon the other party's material
breach of any provision of this Agreement or of any
representation made in this Agreement, unless such breach
has been cured within 10 days after receipt of notice of
breach from the non-breaching party.
d. Upon termination of this Agreement all authorizations,
rights and obligations shall cease except: (1) the
obligation to settle accounts hereunder, including
commissions on Premiums subsequently received for
Contracts in effect at the time of termination or issued
pursuant to Applications received by AILIC prior to
termination; and (2) the obligations contained in
Sections 4, 6, 10, 11 and 12 hereof.
14. MISCELLANEOUS
a. Binding Effect
Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary
corporate action by such party and when so executed and delivered
this Agreement shall be the valid and binding obligation of such
party enforceable in accordance with its terms. This Agreement
shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto of the
respective successors and assigns of the parties hereto provided
that neither party shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
other party.
b. Amendment of Schedules
The parties to this Agreement may amend Schedules 1, 2
and 3 to this Agreement from time to time to reflect additions of
or changes in any class of Contracts, Commissions or
jurisdictions in which Contracts may be offered and sold. The
provisions of this Agreement shall be equally applicable to each
such class of Contracts that may be added to the Schedules,
unless the context otherwise requires. Any other change in the
terms or provisions of this Agreement shall be by written
agreement between AILIC and AAGS.
<PAGE>
c. Rights, Remedies, etc. are Cumulative
The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.
Failure of either party to insist upon strict compliance with any
of the conditions of this Agreement shall not be construed as a
waiver of any of the conditions, but the same shall remain in
full force and effect. No waiver of any of the provisions of
this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.
d. Notices.
All notices hereunder are to be made in writing and shall
be given:
If to AILIC, to:
Annuity Investors Life Insurance Company
250 East Fifth Street, 10th Floor
Cincinnati, Ohio 45202
Attention: General Counsel
If to AAGS, to:
AAG Securities, Inc.
250 East Fifth Street, 10th Floor
Cincinnati, Ohio 45202
Attention: General Counsel
or such other address as such party may hereafter specify in
writing. Each such notice to a party shall be either hand
delivered or transmitted by registered or certified United States
mail with return receipt requested, and shall be effective upon
delivery.
e. Arbitration
Any controversy or claim arising out of relating to this
Agreement, or the breach hereof, shall be settled by arbitration
in the forum jointly selected by AILIC and AAGS (but if
applicable law requires some other forum, then such other forum)
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
f. Interpretation; Jurisdiction
This Agreement constitutes the whole agreement between
the parties thereto with respect to the subject matter hereof,
and supersedes all prior oral or written understandings,
<PAGE>
agreements or negotiations between the parties with respect to
such subject matter. No prior writings by or between the parties
with respect to the subject matter hereof shall be used by either
party in connection with the interpretation of any provision of
this Agreement. This Agreement shall be construed and its
provisions interpreted under and in accordance with the internal
laws of the State of Ohio without giving effect to principles of
conflict of laws.
g. Severability
This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action
prohibited by applicable federal or state law or profit a party
from taking action required by applicable federal or state law,
then it is the intention of the parties hereto that such
provision shall be enforced to the extent permitted under the
law, and, in any event, that all other provisions of this
Agreement shall remain valid and duly enforceable as if the
provision at issue had never been a part hereof.
h. Section and Other Headings
The headings in this Agreement are included for conve-
nience of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction or
effect.
i. Counterparts
This Agreement may be executed in two or more counter-
parts, each of which taken together shall constitute one and the
same instrument.
j. Regulation
This Agreement shall be subject to the provisions of the
1933 Act, 1934 Act and 1940 Act and the Regulations and the rules
and regulations of the NASD, from time to time in effect,
including such exemptions from the 1940 Act as the SEC may grant,
and the terms hereof shall be interpreted and construed in
accordance therewith.
<PAGE>
IN WITNESS WHEREOF, each party hereto represents that the officer
signing this Agreement on the party's behalf is duly authorized to execute
this Agreement; and the parties hereto have caused this Agreement to be
duly executed by such authorized officers on the date specified below.
ANNUITY INVESTORS LIFE INSURANCE
COMPANY
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
AAG SECURITIES, INC.
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
<PAGE>
Schedule 1
Contracts Subject to Distribution Agreement
<TABLE>
<CAPTION>
<S> <C> <C>
Contract Marketing Name Policy Form Nos. SEC Registration
No.
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</TABLE>
<PAGE>
Schedule 2
----------
Commissions
<PAGE>
Schedule 3
List of Jurisdictions in which the
Contracts may be Offered for Sale
<PAGE>
<PAGE>
EXHIBIT (3)(b)
SELLING AGREEMENT
AGREEMENT made this _______ day of _________________, 19__, by
and between ANNUITY INVESTORS LIFE INSURANCE COMPANY, an Ohio life
insurance company ("AILIC"), AAG SECURITIES, INC., an Ohio corporation
("AAGS") and _______________________________________, a ___________
corporation ("Broker/Dealer") and any and all insurance agency affiliates
or subsidiaries of Broker/Dealer ("Agencies"). Broker/Dealer and the
Agencies are hereinafter referred to as the "Producers." The Agencies are
listed in Appendix I to this Agreement, as may be amended from time to
time.
WHEREAS, AILIC issues certain variable annuity and variable
insurance policies, and certificates thereunder in the case of group
policies ("Contracts"), described in this Agreement, which are deemed
securities under the Securities Act of 1933, and
WHEREAS, AAGS is duly licensed as a broker-dealer with the
National Association of Securities Dealers, Inc. ("NASD") and the
Securities and Exchange Commission ("SEC"), and
WHEREAS, Broker/Dealer is duly licensed as a broker-dealer with
the NASD and SEC, and
WHEREAS, AILIC has appointed AAGS as the principal underwriter of
the Contracts, and
WHEREAS, AAGS proposes to have Broker/Dealer's registered
representatives ("Representatives") who are also duly licensed insurance
agents solicit sales of the Contracts, and
WHEREAS, AAGS delegates to Broker/Dealer and the Agencies, to the
extent legally permitted, training, supervisory and certain administrative
responsibilities and duties.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Appointment. AILIC and AAGS hereby appoint Broker/Dealer
and the Agencies under the securities and insurance laws to supervise
Representatives in connection with the distribution of the Contracts,
solely in accordance with the Contract and the then current Prospectus
relating thereto, and to provide certain services as described herein.
2. Supervision of Representatives. Broker/Dealer shall have
full responsibility for the training and supervision of all
Representatives associated with Broker/Dealer who are engaged directly or
indirectly in the offer or sale of the Contracts and all such persons
shall be subject to the control of Broker/Dealer with respect to such
persons' securities-related activities in connection with the Contracts.
Broker/Dealer will establish rules, procedures and supervisory and
<PAGE>
inspection techniques necessary to diligently supervise the activities of
its Representatives.
Producers will cause the Representatives to be trained in the
sale of the Contracts; Producers warrant that Representatives qualify
under applicable federal and state laws to engage in the sale of the
Contracts; and Producers will cause such Representatives to be registered
representatives of Broker/Dealer before such Representatives engage in the
solicitation of applications for the Contracts in jurisdictions where
AILIC has authorized such solicitation. Broker/Dealer has full
responsibility in connection with the training, supervision and control of
the Representatives as contemplated by Section 15(b)(4)(E) of the
Securities Exchange Act of 1934 (the "1934 Act"). By submitting to AAGS or
AILIC a registered representative for appointment, Broker/Dealer shall be
deemed to have certified Representatives' qualifications including those
set forth in Appendix II hereto. Upon request, Broker/Dealer shall confirm
the foregoing by delivering a letter in the form of Appendix II hereto.
Producers shall ensure that the Contracts are offered, sold and serviced
only through Representatives who comply with all appropriate state
insurance licensing requirements and solely in accordance with the
Contract and the then current Prospectus relating thereto.
3. Appointment of Agents. With respect to each Representa-
tive to be appointed, Broker/Dealer shall submit to AAGS an Agent Data
Form, a copy of a current NASD status sheet, a copy of the appropriate
state insurance license and such additional documents as requested by
AILIC or AAGS and shall await approval from AILIC before a Representative
shall be permitted to solicit applications for the sale of Contracts.
4. Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to supervision by Broker/Dealer,
ceases to be a registered representative of Broker/Dealer, or fails to
meet the rules and standards imposed by Broker/Dealer on its
Representatives, Broker/Dealer shall certify such fact to AILIC and shall
immediately notify such Representative that he or she is no longer
authorized to sell the Contracts, and Broker/Dealer shall take whatever
additional action may be necessary to terminate the sales activities of
such Representative relating to the Contracts.
5. Compliance with NASD Rules of Fair Practice and Federal
and State Security and Insurance Laws. Broker/Dealer shall and shall
ensure that its Representatives fully comply with the requirements of the
1934 Act and the NASD and all other applicable federal or state laws
applicable to the offer, sale and service of the Contracts and will
establish such rules and procedures as may be necessary to cause diligent
supervision of the securities and insurance activities of Representatives.
Broker/Dealer agrees to maintain all transactions, books and records
concerning the activities of their Representatives as required by the SEC,
NASD or other regulatory agencies having jurisdiction, or under applicable
state insurance laws or regulations. Upon request by AILIC or AAGS,
Broker/Dealer shall furnish or make available for inspection, such
- 2 -
<PAGE>
appropriate records as may be necessary to establish such diligent
supervision.
6. Prospectus, Sales Promotion Material and Advertising.
Broker/Dealer shall be provided with, and Broker/Dealer shall forward to
Representatives, prospectuses relating to the Contracts and such other
material as AILIC or AAGS determines to be necessary or desirable for use
in connection with sales of the Contracts. Broker/Dealer shall ensure that
no sales promotion materials or advertising related to AILIC, AAGS and/or
the Contracts shall be used by Representatives unless the specific item
has first been approved by AILIC or AAGS in writing. Producers and their
Representative shall discontinue the use of any item when notified by
AILIC or AAGS.
No Producer or any Representative shall in connection with the
offer or sale of Contracts use any advertising material, prospectus,
proposal or representation either in general or in relation to a Contract,
AAGS or AILIC unless furnished by AAGS or AILIC or until the consent of
AAGS or AILIC is first obtained. Neither Producers nor any Representative
shall issue or recirculate any illustration, circular, statement or
memorandum of any sort, misrepresenting the terms, benefits or advantages
of any Contract, or make any misleading statement as to benefits thereon
or the financial position of AILIC.
7. Applications. Producers shall cause all applications for
Contracts to be made on application forms supplied by AILIC and all
payments collected by Broker/Dealer or any Representative to be remitted
promptly in full, together with such application forms and any other
documentation, directly to AILIC at the address indicated on such
application. Producers shall review all such applications for
completeness. Producers shall be solely responsible for determining the
suitability of Contracts for purchasers. Checks or money orders for
Purchase Payments shall be drawn to the order of AILIC. All applications
are subject to acceptance or rejection by AILIC at its sole discretion.
Producers agree to remit in full to AILIC immediately upon receipt all
Purchase Payments received on such applications, forms and any other
required documentation obtained in respect to the Contracts.
8. Compensation.
(a) Commissions. Commissions payable in connection
with the Contracts for which Broker/Dealer is the broker of record shall
be payable in accordance with the Schedule(s) attached hereto and made a
part hereof and shall be paid by or on behalf of AAGS to one or more of
the Producers in accordance with applicable insurance and securities laws.
Payment of commissions to the Producer(s) shall be full and sole
compensation for all services and expenses and for the fulfillment of
duties under this Agreement. These commissions will be paid as a
percentage of Purchase Payments received in cash and accepted by AILIC on
applications obtained by the Representatives of Broker/Dealer provided a
Contract is issued, delivered to and accepted by the applicant. Upon
termination of this Agreement, all compensation to Broker/Dealer hereunder
- 3 -
<PAGE>
shall cease; however, Producers shall continue to be liable for any
chargebacks (as defined in Subsections (A), (B) and (C) below). Producers
shall have no interest in any surrender charges, deductions or other fees
payable to AILIC or AAGS. The Producers shall pay the person(s) entitled
thereto as provided in any agreement between Producers and the
Representatives, and AILIC and AAGS shall have no responsibility or
liability therefor.
A) If AAGS has paid any compensation in
advance, Producers hereby agree that they are indebted to AAGS if
the Purchase Payment on which the compensation is based is not
paid within the time provided by the Contract, or allowed by
AILIC, or, if the Purchase Payment is paid, if Producers would
not have been entitled to the compensation when the Purchase
Payment is paid. AAGS, in its sole discretion, will determine
whether or not Producers would have been entitled to the
compensation when the Purchase Payment is paid.
B) Upon demand by AAGS, the Producers
hereby agree to return to AAGS any compensation paid to them
based on refunds or adjustments of Contract values, in whole or
in part, including in the event of termination, modification or
recision of a Contract. AILIC may in its sole discretion, and at
any time, terminate, modify or rescind the sale of any Contract
or contract issued by it, and Producers are indebted to AAGS for
the amount of compensation deemed necessary to refund until
Producers repay such amount.
C) Any compensation which would be due
Producers under this Agreement shall not become due if any
Producer is indebted to AAGS or AILIC. In the case of such
indebtedness, any compensation will be applied by AAGS to reduce
the indebtedness, regardless of any claim or lien by Producers or
by someone other than AAGS. Upon termination of this Agreement,
the Producers shall immediately pay to AAGS any and all amounts
which are owed.
The foregoing subsections A, B and C shall survive the
termination of this Agreement.
(b) Time of Payment. AAGS shall pay or cause to be
paid any compensation due Producers within fifteen (15) business days
after the end of the calendar month in which Purchase Payments upon which
such compensation is based are accepted by AILIC, and for which Contracts
have been issued and accepted by the applicant.
(c) Amendments of Schedules. AAGS may, upon at least
ten (10) business days prior written notice to Broker/Dealer, amend the
attached Schedule(s) made part hereof. Any such amendments shall be in
writing and shall apply to premiums received by AILIC after the effective
date of such written notice.
- 4 -
<PAGE>
(d) Prohibition Against Rebates and Replacements.
Except as permitted by law, if any Producer or any Representative of
Broker/Dealer shall rebate or offer to rebate all or any part of a
Purchase Payment or commission on a Contract, or if any Producer or any
Representative of Broker/Dealer provides or offers to provide an applicant
with other valuable consideration or inducement in connection with a
Contract, the same shall be grounds for termination of this Agreement by
AILIC or AAGS. If any Producer, or any Representative of Broker/Dealer
shall withhold any Purchase Payment on a Contract, the same shall also be
grounds for termination of this Agreement by AILIC or AAGS. If any
Producer, or any Representative of Broker/Dealer, shall at any time induce
or endeavor to induce any person paying Purchase Payments on any Contract
issued hereunder to discontinue Purchase Payments or to relinquish any
such Contract except under circumstances in which there are reasonable
grounds for believing the Contract is not suitable for such person, any
and all compensation due Producers shall cease and terminate.
(e) Indebtedness. Nothing in this Agreement shall be
construed as giving Broker/Dealer the right to incur an indebtedness on
behalf of AILIC or AAGS.
9. Investigations. Producers, AAGS and AILIC agree to
cooperate fully in any investigation or proceeding with respect to any
Representative or other agent or the Producers to the extent that such
investigation or proceeding is in connection with the Contracts. Without
limiting the foregoing:
(a) AILIC and AAGS will promptly notify Producers of
any substantive customer complaint or notice of any regulatory
investigation or proceeding or judicial proceeding received by it with
respect to Producers or any Representative or other agent of Producers
with respect to AILIC or AAGS which may affect the issuance of the
Contracts marketed under this Agreement.
(b) Producers will promptly notify AILIC and AAGS of
any substantive customer complaint or notice of any regulatory
investigation or proceeding or judicial proceeding received by Producers
with respect to Producers or to any Representative or other agent of
Producers in connection with the Contracts or any activity in connection
therewith.
In the case of a substantive complaint in connection with the
Contracts, AILIC, AAGS, and Producers will cooperate in investigating such
complaint. In connection therewith, Producers shall provide AILIC and AAGS
with all information reasonably requested. AILIC and AAGS shall respond to
and defend any such complaint.
10. Independent Contractors. Producers in performing their
duties hereunder shall be acting as independent contractors and not as
agents or employees of AILIC or AAGS. In addition, nothing contained
herein shall be construed as a partnership among AILIC, AAGS and
Producers.
- 5 -
<PAGE>
11. Indemnification. Producers shall indemnify and hold
harmless AILIC and AAGS from any claims, damages, expenses (including
reasonable attorneys' fees and expenses), liabilities or causes of action,
asserted or brought by anyone, resulting from any negligent, fraudulent,
or intentional acts, omissions, or errors of Producers, their employees,
registered representatives, other representatives, or agents in the
offering for sale, solicitation, or servicing of the Contracts, and from
any negligent, fraudulent, or intentional acts, omissions, or errors of
Producers, their employees, registered representatives, other
representatives, or agents in violation of Federal or State laws or
regulations and NASD rules of any nature, applicable to the offering for
sale, solicitation, or servicing of the Contracts.
Broker/Dealer shall assume full responsibility for the activities
of all persons associated with it who are engaged directly or indirectly
in the sales and servicing operations of Broker/Dealer. Broker/Dealer
shall indemnify and hold harmless AILIC and AAGS from any claims, damages,
expenses, liabilities or causes of action, asserted or brought by anyone,
resulting from any private business transactions of any associated persons
which are the subject of this paragraph.
AILIC and AAGS shall indemnify and hold harmless Producers from
any claims, damages, expenses, liabilities or causes of action, asserted
or brought by anyone, resulting from any negligent, fraudulent, or
intentional acts, omissions, or errors of AILIC or AAGS or their employees
in the offering for sale, solicitation, or servicing of the Contracts and
from any negligent, fraudulent, or intentional acts, omissions, or errors
of AILIC or AAGS or their employees in violation of Federal or State laws
or regulations and NASD rules of any nature, applicable to the offering
for sale, solicitation, or servicing of the Contracts.
12. Termination. AAGS may terminate this Agreement immedi-
ately and without notice if the Broker/Dealer fails to maintain its
registration as a broker/dealer under the 1934 Act or a member of the
NASD. AAGS may terminate this Agreement immediately upon providing written
notice to Broker/Dealer or Agency if Broker/Dealer or Agency violates this
Agreement or fails to perform to AAGS's satisfaction under the terms and
conditions of this Agreement or if Broker/Dealer or Agency becomes
insolvent or files a petition for bankruptcy, reorganization or
liquidation under applicable law. AAGS and Broker/Dealer or Agency shall
each have the right, upon thirty days' written notice to the other, to
terminate this agreement for whatever reason deemed appropriate by such
party. Notwithstanding the termination of this Agreement, AAGS,
Broker/Dealer and Agency acknowledge that each of them shall be
individually and respectively liable, responsible and accountable for any
and all actions undertaken prior to the effective date of the termination
of this Agreement. In furtherance of the foregoing, the provisions of
Sections 8, 9, 10, 11 and 15 hereof shall survive termination
13. Fidelity Bond. Broker/Dealer shall secure and maintain a
fidelity bond in at least the amounts prescribed under Article III,
Section 32 of the NASD Rules of Fair Practice. Broker/Dealer shall provide
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<PAGE>
AAGS with a copy of said bond within thirty days after executing this
Agreement.
14. Confirmations. Upon or prior to completion of each
transaction for which the issuance of a confirmation is legally required,
a confirmation reflecting the fact of the transaction and those items
under SEC Rule 10b-10 will be promptly forwarded by AILIC on AAGS's
behalf. A copy of such confirmation will be made available to
Broker/Dealer.
15. Scope of Authority for Processing Business.
Broker/Dealer shall be authorized to: (a) accept applications for
Contracts, (b) receive for forwarding to AILIC the Purchase Payments paid
in connection with any such applications, (c) deliver the Contracts issued
to the applicants by AILIC, and (d) collect Purchase Payments for
forwarding to AILIC as specifically directed by such applicants who have
authorized Broker/Dealer to act on their behalf.
Broker/Dealer is not authorized to: (a) alter any applications
or Contracts, (b) collect or in any manner receive premiums from
applicants in the form of checks, money orders or electronic funds
transfers payable to any person or entity other than AILIC, (c) waive any
forfeiture, (d) make any settlement of any claim or claims, or (e) perform
any function other than as expressly authorized in the preceding
paragraph.
