<PAGE>
File No. 33-65409
File No. 811-07299
As filed with the Securities and Exchange Commission on June 26, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. ___1___ ( X )
Post-effective Amendment No. ______ ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Amendment No. __1__ ( X )
(Check appropriate box or boxes)
-------------------------
ANNUITY INVESTORS(SERVICEMARK) VARIABLE ACCOUNT A
(Exact Name of Registrant)
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED TRADEMARK)
(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
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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
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Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of the Registration Statement.
DECLARATION REQUIRED BY RULE 24f-2 (a) (1)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the Registrant declares that an indefinite number of its securities is
being registered under the Securities Act of 1933. Fee $500.00
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
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<TABLE>
<CAPTION>
<S> <C> <C>
Item of Form N-4 Prospectus Caption
---------------- ------------------
1. Cover Page . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Definitions . . . . . . . . . . . . . . . . . . . . . . Definitions
3. Synopsis . . . . . . . . . . . . . . . . . . . . . . . Highlights
4. Condensed Financial Information
(a) Accumulation Unit Values . . . . . . . . . . . Not Applicable
(b) Performance Data . . . . . . . . . . . . . . . Not Applicable
(c) Financial Statements . . . . . . . . . . . . . Financial Statements for the Company
5. General Description of Registrant, Depositor and
Portfolio Companies
(a) Depositor . . . . . . . . . . . . . . . . . . Annuity Investors Life Insurance Company
(b) Registrant . . . . . . . . . . . . . . . . . . The Separate Account
(c) Portfolio Company . . . . . . . . . . . . . . The Funds
(d) Fund Prospectus . . . . . . . . . . . . . . . The Funds
(e) Voting Rights . . . . . . . . . . . . . . . . Voting Rights
6. Deductions and Expenses
(a) General . . . . . . . . . . . . . . . . . . . Charges and Deductions
(b) Sales Load % . . . . . . . . . . . . . . . . . Contingent Deferred Sales Charge
(c) Special Purchase Plan . . . . . . . . . . . . Contingent Deferred Sales Charge
(d) Commissions . . . . . . . . . . . . . . . . . Distribution of the Contract
<PAGE>
Item of Form N-4 Prospectus Caption
---------------- ------------------
(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 . . . . . . . . Purchase Payments
(ii) Transfers . . . . . . . . . . . . . . Transfers
(iii) Exchanges . . . . . . . . . . . . . . Additions, Deletions or Substitutions
(c) Changes . . . . . . . . . . . . . . . . . . . Changes -- Waivers
(d) Inquiries . . . . . . . . . . . . . . . . . . Contacting the Company
8. Annuity Period . . . . . . . . . . . . . . . . . . . . Settlement Options
9. Death Benefit . . . . . . . . . . . . . . . . . . . . . Death Benefit
10. Purchases and Contract Values
(a) Purchases . . . . . . . . . . . . . . . . . . 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 Owner . . . . . . . . . . . . . . . . . . . Surrender Value; Systematic Withdrawal
By Annuitant . . . . . . . . . . . . . . . . . Not Applicable
(b) Texas ORP . . . . . . . . . . . . . . . . . . Texas Optional Retirement Program
(c) Check Delay . . . . . . . . . . . . . . . . . Suspension or Delay in Payment of Surrender
Value
(d) Free Look . . . . . . . . . . . . . . . . . . Right to Cancel
<PAGE>
Item of Form N-4 Prospectus Caption
---------------- ------------------
12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . Federal Tax Matters
13. Legal Proceedings . . . . . . . . . . . . . . . . . . . Legal Proceedings
14. Table of Contents for the Statement of Additional
Information . . . . . . . . . . . . . . . . . . . . . . Statement of Additional Information
PART B
------
Statement of Additional
Item of Form N-4 Information Caption
---------------- -----------------------
15. Cover Page . . . . . . . . . . . . . . . . . . . . . . Cover Page
16. Table of Contents . . . . . . . . . . . . . . . . . . . Table of Contents
17. General Information and General Information and History
History . . . . . . . . . . . . . . . . . . . . . . . .