16. Miscellaneous. AAGS and AILIC reserve the right, without
notice to Producers, to suspend, withdraw, or modify the offering of the
Contracts or to change the conditions of their offering with respect to
anyone. Producers are not authorized to market any Contract until notified
by AILIC or AAGS of an effective registration statement therefor with the
Securities and Exchange Commission. AAGS will provide Broker/Dealer with a
list, and updates thereto which list the jurisdictions in which the
Contracts may be sold.
The right is reserved to AILIC and AAGS to contract separately
with any employee, representative or agent of Producers in connection with
the Contracts or otherwise, provided that the terms of any such contract
do not conflict with the provisions of this Agreement. Nothing contained
herein shall prevent or restrict (i) AILIC or AAGS from marketing said
Contracts through other broker/dealers, insurance agents and brokers, and
through its own organization, or (ii) Producers from acting as agent
and/or broker for other insurance companies, whether or not affiliated
with a Producer, in any jurisdiction with respect to any insurance or
securities product, including securities products similar or identical to
those of AILIC or AAGS. Neither Producers nor their Representatives shall
have any right of exclusivity to market and sell Contracts in any
geographical area.
Any manuals, guides, books, tapes, programs and other materials,
if any, developed by AILIC or AAGS, which may be delivered to
Broker/Dealer from time to time will be owned solely by AILIC or AAGS, as
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<PAGE>
the case may be; however, during such time as this Agreement is in effect
between the parties hereto, if the Producers elect to do so,
Representatives may use any such manuals, guides, books, programs and
other materials which may have been delivered to the Producers but may use
them solely in the Producers' business hereunder, and upon such terms and
conditions as AILIC or AAGS may establish at the time of such delivery.
Upon termination of this Agreement, such items will be returned promptly
to AAGS. Included on Appendix I is a list of jurisdictions in which
Broker/Dealer or Agency is duly authorized to sell the Contracts and
receive commissions thereon and Producers represent that this list is true
and complete.
17. Notices, Etc. All notices, demands, billings, requests
and other written communications hereunder shall be deemed to have been
properly given to Producers when delivered by hand or sent by registered
or certified United States mail, postage prepaid and addressed to
Producers at _________________________________________________________.
Any communications to AILIC or AAGS shall be deemed properly given if
delivered by hand or sent by registered or certified United States mail,
postage prepaid and addressed to AILIC or AAGS, respectively, at 250 East
Fifth Street, 10th Floor, Cincinnati, Ohio 45202, Attention: Mark F.
Muething, Esq. The address for notice hereunder may be changed by giving
written notice of such change to the other parties in accordance with the
provisions of this Section 17.
18. Governing Law. This Agreement shall be interpreted in
accordance with the laws of the State of Ohio. The parties hereto agree
that any state or federal court located in Hamilton County, Ohio shall
have sole and exclusive jurisdiction and be the appropriate venue for any
required judicial interpretation and enforcement of this Agreement.
19. Binding Effect. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule, or otherwise,
the remainder of this Agreement shall not be affected thereby.
20. No Assignment. This Agreement, and the rights and duties
hereunder, may not be assigned or delegated except as expressly provided
for herein. Commissions to be paid pursuant to this Agreement may not be
assigned without the consent of AAGS.
21. No Waiver. Any failure to enforce any right under this
Agreement or to object to any violations of its terms shall not operate as
a waiver of any rights.
This Agreement shall be effective as of the date it is fully
executed by all parties. This Agreement constitutes the entire Agreement
between the parties hereto. However, AILIC and AAGS reserve the right to
modify the Schedules as provided herein. AILIC and AAGS further reserve
the right to amend from time to time this Agreement, other than its
schedule, by providing thirty (30) days written notice to the
Broker/Dealer. Broker/Dealer shall be deemed to have accepted all terms
and conditions set forth in such amendment if no objections are received
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<PAGE>
in writing by AILIC or AAGS within fifteen (15) days after notification is
mailed. This Agreement supersedes in its entirety any and all previous
agreements among the parties hereto with respect to the Contracts;
provided, however, any former agreement shall survive with respect to any
Contracts offered or sold during the term thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officials thereunto duly authorized, as
of the day and year first above written.
ANNUITY INVESTORS LIFE AAG SECURITIES, INC.
INSURANCE COMPANY
BY: ____________________________ BY: ___________________________
Name: __________________ Name: ________________
Title:__________________ Title: _______________
BROKER/DEALER:
_______________________________
BY: ___________________________
Name: ________________
Title: _______________
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<PAGE>
APPENDIX I
[LIST OF AGENCIES]
States
Name of Agency in which Licensed Taxpayer I.D. No.
-------------- ----------------- -----------------
By executing below, the foregoing entities agree to join in this
Agreement as an Agency and be bound by all terms of such Agreement.
Name of Agency
_____________________________
By: _________________________
Its: ________________________
Name of Agency
_____________________________
By: _________________________
Its: ________________________
Name of Agency
_____________________________
By: _________________________
Its: ________________________
Name of Agency
_____________________________
By: _________________________
Its: ________________________
<PAGE>
APPENDIX II
General Letter of Recommendation
BROKER/DEALER hereby certifies to AAGS and AILIC that all the
following requirements will be fulfilled in conjunction with the
submission of licensing/appointment papers for all applicants as agents of
AILIC submitted by BROKER/DEALER. BROKER/DEALER will, upon request,
forward proof of compliance with same to AAGS and AILIC in a timely
manner.
1. We have made a thorough and diligent inquiry and investi-
gation relative to each applicant's identity, residence
and business reputation and declare that each applicant
is personally known to us, has been examined by us, is
known to be of good moral character, has a good business
reputation, is reliable, is financially responsible and
is worthy of a license. Each individual is trustworthy,
competent and qualified to act as an agent for AILIC to
hold himself out in good faith to the general public.
2. We have on file a U-4 form which was completed by each
applicant. We have fulfilled all the necessary investi-
gative requirements for the registration of each appli-
cant as a registered representative through our NASD
member firm and each applicant is presently registered as
an NASD registered representative.
The above information in our files indicates no fact or
condition which would disqualify the applicant from
receiving a license and all the findings of all investi-
gative information is favorable.
3. We certify that all educational requirements have been
met for the specified state each applicant is requesting
a license in, and that all such persons have fulfilled
the appropriate examination, education and training
requirements.
4. If the applicant is required to submit his picture, his
signature, and securities registration in the state in
which he is applying for a license, we certify that those
items forwarded to AILIC are those of the applicant and
the securities registration is a true copy of the
original.
5. We hereby warrant that the applicant is not applying for
a license with AILIC in order to place insurance chiefly
and solely on his life or property, or lives or property
of his relatives, or lines or property of his associates.
6. We will not permit any applicant to transact insurance as
an agent until duly licensed therefore. No applicants
<PAGE>
have been given a contract or furnished supplies, nor
have any applicants been permitted to write, solicit
business, or act as an agent in any capacity, and they
will not be so permitted until the certificate of
authority or license applied for is received.
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<PAGE>
<PAGE>
Exhibit (8)(a)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 21st day of November, 1995,
between Annuity Investors Life Insurance Company ("Insurance Company"), a
life insurance company organized under the laws of the State of Ohio, and
DREYFUS VARIABLE INVESTMENT FUND ("Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Trustees of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the Fund calculates net
asset value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract that uses the
Fund as an underlying investment medium. Individuals who
participate under a group Contract are "Participants".
1.6 "Contractholder" shall mean any entity that is a party to a
Contract with a Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as
defined by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates,
including Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company
(including Insurance Company), which offers variable annuity and/or
variable life insurance contracts to the public and which has
entered into an agreement with the Fund for the purpose of making
Fund shares available to serve as an underlying investment medium
for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement
of additional information, as most recently filed with the
Commission.
1.11 "Separate Account" shall mean Annuity Investors Variable Account A,
a separate account established by Insurance Company in accordance
with the laws of the State of Ohio.
<PAGE>
1.12 "Software Program" shall mean the software program used by the Fund
for providing Fund and account balance information including net
asset value per share. Such Program may include the Lion System.
In situations where the Lion System or any other Software Program
used by the Fund is not available, such information may be provided
by telephone and confirmed by facsimiles. The Lion System shall be
provided to Insurance Company at no charge.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an
insurance company duly organized and in good standing under
applicable law; (b) it has legally and validly established the
Separate Account pursuant to the laws of the State of Ohio for the
purpose of offering to the public certain individual and group
variable annuity contracts; (c) it has registered or will register
the Separate Account as a unit investment trust under the Act to
serve as the segregated investment account for the Contracts; and
(d) each Separate Account is eligible to invest in shares of the
Fund without such investment disqualifying the Fund as an
investment medium for insurance company separate accounts
supporting variable annuity contracts or variable life insurance
contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts
will be described in a registration statement filed under the
Securities Act of 1933, as amended ("1933 Act"); (b) the Contracts
will be issued and sold in compliance in all material respects with
all applicable federal and state laws; and (c) the sale of the
Contracts shall comply in all material respects with state
insurance law requirements. Insurance Company agrees to inform the
Fund promptly of any investment restrictions imposed by state
insurance law and applicable to the Fund.
2.3 Insurance Company represents and warrants that the income, gains
and losses, whether or not realized, from assets allocated to the
Separate Account are, in accordance with the applicable Contracts,
to be credited to or charged against such Separate Account without
regard to other income, gains or losses from assets allocated to
any other accounts of Insurance Company. Insurance Company
represents and warrants that the assets of the Separate Account are
and will be kept separate from Insurance Company's General Account
and any other separate accounts Insurance Company may have, and
will not be charged with liabilities from any business that
Insurance Company may conduct or the liabilities of any companies
affiliated with Insurance Company.
2.4 Fund represents that the Fund is registered with the Commission
under the Act as an open-end, diversified management investment
company and possesses, and shall maintain, all legal and regulatory
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<PAGE>
licenses, approvals, consents and/or exemptions required for Fund
to operate and offer its shares as an underlying investment medium
for Participating Companies. The Fund has established eight series
of shares (each, a "Series") and may in the future establish other
series of shares.
2.5 Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), and that it will make every
effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify Insurance
Company immediately upon having a reasonable basis for believing
that it has ceased to so qualify or that it might not so qualify in
the future.
2.6 Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life
insurance policies or annuity contracts, whichever is appropriate,
under applicable provisions of the Code, and that it will make
every effort to maintain such treatment and that it will notify the
Fund and Dreyfus immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future. Insurance Company
agrees that any prospectus offering a Contract that is a "modified
endowment contract," as that term is defined in Section 7702A of
the Code, will identify such Contract as a modified endowment
contract (or policy).
2.7 Fund agrees that the Fund's assets shall be managed and invested in
a manner that complies with the requirements of Section 817(h) of
the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject
to the other terms of this Agreement) to make Series' shares
available to other Participating Companies and contractholders.
2.9 Fund represents and warrants that any of its trustees, officers,
employees, investment advisers, and other individuals/entities who
deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less
than that required by Rule 17g-1 under the Act. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees
and agents who deal with the money and/or securities of the Fund
are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage in an amount not less than the
coverage required to be maintained by the Fund. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
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<PAGE>
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for
the investment of certain amounts in the Series' shares.
3.2 Fund agrees to make the shares of its Series available for purchase
at the then applicable net asset value per share by the Separate
Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, the Fund may refuse to sell the
shares of any Series to any person, or suspend or terminate the
offering of the shares of any Series if such action is required by
law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board, acting in good faith and in light of
its fiduciary duties under federal and any applicable state laws,
necessary and in the best interests of the shareholders of such
Series.
3.3 Fund agrees that shares of the Fund will be sold only to
Participating Companies and their separate accounts and to the
general accounts of those Participating Companies and their
affiliates. No shares of any Series will be sold to the general
public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain (loss) information for each Series
available on a per-share and Series basis to Insurance Company by
6:00 p.m. Eastern Time on each Business Day. Any material errors
in the calculation of net asset value, dividend and capital gain
(loss) information shall be reported immediately upon discovery to
Insurance Company. Non-material errors will be corrected in the
next Business Day's net asset value per share for the Series in
question.
3.5 At the end of each Business Day, Insurance Company will use the
information described in Sections 3.2 and 3.4 to calculate the
Separate Account unit values for the day. Using this unit value,
Insurance Company will process the day's Separate Account
transactions received by it by the close of trading on the floor of
the New York Stock Exchange (currently 4:00 p.m. Eastern time) to
determine the net dollar amount of Series shares which will be
purchased or redeemed at that day's closing net asset value per
share for such Series. The net purchase or redemption orders will
be transmitted to the Fund by Insurance Company by 11:00 a.m.
Eastern Time on the Business Day next following Insurance Company's
receipt of that information.
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<PAGE>
3.6 Fund appoints Insurance Company as its agent for the limited
purpose of accepting orders for the purchase and redemption of
shares of each Series for the Separate Account. Fund will execute
orders for any Series at the applicable net asset value per share
determined as of the close of trading on the day of receipt of such
orders by Insurance Company acting as agent ("effective trade
date"), provided that the Fund receives notice of such orders by
11:00 a.m. Eastern Time on the next following Business Day and, if
such orders request the purchase of Series shares, the conditions
specified in Section 3.8, as applicable, are satisfied. A
redemption or purchase request for any Series that does not satisfy
the conditions specified in this Section and in Section 3.8, as
applicable, will be effected at the net asset value computed for
such Series on the Business Day immediately preceding the Business
Day upon which such conditions have been satisfied in accordance
with the requirements of this Section and Section 3.8.
3.7 Insurance Company will use its best efforts to notify Fund in
advance of any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Series
shares, Insurance Company will pay for such purchases by wiring
Federal Funds to Fund or its designated custodial account on the
day the order is transmitted. Insurance Company shall make all
reasonable efforts to transmit to the Fund payment in Federal Funds
by 12:00 noon Eastern Time on the Business Day the Fund receives
the notice of the order pursuant to Section 3.5. Fund will execute
such orders at the applicable net asset value per share determined
as of the close of trading on the effective trade date if Fund
receives payment in Federal Funds by 12:00 midnight Eastern Time on
the Business Day the Fund receives the notice of the order pursuant
to Section 3.5. If payment in Federal Funds for any purchase is
not received or is received by the Fund after 12:00 noon Eastern
Time on such Business Day, Insurance Company shall promptly upon
the Fund's request, reimburse the Fund for any charges, costs,
fees, interest or other expenses incurred by the Fund in connection
with any advances to, or borrowings or overdrafts by, the Fund, or
any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request.
Payment for Series shares redeemed by the Separate Account or the
Insurance Company shall be made in Federal Funds transmitted by
wire to the Insurance Company or any other designated person on the
next Business Day after the Fund is properly notified of the
redemption order of Series shares (unless redemption proceeds are
to be applied to the purchase of Fund shares of other Series),
except that the Fund reserves the right to delay payment of
redemption proceeds to the extent permitted under Section 22(e) of
the 1940 Act. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption
proceeds by the Insurance Company; the Insurance Company alone
shall be responsible for such action.
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<PAGE>
3.9 Fund has the obligation to ensure that Series shares are registered
with applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by
Insurance Company. Transfer of Series shares will be by book entry
only. No share certificates will be issued to Insurance Company.
Insurance Company will record shares ordered from Fund in an
appropriate title for the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of
shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on
the first Business Day thereafter, Fund shall communicate to
Insurance Company the amount of dividend and capital gain, if any,
per share of each Series. All dividends and capital gains of any
Series shall be automatically reinvested in additional shares of
the relevant Series at the applicable net asset value per share of
such Series on the payable date. Fund shall, on the day after the
payable date or, if not a Business Day, on the first Business Day
thereafter, notify Insurance Company of the number of shares so
issued.
3.13 This Agreement does not cover the sale of any Fund shares to the
Insurance Company general account.
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<PAGE>
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of
each month for all of Insurance Company's accounts by the fifteenth
(15th) Business Day of the following month.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other
printed materials (which the Fund customarily provides to its
shareholders) in quantities as Insurance Company may reasonably
request for distribution to each Contractholder and Participant.
4.3 Fund will provide to Insurance Company at least one complete copy
of all registration statements, Prospectuses, reports, proxy
statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its
shares, contemporaneously with the filing of such document with the
Commission or other regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to
any of the above, that relate to the Contracts or the Separate
Account, contemporaneously with the filing of such document with
the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Series,
including but not limited to management fees, administrative
expenses and legal and regulatory costs, will be made in the
determination of the relevant Series' daily net asset value per
share so as to accumulate to an annual charge at the rate set forth
in the Fund's Prospectus. Excluded from the expense limitation
described herein shall be brokerage commissions and transaction
fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly
any expenses of the Fund or expenses relating to the distribution
of its shares. Insurance Company shall pay the following expenses
or costs:
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus, or
marketing materials for prospective Insurance Company
- 7 -
<PAGE>
Contractholders and Participants as Dreyfus and Insurance
Company shall agree from time to time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders
and Participants.
c. Distribution expenses of Fund materials or marketing
materials for Insurance Company Contractholders and
Participants.
Except as provided herein, all other Fund expenses shall not be
borne by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated December
23, 1987 of the Securities and Exchange Commission under Section
6(c) of the Act and, in particular, has reviewed the conditions to
the relief set forth in the related Notice. As set forth therein,
Insurance Company agrees to report any potential or existing
conflicts promptly to the Board, and in particular whenever
contract voting instructions are disregarded, and recognizes that
it will be responsible for assisting the Board in carrying out its
responsibilities under such application. Insurance Company agrees
to carry out such responsibilities with a view to the interests of
existing Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists
with regard to Contractholder investments in the Fund, the Board
shall give prompt notice to all Participating Companies. If the
Board determines that Insurance Company is responsible for causing
or creating said conflict, Insurance Company shall at its sole cost
and expense, and to the extent reasonably practicable (as
determined by a majority of the Disinterested Board Members), take
such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may
include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from
the Series and reinvesting such assets in a different
investment medium, or submitting the question of whether such
segregation should be implemented to a vote or all affected
Contractholders; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a
decision by Insurance Company to disregard Contractholder voting
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<PAGE>
instructions and said decision represents a minority position or
would preclude a majority vote by all Contractholders having an
interest in the Fund, Insurance Company may be required, at the
Board's election, to withdraw the Separate Account's investment in
the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested
Board Members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to bear the expense of establishing
a new funding medium for any Contract. Insurance Company shall not
be required by this Article to establish a new funding medium for
any Contract if an offer to do so has been declined by vote of a
majority of the Contractholders materially adversely affected by
the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by
the Separate Account or the Fund taken or omitted as a result of
any act or failure to act by Insurance Company pursuant to this
Article VI shall relieve Insurance Company of its obligations
under, or otherwise affect the operation of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to
Insurance Company, of the Fund's proxy material, annual and semi-
annual reports to shareholders and other communications to
shareholders in such quantity as Insurance Company shall reasonably
require for distributing to Contractholders or Participants.
Insurance Company shall:
a. solicit voting instructions from Contractholders or
Participants on a timely basis and in accordance with
applicable law;
b. vote the Series shares in accordance with instructions
received from Contractholders or Participants; and
c. vote Series shares for which no instructions have been
received in the same proportion as Series shares for which
instructions have been received.
Insurance Company agrees to be responsible for assuring that voting
Fund shares for the Separate Account is conducted in a manner
consistent with other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior
written consent of the Fund and Dreyfus, solicit, induce or
encourage Contractholders to (a) change or supplement the Fund's
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current investment adviser or (b) change, modify, substitute, add
to or delete the Fund from the current investment media for the
Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance
Company with the following documents, in quantities as Insurance
Company may reasonably request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which
shall have the requisite licenses to solicit applications for the
sale of Contracts. No representation is made as to the number or
amount of Contracts that are to be sold by Insurance Company.
Insurance Company shall make reasonable efforts to market the
Contracts and shall comply with all applicable federal and state
laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to
the Fund, each piece of sales literature or other promotional
material in which the Fund, its investment adviser or the
administrator is named, at least fifteen Business Days prior to its
use. No such material shall be used unless the Fund approves such
material. Such approval (if given) must be in writing and shall be
presumed not given if not received within ten Business Days after
receipt of such material. The Fund shall use all reasonable
efforts to respond within ten days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund or any Series in connection with the sale of the Contracts
other than the information or representations contained in the
registration statement or Prospectus, as may be amended or
supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material
approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance
Company, each piece of the Fund's sales literature or other
promotional material in which Insurance Company or the Separate
Account is named, at least fifteen Business Days prior to its use.