18. Services
(a) Fees and Expenses of 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
(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
<PAGE>
Statement of Additional
Item of Form N-4 Information Caption
---------------- -----------------------
21. Calculation of Performance Data
(a) Money Market Funded Sub Accounts . . . . . . . Money Market Sub-Account Standardized Yield
Calculation
(b) Other Sub-Accounts . . . . . . . . . . . . . . Other Sub-Account Standardized Yield
Calculations
22. Annuity Payments . . . . . . . . . . . . . . . . . . . (Prospectus) Fixed Dollar Benefit; Variable
Dollar 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 Owners . . . . . . . . . . . . . . . . . . . Number of Owners
28. Indemnification . . . . . . . . . . . . . . . . . . . . Indemnification
29. Principal Underwriters . . . . . . . . . . . . . . . . Principal Underwriter
30. Location of Accounts and Location of Accounts and Records
Records . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
31. Management Services . . . . . . . . . . . . . . . . . . Management Services
32. Undertakings . . . . . . . . . . . . . . . . . . . . . Undertakings
Signature Page . . . . . . . . . . . . . . . . . . . . Signature Page
</TABLE>
<PAGE>
Subject to Completion: Dated _____________, 1996
ANNUITY INVESTORS(SERVICEMARK) VARIABLE ACCOUNT A
of
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED TRADEMARK)
PROSPECTUS
for the
Commodore Mariner(SERVICEMARK) and Commodore Americus(SERVICEMARK)
Individual Flexible Premium Deferred Annuities
Issued by
ANNUITY INVESTORS LIFE INSURANCE COMPANY
P.O. Box 5423, Cincinnati, Ohio 45201-5423, (800) 789-6771
This Prospectus describes the Commodore Mariner and Commodore Americus
Individual Flexible Premium Deferred Annuity Contracts (each, the
"Contract") issued by Annuity Investors Life Insurance Company (the
"Company").
The Commodore Americus is available in connection with arrangements that
qualify for favorable tax treatment ("Qualified Contract(s)") under
sections 401, 403 and 408 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Commodore Mariner is available for non-tax-qualified
annuity purchases ("Non-Qualified Contract(s)"), including Contracts
purchased by an employer in connection with a Code Section 457 or non-
qualified deferred compensation plan.
The Contract provides for the accumulation of an Account Value on a fixed
or variable basis, or a combination of both. The Contract 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: (1) Janus Aspen Series Aggressive Growth Portfolio; (2)
Janus Aspen Series Worldwide Growth Portfolio; (3) Janus Aspen Series
Balanced Portfolio; (4) Janus Aspen Series Short-Term Bond Portfolio; (5)
Dreyfus Variable Investment Fund-Capital Appreciation Portfolio; (6) The
Dreyfus Socially Responsible Growth Fund, Inc.; (7) Dreyfus Stock Index
Fund; (8) Merrill Lynch Variable Series Funds, Inc., Basic Value Focus
Fund; (9) Merrill Lynch Variable Series Funds, Inc., Global Strategy Focus
Fund; (10) Merrill Lynch Variable Series Funds, Inc., High Current Income
Fund; and (11) Merrill Lynch Variable Series Funds, Inc., Domestic Money
Market Fund.
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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.
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 _______________, 1996.
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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.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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.
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Page 3
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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TABLE OF CONTENTS
Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Contract . . . . . . . . . . . . . . . . . . . . . . 6
The Separate Account . . . . . . . . . . . . . . . . . . 6
The Fixed Account . . . . . . . . . . . . . . . . . . . . 6
Transfers Before the Annuity Commencement Date . . . . . 7
Surrenders . . . . . . . . . . . . . . . . . . . . . . . 7
Contingent Deferred Sales Charge ("CDSC") . . . . . . . . 7
Other Charges and Deductions . . . . . . . . . . . . . . 7
Annuity Benefits . . . . . . . . . . . . . . . . . . . . 8
Death Benefit . . . . . . . . . . . . . . . . . . . . . . 8
Federal Income Tax Consequences . . . . . . . . . . . . . 8
Right to Cancel . . . . . . . . . . . . . . . . . . . . . 8
Contacting the Company . . . . . . . . . . . . . . . . . 8
SUMMARY OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 9
Owner Transaction Expenses . . . . . . . . . . . . . . . 9
Examples . . . . . . . . . . . . . . . . . . . . . . . . 12
FINANCIAL STATEMENTS FOR THE COMPANY . . . . . . . . . . . . . . . . 13
THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Janus Aspen Series . . . . . . . . . . . . . . . . . . . 14
Aggressive Growth Portfolio . . . . . . . . . . . 14
Worldwide Growth Portfolio . . . . . . . . . . . 14
Balanced Portfolio . . . . . . . . . . . . . . . 14
Short-Term Bond Portfolio . . . . . . . . . . . . 14
Dreyfus Funds . . . . . . . . . . . . . . . . . . . . . . 14
Capital Appreciation Portfolio . . . . . . . . . 14
The Dreyfus Socially Responsible Growth
Fund, Inc. . . . . . . . . . . . . . . . . . . . 14
Dreyfus Stock Index Fund . . . . . . . . . . . . 14
Merrill Lynch Variable Series Funds, Inc. . . . . . . . . 15
Basic Value Focus Fund . . . . . . . . . . . . . 15
Global Strategy Focus Fund . . . . . . . . . . . 15
High Current Income Fund . . . . . . . . . . . . 15
Domestic Money Market Fund. . . . . . . . . . . . 15
Additions, Deletions, or Substitutions . . . . . . . . . 16
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 16
Yield Data . . . . . . . . . . . . . . . . . . . . . . . 16