No such material shall be used unless Insurance Company approves
such material. Such approval (if given) must be in writing and
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shall be presumed not given if not received within ten Business
Days after receipt of such material. Insurance Company shall use
all reasonable efforts to respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Series shares, give
any information or make any representations on behalf of Insurance
Company or concerning Insurance Company, the Separate Account, or
the Contracts other than the information or representations
contained in a registration statement or prospectus for the
Contracts, as may be amended or supplemented from time to time, or
in published reports for the Separate Account which are in the
public domain or approved by Insurance Company for distribution to
Contractholders or Participants, or in sales literature or other
promotional material approved by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include,
without limitation, advertisements (such as material published, or
designed for use, in a newspaper, magazine or other periodical,
radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures or other public media), sales
literature (such as any written communication distributed or made
generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports and proxy materials, and any other
material constituting sales literature or advertising under
National Association of Securities Dealers, Inc. rules, the Act or
the 1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund,
Dreyfus, any sub-investment adviser of a Series, and their
affiliates, and each of their directors, trustees, officers,
employees, agents and each person, if any, who controls or is
associated with any of the foregoing entities or persons within the
meaning of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of Section 9.1), against any and all losses, claims,
damages or liabilities joint or several (including any
investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted) for which the Indemnified
Parties may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
in respect to thereof) (i) arise out of or are based upon any
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untrue statement or alleged untrue statement of any material fact
contained in information furnished by Insurance Company for use in
the registration statement or Prospectus or sales literature or
advertisements of the Fund or with respect to the Separate Account
or Contracts, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading; (ii) arise out of or as a result of conduct, statements
or representations (other than statements or representations
contained in the Prospectus and sales literature or advertisements
of the Fund) of Insurance Company or its agents, with respect to
the sale and distribution of Contracts for which Series' shares are
an underlying investment; (iii) arise out of the wrongful conduct
of Insurance Company or persons under its control with respect to
the sale or distribution of the Contracts or Series' shares; (iv)
arise out of Insurance Company's incorrect calculation and/or
untimely reporting of net purchase or redemption orders; or (v)
arise out of any breach by Insurance Company of a material term of
this Agreement or as a result of any failure by Insurance Company
to provide the services and furnish the materials or to make any
payments provided for in this Agreement. Insurance Company will
reimburse any Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that with respect to clauses (i) and (ii) above
Insurance Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon any untrue statement or omission or alleged omission
made in such registration statement, prospectus, sales literature,
or advertisement in conformity with written information furnished
to Insurance Company by the Fund specifically for use therein.
This indemnity agreement will be in addition to any liability which
Insurance Company may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Insurance Company
and each of its directors, officers, employees, agents and each
person, if any, who controls Insurance Company within the meaning
of the 1933 Act against any losses, claims, damages or liabilities
to which Insurance Company or any such director, officer, employee,
agent or controlling person may become subject, under the 1933 Act
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (1) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement or Prospectus
or sales literature or advertisements of the Fund; (2) arise out of
or are based upon the omission to state in the registration
statement or Prospectus or sales literature or advertisements of
the Fund any material fact required to be stated therein or
necessary to make the statements therein not misleading; or (3)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or Prospectus or sales literature or advertisements with
respect to the Separate Account or the Contracts and such
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statements were based on information provided to Insurance Company
by the Fund; and the Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such
director, officer, employee, agent or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Fund will
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or omission or alleged omission made in such Registration
Statement, Prospectus, sales literature or advertisements in
conformity with written information furnished to the Fund by
Insurance Company specifically for use therein. This indemnity
agreement will be in addition to any liability which the Fund may
otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless
against any and all liability, loss, damages, costs or expenses
which Insurance Company may incur, suffer or be required to pay due
to the Fund's (1) incorrect calculation of the daily net asset
value, dividend rate or capital gain (loss) distribution rate of a
Series; (2) incorrect reporting of the daily net asset value,
dividend rate or capital gain (loss) distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain (loss) distribution rate; provided that the Fund shall have no
obligation to indemnify and hold harmless Insurance Company if the
incorrect calculation or incorrect or untimely reporting was the
result of incorrect information furnished by Insurance Company or
information furnished untimely by Insurance Company or otherwise as
a result of or relating to a breach of this Agreement by Insurance
Company.
9.4 Promptly after receipt by an indemnified party under this Article
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under this Article, notify the indemnifying
party of the commencement thereof. The omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability under this Article IX, except to the extent that the
omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of
the failure to give such notice. In case any such action is
brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent
that it may wish, assume the defense thereof, with counsel
satisfactory to such indemnified party, and to the extent that the
indemnifying party has given notice to such effect to the
indemnified party and is performing its obligations under this
Article, the indemnifying party shall not be liable for any legal
or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof, other than reasonable costs
of investigation. Notwithstanding the foregoing, in any such
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proceeding, any indemnified party shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article IX.
9.5 Insurance Company shall indemnify and hold the Fund, Dreyfus and
any sub-investment adviser of a Series harmless against any tax
liability incurred by the Fund under Section 851 of the Code
arising from purchases or redemptions by Insurance Company's
General Accounts or the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the
provisions herein.
10.2 This Agreement shall terminate without penalty as to one or more
Series at the option of the terminating party:
a. At the option of Insurance Company or the Fund at any time
from the date hereof upon 180 days' notice, unless a shorter
time is agreed to by the parties;
b. At the option of Insurance Company, if shares of any Series
are not reasonably available to meet the requirements of the
Contracts as determined by Insurance Company. Prompt notice
of election to terminate shall be furnished by Insurance
Company, said termination to be effective ten days after
receipt of notice unless the Fund makes available a
sufficient number of shares to meet the requirements of the
Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution of
formal proceedings against the Fund by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in Insurance Company's reasonable
judgment, materially impair the Fund's ability to meet and
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perform the Fund's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by
Insurance Company with said termination to be effective upon
receipt of notice;
d. At the option of the Fund, upon the institution of formal
proceedings against Insurance Company by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in the Fund's reasonable judgment,
materially impair Insurance Company's ability to meet and
perform Insurance Company's obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by
the Fund with said termination to be effective upon receipt
of notice;
e. At the option of the Fund, if the Fund shall determine, in
its sole judgment reasonably exercised in good faith, that
Insurance Company has suffered a material adverse change in
its business or financial condition or is the subject of
material adverse publicity and such material adverse change
or material adverse publicity is likely to have a material
adverse impact upon the business and operation of the Fund or
Dreyfus, the Fund shall notify Insurance Company in writing
of such determination and its intent to terminate this
Agreement, and after considering the actions taken by
Insurance Company and any other changes in circumstances
since the giving of such notice, such determination of the
Fund shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall
be the effective date of termination;
f. Upon termination of the Investment Advisory Agreement between
the Fund and Dreyfus or its successors unless Insurance
Company specifically approves the selection of a new Fund
investment adviser. The Fund shall promptly furnish notice
of such termination to Insurance Company;
g. In the event the Fund's shares are not registered, issued or
sold in accordance with applicable federal law, or such law
precludes the use of such shares as the underlying investment
medium of Contracts issued or to be issued by Insurance
Company. Termination shall be effective immediately upon
such occurrence without notice;
h. At the option of the Fund upon a determination by the Board
in good faith that it is no longer advisable and in the best
interests of shareholders for the Fund to continue to operate
pursuant to this Agreement. Termination pursuant to this
Subsection (h) shall be effective upon notice by the Fund to
Insurance Company of such termination;
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<PAGE>
i. At the option of the Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably
believes that the Contracts may fail to so qualify;
j. At the option of either party to this Agreement, upon the
breach by a party of any material provision of this
Agreement, which breach has not been cured to the reasonable
satisfaction of the other party within 10 days after written
notice of such breach is delivered to such other party;
k. At the option of the Fund, if the Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the
written consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f
or 10.2k herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to
Section 10.2 hereof, the Fund and Dreyfus may, at the option of the
Fund, continue to make available additional Series shares for so
long as the Fund desires pursuant to the terms and conditions of
this Agreement as provided below, for all Contracts in effect on
the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, if the Fund or Dreyfus so elects to make additional
Series shares available, the owners of the Existing Contracts or
Insurance Company, whichever shall have legal authority to do so,
shall be permitted to reallocate investments in the Series, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts, if
permitted by the terms of the Existing Contracts. In the event of
a termination of this Agreement pursuant to Section 10.2 hereof,
the Fund and Dreyfus, as promptly as is practicable under the
circumstances, shall notify Insurance Company whether Dreyfus and
the Fund will continue to make Series shares available after such
termination. If Series shares continue to be made available after
such termination, the provisions of this Agreement shall remain in
effect and thereafter either the Fund or Insurance Company may
terminate the Agreement, as so continued pursuant to this Section
10.3, upon prior written notice to the other party, such notice to
be for a period that is reasonable under the circumstances but, if
given by the Fund, need not be for more than six months.
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ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the
following addresses:
Insurance Company: Annuity Investors Life Insurance
Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Attn: Mark F. Muething
Fund: Dreyfus Variable Investment Fund
200 Park Avenue
New York, New York 10166
Attn: Daniel C. Maclean
with copies to: Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of
the Fund. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding
upon any Trustee, officer or shareholder of the Fund individually.
ARTICLE XIV
LAW
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14.1 This Agreement shall be construed in accordance with the internal
laws of the State of New York, without giving effect to principles
of conflict of laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
to be duly executed and attested as of the date first above
written.
ANNUITY INVESTORS LIFE INSURANCE
COMPANY
/s/ Mark F. Muething
By: ______________________________
Its: Senior Vice President
-----------------------------
Attest: Charles K. McManus
---------------------
Senior Vice President
DREYFUS VARIABLE INVESTMENT FUND
By: /s/ [Illegible]
-----------------------------
Its: Assistant Treasurer
-----------------------------
Attest: /s/[Illegible]
--------------
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<PAGE>
Exhibit (8)(b)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 21st day of November, 1995,
between Annuity Investors Life Insurance Company ("Insurance Company"), a
life insurance company organized under the laws of the State of Ohio, and
DREYFUS LIFE AND ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX
FUND), a corporation organized under the laws of the State of Maryland
(the "Fund").
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the Fund calculates net
asset value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract that uses the
Fund as an underlying investment medium. Individuals who
participate under a group Contract are "Participants".
1.6 "Contractholder" shall mean any entity that is a party to a
Contract with a Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as
defined by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates,
including Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company
(including Insurance Company), which offers variable annuity and/or
variable life insurance contracts to the public and which has
entered into an agreement with the Fund for the purpose of making
Fund shares available to serve as an underlying investment medium
for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement
of additional information, as most recently filed with the
Commission.
1.11 "Separate Account" shall mean Annuity Investors Variable Account A,
a separate account established by Insurance Company in accordance
with the laws of the State of Ohio.
<PAGE>
1.12 "Software Program" shall mean the software program used by the Fund
for providing Fund and account balance information including net
asset value per share. Such Program may include the Lion System.
In situations where the Lion System or any other Software Program
used by the Fund is not available, such information may be provided
by telephone and confirmed by facsimiles. The Lion System shall be
provided to Insurance Company at no charge.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an
insurance company duly organized and in good standing under
applicable law; (b) it has legally and validly established the
Separate Account pursuant to the laws of the State of Ohio for the
purpose of offering to the public certain individual and group
variable annuity contracts; (c) it has registered or will register
the Separate Account as a unit investment trust under the Act to
serve as the segregated investment account for the Contracts; and
(d) each Separate Account is eligible to invest in shares of the
Fund without such investment disqualifying the Fund as an
investment medium for insurance company separate accounts
supporting variable annuity contracts or variable life insurance
contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts
will be described in a registration statement filed under the
Securities Act of 1933, as amended ("1933 Act"); (b) the Contracts
will be issued and sold in compliance in all material respects with
all applicable federal and state laws; and (c) the sale of the
Contracts shall comply in all material respects with state
insurance law requirements. Insurance Company agrees to inform the
Fund promptly of any investment restrictions imposed by state
insurance law and applicable to the Fund.
2.3 Insurance Company represents and warrants that the income, gains
and losses, whether or not realized, from assets allocated to the
Separate Account are, in accordance with the applicable Contracts,
to be credited to or charged against such Separate Account without
regard to other income, gains or losses from assets allocated to
any other accounts of Insurance Company. Insurance Company
represents and warrants that the assets of the Separate Account are
and will be kept separate from Insurance Company's General Account
and any other separate accounts Insurance Company may have, and
will not be charged with liabilities from any business that
Insurance Company may conduct or the liabilities of any companies
affiliated with Insurance Company.
2.4 Fund represents that it is registered with the Commission under the
Act as an open-end, non-diversified management investment company
and possesses, and shall maintain, all legal and regulatory
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licenses, approvals, consents and/or exemptions required for Fund
to operate and offer its shares as an underlying investment medium
for Participating Companies.
2.5 Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), and that it will make every
effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify Insurance
Company immediately upon having a reasonable basis for believing
that it has ceased to so qualify or that it might not so qualify in
the future.
2.6 Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life
insurance policies or annuity contracts, whichever is appropriate,
under applicable provisions of the Code, and that it will make
every effort to maintain such treatment and that it will notify the
Fund and Dreyfus immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future. Insurance Company
agrees that any prospectus offering a Contract that is a "modified
endowment contract," as that term is defined in Section 7702A of
the Code, will identify such Contract as a modified endowment
contract (or policy).
2.7 Fund agrees that the Fund's assets shall be managed and invested in
a manner that complies with the requirements of Section 817(h) of
the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject
to the other terms of this Agreement) to make Fund shares available
to other Participating Companies and contractholders.
2.9 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who
deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less
than that required by Rule 17g-1 under the Act. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees
and agents who deal with the money and/or securities of the Fund
are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage in an amount not less than the
coverage required to be maintained by the Fund. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
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<PAGE>
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for
the investment of certain amounts in shares of the Fund.
3.2 Fund agrees to make its shares available for purchase at the then
applicable net asset value per share by the Separate Account on
each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, the Fund may refuse to sell its
shares to any person, or suspend or terminate the offering of its
shares if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of
the Board, acting in good faith and in light of its fiduciary
duties under federal and any applicable state laws, necessary and
in the best interests of the Fund's shareholders.
3.3 Fund agrees that shares of the Fund will be sold only to
Participating Companies and their separate accounts and to the
general accounts of those Participating Companies and their
affiliates. No shares will be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain (loss) information on a per-share and
Fund basis to Insurance Company by 6:00 p.m. Eastern Time on each
Business Day. Any material errors in the calculation of net asset
value, dividend and capital gain (loss) information shall be
reported immediately upon discovery to Insurance Company. Non-
material errors will be corrected in the next Business Day's net
asset value per share.
3.5 At the end of each Business Day, Insurance Company will use the
information described in Sections 3.2 and 3.4 to calculate the
Separate Account unit values for the day. Using this unit value,
Insurance Company will process the day's Separate Account
transactions received by it by the close of trading on the floor of
the New York Stock Exchange (currently 4:00 p.m. Eastern time) to
determine the net dollar amount of Fund shares which will be
purchased or redeemed at that day's closing net asset value per
share. The net purchase or redemption orders will be transmitted
to the Fund by Insurance Company by 11:00 a.m. Eastern Time on the
Business Day next following Insurance Company's receipt of that
information.
3.6 Fund appoints Insurance Company as its agent for the limited
purpose of accepting orders for the purchase and redemption of Fund
shares for the Separate Account. Fund will execute orders at the
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applicable net asset value per share determined as of the close of
trading on the day of receipt of such orders by Insurance Company
acting as agent ("effective trade date"), provided that the Fund
receives notice of such orders by 11:00 a.m. Eastern Time on the
next following Business Day and, if such orders request the
purchase of Fund shares, the conditions specified in Section 3.8,
as applicable, are satisfied. A redemption or purchase request
that does not satisfy the conditions specified in this Section and
in Section 3.8, as applicable, will be effected at the net asset
value per share computed on the Business Day immediately preceding
the Business Day upon which such conditions have been satisfied in
accordance with the requirements of this Section and Section 3.8.
3.7 Insurance Company will use its best efforts to notify Fund in
advance of any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Fund shares,
Insurance Company will pay for such purchases by wiring Federal
Funds to Fund or its designated custodial account on the day the
order is transmitted. Insurance Company shall make all reasonable
efforts to transmit to the Fund payment in Federal Funds by 12:00
noon Eastern Time on the Business Day the Fund receives the notice
of the order pursuant to Section 3.5. Fund will execute such
orders at the applicable net asset value per share determined as of
the close of trading on the effective trade date if Fund receives
payment in Federal Funds by 12:00 midnight Eastern Time on the
Business Day the Fund receives the notice of the order pursuant to
Section 3.5. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 12:00 noon Eastern Time
on such Business Day, Insurance Company shall promptly upon the
Fund's request, reimburse the Fund for any charges, costs, fees,
interest or other expenses incurred by the Fund in connection with
any advances to, or borrowings or overdrafts by, the Fund, or any
similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request.
Payment for shares redeemed by the Separate Account or the
Insurance Company shall be made in Federal Funds transmitted by
wire to the Insurance Company or any other designated person on the
next Business Day after the Fund is properly notified of the
redemption order of shares, except that the Fund reserves the right
to delay payment of redemption proceeds to the extent permitted
under Section 22(e) of the 1940 Act. The Fund shall not bear any
responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds by the Insurance Company; the Insurance
Company alone shall be responsible for such action.
3.9 Fund has the obligation to ensure that Fund shares are registered
with applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by
Insurance Company. Transfer of Fund shares will be by book entry
only. No share certificates will be issued to Insurance Company.
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<PAGE>
Insurance Company will record shares ordered from Fund in an
appropriate title for the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of
shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on
the first Business Day thereafter, Fund shall communicate to
Insurance Company the amount of dividend and capital gain, if any,
per share. All dividends and capital gains shall be automatically
reinvested in additional shares of the Fund at the net asset value
per share on the ex-dividend date. Fund shall, on the day after
the ex-dividend date or, if not a Business Day, on the first
Business Day thereafter, notify Insurance Company of the number of
shares so issued.
3.13 This Agreement does not cover the sale of any Fund shares to the
Insurance Company general account.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of
each month for all of Insurance Company's accounts by the fifteenth
(15th) Business Day of the following month.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other
printed materials (which the Fund customarily provides to its
shareholders) in quantities as Insurance Company may reasonably
request for distribution to each Contractholder and Participant.
4.3 Fund will provide to Insurance Company at least one complete copy
of all registration statements, Prospectuses, reports, proxy
statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its
shares, contemporaneously with the filing of such document with the
Commission or other regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to
any of the above, that relate to the Contracts or the Separate
Account, contemporaneously with the filing of such document with
the Commission.
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<PAGE>
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Fund,
including but not limited to management fees, administrative
expenses and legal and regulatory costs, will be made in the
determination of the Fund's daily net asset value per share so as
to accumulate to an annual charge at the rate set forth in the
Fund's Prospectus. Excluded from the expense limitation described
herein shall be brokerage commissions and transaction fees and
extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly
any expenses of the Fund or expenses relating to the distribution
of its shares. Insurance Company shall pay the following expenses
or costs:
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus, or
marketing materials for prospective Insurance Company
Contractholders and Participants as Dreyfus and Insurance
Company shall agree from time to time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders
and Participants.
c. Distribution expenses of Fund materials or marketing
materials for Insurance Company Contractholders and
Participants.
Except as provided herein, all other Fund expenses shall not be
borne by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated December
23, 1987 of the Securities and Exchange Commission under Section
6(c) of the Act and, in particular, has reviewed the conditions to
the relief set forth in the related Notice. As set forth therein,
Insurance Company agrees to report any potential or existing
conflicts promptly to the Board, and in particular whenever
contract voting instructions are disregarded, and recognizes that
it will be responsible for assisting the Board in carrying out its
responsibilities under such application. Insurance Company agrees
to carry out such responsibilities with a view to the interests of
existing Contractholders.
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<PAGE>
6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists
with regard to Contractholder investments in the Fund, the Board
shall give prompt notice to all Participating Companies. If the
Board determines that Insurance Company is responsible for causing
or creating said conflict, Insurance Company shall at its sole cost
and expense, and to the extent reasonably practicable (as
determined by a majority of the Disinterested Board Members), take
such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may
include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from
the Fund and reinvesting such assets in a different
investment medium, or submitting the question of whether such
segregation should be implemented to a vote or all affected
Contractholders; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a
decision by Insurance Company to disregard Contractholder voting
instructions and said decision represents a minority position or
would preclude a majority vote by all Contractholders having an
interest in the Fund, Insurance Company may be required, at the
Board's election, to withdraw the Separate Account's investment in
the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested
Board Members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to bear the expense of establishing
a new funding medium for any Contract. Insurance Company shall not
be required by this Article to establish a new funding medium for
any Contract if an offer to do so has been declined by vote of a
majority of the Contractholders materially adversely affected by
the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by
the Separate Account or the Fund taken or omitted as a result of
any act or failure to act by Insurance Company pursuant to this
Article VI shall relieve Insurance Company of its obligations
under, or otherwise affect the operation of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to
Insurance Company, of the Fund's proxy material, annual and semi-
annual reports to shareholders and other communications to
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<PAGE>
shareholders in such quantity as Insurance Company shall reasonably
require for distributing to Contractholders or Participants.
Insurance Company shall:
a. solicit voting instructions from Contractholders or
Participants on a timely basis and in accordance with
applicable law;
b. vote Fund shares in accordance with instructions received
from Contractholders or Participants; and
c. vote Fund shares for which no instructions have been received
in the same proportion as Fund shares for which instructions
have been received.
Insurance Company agrees to be responsible for assuring that voting
Fund shares for the Separate Account is conducted in a manner
consistent with other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior
written consent of the Fund and Dreyfus, solicit, induce or
encourage Contractholders to (a) change or supplement the Fund's
current investment adviser or (b) change, modify, substitute, add
to or delete the Fund from the current investment media for the
Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance
Company with the following documents, in quantities as Insurance
Company may reasonably request:
a. Current Prospectus and any supplements thereto; and
b. other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which
shall have the requisite licenses to solicit applications for the
sale of Contracts. No representation is made as to the number or
amount of Contracts that are to be sold by Insurance Company.
Insurance Company shall make reasonable efforts to market the
Contracts and shall comply with all applicable federal and state
laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to
the Fund, each piece of sales literature or other promotional
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<PAGE>
material in which the Fund, its investment adviser or the
administrator is named, at least fifteen Business Days prior to its
use. No such material shall be used unless the Fund approves such
material. Such approval (if given) must be in writing and shall be
presumed not given if not received within ten Business Days after
receipt of such material. The Fund shall use all reasonable
efforts to respond within ten days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund in connection with the sale of the Contracts other than
the information or representations contained in the registration
statement or Prospectus, as may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in
sales literature or other promotional material approved by the
Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance
Company, each piece of the Fund's sales literature or other
promotional material in which Insurance Company or the Separate
Account is named, at least fifteen Business Days prior to its use.
No such material shall be used unless Insurance Company approves
such material. Such approval (if given) must be in writing and
shall be presumed not given if not received within ten Business
Days after receipt of such material. Insurance Company shall use
all reasonable efforts to respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Fund shares, give
any information or make any representations on behalf of Insurance
Company or concerning Insurance Company, the Separate Account, or
the Contracts other than the information or representations
contained in a registration statement or prospectus for the
Contracts, as may be amended or supplemented from time to time, or
in published reports for the Separate Account which are in the
public domain or approved by Insurance Company for distribution to
Contractholders or Participants, or in sales literature or other
promotional material approved by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include,
without limitation, advertisements (such as material published, or
designed for use, in a newspaper, magazine or other periodical,
radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures or other public media), sales
literature (such as any written communication distributed or made
generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
- 10 -
<PAGE>
information, shareholder reports and proxy materials, and any other
material constituting sales literature or advertising under
National Association of Securities Dealers, Inc. rules, the Act or
the 1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund,
Dreyfus, the sub-investment adviser of the Fund, and their
affiliates, and each of their directors, trustees, officers,
employees, agents and each person, if any, who controls or is
associated with any of the foregoing entities or persons within the
meaning of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of Section 9.1), against any and all losses, claims,
damages or liabilities joint or several (including any
investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted) for which the Indemnified
Parties may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
in respect to thereof) (i) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in information furnished by Insurance Company for use in
the registration statement or Prospectus or sales literature or
advertisements of the Fund or with respect to the Separate Account
or Contracts, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading; (ii) arise out of or as a result of conduct, statements
or representations (other than statements or representations
contained in the Prospectus and sales literature or advertisements
of the Fund) of Insurance Company or its agents, with respect to
the sale and distribution of Contracts for which Fund shares are an
underlying investment; (iii) arise out of the wrongful conduct of
Insurance Company or persons under its control with respect to the
sale or distribution of the Contracts or Fund shares; (iv) arise
out of Insurance Company's incorrect calculation and/or untimely
reporting of net purchase or redemption orders; or (v) arise out of
any breach by Insurance Company of a material term of this
Agreement or as a result of any failure by Insurance Company to
provide the services and furnish the materials or to make any
payments provided for in this Agreement. Insurance Company will
reimburse any Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that with respect to clauses (i) and (ii) above
Insurance Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon any untrue statement or omission or alleged omission
made in such registration statement, prospectus, sales literature,
or advertisement in conformity with written information furnished
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<PAGE>
to Insurance Company by the Fund specifically for use therein.
This indemnity agreement will be in addition to any liability which
Insurance Company may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Insurance Company
and each of its directors, officers, employees, agents and each
person, if any, who controls Insurance Company within the meaning
of the 1933 Act against any losses, claims, damages or liabilities
to which Insurance Company or any such director, officer, employee,
agent or controlling person may become subject, under the 1933 Act
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (1) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement or Prospectus
or sales literature or advertisements of the Fund; (2) arise out of
or are based upon the omission to state in the registration
statement or Prospectus or sales literature or advertisements of
the Fund any material fact required to be stated therein or
necessary to make the statements therein not misleading; or (3)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or Prospectus or sales literature or advertisements with
respect to the Separate Account or the Contracts and such
statements were based on information provided to Insurance Company
by the Fund; and the Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such
director, officer, employee, agent or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Fund will
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or omission or alleged omission made in such Registration
Statement, Prospectus, sales literature or advertisements in
conformity with written information furnished to the Fund by
Insurance Company specifically for use therein. This indemnity
agreement will be in addition to any liability which the Fund may
otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless
against any and all liability, loss, damages, costs or expenses
which Insurance Company may incur, suffer or be required to pay due
to the Fund's (1) incorrect calculation of the daily net asset
value, dividend rate or capital gain (loss) distribution rate; (2)
incorrect reporting of the daily net asset value, dividend rate or
capital gain (loss) distribution rate; and (3) untimely reporting
of the net asset value, dividend rate or capital gain (loss)
distribution rate; provided that the Fund shall have no obligation
to indemnify and hold harmless Insurance Company if the incorrect
calculation or incorrect or untimely reporting was the result of
incorrect information furnished by Insurance Company or information
furnished untimely by Insurance Company or otherwise as a result of
or relating to a breach of this Agreement by Insurance Company.
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<PAGE>
9.4 Promptly after receipt by an indemnified party under this Article
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under this Article, notify the indemnifying
party of the commencement thereof. The omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability under this Article IX, except to the extent that the
omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of
the failure to give such notice. In case any such action is
brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent
that it may wish, assume the defense thereof, with counsel
satisfactory to such indemnified party, and to the extent that the
indemnifying party has given notice to such effect to the
indemnified party and is performing its obligations under this
Article, the indemnifying party shall not be liable for any legal
or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof, other than reasonable costs
of investigation. Notwithstanding the foregoing, in any such
proceeding, any indemnified party shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article IX. The provisions of this Article IX shall survive
termination of this Agreement.
9.5 Insurance Company shall indemnify and hold the Fund, Dreyfus and
any sub-investment adviser harmless against any tax liability
incurred by the Fund under Section 851 of the Code arising from
purchases or redemptions by Insurance Company's General Accounts or
the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the
provisions herein.
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<PAGE>
10.2 This Agreement shall terminate without penalty:
a. At the option of Insurance Company or the Fund at any time
from the date hereof upon 180 days' notice, unless a shorter
time is agreed to by the parties;
b. At the option of Insurance Company, if shares of the Fund are
not reasonably available to meet the requirements of the
Contracts as determined by Insurance Company. Prompt notice
of election to terminate shall be furnished by Insurance
Company, said termination to be effective ten days after
receipt of notice unless the Fund makes available a
sufficient number of shares to meet the requirements of the
Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution of
formal proceedings against the Fund by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in Insurance Company's reasonable
judgment, materially impair the Fund's ability to meet and
perform the Fund's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by
Insurance Company with said termination to be effective upon
receipt of notice;
d. At the option of the Fund, upon the institution of formal
proceedings against Insurance Company by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in the Fund's reasonable judgment,
materially impair Insurance Company's ability to meet and
perform Insurance Company's obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by
the Fund with said termination to be effective upon receipt
of notice;
e. At the option of the Fund, if the Fund shall determine, in
its sole judgment reasonably exercised in good faith, that
Insurance Company has suffered a material adverse change in
its business or financial condition or is the subject of
material adverse publicity and such material adverse change
or material adverse publicity is likely to have a material
adverse impact upon the business and operation of the Fund or
Dreyfus, the Fund shall notify Insurance Company in writing
of such determination and its intent to terminate this
Agreement, and after considering the actions taken by
Insurance Company and any other changes in circumstances
since the giving of such notice, such determination of the
Fund shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall
be the effective date of termination;
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<PAGE>
f. Upon termination of the Investment Advisory Agreement between
the Fund and Dreyfus or its successors unless Insurance
Company specifically approves the selection of a new Fund
investment adviser. The Fund shall promptly furnish notice
of such termination to Insurance Company;
g. In the event the Fund's shares are not registered, issued or
sold in accordance with applicable federal law, or such law
precludes the use of such shares as the underlying investment
medium of Contracts issued or to be issued by Insurance
Company. Termination shall be effective immediately upon
such occurrence without notice;
h. At the option of the Fund upon a determination by the Board
in good faith that it is no longer advisable and in the best
interests of shareholders for the Fund to continue to operate
pursuant to this Agreement. Termination pursuant to this
Subsection (h) shall be effective upon notice by the Fund to
Insurance Company of such termination;
i. At the option of the Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably
believes that the Contracts may fail to so qualify;
j. At the option of either party to this Agreement, upon the
breach by a party of any material provision of this
Agreement, which breach has not been cured to the reasonable
satisfaction of the other party within 10 days after written
notice of such breach is delivered to such other party;
k. At the option of the Fund, if the Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the
written consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f
or 10.2k herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to
Section 10.2 hereof, the Fund and Dreyfus may, at the option of the
Fund, continue to make available additional Series shares for so
long as the Fund desires pursuant to the terms and conditions of
this Agreement as provided below, for all Contracts in effect on
the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, if the Fund or Dreyfus so elects to make additional
Series shares available, the owners of the Existing Contracts or
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<PAGE>
Insurance Company, whichever shall have legal authority to do so,
shall be permitted to reallocate investments in the Series, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts, if
permitted by the terms of the Existing Contracts. In the event of
a termination of this Agreement pursuant to Section 10.2 hereof,
the Fund and Dreyfus, as promptly as is practicable under the
circumstances, shall notify Insurance Company whether Dreyfus and
the Fund will continue to make Series shares available after such
termination. If Series shares continue to be made available after
such termination, the provisions of this Agreement shall remain in
effect and thereafter either the Fund or Insurance Company may
terminate the Agreement, as so continued pursuant to this Section
10.3, upon prior written notice to the other party, such notice to
be for a period that is reasonable under the circumstances but, if
given by the Fund, need not be for more than six months.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and Fund.
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<PAGE>
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the
following addresses:
Insurance Company: Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, OH 45202
Attn: Mark F. Muething
Fund: Dreyfus Stock Index Fund
200 Park Avenue
New York, New York 10166
Attn: Daniel C. Maclean
with copies to: Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the addresses
as evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of
the Fund. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding
upon any director, officer or shareholder of the Fund individually.
ARTICLE IV
LAW
14.1 This Agreement shall be construed in accordance with the internal
laws of the State of New York, without giving effect to principles
of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
duly executed and attested as of the date first above written.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By: /s/ Mark F. Muething
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<PAGE>
------------------------------------
Its: Senior Vice President
-----------------------------------
Attest: /s/ Charles K. McManue
----------------------
Senior Vice President
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
(d/b/a DREYFUS STOCK INDEX FUND)
By: /s/ [Illegible]
-------------------------------------
Its: Vice President
------------------------------------
Attest: /s/ [Illegible]
----------------
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<PAGE>
<PAGE>
EXHIBIT (8)(c)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 21st day of November, 1995,
between Annuity Investors Life Insurance Company ("Insurance Company"), a
life insurance company organized under the laws of the State of Ohio, and
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC., a corporation
organized under the laws of the State of Maryland (the "Fund").
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the Fund calculates
net asset value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract that uses the
Fund as an underlying investment medium. Individuals who
participate under a group Contract are "Participants".
1.6 "Contractholder" shall mean any entity that is a party to a
Contract with a Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the
Board that are not deemed to be "interested persons" of the Fund,
as defined by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates,
including Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company
(including Insurance Company), which offers variable annuity
and/or variable life insurance contracts to the public and which
has entered into an agreement with the Fund for the purpose of
making Fund shares available to serve as an underlying investment
medium for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and
statement of additional information, as most recently filed with
the Commission.
1.11 "Separate Account" shall mean Annuity Investors Variable Account
A, a separate account established by Insurance Company in
accordance with the laws of the State of Ohio.
<PAGE>
1.12 "Software Program" shall mean the software program used by the
Fund for providing Fund and account balance information including
net asset value per share. Such Program may include the Lion
System. In situations where the Lion System or any other
Software Program used by the Fund is not available, such
information may be provided by telephone and confirmed by
facsimiles. The Lion System shall be provided to Insurance
Company at no charge.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an
insurance company duly organized and in good standing under
applicable law; (b) it has legally and validly established the
Separate Account pursuant to the laws of the State of Ohio for
the purpose of offering to the public certain individual and
group variable annuity contracts; (c) it has registered or will
register the Separate Account as a unit investment trust under
the Act to serve as the segregated investment account for the
Contracts; and (d) each Separate Account is eligible to invest in
shares of the Fund without such investment disqualifying the Fund
as an investment medium for insurance company separate accounts
supporting variable annuity contracts or variable life insurance
contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts
will be described in a registration statement filed under the
Securities Act of 1933, as amended ("1933 Act"); (b) the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws; and (c) the
sale of the Contracts shall comply in all material respects with
state insurance law requirements. Insurance Company agrees to
inform the Fund promptly of any investment restrictions imposed
by state insurance law and applicable to the Fund.
2.3 Insurance Company represents and warrants that the income, gains
and losses, whether or not realized, from assets allocated to the
Separate Account are, in accordance with the applicable
Contracts, to be credited to or charged against such Separate
Account without regard to other income, gains or losses from
assets allocated to any other accounts of Insurance Company.
Insurance Company represents and warrants that the assets of the
Separate Account are and will be kept separate from Insurance
Company's General Account and any other separate accounts
Insurance Company may have, and will not be charged with
liabilities from any business that Insurance Company may conduct
or the liabilities of any companies affiliated with Insurance
Company.
2.4 Fund represents that it is registered with the Commission under
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<PAGE>
the Act as an open-end, diversified management investment company
and possesses, and shall maintain, all legal and regulatory
licenses, approvals, consents and/or exemptions required for Fund
to operate and offer its shares as an underlying investment
medium for Participating Companies.
2.5 Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and that it will make
every effort to maintain such qualification (under Subchapter M
or any successor or similar provision) and that it will notify
Insurance Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not
so qualify in the future.
2.6 Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life
insurance policies or annuity contracts, whichever is
appropriate, under applicable provisions of the Code, and that it
will make every effort to maintain such treatment and that it
will notify the Fund and Dreyfus immediately upon having a
reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
Insurance Company agrees that any prospectus offering a Contract
that is a "modified endowment contract," as that term is defined
in Section 7702A of the Code, will identify such Contract as a
modified endowment contract (or policy).
2.7 Fund agrees that the Fund's assets shall be managed and invested
in a manner that complies with the requirements of Section 817(h)
of the Code.
2.8 Insurance Company agrees that the Fund shall be permitted
(subject to the other terms of this Agreement) to make Fund
shares available to other Participating Companies and
contractholders.
2.9 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities
who deal with the money and/or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount
not less than that required by Rule 17g-1 under the Act. The
aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its
employees and agents who deal with the money and/or securities of
the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage in an amount not less
than the coverage required to be maintained by the Fund. The
aforesaid Bond shall include coverage for larceny and
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embezzlement and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third
party beneficiary under this Agreement and may enforce any and
all rights conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide
for the investment of certain amounts in shares of the Fund.
3.2 Fund agrees to make its shares available for purchase at the then
applicable net asset value per share by the Separate Account on
each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, the Fund may refuse to sell its
shares to any person, or suspend or terminate the offering of its
shares if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of
the Board, acting in good faith and in light of its fiduciary
duties under federal and any applicable state laws, necessary and
in the best interests of the Fund's shareholders.
3.3 Fund agrees that shares of the Fund will be sold only to
Participating Companies and their separate accounts and to the
general accounts of those Participating Companies and their
affiliates. No shares will be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset
value, dividend and capital gain (loss) information on a per-
share and Fund basis to Insurance Company by 6:00 p.m. Eastern
Time on each Business Day. Any material errors in the
calculation of net asset value, dividend and capital gain (loss)
information shall be reported immediately upon discovery to
Insurance Company. Non-material errors will be corrected in the
next Business Day's net asset value per share.
3.5 At the end of each Business Day, Insurance Company will use the
information described in Sections 3.2 and 3.4 to calculate the
Separate Account unit values for the day. Using this unit value,
Insurance Company will process the day's Separate Account
transactions received by it by the close of trading on the floor
of the New York Stock Exchange (currently 4:00 p.m. Eastern time)
to determine the net dollar amount of Fund shares which will be
purchased or redeemed at that day's closing net asset value per
share. The net purchase or redemption orders will be transmitted
to the Fund by Insurance Company by 11:00 a.m. Eastern Time on
the Business Day next following Insurance Company's receipt of
that information.
3.6 Fund appoints Insurance Company as its agent for the limited
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purpose of accepting orders for the purchase and redemption of
Fund shares for the Separate Account. Fund will execute orders
at the applicable net asset value per share determined as of the
close of trading on the day of receipt of such orders by
Insurance Company acting as agent ("effective trade date"),
provided that the Fund receives notice of such orders by 11:00
a.m. Eastern Time on the next following Business Day and, if such
orders request the purchase of Fund shares, the conditions
specified in Section 3.8, as applicable, are satisfied. A
redemption or purchase request that does not satisfy the
conditions specified in this Section and in Section 3.8, as
applicable, will be effected at the net asset value per share
computed on the Business Day immediately preceding the Business
Day upon which such conditions have been satisfied in accordance
with the requirements of this Section and Section 3.8.
3.7 Insurance Company will use its best efforts to notify Fund in
advance of any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Fund
shares, Insurance Company will pay for such purchases by wiring
Federal Funds to Fund or its designated custodial account on the
day the order is transmitted. Insurance Company shall make all
reasonable efforts to transmit to the Fund payment in Federal
Funds by 12:00 noon Eastern Time on the Business Day the Fund
receives the notice of the order pursuant to Section 3.5. Fund
will execute such orders at the applicable net asset value per
share determined as of the close of trading on the effective
trade date if Fund receives payment in Federal Funds by 12:00
midnight Eastern Time on the Business Day the Fund receives the
notice of the order pursuant to Section 3.5. If payment in
Federal Funds for any purchase is not received or is received by
the Fund after 12:00 noon Eastern Time on such Business Day,
Insurance Company shall promptly upon the Fund's request,
reimburse the Fund for any charges, costs, fees, interest or
other expenses incurred by the Fund in connection with any
advances to, or borrowings or overdrafts by, the Fund, or any
similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase
request. Payment for shares redeemed by the Separate Account or
the Insurance Company shall be made in Federal Funds transmitted
by wire to the Insurance Company or any other designated person
on the next Business Day after the Fund is properly notified of
the redemption order of shares, except that the Fund reserves the
right to delay payment of redemption proceeds to the extent
permitted under Section 22(e) of the 1940 Act. The Fund shall
not bear any responsibility whatsoever for the proper
disbursement or crediting of redemption proceeds by the Insurance
Company; the Insurance Company alone shall be responsible for
such action.
3.9 Fund has the obligation to ensure that Fund shares are registered
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with applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by
Insurance Company. Transfer of Fund shares will be by book entry
only. No share certificates will be issued to Insurance Company.