Total Return Data . . . . . . . . . . . . . . . . . . . . 17
ANNUITY INVESTORS LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT . . 17
Annuity Investors Life Insurance Company . . . . . . . . 17
Published Ratings . . . . . . . . . . . . . . . . . . . . 18
The Separate Account . . . . . . . . . . . . . . . . . . 18
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Fixed Account Options . . . . . . . . . . . . . . . . . . 19
Renewal of Fixed Account Options . . . . . . . . . . . . 19
THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Right to Cancel . . . . . . . . . . . . . . . . . . . . . 20
PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Purchase Payments . . . . . . . . . . . . . . . . . . . . 20
Allocation of Purchase Payments . . . . . . . . . . . . . 21
ACCOUNT VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fixed Account Value . . . . . . . . . . . . . . . . . . . 21
Variable Account Value . . . . . . . . . . . . . . . . . 21
Accumulation Unit Value . . . . . . . . . . . . . . . . . 22
Net Investment Factor . . . . . . . . . . . . . . . . . . 22
TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Telephone Transfers . . . . . . . . . . . . . . . . . . . 23
Dollar Cost Averaging . . . . . . . . . . . . . . . . . . 23
Portfolio Rebalancing . . . . . . . . . . . . . . . . . . 24
Interest Sweep . . . . . . . . . . . . . . . . . . . . . 24
Changes By the Company . . . . . . . . . . . . . . . . . 25
SURRENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Surrender Value . . . . . . . . . . . . . . . . . . . . . 25
Suspension or Delay in Payment of Surrender Value . . . . 26
Free Withdrawal Privilege . . . . . . . . . . . . . . . . 26
Systematic Withdrawal . . . . . . . . . . . . . . . . . . 26
CONTRACT LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
When A Death Benefit Will Be Paid . . . . . . . . . . . . 27
Death Benefit Values . . . . . . . . . . . . . . . . . . 28
Death Benefit Commencement Date . . . . . . . . . . . . . 28
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Page ii
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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Form of Death Benefit . . . . . . . . . . . . . . . . . . 29
Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . 29
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . 29
Contingent Deferred Sales Charge ("CDSC") . . . . . . . . 29
Maintenance and Administrative Charges . . . . . . . . . 30
Mortality and Expense Risk Charge . . . . . . . . . . . . 31
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . 32
Transfer Fee . . . . . . . . . . . . . . . . . . . . . . 32
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . 32
SETTLEMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 32
Annuity Commencement Date . . . . . . . . . . . . . . . . 32
Election of Settlement Option . . . . . . . . . . . . . . 33
Benefit Payments . . . . . . . . . . . . . . . . . . . . 33
Fixed Dollar Benefit . . . . . . . . . . . . . . . . . . 33
Variable Dollar Benefit . . . . . . . . . . . . . . . . . 33
Settlement Options . . . . . . . . . . . . . . . . . . . 34
Minimum Amounts . . . . . . . . . . . . . . . . . . . . . 35
Settlement Option Tables . . . . . . . . . . . . . . . . 35
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 35
Non-participating . . . . . . . . . . . . . . . . . . . . 35
Misstatement . . . . . . . . . . . . . . . . . . . . . . 35
Proof of Existence and Age . . . . . . . . . . . . . . . 36
Discharge of Liability . . . . . . . . . . . . . . . . . 36
Transfer of Ownership . . . . . . . . . . . . . . . . . . 36
Non-Qualified Contract . . . . . . . . . 36
Qualified Contract . . . . . . . . . . . 36
Assignment . . . . . . . . . . . . . . . . . . . . . . . 36
Non-Qualified Contract . . . . . . . . . . . . . 36
Qualified Contract . . . . . . . . . . . . . . . 37
Annual Report . . . . . . . . . . . . . . . . . . . . . . 37
Incontestability . . . . . . . . . . . . . . . . . . . . 37
Entire Contract . . . . . . . . . . . . . . . . . . . . . 37
Changes -- Waivers . . . . . . . . . . . . . . . . . . . 37
Notices and Directions . . . . . . . . . . . . . . . . . 37
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Page iii
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 38
Introduction . . . . . . . . . . . . . . . . . . . . . . 38
Taxation of Annuities In General . . . . . . . . . . . . 38
Surrenders . . . . . . . . . . . . . . . . . . . . . . . 38
Qualified Contracts . . . . . . . . . . . . . . . 38
Non-Qualified Contracts . . . . . . . . . . . . . 39
Annuity Benefit Payments . . . . . . . . . . . . . . . . 39
Penalty Tax . . . . . . . . . . . . . . . . . . . . . . . 39
Taxation of Death Benefit Proceeds . . . . . . . . . . . 39
Transfers, Assignments, or Exchanges of the Contract . . 39
Qualified Contracts - General . . . . . . . . . . . . . . 40
Texas Optional Retirement Program . . . . . . . . . . . . 40
Individual Retirement Annuities . . . . . . . . . . . . . 40
Tax-Sheltered Annuities . . . . . . . . . . . . . . . . . 40
Corporate Pension and Profit Sharing Plans and
H.R. 10 Plans . . . . . . . . . . . . . . . . . . . . . 40
Certain Deferred Compensation Plans . . . . . . . . . . . 40
Withholding . . . . . . . . . . . . . . . . . . . . . . . 41
Possible Changes in Taxation . . . . . . . . . . . . . . 41
Other Tax Consequences . . . . . . . . . . . . . . . . . 41
General . . . . . . . . . . . . . . . . . . . . . . . . . 41
DISTRIBUTION OF THE CONTRACT . . . . . . . . . . . . . . . . . . . . 41
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 43
STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . 43
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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DEFINITIONS
Account(s): The Sub-Account(s) and/or the Fixed Account options.