Insurance Company will record shares ordered from Fund in an
appropriate title for the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number
of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day,
on the first Business Day thereafter, Fund shall communicate to
Insurance Company the amount of dividend and capital gain, if
any, per share. All dividends and capital gains shall be
automatically reinvested in additional shares of the Fund at the
net asset value per share on the ex-dividend date. Fund shall,
on the day after the ex-dividend date or, if not a Business Day,
on the first Business Day thereafter, notify Insurance Company of
the number of shares so issued.
3.13 This Agreement does not cover the sale of any Fund shares to the
Insurance Company general account.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of
each month for all of Insurance Company's accounts by the
fifteenth (15th) Business Day of the following month.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and
other printed materials (which the Fund customarily provides to
its shareholders) in quantities as Insurance Company may
reasonably request for distribution to each Contractholder and
Participant.
4.3 Fund will provide to Insurance Company at least one complete copy
of all registration statements, Prospectuses, reports, proxy
statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such document
with the Commission or other regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of
all registration statements, Prospectuses, reports, proxy
statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Contracts
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or the Separate Account, contemporaneously with the filing of
such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Fund,
including but not limited to management fees, administrative
expenses and legal and regulatory costs, will be made in the
determination of the Fund's daily net asset value per share so as
to accumulate to an annual charge at the rate set forth in the
Fund's Prospectus. Excluded from the expense limitation
described herein shall be brokerage commissions and transaction
fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the
next sentence, Insurance Company shall not be required to pay
directly any expenses of the Fund or expenses relating to the
distribution of its shares. Insurance Company shall pay the
following expenses or costs:
a. Such amount of the production expenses of any Fund
materials including the cost of printing the Fund's
Prospectus, or marketing materials for prospective
Insurance Company Contractholders and Participants as
Dreyfus and Insurance Company shall agree from time to
time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company
Contractholders and Participants.
c. Distribution expenses of Fund materials or marketing
materials for Insurance Company Contractholders and
Participants.
Except as provided herein, all other Fund expenses shall not be
borne by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 The Fund shall furnish Insurance Company with a copy of its
application for an order of the Securities and Exchange
Commission under Section 6(c) of the Act for mixed and shared
funding relief, and the notice of filing of such application and
order when issued by the SEC. Insurance Company agrees to comply
with the conditions on which such order is issued, including
reporting any potential or existing conflicts promptly to the
Board, and in particular whenever Contractholder voting
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instructions are disregarded, to the extent that such conditions
are not materially different from the conditions of the mixed and
shared funding relief obtained by Dreyfus Variable Investment
Fund and Dreyfus Life and Annuity Index Fund, Inc., respectively;
and recognizes that it shall be responsible for assisting the
Board in carrying out its responsibilities in connection with
such order. Insurance Company agrees to carry out such
responsibilities with a view to the interests of existing
Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict
exists with regard to Contractholder investments in the Fund, the
Board shall give prompt notice to all Participating Companies.
If the Board determines that Insurance Company is responsible for
causing or creating said conflict, Insurance Company shall at no
cost and expense to the Fund, and to the extent reasonably
practicable (as determined by a majority of the Disinterested
Board Members), take such action as is necessary to remedy or
eliminate the irreconcilable material conflict. Such necessary
action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account
from the Fund and reinvesting such assets in a different
investment medium, or submitting the question of whether
such segregation should be implemented to a vote or all
affected Contractholders; and/or
b. Establishing a new registered management investment
company.
6.3 If a material irreconcilable conflict arises as a result of a
decision by Insurance Company to disregard Contractholder voting
instructions and said decision represents a minority position or
would preclude a majority vote by all Contractholders having an
interest in the Fund, Insurance Company may be required, at the
Board's election, to withdraw the Separate Account's investment
in the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested
Board Members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to bear the expense of
establishing a new funding medium for any Contract. Insurance
Company shall not be required by this Article to establish a new
funding medium for any Contract if an offer to do so has been
declined by vote of a majority of the Contractholders materially
adversely affected by the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by
the Separate Account or the Fund taken or omitted as a result of
any act or failure to act by Insurance Company pursuant to this
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Article VI shall relieve Insurance Company of its obligations
under, or otherwise affect the operation of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to
Insurance Company, of the Fund's proxy material, annual and semi-
annual reports to shareholders and other communications to
shareholders in such quantity as Insurance Company shall
reasonably require for distributing to Contractholders or
Participants.
Insurance Company shall:
a. solicit voting instructions from Contractholders or
Participants on a timely basis and in accordance with
applicable law;
b. vote Fund shares in accordance with instructions received
from Contractholders or Participants; and
c. vote Fund shares for which no instructions have been
received in the same proportion as Fund shares for which
instructions have been received.
Insurance Company agrees to be responsible for assuring that
voting Fund shares for the Separate Account is conducted in a
manner consistent with other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior
written consent of the Fund and Dreyfus, solicit, induce or
encourage Contractholders to (a) change or supplement the Fund's
current investment adviser or (b) change, modify, substitute, add
to or delete the Fund from the current investment media for the
Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance
Company with the following documents, in quantities as Insurance
Company may reasonably request:
a. Current Prospectus and any supplements thereto; and
b. other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this
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Agreement.
8.2 Insurance Company shall designate certain persons or entities
which shall have the requisite licenses to solicit applications
for the sale of Contracts. No representation is made as to the
number or amount of Contracts that are to be sold by Insurance
Company. Insurance Company shall make reasonable efforts to
market the Contracts and shall comply with all applicable federal
and state laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished,
to the Fund each piece of sales literature or other promotional
material in which the Fund, its investment adviser or the
administrator is named, at least fifteen Business Days prior to
its use. No such material shall be used unless the Fund approves
such material. Such approval (if given) must be in writing and
shall be presumed not given if not received within ten Business
Days after receipt of such material. The Fund shall use all
reasonable efforts to respond within ten days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund in connection with the sale of the Contracts other than
the information or representations contained in the registration
statement or Prospectus, as may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or
in sales literature or other promotional material approved by the
Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance
Company, each piece of the Fund's sales literature or other
promotional material in which Insurance Company or the Separate
Account is named, at least fifteen Business Days prior to its
use. No such material shall be used unless Insurance Company
approves such material. Such approval (if given) must be in
writing and shall be presumed not given if not received within
ten Business Days after receipt of such material. Insurance
Company shall use all reasonable efforts to respond within ten
days of receipt.
8.6 Fund shall not, in connection with the sale of Fund shares, give
any information or make any representations on behalf of
Insurance Company or concerning Insurance Company, the Separate
Account, or the Contracts other than the information or
representations contained in a registration statement or
prospectus for the Contracts, as may be amended or supplemented
from time to time, or in published reports for the Separate
Account which are in the public domain or approved by Insurance
Company for distribution to Contractholders or Participants, or
in sales literature or other promotional material approved by
Insurance Company.
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<PAGE>
8.7 For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include,
without limitation, advertisements (such as material published,
or designed for use, in a newspaper, magazine or other
periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or other
public media), sales literature (such as any written
communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, or reprints
or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or
all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales
literature or advertising under National Association of
Securities Dealers, Inc. rules, the Act or the 1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund,
Dreyfus, the sub-investment adviser of the Fund, and their
respective affiliates, and each of their directors, trustees,
officers, employees, agents and each person, if any, who controls
or is associated with any of the foregoing entities or persons
within the meaning of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of Section 9.1), against any
and all losses, claims, damages or liabilities joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted) for
which the Indemnified Parties may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) (i) arise out of
or are based upon any untrue statement or alleged untrue
statement of any material fact contained in information furnished
by Insurance Company for use in the registration statement or
Prospectus or sales literature or advertisements of the Fund or
with respect to the Separate Account or Contracts, or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(ii) arise out of or as a result of conduct, statements or
representations (other than statements or representations
contained in the Prospectus and sales literature or
advertisements of the Fund) of Insurance Company or its agents,
with respect to the sale and distribution of Contracts for which
Fund shares are an underlying investment; (iii) arise out of the
wrongful conduct of Insurance Company or persons under its
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control with respect to the sale or distribution of the Contracts
or Fund shares; (iv) arise out of Insurance Company's incorrect
calculation and/or untimely reporting of net purchase or
redemption orders; or (v) arise out of any breach by Insurance
Company of a material term of this Agreement or as a result of
any failure by Insurance Company to provide the services and
furnish the materials or to make any payments provided for in
this Agreement. Insurance Company will reimburse any Indemnified
Party in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that
with respect to clauses (i) and (ii) above Insurance Company will
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any
untrue statement or omission or alleged omission made in such
registration statement, prospectus, sales literature, or
advertisement in conformity with written information furnished to
Insurance Company by the Fund specifically for use therein. This
indemnity agreement will be in addition to any liability which
Insurance Company may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Insurance Company
and each of its directors, officers, employees, agents and each
person, if any, who controls Insurance Company within the meaning
of the 1933 Act against any losses, claims, damages or
liabilities to which Insurance Company or any such director,
officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or Prospectus or sales literature or
advertisements of the Fund; (2) arise out of or are based upon
the omission to state in the registration statement or Prospectus
or sales literature or advertisements of the Fund any material
fact required to be stated therein or necessary to make the
statements therein not misleading; or (3) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in the registration statement or
Prospectus or sales literature or advertisements with respect to
the Separate Account or the Contracts and such statements were
based on information provided to Insurance Company by the Fund;
and the Fund will reimburse any legal or other expenses
reasonably incurred by Insurance Company or any such director,
officer, employee, agent or controlling person in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Fund will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or omission or alleged omission made in such
Registration Statement, Prospectus, sales literature or
advertisements in conformity with written information furnished
to the Fund by Insurance Company specifically for use therein.
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This indemnity agreement will be in addition to any liability
which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless
against any and all liability, loss, damages, costs or expenses
which Insurance Company may incur, suffer or be required to pay
due to the Fund's (1) incorrect calculation of the daily net
asset value, dividend rate or capital gain (loss) distribution
rate; (2) incorrect reporting of the daily net asset value,
dividend rate or capital gain (loss) distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or
capital gain (loss) distribution rate; provided that the Fund
shall have no obligation to indemnify and hold harmless Insurance
Company if the incorrect calculation or incorrect or untimely
reporting was the result of incorrect information furnished by
Insurance Company or information furnished untimely by Insurance
Company or otherwise as a result of or relating to a breach of
this Agreement by Insurance Company.
9.4 Promptly after receipt by an indemnified party under this Article
of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against
the indemnifying party under this Article, notify the
indemnifying party of the commencement thereof. The omission to
so notify the indemnifying party will not relieve the
indemnifying party from any liability under this Article IX,
except to the extent that the omission results in a failure of
actual notice to the indemnifying party and such indemnifying
party is damaged solely as a result of the failure to give such
notice. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume
the defense thereof, with counsel satisfactory to such
indemnified party, and to the extent that the indemnifying party
has given notice to such effect to the indemnified party and is
performing its obligations under this Article, the indemnifying
party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection
with the defense thereof, other than reasonable costs of
investigation. Notwithstanding the foregoing, in any such
proceeding, any indemnified party shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The indemnifying party shall not be liable for any
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settlement of any proceeding effected without its written
consent.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article IX. The provisions of this Article IX shall survive
termination of this Agreement.
9.5 Insurance Company shall indemnify and hold the Fund, Dreyfus and
sub-investment adviser harmless against any tax liability
incurred by the Fund under Section 851 of the Code arising from
purchases or redemptions by Insurance Company's General Accounts
or the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the
provisions herein.
10.2 This Agreement shall terminate without penalty:
a. At the option of Insurance Company or the Fund at any
time from the date hereof upon 180 days' notice, unless a
shorter time is agreed to by the parties;
b. At the option of Insurance Company, if shares of the Fund
are not reasonably available to meet the requirements of
the Contracts as determined by Insurance Company. Prompt
notice of election to terminate shall be furnished by
Insurance Company, said termination to be effective ten
days after receipt of notice unless the Fund makes
available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution
of formal proceedings against the Fund by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in Insurance
Company's reasonable judgment, materially impair the
Fund's ability to meet and perform the Fund's obligations
and duties hereunder. Prompt notice of election to
terminate shall be furnished by Insurance Company with
said termination to be effective upon receipt of notice;
d. At the option of the Fund, upon the institution of formal
proceedings against Insurance Company by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling,
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judgment or outcome of which would, in the Fund's
reasonable judgment, materially impair Insurance
Company's ability to meet and perform Insurance Company's
obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by the Fund with
said termination to be effective upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine,
in its sole judgment reasonably exercised in good faith,
that Insurance Company has suffered a material adverse
change in its business or financial condition or is the
subject of material adverse publicity and such material
adverse change or material adverse publicity is likely to
have a material adverse impact upon the business and
operation of the Fund or Dreyfus, the Fund shall notify
Insurance Company in writing of such determination and
its intent to terminate this Agreement, and after
considering the actions taken by Insurance Company and
any other changes in circumstances since the giving of
such notice, such determination of the Fund shall
continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth day shall be
the effective date of termination;
f. Upon termination of the Investment Advisory Agreement
between the Fund and Dreyfus or its successors unless
Insurance Company specifically approves the selection of
a new Fund investment adviser. The Fund shall promptly
furnish notice of such termination to Insurance Company;
g. In the event the Fund's shares are not registered, issued
or sold in accordance with applicable federal law, or
such law precludes the use of such shares as the
underlying investment medium of Contracts issued or to be
issued by Insurance Company. Termination shall be
effective immediately upon such occurrence without
notice;
h. At the option of the Fund upon a determination by the
Board in good faith that it is no longer advisable and in
the best interests of shareholders for the Fund to
continue to operate pursuant to this Agreement.
Termination pursuant to this Subsection (h) shall be
effective upon notice by the Fund to Insurance Company of
such termination;
i. At the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies,
as applicable, under the Code, or if the Fund reasonably
believes that the Contracts may fail to so qualify;
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<PAGE>
j. At the option of either party to this Agreement, upon the
breach by a party of any material provision of this
Agreement, which breach has not been cured to the
reasonable satisfaction of the other party within 10 days
after written notice of such breach is delivered to such
other party;
k. At the option of the Fund, if the Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the
written consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e,
10.2f or 10.2k herein shall not affect the operation of Article V
of this Agreement. Any termination of this Agreement shall not
affect the operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to
Section 10.2 hereof, the Fund and Dreyfus may, at the option of
the Fund, continue to make available additional Fund shares for
so long as the Fund desires pursuant to the terms and conditions
of this Agreement as provided below, for all Contracts in effect
on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Fund or Dreyfus so elects to make
additional Fund shares available, the owners of the Existing
Contracts or Insurance Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments
in the Fund, redeem investments in the Fund and/or invest in the
Fund upon the making of additional purchase payments under the
Existing Contracts, if permitted by the terms of the Existing
Contracts. In the event of a termination of this Agreement
pursuant to Section 10.2 hereof, the Fund and Dreyfus, as
promptly as is practicable under the circumstances, shall notify
Insurance Company whether Dreyfus and the Fund will continue to
make Fund shares available after such termination. If Fund
shares continue to be made available after such termination, the
provisions of this Agreement shall remain in effect and
thereafter either the Fund or Insurance Company may terminate the
Agreement, as so continued pursuant to this Section 10.3, upon
prior written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if given
by the Fund, need not be for more than six months.
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<PAGE>
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by
certified mail, return receipt requested, to the appropriate
parties at the following addresses:
Insurance Company: Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, OH 45201
Attn: Mark F. Muething
Fund: The Dreyfus Socially Responsible
Growth Fund, Inc.
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue, 6th Floor West
New York, New York 10166
Attn: Eric B. Fischman, Esq.
with copies to: The Dreyfus Socially Responsible
Growth Fund, Inc.
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Attn: Daniel C. Maclean, Esq.
Lawrence B. Stoller, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of
the Fund. The obligations of this Agreement shall only be
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binding upon the assets and property of the Fund and shall not be
binding upon any director, officer or shareholder of the Fund
individually.
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal
laws of the State of New York, without giving effect to
principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
duly executed and attested as of the date first above written.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By: /s/ Mark F. Muething
Its: Senior Vice President
Attest: /s/ Charles K. McManus
Senior Vice President
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
By: /s/ Eric Fischman
Its: Vice President
Attest: /s/ [Illegible]
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<PAGE>
<PAGE>
EXHIBIT (8)(d)
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 1st day of September, 1995, between
JANUS ASPEN SERIES, an open-end management investment company organized as
a Delaware business trust (the "Trust"), and ANNUITY INVESTORS LIFE
INSURANCE COMPANY, a life insurance company organized under the laws of
the State of Ohio (the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A, as may be
amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and
Exchange Commission as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has
registered the offer and sale of its shares under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies that have
entered into participation agreements with the Trust (the "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into
several series of shares, each series representing an interest in a
particular managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Trust to be
sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
certain qualified pension and retirement plans (the "Exemptive Order");
and
WHEREAS, the Company has registered or will register certain
variable life insurance policies and/or variable annuity contracts under
the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
<PAGE>
NOW THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE I.
Sale of Trust Shares
1.1 The Trust shall make shares of its Portfolios available
to the Accounts at the net asset value next computed after receipt of such
purchase order by the Trust (or its agent), as established in accordance
with the provisions of the then current prospectus of the Trust. Shares
of a particular Portfolio of the Trust shall be ordered in such quantities
and at such times as determined by the Company to be necessary to meet the
requirements of the Contracts. The Trustees of the Trust (the "Trustees")
may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of
any Portfolio when requested by the Company on behalf of an Account at the
net asset value next computed after receipt by the Trust (or its agent) of
the request for redemption, as established in accordance with the
provisions of the then current prospectus of the Trust. The Trust shall
make payment for such shares in the manner established from time to time
by the Trust, but in no event shall payment be delayed for a greater
period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust
hereby appoints the Company as its agent for the limited purpose of
receiving and accepting purchase and redemption orders resulting from
investment in and payments under the Contracts. Receipt by the Company
shall constitute receipt by the Trust provided that i) such orders are
received by the Company in good order prior to the time the net asset
value of each Portfolio is priced in accordance with its prospectus and
ii) the Trust receives notice of such orders by 11:00 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which the
Trust calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in
accordance with Section 1.3 shall be paid for no later than 12:00 noon New
York time on the same Business Day that the Trust receives notice of the
order. Payments shall be made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by
book entry only. Stock certificates will not be issued to the Company or
the Account. Shares ordered from the Trust will be recorded in the
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appropriate title for each Account or the appropriate subaccount of each
Account.
1.6 The Trust shall furnish prompt notice to the Company of
any income dividends or capital gain distributions payable on the Trust's
shares. The Company hereby elects to receive all such income dividends
and capital gain distributions as are payable on a Portfolio's shares in
additional shares of that Portfolio. The Trust shall notify the Company
of the number of shares so issued as payment of such dividends and
distributions by the close of the following Business Day.
1.7 The Trust shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share
available by 6 p.m. New York time. When available, the net asset value
will be communicated to the Company by telephone and confirmed by
facsimile.
1.8 The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to
certain qualified pension and retirement plans to the extent permitted by
the Exemptive Order. No shares of any Portfolio will be sold directly to
the general public. The Company agrees that Trust shares will be used
only for the purposes of funding the Contracts and Accounts listed in
Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance
Companies shall have the obligations and responsibilities regarding pass-
through voting and conflicts of interest corresponding to those contained
in Section 2.8 and Article IV. of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing
with the Securities and Exchange Commission and any state regulators
requiring such filing all shareholder reports, notices, proxy materials
(or similar materials such as voting instruction solicitation materials),
prospectuses and statements of additional information of the Trust. The
Trust shall bear the costs of registration and qualification of its
shares, preparation and filing of the documents listed in this Section 2.1
and all taxes to which an issuer is subject on the issuance and transfer
of its shares.
2.2 At the option of the Company, the Trust shall either (a)
provide the Company (at the Company's expense) with as many copies of the
Trust's current prospectus, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to any
of the foregoing, as the Company shall reasonably request; or (b) provide
the Company with a camera ready copy of such documents in a form suitable
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<PAGE>
for printing. The Trust shall provide the Company with a copy of its
statement of additional information in a form suitable for duplication by
the Company. The Trust (at its expense) shall provide the Company with
copies of any Trust-sponsored proxy materials in such quantity as the
Company shall reasonably require for distribution to Contract owners.
2.3 The Company shall bear the costs of printing and
distributing the Trust's prospectus, statement of additional information,
shareholder reports and other shareholder communications to owners of and
applicants for policies for which the Trust is serving or is to serve as
an investment vehicle. The Company shall bear the costs of distributing
proxy materials (or similar materials such as voting solicitation
instructions) to Contract owners. The Company assumes sole responsibility
for ensuring that such materials are delivered to Contract owners in
accordance with applicable federal and state securities laws.
2.4 The Company agrees and acknowledges that the Trust's
adviser, Janus Capital Corporation ("Janus Capital"), is the sole owner of
the name and mark "Janus" and that all use of any designation comprised in
whole or part of Janus (a "Janus Mark") under this Agreement shall inure
to the benefit of Janus Capital. Except as provided in Section 2.5, the
Company shall not use any Janus Mark on its own behalf or on behalf of the
Accounts or Contracts in any registration statement, advertisement, sales
literature or other materials relating to the Accounts or Contracts
without the prior written consent of Janus Capital. Upon termination of
this Agreement for any reason, the Company shall cease all use of any
Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to
the Trust or its designee, a copy of each Contract prospectus or statement
of additional information in which the Trust or its investment adviser is
named prior to the filing of such document with the Securities and
Exchange Commission. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee, each piece of sales literature or
other promotional material in which the Trust or its investment adviser is
named, at least ten Business Days prior to its use. No such material
shall be used if the Trust or its designee reasonably objects to such use
within ten Business Days after receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the
Trust or its investment adviser in connection with the sale of the
Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Trust shares (as such registration statement and prospectus may be amended
or supplemented from time to time), reports of the Trust, Trust-sponsored
proxy statements, or in sales literature or other promotional material
approved by the Trust or its designee, except as required by legal process
or regulatory authorities or with the written permission of the Trust or
its designee.
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<PAGE>
2.7 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement
and prospectus may be amended or supplemented from time to time), or in
materials approved by the Company for distribution including sales
literature or other promotional materials, except as required by legal
process or regulatory authorities or with the written permission of the
Company.
2.8 So long as, and to the extent that the Securities and
Exchange Commission interprets the 1940 Act to require pass-through voting
privileges for variable policyowners, the Company will provide pass-
through voting privileges to owners of policies whose cash values are
invested, through the Accounts, in shares of the Trust. The Trust shall
require all Participating Insurance Companies to calculate voting
privileges in the same manner and the Company shall be responsible for
assuring that the Accounts calculate voting privileges in the manner
established by the Trust. With respect to each Account, the Company will
vote shares of the Trust held by the Account and for which no timely
voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares
for which voting instructions are received. The Company and its agents
will in no way recommend or oppose or interfere with the solicitation of
proxies for Trust shares held by Contract owners without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion.
ARTICLE III.
Representations and Warranties
3.1 The Company represents and warrants that it is an
insurance company duly organized and in good standing under the laws of
the State of Ohio and that it has legally and validly established each
Account as a segregated asset account under such law on the date set forth
in Schedule A.
3.2 The Company represents and warrants that it has
registered or, prior to any issuance or sale of the Contracts, will
register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for
the Contracts.
3.3 The Company represents and warrants that the Contracts
will be registered under the 1933 Act prior to any issuance or sale of the
Contracts; the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws; and the sale
of the Contracts shall comply in all material respects with state
insurance suitability requirements.
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<PAGE>
3.4 The Trust represents and warrants that it is duly
organized and validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares
offered and sold pursuant to this Agreement will be registered under the
1933 Act and the Trust shall be registered under the 1940 Act prior to any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its shares. The
Trust shall register and qualify its shares for sale in accordance with
the laws of the various states only if and to the extent deemed advisable
by the Trust.
3.6 The Trust represents and warrants that the investments of
each Portfolio will comply with the diversification requirements set forth
in Section 817(h) of the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
ARTICLE IV.
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be
made available for investment to other Participating Insurance Companies.
In such event, the Trustees will monitor the Trust for the existence of
any material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. An irreconcilable
material conflict may arise for a variety of reasons, including: (a) an
action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard
the voting instructions of contract owners. The Trustees shall promptly
inform the Company if they determine that an irreconcilable material
conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or
existing conflicts of which it is aware to the Trustees. The Company will
assist the Trustees in carrying out their responsibilities under the
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but
not limited to, information as to a decision by the Company to disregard
Contract owner voting instructions.
4.3 If it is determined by a majority of the Trustees, or a
majority of its disinterested Trustees, that a material irreconcilable
conflict exists that affects the interests of Contract owners, the Company
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<PAGE>
shall, in cooperation with other Participating Insurance Companies whose
contract owners are also affected, at its expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever steps
are necessary to remedy or eliminate the irreconcilable material conflict,
which steps could include: (a) withdrawing the assets allocable to some
or all of the Accounts from the Trust or any Portfolio and reinvesting
such assets in a different investment medium, including (but not limited
to) another Portfolio of the Trust, or submitting the question of whether
or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
4.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions
and that decision represents a minority position or would preclude a
majority vote, the Company may be required, at the Trust's election, to
withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of
the disinterested Trustees. Any such withdrawal and termination must take
place within six (6) months after the Trust gives written notice that this
provision is being implemented. Until the end of such six (6) month
period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company
will withdraw the affected Account's investment in the Trust and terminate
this Agreement with respect to such Account within six (6) months after
the Trustees inform the Company in writing that it has determined that
such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Until the end of
such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares
of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this
Agreement, a majority of the disinterested Trustees shall determine
whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Company be required to
establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of Contract owners materially
adversely affected by the irreconcilable material conflict. In the event
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<PAGE>
that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will
withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in
writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7 The Company shall at least annually submit to the
Trustees such reports, materials or data as the Trustees may reasonable
request so that the Trustees may fully carry out the duties imposed upon
them by the Exemptive Order, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with respect
to mixed or shared funding (as defined in the Exemptive Order) on terms
and conditions materially different from those contained in the Exemptive
Order, then the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with
Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable.
ARTICLE V.
Indemnification
5.1 Indemnification By the Company. The Company agrees to
indemnify and hold harmless the Trust and each of its Trustees, officers,
employees and agents and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Article V.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Company) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common
law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in a registration statement or prospectus for the
Contracts or in the Contracts themselves or in sales literature
generated or approved by the Company on behalf of the Contracts
or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of
this Article V.), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
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<PAGE>
not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the
Company by or on behalf of the Trust for use in Company Documents
or otherwise for use in connection with the sale of the Contracts
or Trust shares; or
(b) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Trust Documents as
defined in Section 5.2(a)) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement
or alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance
upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the
Company to provide the services or furnish the materials required
under the terms of this Agreement; or
(e) arise out of or result from any material breach
of any representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
5.2 Indemnification By the Trust. The Trust agrees to
indemnify and hold harmless the Company and each of its directors,
officers, employees and agents and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Article V.) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust) or expenses (including
the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or
at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement or prospectus for the
Trust or in sales literature generated or approved by the Trust
or on behalf of the Trust (or any amendment or supplement
thereto), (collectively, "Trust Documents" for the purposes of
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this Article V.), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the
Trust by or on behalf of the Company for use in Trust Documents
or otherwise for use in connection with the sale of the Contracts
or Trust shares; or
(b) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Company Documents) or
wrongful conduct of the Trust or persons under its control, with
respect to the sale or acquisition of the Contracts or Trust
shares; or
(c) arise out of or result from any untrue statement
or alleged untrue statement of a material fact contained in
Company Documents or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately
derived from written information furnished to the Company by or
on behalf of the Trust; or
(d) arise out of or result from any failure by the
Trust to provide the services or furnish the materials required
under the terms of this Agreement; or
(e) arise out of or result from any material breach
of any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust.
5.3 Neither the Company nor the Trust shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party
that arise from such Indemnified Party's willful misfeasance, bad faith or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the other party in writing within a
reasonable time after the summons, or other first written notification,
giving information of the nature of the claim shall have been served upon
or otherwise received by such Indemnified Party (or after such Indemnified
Party shall have received notice of service upon or other notification to
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any designated agent), but failure to notify the party against whom
indemnification is sought of any such claim shall not relieve that party
from any liability which it may have to the Indemnified Party in the
absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the
Indemnified Parties, the indemnifying party shall be entitled to
participate, at its own expense, in the defense of such action. The
indemnifying party also shall be entitled to assume the defense thereof,
with counsel reasonably satisfactory to the party named in the action.
After notice from the indemnifying party to the Indemnified Party of an
election to assume such defense, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation.
ARTICLE VI.
Termination
6.1 This Agreement may be terminated by either party for any
reason by ninety (90) days advance written notice delivered to the other
party.
6.2 Notwithstanding any termination of this Agreement, the
Trust shall, at the option of the Company, continue to make available
additional shares of the Trust (or any Portfolio) pursuant to the terms
and conditions of this Agreement for all Contracts in effect on the
effective date of termination of this Agreement, provided that the Company
continues to pay the costs set forth in Section 2.3.
6.3 The provisions of Article V. shall survive the
termination of this Agreement, and the provisions of Article IV. and
Section 2.8 shall survive the termination of this Agreement as long as
shares of the Trust are held on behalf of Contract owners in accordance
with Section 6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
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If to the Trust:
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Attention: David C. Tucker, Esq.
If to the Company:
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Attention: Mark F. Muething, Esq.
ARTICLE VIII.
Miscellaneous
8.1 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and
the same instrument.
8.3 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of State of
Colorado.
8.5 The parties to this Agreement acknowledge and agree that
all liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied solely
out of the assets of the Trust and that no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be personally
liable for any such liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
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<PAGE>
8.8 The parties to this Agreement acknowledge and agree that
this Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior written
approval of the other party.
8.10 No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized
and executed by both parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year
first above written.
ANNUITY INVESTORS
LIFE INSURANCE COMPANY
By: /s/ Mark F. Muething
__________________________
Name: Mark F. Muething
Title: Senior Vice President
JANUS ASPEN SERIES
By: /s/ Deborah E. Bielicke
_________________________
Name: Deborah E. Bielicke
Title: Assistant Vice President
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<PAGE>
SCHEDULE A
Separate Accounts and Associated Contracts
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
-------------------------------------- -------------------
Annuity Investors Variable Account A Group Flexible Premium
May 26, 1995 Deferred Annuity
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<PAGE>
EXHIBIT (8)(e)
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 4th day of June, 1995, between
MERRILL LYNCH VARIABLE SERIES FUNDS, INC., an open-end management
investment company organized as a Maryland corporation (the "Fund"), and
ANNUITY INVESTORS LIFE INSURANCE COMPANY, a life insurance company
organized under the laws of the State of Ohio (the "Company"), on its own
behalf and on behalf of each segregated asset account of the Company set
forth on Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
--------------------
WHEREAS, the Fund has filed a registration statement with the
Securities and Exchange Commission to register itself as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and to register the offer and sale of its shares
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Fund desires to act as an investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies that have
entered into participation agreements with the Fund (the "Participating
Insurance Companies"); and
WHEREAS, Merrill Lynch Funds Distributors, Inc. (the "Under-
writer") is registered as a broker-dealer with the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of The National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the capital stock of the Fund is divided into several
series of shares, each series representing an interest in a particular
managed portfolio of securities and other assets; and
WHEREAS, the series of shares of the Fund offered by the Fund to
the Company and the Accounts are set forth on Schedule B attached hereto
(each, a "Portfolio," and, collectively, the "Portfolios"); and
WHEREAS, the Fund has applied for an order from the Securities
and Exchange Commission granting Participating Insurance Companies and
their separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a) and 15(b) of the 1940 Act, and rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Fund to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated life
insurance companies and certain qualified pension and retirement plans
(the "Shared Fund Exemptive Order");
WHEREAS, Merrill Lynch Asset Management, L.P. is duly registered
as an investment adviser under the Investment Advisers Act of 1940, as
<PAGE>
amended, and any applicable state securities law, and is the Fund's
investment adviser; and
WHEREAS, the Company has registered or will register certain
variable life insurance policies and/or variable annuity contracts under
the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule B attached hereto (the "Shares") on
behalf of the Accounts to fund the Contracts, and the Fund intends to sell
such Shares to the Accounts at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE 1
Sale of Fund Shares
-------------------
1.1 The Fund shall cause the Underwriter to make shares of
its Portfolios available to the Accounts at the net asset value next
computed after receipt of such purchase order by the Fund (or its agent),
as established in accordance with the provisions of the then current
prospectus of the Fund. Shares of a particular Portfolio of the Fund
shall be ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts. The
Directors of the Fund (the "Directors") may refuse to sell shares of any
Portfolio to any person (including the Company and the Accounts), or
suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Directors acting in good faith and in
light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such
Portfolio.
1.2 The Fund will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net
asset value next computed after receipt by the Fund (or its agent) of the
request for redemption, as established in accordance with the provisions
of the then current prospectus of the Fund. The Fund shall make payment
for such shares in the manner established from time to time by the Fund,
but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act (including any Rule or order of the SEC
thereunder).
1.3 The Fund shall accept purchase and redemption orders
resulting from investment in and payments under the Contracts on each
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<PAGE>
Business Day, provided that such orders are received prior to such time as
the Fund may, from time to time, inform the Company is the deadline for
such orders and reflect instructions received by the Company from Contract
holders in good order prior to the time the net asset value of each
Portfolio is priced in accordance with its prospectus on the prior
Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its
net asset value pursuant to the rules of the SEC.
1.4 Purchase orders that are transmitted to the Fund in
accordance with section 1.3 shall be paid for no later than such time as
the Fund may, from time to time, inform the Company is the deadline for
such payment on the same Business Day that the Fund receives notice of the
order. Payments shall be made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to the Company or
the Account. Shares ordered from the Fund will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
1.6 The Fund shall furnish prompt notice to the Company of
any income, dividends or capital gain distributions payable on the Fund's
shares. The Company hereby elects to receive all such income dividends
and capital gain distributions as are payable on a Portfolio's shares in
additional shares of that Portfolio. The Fund shall notify the Company of
the number of shares so issued as payment of such dividends and
distributions.
1.7 The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share
available by 5:00 P.M., New York time.
1.8 The Company agrees that it will not take any action to
operate the Account as a management investment company under the 1940 Act
without the Fund's and the Underwriter's prior written consent.
1.9 The Fund agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts. No shares
of any Portfolio will be sold directly to the general public. The Company
agrees that Fund shares will be used only for the purposes of funding the
Contacts and Accounts listed in Schedule A, as amended from time to time.
1.10 The Fund agrees that all Participating Insurance
Companies shall have the obligations and responsibilities regarding pass-
through voting and conflicts of interest corresponding to those contained
in section 2.8 and Article 4 of this Agreement.
1.11 As long as it shall be the intention of the Fund to
maintain the net asset value per share of any Portfolio at $1.00, on any
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<PAGE>
day on which (a) the net asset value per share of the Shares is
determined, (b) Merrill Lynch Asset Management, L.P. ("MLAM") determines,
in the manner described in the then current prospectus of the Fund that
the net income of such Portfolio on such day is negative, and (c) MLAM
delivers a certificate to the Company setting forth the reduction in the
number of outstanding Shares to be effected as described in the then
current prospectus of the Fund in connection with such determination, the
Company, on behalf of itself and the Accounts, agrees to return to the
Fund its pro rata share of the number of Shares to be reduced and agrees
that, upon delivery of such certificate, (a) its ownership interest in the
Shares so to be returned shall immediately cease, (b) such Shares shall be
deemed to have been cancelled and to be no longer outstanding, and (c) all
rights in respect of such Shares shall cease.
ARTICLE 2
Obligations of the Parties
--------------------------
2.1 The Fund shall prepare and be responsible for filing with
the SEC and any state securities regulators requiring such filing, all
shareholder reports, notices, proxy materials (or similar materials such
as voting instruction solicitation materials), prospectuses and statements
of additional information of the Fund. The Fund shall bear the costs of
registration and qualification of its shares, preparation and filing of
the documents listed in this section 2.1 and all taxes to which an issuer
is subject on the issuance and transfer of its shares.
2.2 At least annually, the Fund or its designee shall provide
the Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule B hereto) for the
Shares as the Company may reasonably request for distribution to existing
Contract owners whose Contracts are funded by such Shares. The Fund or
its designee shall provide the Company, at the Company's expense, with as
many copies of the current prospectus for the Shares as the Company may
reasonably request for distribution to prospective purchasers of
Contracts. If requested by the Company in lieu thereof, the Fund or its
designee shall provide such documentation (including a "camera ready" copy
of the new prospectus as set in type or, at the request of the Company, a
diskette in the form sent to the financial printer) and other assistance
as is reasonably necessary in order for the parties hereto once each year
(or more frequently if the prospectus for the Shares is supplemented or
amended) to have the prospectus for the Contracts and the prospectus for
the Shares printed together in one document; the expenses of such printing
to be borne by the Company. In the event that the Company requests that
the Fund or its designee provide the Fund's prospectus in a "camera ready"
or diskette format, the Fund shall be responsible solely for providing the
prospectus in the format in which it is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in
such format (e.g., typesetting expenses), and the Company shall bear the
expense of adjusting or changing the format to conform with any of its
prospectuses.
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<PAGE>
2.3 The prospectus for the Shares shall state that the
statement of additional information for the Shares is available from the
Fund or its designee. The Fund or its designee, at its expense, shall
print and provide such statement of additional information to the Company
(or a master of such statement suitable for duplication by the Company)
for distribution to any owner of a Contract funded by the Shares. The
Fund or its designee, at the Company's expense, shall print and provide
such statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement.
2.4 The Fund or its designee shall provide the Company free
of charge copies, if and to the extent applicable to the Shares, of the
Fund's proxy materials, reports to Shareholders and other communications
to Shareholders in such quantity as the Company shall reasonably require
for distribution to Contract owners.
2.5 The Company shall furnish, or cause to be furnished, to
the Fund or its designee, a copy of each Contract prospectus or statement
of additional information in which the Fund or its investment adviser is
named prior to the filing of such document with the SEC. The Company
shall furnish, or shall cause to be furnished, to the Fund or its
designee, each piece of sales literature or other promotional material in
which the Fund or its investment adviser is named, at least five Business
Days prior to its use. No such prospectus, statement of additional
information or material shall be used if the Fund or its designee
reasonably objects to such use within five Business Days after receipt of
such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
or its investment adviser in connection with the sale of the Contracts
other than information or representations contained in and accurately
derived from the registration statement or prospectus for the Fund shares
(as such registration statement and prospectus may be amended or
supplemented from time to time), reports of the Fund, Fund-sponsored proxy
statements, or in sales literature or other promotional material approved
by the Fund or its designee, except with the written permission of the
Fund or its designee.
2.7 The Fund shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement
and prospectus may be amended or supplemented from time to time), or in
materials approved by the Company for distribution including sales
literature or other promotional materials, except with the written
permission of the Company.
2.8 The Company shall amend the Registration Statement of the
Contracts under the 1933 Act and the Registration Statement for the
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<PAGE>
Account under the 1940 Act from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be
required by applicable law. The Company shall register and qualify the
Contracts for sale to the extent required by applicable securities laws of
the various states.
2.9 The Company shall be responsible for assuring that any
prospectus offering a Contract that is a life insurance contract where it
is reasonably probable that such Contract would be a "modified endowment
contract," as that term is defined in Section 7702A of the Internal
Revenue Code of 1986, as amended (the "Code"), will identify such Contract
as a modified endowment contract (or policy).
2.10 So long as, and to the extent that the SEC interprets the
1940 Act to require pass-through voting privileges for variable
policyowners; (a) the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the
Accounts, in shares of the Fund; (b) the Fund shall require all
Participating Insurance Companies to calculate voting privileges in the
same manner and the Company shall be responsible for assuring that the
Accounts calculate voting privileges in the manner established by the
Fund; (c) with respect to each Account, the Company will vote shares of
the Fund held by the Account and for which no timely voting instructions
from policyowners are received as well as shares it owns that are held by
that Account, in the same proportion as those shares for which voting
instructions are received; and (d) the Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for
Fund shares held by Contract owners without the prior written consent of
the Fund, which consent may be withheld in the Fund's sole discretion.
ARTICLE 3
Representations and Warranties
------------------------------
3.1 The Company represents and warrants that it is an
insurance company duly organized and in good standing under the laws of
the State of Ohio and has established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that it has
registered or, prior to any issuance or sale of the Contracts, will
register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for
the Contracts.
3.3 The Company represents and warrants that the Contracts
will be registered under the 1933 Act prior to any issuance or sale of the
Contracts; the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws; and the sale
of the Contracts shall comply in all material respects with state
insurance suitability requirements.
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<PAGE>
3.4 The Company represents and warrants that the Contracts
are currently and at the time of issuance will be treated as annuity
contracts or life insurance policies, whichever is appropriate, under
applicable provisions of the Code. The Company shall make every effort to
maintain such treatment and shall notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
3.5 The Company represents and warrants that no affiliated
person (as such term is defined in the 1940 Act) is currently ineligible
to be affiliated with the Company pursuant to the eligibility restrictions
of Section 9(a) of the 1940 Act, and the Company shall notify the Fund and
the Underwriter immediately if any affiliated person becomes ineligible.
3.6 The Fund represents and warrants that it is duly
organized and validly existing under the laws of the State of Maryland.
3.7 The Fund represents and warrants that the Fund Shares
offered and sold pursuant to this Agreement will be registered under the
1933 Act and the Fund is registered under the 1940 Act. The Fund shall
use its best efforts to amend its registration statement under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Company shall advise the Fund of
any state requirements to register the Shares for sale in such states. If
the Fund determines registration is appropriate, the Fund shall use its
best efforts to register and qualify its shares for sale in accordance
with the laws of all fifty states, the District of Columbia, Virgin
Islands and Puerto Rico and such other jurisdictions reasonably requested
by the Company.
3.8 The Fund represents and warrants that the investments of
each Portfolio will comply with the diversification requirements set forth
in section 817(h) of the Code and the rules and regulations thereunder.
ARTICLE 4
Potential Conflicts
-------------------
4.1 The parties acknowledge that the Fund's shares may be
made available for investment to other Participating Insurance Companies.
In such event, the Directors will monitor the Fund for the existence of
any material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. An irreconcilable
material conflict may arise for a variety of reasons, including: (a) an
action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or
securities decision in any relevant proceeding; (d) the manner in which
the investments of any Portfolio are being managed; (e) a difference in
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<PAGE>
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard
the voting instructions of contract owners. The Trustees shall promptly
inform the Company if they determine that an irreconcilable material
conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or
existing conflicts of which it is aware to the Directors. The Company
will assist the Directors in carrying out their responsibilities under the
Shared Trust Exemptive Order by providing the Directors with all
information reasonably necessary for the Directors to consider any issues
raised, including, but not limited to, information as to a decision by the
Company to disregard Contract owner voting instructions.
4.3 If it is determined by a majority of the Directors, or a
majority of the Fund's Directors who are not affiliated with Merrill Lynch
Asset Management, L.P. or the Underwriter (the "Disinterested Directors"),
that a material irreconcilable conflict exists that affects the interests
of Contract owners, the Company shall, in cooperation with other
Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by
the Directors) take whatever steps are necessary to remedy or eliminate
the irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to some or all of the Accounts from the
Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contracts owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract
owners the option of making such a charge; and (b) establishing a new
registered management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions
and that decision represents a minority position or would preclude a
majority vote, the Company may be required, at the Fund's election, to
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of
the Disinterested Directors. Any such withdrawal and termination must
take place within 30 days after the Fund gives written notice that this
provision is being implemented. Until the end of such 30 day period, the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
4.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company
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<PAGE>
will withdraw the affected Account's investment in the Fund and terminate
this Agreement with respect to such Account within 30 days after the Fund
informs the Company in writing that it has determined that such decision
has created an irreconcilable material conflict; provided, however, that
such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority
of the Disinterested Directors. Until the end of such 30 day period, the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
4.6 For purposes of sections 4.3 through 4.6 of this Agree-
ment, a majority of the Disinterested Directors shall determine whether
any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Company be required to establish a new
funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Directors
determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the company will withdraw the
Account's investment in the Fund and terminate this Agreement within
thirty days after the Directors inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the Disinterested
Directors.
4.7 The Company shall at least annually submit to the
Directors such reports, materials or data as the Directors may reasonably
request so that the Directors may fully carry out the duties imposed upon
them by the Shared Trust Exemptive Order, and said reports, materials and
data shall be submitted more frequently if deemed appropriate by the
Directors.
4.8 If and to the extent that (a) Rule 6e-2 and Rule 6e-3(T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with respect
to mixed or shared funding (as defined in the application for the Shared
Fund Exemptive Order) on terms and conditions materially different from
those contained in the application for the Shared Fund Exemptive Order, or
(b) the Shared Fund Exemptive Order is granted on terms and conditions
that differ from those set forth in this Article 4, then the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary (a) to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable, or (b) to conform this Article 4 to the terms and conditions
contained in the Shared Fund Exemptive Order, as the case may be.
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<PAGE>
ARTICLE 5
Indemnification
---------------
5.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Fund and each of its Directors, officers,
employees and agents and each person, if any, who controls the Fund within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Article 5) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or expenses (including the reasonable
costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or common law
or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue
statements or alleged untrue statements of any material
fact contained in a registration statement or prospectus
for the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company on
behalf of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article 5),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately
derived from written information furnished to the Company
by or on behalf of the Fund for use in Company Documents
or otherwise for use in connection with the sale of the
Contracts or Shares; or
(b) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Fund Documents
as defined in section 5.2(a)) or wrongful conduct of the
Company or persons under its control, with respect to the
sale or acquisition of the Contracts or Shares; or
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material fact
contained in Fund Documents as defined in section 5.2(a)
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading if such
statement or omission was made in reliance upon and
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<PAGE>
accurately derived from written information furnished to
the Fund by or on behalf of the Company; or
(d) arise out of or result from any failure by
the Company to provide the services or furnish the
materials required under the terms of this Agreement; or
(e) arise out of or result from any material
breach of any representation and/or warranty made by the
Company in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Company.
5.2 Indemnification by the Fund. The Fund agrees to
indemnify and hold harmless the Company and each of its directors,
officers, employees and agents and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Article 5) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or expenses (including
the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or
at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue
statements or alleged untrue statements of any material
fact contained in the registration statement or
prospectus for the Fund (or any amendment or supplement
thereto) or in sales literature approved by the Fund (but
solely with respect to statements regarding the Fund),
(collectively, "Fund Documents" for the purposes of this
Article 5), or arise out of or are based upon the omis-
sion or the alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
indemnity shall not apply as to any indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately
derived from written information furnished to the Fund by
or on behalf of the Company for use in Fund Documents or
otherwise for use in connection with the sale of the
Contracts or Shares; or
(b) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Company Docu-
ments) or wrongful conduct of the Fund or persons under
its control, with respect to the sale or acquisition of
the Contracts or Shares; or
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<PAGE>
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material fact
contained in Company Documents or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written
information furnished to the Company by or on behalf of
the Fund; or
(d) arise out of or result from any failure by
the Fund to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material
breach of any representation and/or warranty made by the
Fund in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund.
5.3 Neither the Company nor the Fund shall be liable under
the indemnification provisions of section 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party
that arise from such Indemnified Party's willful misfeasance, bad faith or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4 Neither the Company nor the Fund shall be liable under
the indemnification provisions of section 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the other party in writing within a
reasonable time after the summons, or other first written notification,
giving information of the nature of the claim shall have been served upon
or otherwise received by such Indemnified Party (or after such Indemnified
Party shall have received notice of service upon or other notification to
any designated agent), but failure to notify the party against whom
indemnification is sought of any such claim or shall not relieve that
party from any liability which it may have to the Indemnified Party in the
absence of sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemni-
fied Parties, the indemnifying party shall be entitled to participate, at
its own expense, in the defense of such action. The indemnifying party
also shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After notice
from the indemnifying party to the Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
- 12 -
<PAGE>
ARTICLE 6
Termination
-----------
6.1 This Agreement may be terminated by either party for any
reason by six (6) months' advance written notice delivered to the other
party.
6.2 This Agreement may be terminated at the option of the
Fund upon institution of formal proceedings against the Company by the
NASD, the SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of the Account, the
administration of the Contracts or the purchase of the Shares, or an
expected or anticipated ruling, judgment or outcome which would, in the
Fund's reasonable judgment, materially impair the Company's ability to
meet and perform the Company's obligations and duties hereunder.
6.3 This Agreement may be terminated at the option of the
Fund if the Contracts cease to qualify as annuity contracts or life
insurance policies, as applicable, under the Code, or if the Fund
reasonably believes that the Contracts may fail to so qualify.
6.4 This Agreement may be terminated at the option of either
the Fund or the Underwriter if the Fund or the Underwriter, respectively,
shall determine, in their sole judgment exercised in good faith, that
either (1) the Company shall have suffered a material adverse change in
its business or financial condition or (2) the Company shall have been the
subject of material adverse publicity which is likely to have a material
adverse impact upon the business and operations of either the Fund or the
Underwriter.
6.5 Notwithstanding any termination of this Agreement
pursuant to this Article 6, the Fund and the Underwriter may, at the
option of the Fund, continue to make available additional Fund Shares for
so long after the termination of this Agreement as the Fund desires
pursuant to the terms and conditions of this Agreement as provided in
Section 6.6 below, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if the Fund or Underwriter
so elects to make additional Shares available, the owners of the Existing
Contracts or the Company, whichever shall have legal authority to do so,
shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts.
6.6 In the event of a termination of this Agreement pursuant
to this Article 6, the Fund and the Underwriter shall promptly notify the
Company whether the Underwriter and the Fund will continue to make Fund
Shares available after such termination. If Fund Shares continue to be
made available after such termination, the provisions of this Agreement
shall remain in effect except for Section 6.1 and thereafter either the
- 13 -
<PAGE>
Fund or the Company may terminate the Agreement, as so continued pursuant
to this Section 6.6, upon prior written notice to the other party, such
notice to be for a period that is reasonable under the circumstances but,
if given by the Fund, need not be greater than six months.
6.7 The provisions of Article 5 shall survive the termination
of this Agreement, and the provisions of Article 4 and Sections 2.4 and
2.10 shall survive the termination of this Agreement as long as shares of
the Fund are held on behalf of Contract owners in accordance with section
6.5.
ARTICLE 7
Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
Merrill Lynch Variable Series Funds, Inc.
c/o Merrill Lynch Asset Management, L.P.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: General Counsel
If to the Company:
Annuity Investors Life Insurance Company
250 East Fifth Street, 10th Floor
Cincinnati, Ohio 46202
Attention: Mark F. Muething
ARTICLE 8
Miscellaneous
-------------
8.1 The captions in this Agreement are included for con-
venience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and
the same instrument.
8.3 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
- 14 -
<PAGE>
8.4 This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of
New York, shall be subject to the provisions of the 1933, 1934 and 1940
Acts, and the rules, regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant
and the terms hereof shall be interpreted and construed in accordance
therewith.
8.5 The parties to this Agreement acknowledge and agree that
all liabilities of the Fund arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied solely
out of the assets of the Fund and that no Director, officer, agent or
holder of shares of beneficial interest of the Fund shall be personally
liable for any such liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
8.8 The parties to this Agreement acknowledge and agree that
this Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior written
approval of the other party.
8.10 No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized
and executed by both parties.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Fund Participation Agreement as of the date and
year first above written.
ANNUITY INVESTORS LIFE
INSURANCE COMPANY
By: /s/ Mark F. Muething
__________________________
Name: Mark F. Muething
Title: Senior Vice President
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC.
By: /s/ Michael Henewinkel
__________________________
Name: Michael Henewinkel
Title: Vice President, Secretary
- 16 -
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded By
Date Established by Board of Directors Separate Account
______________________________________ ___________________
Annuity Investors Variable Account A Group Flexible Premium
May 26, 1995 Deferred Annuity
- 17 -
<PAGE>
Schedule B
----------
Portfolio Subject To Participation Agreement
--------------------------------------------
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund
Global Strategy Focus Fund
High Current Income Fund
Domestic Money Market Fund
- 18 -
<PAGE>
<PAGE>
EXHIBIT (8)(f)
SERVICE AGREEMENT
THIS SERVICE AGREEMENT (hereinafter called "Agreement") dated
December 1, 1995, by and between AMERICAN ANNUITY GROUP, INC.(hereinafter
called "AAG") and ANNUITY INVESTORS LIFE INSURANCE COMPANY (hereinafter
called "AILIC").
WHEREAS, AAG has extensive experience in the administration of
annuity business; and
WHEREAS, AILIC is a subsidiary of AAG, and desires that AAG
perform certain administrative, accounting and other services (hereinafter
called "Services") for AILIC in its business operations and desires
further to make use in its day-to-day operations of certain property,
equipment, and facilities (hereinafter called "Facilities") of AAG and its
subsidiaries as AILIC may request; and
WHEREAS, AAG and AILIC contemplate that such an arrangement will
achieve certain operating economies and improve Services to the benefit of
AAG, AILIC and AILIC's policyholders; and
WHEREAS, AAG and AILIC wish to assure that all charges for
Services and the use of Facilities incurred hereunder are reasonable and
in accordance with the requirements of applicable law and regulations and
to the extent practicable reflect actual costs and are arrived at in a
fair and equitable manner, and that estimated costs, whenever used, are
adjusted periodically, to bring them into alignment with actual costs; and
WHEREAS, AAG and AILIC wish to identify the Services to be
rendered to AILIC and AAG and its subsidiaries and the Facilities to be
used by AILIC and to provide a method for determining the charges to be
made to AILIC.
NOW, THEREFORE, in consideration of the premises and of the
promises set forth herein, and intending to be legally bound hereby, AAG
and AILIC agree as follows:
1. PERFORMANCE OF SERVICES AND USE OF FACILITIES. AAG agrees to the
extent requested by AILIC to perform such Services for AILIC as AILIC
determines to be reasonably necessary in the conduct of its business and
operations.
AAG agrees to the extent requested by AILIC to make available its
personnel and Facilities to AILIC as AILIC may determine to be reasonably
necessary in the conduct of its business and operations, including but not
limited to the following functions: policy administration; accounting and
auditing services; actuarial; marketing; legal; administrative and other
regulatory matters; general corporate matters; contract matters; use of
data processing and computer equipment; use of business property, whether
owned or leased; and use of communications equipment. It is the intent of
the parties that AAG will perform all services which AILIC requires in
connection with its business of marketing, issuing and servicing fixed and
<PAGE>
variable annuities and provide all Facilities needed in connection with
such business. Notwithstanding the foregoing, this Agreement is not
intended to cover investment services or policy distribution which may be
the subject of separate agreements.
AAG agrees at all times to use its best efforts to maintain
sufficient personnel and Facilities of the kind necessary to perform the
Services sent forth in this Agreement. AAG shall have the right upon
thirty (30) days prior written notice to and non-disapproval by the Ohio
Department of Insurance to subcontract with those subsidiaries, affiliates
or unrelated third parties (hereinafter "Subcontractors") accepted in
writing by AILIC to perform any Services and provide any personnel and
Facilities which AAG is obligated to provide to AILIC pursuant to this
Agreement and in strict accordance with the terms, conditions and
limitations contained in this Agreement; provided, however, AAG shall not
be relieved of its obligations, or of any liability hereunder to AILIC
arising as a result of any failures of SUBCONTRACTORS to perform. Until
changed in accordance with the foregoing, Services shall be provided by
AAG.
(a) CAPACITY OF PERSONNEL; STATUS OF FACILITIES, Whenever
AAG utilizes its personnel to perform Services for AILIC pursuant to this
Agreement, such personnel shall at all times remain employees of AAG
subject solely to its direction and control and AAG shall alone retain
full liability to such employees for their welfare, salaries, fringe
benefits, legally required employer contributions and tax obligations.
No facility of AAG used in performing Services for or subject to
use by AILIC shall be deemed to be transferred, assigned, conveyed or
leased by performance or use pursuant to this Agreement.
(b) EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing
any Services hereunder which require the exercise of judgment by AAG, AAG
shall perform any such Services in accordance with any standards and
guidelines AILIC develops and communicates to AAG. In performing any
Services hereunder, AAG shall at all times act in a manner reasonably
calculated to be in, or not opposed to, the best interests of AILIC. AAG
shall have no liability for any action taken or omitted by it in
furnishing Services and Facilities under this Agreement, in good faith and
without gross negligence or willful misconduct.
(c) CONTROL. The performance of Services by AAG for AILIC
pursuant to this Agreement shall in no way impair the absolute control of
the business and operations of AAG or AILIC by their respective Boards of
Directors. AAG shall act hereunder so as to assure the separate operating
identity of AILIC as required pursuant to the laws of the State of Ohio.
2. SERVICES. The performance of services by AAG under this
Agreement with respect to the business and operations of AILIC shall at
all times be subject to the direction and control of the Board of
Directors of AILIC.
- 2 -
<PAGE>
Subject to the foregoing and to the terms and conditions of this
Agreement, AAG shall provide to AILIC the Services set forth below.
(a) POLICY ADMINISTRATION. Under the general supervision of
the Board of Directors of AILIC, AAG shall provide all services in
connection with policy administration and policyholder services including:
policy issuance, premium processing, loan processing, surrender and
annuity processing and policyholder services.
(b) ACCOUNTING AND AUDITING. Under the general supervision
of the Board of Directors of AILIC, AAG shall provide the following
accounting services: preparation and maintenance of the financial
statements and reports including annual and quarterly statements on both
statutory and GAAP bases and tax returns, and processing of the related
financial records and transactions of AILIC. AAG shall also provide such
assistance as may be required with respect to tax and auditing services.
(c) ACTUARIAL. Under the general supervision of the Board of
Directors of AILIC, AAG shall provide all actuarial services needed in
connection with AILIC's business including policy design and development
and reserve valuation.
(d) MARKETING. Under the general supervision of the Board of
Directors of AILIC, AAG shall provide all marketing services needed in
connection with AILIC's business including market research, development of
marketing materials and campaigns and recruitment of agents.
(e) LEGAL. Under the general supervision of the Board of
Directors of AILIC, AAG shall provide all legal services and compliance
services needed in connection with AILIC's business including company
licensing, product approval and other regulatory matters.
(f) ADMINISTRATIVE AND OTHER REGULATORY MATTERS. Under the
general supervision of the Board of Directors of AILIC, AAG shall provide
all administrative and regulatory services needed in connection with
AILIC's business.
(g) CORPORATE MATTERS. Under the general supervision of the
Board of Directors of AILIC, AAG shall provide services with respect to
general corporate matters involving AILIC.
(h) POLICY MATTERS. Under the general supervision of the
Board of Directors of AILIC, AAG shall provide all services in connection
with the development of policies and products to be marketed by AILIC.
(i) DATA PROCESSING AND COMPUTER EQUIPMENT. Under the general
supervision of the Board of Directors of AILIC, AAG shall provide
telecommunications services and electronic data processing services,
Facilities and integration, including software programming and
documentation and hardware utilization.
- 3 -
<PAGE>
3. CHARGES. AILIC shall not be charged by AAG for the Services and
Facilities provided by AAG until such time as AILIC becomes an operating
entity issuing annuity contracts. All expenses incurred prior to such time
in the development of the annuity contracts shall be borne by AAG under
the general supervision of the Board of Directors of AILIC.
After such time, the charge to AILIC for such Services and
Facilities shall be at a rate as mutually agreed upon plus a reasonable
charge for direct overhead, the amount of such charge for overhead to be
agreed upon by the parties from time to time and reported annually.
The bases for determining such charges for Services and
Facilities to AILIC shall be those used by AAG for internal cost
distribution including, where appropriate, Activity Based Costing records.
Such bases shall be modified and adjusted by mutual agreement where
necessary or appropriate to reflect fairly and equitably the actual
incidence of cost incurred by AAG and/or SUBCONTRACTORS on behalf of
AILIC.
4. PAYMENT. AAG and/or SUBCONTRACTORS shall submit to AILIC within
thirty (30) days of the end of each calendar month a written statement of
the amount estimated to be owed by AILIC for Services and the use of
personnel or Facilities pursuant to this Agreement in that calendar month
and AILIC shall pay to the party rendering the statement within thirty
(30) days following receipt of such written statement the amount set forth
in the statement.
Within thirty (30) days after the end of each calendar quarter,
AAG and/or SUBCONTRACTORS will submit to AILIC a detailed written
statement of the charges due from AILIC to AAG and/or SUBCONTRACTORS in
the preceding calendar quarter, including charges not included in any
previous statements, and any balance payable as shown in such statement
shall be paid within fifteen (15) days following receipt of such written
statement by AILIC.
5. ACCOUNTING RECORDS AND DOCUMENTS. AAG and/or SUBCONTRACTORS
shall be responsible for maintaining full and accurate accounting records
of all Services rendered and Facilities used pursuant to this Agreement
and such additional information as AILIC may reasonably request for
purposes of its internal bookkeeping and accounting operations. The
accounting records to be maintained by AAG shall include any records
required to be maintained by AILIC under applicable laws. AAG and/or
SUBCONTRACTORS shall keep such accounting records insofar as they pertain
to the computation of charges hereunder available at its principal offices
for audit, inspection and copying by AILIC or any governmental agency
having jurisdiction over AILIC during all reasonable business hours. With
respect to accounting and statistical records prepared by AAG by reason of
its performance under this Agreement, summaries of such records shall be
delivered to AILIC within thirty (30) days from the end of the month to
which the records pertain.
- 4 -
6. OTHER RECORDS AND DOCUMENTS. All books, records, and files
established and maintained by AAG and/or SUBCONTRACTORS by reason of its
performance under this Agreement which, absent this Agreement, would have
been held by AILIC shall be deemed the property of AILIC, and shall be
subject to examination by AILIC and persons authorized by it at all times,
and shall be delivered to AILIC at least quarterly. With respect to
original documents other than those provided for in Section 5 hereof which
would otherwise be held by AILIC and which may be obtained by AAG in
performing under this Agreement, AAG shall deliver such documents to AILIC
within thirty (30) days of their receipt by AAG except where continued
custody of such original documents is necessary to perform hereunder
7. LICENSING. AAG shall be responsible for obtaining any licenses
or permits needed to provide the services described herein and shall be
responsible for providing personnel who have any required license or
permit.
8. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be
deemed to grant AAG an exclusive right to provide Services to AILIC, and
AILIC retains the right to contract with any third party, affiliated or
unaffiliated, for the performance of Services or for the use of Facilities
as are available to or have been requested by AILIC pursuant to this
Agreement. Similarly, AAG retains the right to contract with any third
party, affiliated or unaffiliated, to perform services or to provide
facilities, identical or similar to those being performed or provided
herein.
9. TERMINATION AND MODIFICATION. This Agreement shall remain in
effect until terminated by either AAG or AILIC upon giving thirty (30)
days or more advance written notice, provided that AILIC shall have the
right to elect to continue to receive data processing Services and/or to
continue to utilize data processing Facilities and related software for up
to one year from the date of such notice. Upon termination, AAG shall
promptly deliver to AILIC all books and records that are, or are deemed by
this Agreement to be, the property of AILIC.
10. SETTLEMENT ON TERMINATION. No later than ninety (90) days after
the effective date of termination of this Agreement, AAG shall deliver to
AILIC a detailed written statement for all charges incurred and not
included in any previous statement to the effective date of termination.
The amount owned hereunder shall be due and payable within thirty(30) days
of receipt of such statement.
11. EFFECTIVE DATE. This Agreement shall become effective upon the
later of (i) the date hereof, or (ii) the receipt of any required approval
of the Ohio Department of Insurance or the expiration of any waiting
period provided for by the laws or regulations of the State of Ohio.
12. ASSIGNMENT. This Agreement and any rights pursuant hereto shall
not be assignable by either party hereto, except as set forth herein or by
operation of law. Except as and to the extent specifically provided in
this Agreement, nothing in this Agreement, expressed or implied, is
- 5 -
intended to confer on any person other than the parties hereto, or their
respective legal successors, any rights, remedies, obligations or
liabilities, or to relieve any person other than the parties hereto, or
their respective legal successors, from any obligations or liabilities
that would otherwise be applicable. The covenants and agreements
contained in this Agreement shall be binding upon, extend to and inure to
the benefit of the parties hereto, their, and each of their, successors
and assigns respectively.
13. GOVERNING LAW. This Agreement is made pursuant to and shall be
governed by, interpreted under, and the rights of the parties determined
in accordance with, the laws of the State of Ohio.
14. ARBITRATION. Any unresolved difference of opinion between the
parties arising out of or relating to this Agreement, or the breach
thereof, except as provided in Section 3, shall be settled by arbitration
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and the Expedited Procedures thereof, and judgment
upon the award rendered by the Arbitrator may be entered in any Court
having jurisdiction thereof. The arbitration shall take place in
Cincinnati, Ohio.
15. NOTICE. All notices, statements or requests provided for
hereunder shall be deemed to have been duly given when delivered by hand
to an officer of the other party, or when deposited with the U.S. Postal
Service, as certified or registered mail, postage prepaid, addressed or to
such other person or place as each party may from time to time designate
by written notice sent as aforesaid.
If to AAG:
AMERICAN ANNUITY GROUP, INC.
250 East Fifth Street, 10th Floor
Cincinnati, OH 45202
Attention: General Counsel
Phone Number (513) 333-5515
Fax Number (513) 357-3397
If to AILIC:
ANNUITY INVESTORS LIFE INSURANCE COMPANY
250 East Fifth Street, 10th Floor
Cincinnati, OH 45202
Attention: General Counsel
Phone Number (513) 333-5515
Fax Number (513) 357-3397
16. ENTIRE AGREEMENT. This Agreement, together with such Amendments
as may from time to time be executed in writing by the parties,
constitutes the entire Agreement between the parties with respect to the
subject matter hereof.
- 6 -
In witness whereof, the parties hereunto set their hands as of
the date first above written.
AMERICAN ANNUITY GROUP, INC.
By: /s/ Mark F. Muething
_____________________________
Its: Senior Vice President
ANNUITY INVESTORS LIFE INSURANCE
COMPANY, INC.
By: /s/ Mark F. Muething
_____________________________
Its: Senior Vice President
- 7 -
EXHIBIT (8)(g)
AGREEMENT
THIS AGREEMENT made this 2nd day of February, 1995 by and among
AAG SECURITIES, INC. ("AAG Securities"), AAG INSURANCE AGENCY, INC. ("AAG
Agency") and such other subsidiaries and affiliates of AAG Agency which
may from time-to-time become a party to this Agreement.
WHEREAS, AAG Securities is a member of the National Association
of Securities Dealers, Inc. ("NASD") and registered as a broker-dealer in
various jurisdictions;
WHEREAS, AAG Securities has registered representatives who have
the requisite licenses to sell both securities and insurance products;
WHEREAS, AAG Agency and certain subsidiaries are licensed as life
insurance agencies in various jurisdictions;
WHEREAS, AAG Securities and AAG Agency are both wholly-owned
subsidiaries of American Annuity Group, Inc.; and
WHEREAS, AAG Securities and AAG Agency desire to cooperate in
connection with the marketing and sale of variable annuities.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, the parties agree as follows:
1. Parties to Agreements. AAG Securities and AAG Agency may
from time-to-time mutually decide that it is in their mutual best
interests to enter into agreements with issuers of variable annuity
products to become agents for such issuers. Any selling agreement or
general agent agreement to be entered into with any such issuer shall be
executed by AAG Securities and AAG Agency or one of its subsidiaries which
is properly licensed as a life insurance agency in the appropriate
jurisdiction.
2. Agents. Only those individuals who are licensed with
both AAG Securities and AAG Agency or one of its subsidiaries will be
permitted to market, sell or service variable annuities through AAG
Securities or AAG Agency or one of its subsidiaries. Individuals who are
licensed with the appropriate entities may market, sell and service only
those variable annuities which are subject to a selling agreement or
general agent agreement as to which AAG Securities and AAG Agency or one
of its subsidiaries are parties.
3. Licensing Files. AAG Securities shall be responsible for
maintaining licensing files for all individuals who are licensed with AAG
Securities and AAG Agency or one of its subsidiaries to permit the
marketing, sale and servicing of variable annuities.
4. Supervision. In each jurisdiction in which the parties
hereto intend to market variable annuities, AAG Securities and AAG Agency
or one of its subsidiaries shall designate a person to be responsible for
supervision of all variable annuity marketing. Such individual must be
(i) an NASD registered principal of AAG Securities, and ii) licensed with
AAG Agency or one of its subsidiaries to sell variable annuities.
5. Additional Duties. AAG Securities shall also perform the
duties set forth on Exhibit "A" attached hereto.
6. Commissions. All net dealer commissions earned on the
sale of variable annuity contracts shall be the property of AAG Agency or
one of its subsidiaries. For purposes of the foregoing, "net dealer
commissions" shall mean all commissions paid by the issuer of the contract
that remain after all commissions have been paid to properly licensed
agents pursuant to agreements among that agent, AAG Securities and AAG
Agency or one of its subsidiaries.
7. Payment of Commissions. AAG Securities shall serve as
the agent for the payment of all commissions on variable annuities sold
pursuant to this Agreement. AAG Securities shall disburse such amounts
and invoice AAG Agency or one of its subsidiaries for the amounts paid.
AAG Agency or one of its subsidiaries agrees to promptly reimburse AAG
Securities for the commissions disbursed.
8. Accounting. All accounting for the commissions earned on
variable annuities sold pursuant to this Agreement shall be done in
accordance with all applicable state and federal laws and regulations and
the rules of the NASD.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
10. Additional Parties. From time-to-time, subsidiaries of
AAG Agency may become parties to this Agreement by executing an Addendum
agreeing to be bound by the provisions hereof.
IN WITNESS WHEREOF, the parties have hereunto set their hands as
of the date first above written.
AAG SECURITIES, INC.
BY: /s/ Mark F. Muething
ITS: Senior Vice President
AAG INSURANCE AGENCY, INC.
BY: /s/ Mark F. Muething
ITS: Senior Vice President
- 2 -
EXHIBIT A
. AAG Securities will operate and be responsible for all securities
services provided in connection with the sale of insurance
products.
. AAG Securities will be responsible for the control and
supervision of all agents selling insurance securities under this
arrangement.
. AAG Securities will be responsible for training, controlling,
supervising and shall assume responsibility for all securities
activities of agents selling insurance securities under this
arrangement.
. AAG Securities will conduct periodic audits of agents selling
securities under this arrangement to ensure that they are in
compliance with AAG Securities' operating procedures and the
federal securities law.
. AAG Securities will approve and assume responsibility for any
advertising or promotional materials pertaining to insurance
securities prior to distribution to ensure that these materials
are in compliance with federal securities laws and the rules of
the NASD.
. AAG Securities will comply with all statutory and regulatory
requirements of the federal securities laws and the rules of the
NASD in connection with the sale of insurance securities.
. AAG Securities will ensure that all its registered
representatives comply with all statutory and regulatory
requirements of the federal securities laws and the rules of the
NASD that are applicable to registered representatives.
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EXHIBIT (8)(h)
INVESTMENT SERVICES AGREEMENT
-----------------------------
THIS INVESTMENT SERVICES AGREEMENT ("Agreement"), dated and
effective as of November 28, 1995 between ANNUITY INVESTORS LIFE INSURANCE
COMPANY, an Ohio corporation ("Company"), and AMERICAN ANNUITY GROUP,
INC., a Delaware corporation ("American").
WHEREAS, Company seeks to obtain information and advice with
respect to the investment of its assets; and
WHEREAS, American, utilizing its own employees along with
services provided by its affiliate, American Money Management ("AMM"), is
willing and able to supply such investment services pursuant to the terms
and conditions set forth below;
NOW, THEREFORE, for the consideration herein stated, the parties
agree as follows:
1. INVESTMENT SERVICES.
1 American shall furnish investment services to Company,
which services shall include the following:
.1 to counsel and advise Company in connection with
the formulation of investment programs and strategies designed to
accomplish Company's investment objectives; and
.2 to manage the investment of Company's portfolios
of Invested Assets (as later defined) in accordance with investment
policies, objectives, directions and guidelines established by Company, as
set forth in Section 1.3 below, and, in connection therewith, to have full
discretion and authority, without prior consultation or prior approval, to
buy, sell and otherwise trade in stocks, bonds and other securities or
assets and take such other actions which American shall deem requisite,
appropriate or advisable.
2 Custody and control of the securities and all other
assets comprising Company's investment portfolio shall at all times be
subject to the direction and control of Company, acting through its Board
of Directors or an appropriate committee thereof. All purchases and sales
of securities shall be in the name of Company, and all certificates or
other instruments representing its investments shall be held by Company or
in accounts at depository institutions designated by Company or in book
form where appropriate. Such securities will be held in accounts
segregated from those of American or its affiliates.
3 American agrees that the investment services it furnishes
will be in accordance with the general, investment policies, objectives
and guidelines (collectively, "Guidelines") submitted by American to
Company and approved by the Board of Directors of Company or an
appropriate committee of the Board of Directors of Company.
4 The Company shall at all times keep American fully
informed as to the funds available, or to become available, for
investment, and generally as to its financial condition. The Company
shall furnish American with copies of financial statements and with other
information with regard to its affairs, as American may from time to time
request.
5 Notwithstanding Section .1 above, American shall not
(i) invest any of the Invested Assets in securities of American or any of
its affiliates or any entity controlled by any of them, (ii) cause Company
to purchase any securities from, or sell any securities to, American or
any of its affiliates or any entity controlled by any of them or (iii)
invest any of such Invested Assets in any investment opportunity which was
previously made available to and declined by American, in each case
without first obtaining the approval of the Board of Directors of the
Company or a appropriate Committee thereof.
6 For purposes of this Agreement, "Invested Assets" shall
mean bonds, stocks (common and preferred), short term investments and
similar invested assets carried on the Company's statutory convention
statements on Schedules BA, DA and D as admitted assets as permitted by
applicable law.
2. PURCHASE AND SALE OF SECURITIES.
American shall place all orders for the purchase and sale of
portfolio securities for Company accounts with brokers or dealers selected
by American and shall seek to execute portfolio transactions on terms
which are advantageous to Company in selecting brokers or dealers to
execute transactions. American shall not be obligated to solicit
competitive bids or seek the lowest available commission cost.
3. OTHER SERVICES; REPORTS AND RECORDS.
1 American shall maintain adequate records relating to the
furnishing of investment services under this Agreement, including those
with respect to the acquisition and disposition of securities, and shall
provide Company with all reports and documentation necessary for proper
accounting and regulatory reporting. American shall provide to Company
such oral or written reports as to its services provided under this
Agreement as Company shall reasonably require.
2 All records maintained pursuant to this Agreement shall
be deemed the property of Company and shall be subject to examination by
Company and by persons authorized by it, or by governmental authorities,
at all times upon reasonable notice. Except as expressly authorized in
this Agreement or directed by Company in writing, American shall keep
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confidential such records and other information obtained by reason of this
Agreement. Upon termination of this Agreement, American shall promptly
return all such records to Company.
4. INVESTMENT FEES; EXPENSES.
1 In full compensation and consideration for the
performance of its obligations hereunder, Company shall pay to American an
annual fee equal to .15% of the statutory carrying value of Invested
Assets. The fee paid by the Company shall not in any case exceed the
actual cost of the services provided by American. In addition, American
shall be entitled to reimbursement for the reasonable fees and expenses of
its outside legal counsel for necessary legal services rendered to
American in connection with the performance of its obligations hereunder.
All such fees and expenses shall be paid by Company. Payments due
hereunder shall be computed by American and paid by Company on a quarterly
basis measured as of the end of the preceding calendar quarter based on
the statutory carrying value of Invested Assets at such date. The
quarterly portion of the fee shall be billed within 30 days after the end
of each calendar quarter or portion thereof in which services are rendered
under this Agreement and paid within 10 days after receipt of the bill.
2 American shall furnish at its own expense necessary
executive and other personnel for providing investment services to Company
hereunder, including personnel to perform clerical, bookkeeping,
accounting and other office functions. Company shall be responsible for
the expenses of (a) brokerage commissions, issue and transfer taxes and
other costs in connection with securities transactions to which Company is
a party, including any portion of such commissions attributable to
research and brokerage services, (b) taxes payable by Company to federal,
state and other governmental agencies, and (c) custodial fees and
expenses.
5. NON-EXCLUSIVITY OF SERVICES.
The services of American to be provided hereunder are not to be
deemed exclusive and American shall be free to provide similar services
for its own account and the accounts of other affiliates, provided that
such services do not materially interfere with services to be rendered
hereunder.
6. SUBCONTRACTING.
Company acknowledges that American intends to subcontract with
American Money Management Corporation to provide a portion of the services
to be rendered hereunder. The arrangement with American Money Management
Corporation to provide those services shall not relieve American of any
liability or responsibility hereunder and any cost or expense of obtaining
such services shall be the sole responsibility of American.
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7. LIABILITY; INDEMNIFICATION.
1 Neither American nor any of its directors, officers or
employees or other persons affiliated with American shall have any
liability hereunder for any act, omission, misstatement or error in
judgment in the course of, or in connection with, providing investment
advisory services under this Agreement, or for any losses that may be
sustained from such investment advisory services. Company shall indemnify
and hold harmless American and its directors, officers, employees and
other affiliated persons from and against any and all liability, claims
and damages arising from or in connection with providing services
hereunder; provided, however, that the foregoing shall not relieve
American from liability for negligence, gross negligence or willful
misfeasance in providing services under this Agreement.
2 As to all other services provided by American hereunder,
neither American nor any of its directors, officers or employees or other
persons affiliated with American shall have any liability hereunder for
any act, omission, misstatement or error in judgment in the course of, or
in connection with, providing such other services, or for any losses that
may be sustained from such other services, and Company shall indemnify and
hold harmless American and its directors, officers, employees and other
affiliated persons from and against any and all liability, claims and
damages arising from or in connection with providing such other services
hereunder; provided, however, that the foregoing shall not relieve
American from liability for negligence, gross negligence or willful
misfeasance in providing such other services.
8. TERMINATION; RENEGOTIATION.
1 This Agreement shall remain in effect until terminated by
any party thereto at any time upon ninety (90) days written notice to the
other party's normal business address. Upon termination of this
Agreement, Company shall pay pro rata any investment fees due for any
portion of a calendar quarter within ten (10) days following the date of
termination.
2 This Agreement shall be subject to renegotiations upon
the request of either party at the end of each three (3) year period
during which this Agreement continues in effect. The party requesting
renegotiation shall provide written notice thereof to the other party's
normal business address during the thirty (30) day period preceding the
end of any three (3) year period. If such renegotiations result in an
Agreement which is unsatisfactory to Company, it shall be entitled to
terminate this Agreement in accordance with the terms hereof.
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9. NOTICES.
Notices or other writings given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex
or telecopy or within two (2) days of mailing if mailed postage prepaid to
such address. The addresses of the parties are:
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, Ohio 45202
Attn: General Counsel
with a copy to:
American Annuity Group, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Attn: General Counsel
Each party may change its address by giving notice as herein
required.
10. SOLE INSTRUMENT.
This instrument constitutes the sole and only agreement of the
parties hereto relating to the subject matter hereof and correctly sets
forth the rights, duties, and obligations of each party to the other as of
its date.
11. WAIVER OR MODIFICATION.
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged.
12. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio.
13. ASSIGNMENT.
No party to this Agreement shall have the right to sell,
transfer, delegate, or assign this Agreement or any of its rights or
duties hereunder to any person, firm or corporation at any time during the
term hereof, and any proposed assignee shall acquire no rights nor be able
to assume any obligations unless the written consent of the other party to
this Agreement is given before such assignment or delegation takes place.
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However, subject to this paragraph, this Agreement binds and inures to the
benefit of the parties, their successors and assigns.
14. COMPLIANCE WITH APPLICABLE LAW. This Agreement shall be
performed in accordance with the requirements of the Securities Act of
1933, Securities Exchange Act of 1934, Investment Company Act of 1940,
Investment Advisors Act of 1940 and the applicable rules and regulations
of the Securities and Exchange Commission promulgated thereunder, to the
extent that any of the foregoing are applicable to the subject matter of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of November 28, 1995, effective for all purposes as of such date for
services rendered subsequent to November 28, 1995.
ANNUITY INVESTORS LIFE INSURANCE
COMPANY
BY: /s/ Mark F. Muething
____________________________
Title: Senior Vice President
AMERICAN ANNUITY GROUP, INC.
BY: /s/ Mark F. Muething
____________________________
Title: Senior Vice President
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EXHIBIT (10)(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 13, 1995, with respect to the financial
statements of Annuity Investors Life Insurance Company (formerly Carillon
Life Insurance Company) included in the Pre-effective Amendment No. 2 of
the Registration Statement (Form N-4 File Nos. 33-39861 and 811-07299) and
related Statement of Additional Information of Annuity Investors Variable
Account A.
/s/ Ernst & Young L.L.P.
------------------------
Ernst & Young
Cincinnati, Ohio
November 28, 1995