Account Value: The aggregate value of the Owner's interest in the Sub-
Account(s) and the Fixed Account options as of the end of any Valuation
Period. The value of the Owner's interest in all Sub-Accounts is the
"Variable Account Value," and the value of the Owner's interest in all
Fixed Account options is the "Fixed Account Value."
Accumulation Period: The period prior to the applicable Commencement
Date.
Accumulation Unit: The unit of measure used to calculate the value of the
Sub-Account(s) prior to the applicable 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.
Annuity Benefit: Periodic payments under a settlement option, which
commence on or after the Annuity Commencement Date.
Annuity Commencement Date: The first day of the first period for which an
Annuity Benefit payment is to be made under a settlement option.
Benefit Payment: The Annuity Benefit or Death Benefit payable under a
settlement option. Variable Dollar Benefit payments may vary in amount.
Fixed Dollar Benefit payments remain constant except under certain joint
and survivor settlement options.
Benefit Payment Period: The period commencing with the Commencement Date
during which Benefit Payments are to be made under the Contract.
Benefit Unit: The unit of measure used to determine the dollar value of
any Variable Dollar Benefit payments after the first Benefit Payment is
made by the Company.
Commencement Date: The Annuity Commencement Date if an Annuity Benefit is
payable under the Contract, or the Death Benefit Commencement Date if a
Death Benefit is payable under the Contract.
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Contract Anniversary: An annual anniversary of the Contract Effective
Date.
Contract Effective Date: The date shown on the Contract Specifications
page.
Contract Year: Any period of twelve months commencing on the Contract
Effective Date and on each Contract Anniversary thereafter.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
Death Benefit Commencement Date: The first day of the first period for
which a Death Benefit payment is to be made under a settlement option.
Death Benefit Valuation Date: The date that Due Proof of Death has been
received by the Company and the earlier to occur of:
(1) the Company's receipt of a Written Request with instructions
as to the form of Death Benefit; or
(2) the Death Benefit Commencement Date.
Due Proof of Death: Any of the following: (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) any other proof
satisfactory to the Company.
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.
Owner: The person or persons identified as such on the Contract
Specifications page.
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Person Controlling Payments:
Non-Qualified Contracts: The "person controlling payments" means the
following, as the case may be:
(1) with respect to Annuity Benefit payments,
(a) the Owner, if the Owner has the right to change the
payee; or
(b) in all other cases, the payee; and
(2) with respect to Death Benefit payments,
(a) the Beneficiary, or
(b) if the Beneficiary is deceased, the payee.
Qualified Contracts: The "person controlling payments" means the
following, as the case may be:
(1) with respect to Annuity Benefit payments, the Owner; and
(2) with respect to Death Benefit payments,
(a) the Beneficiary, or
(b) if the Beneficiary is deceased, the payee.
Purchase Payment: A contribution made to the Company in consideration for
the Contract, after the deduction of any and all of the following that may
apply:
(1) any fee charged by the person remitting payments for the
Owner;
(2) premium taxes; and/or
(3) other taxes.
Separate Account: An account, which may be an investment company, which
is established and maintained by the Company pursuant to the laws of the
State of Ohio.
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 Contract if the Contract 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.
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Written Request: Information provided, or a request made, that is
complete and satisfactory to the Company, 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. An Owner may be required
to return his or her Contract to the Company in connection with a Written
Request.
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HIGHLIGHTS
The Contract
The Commodore Mariner contract described in this Prospectus is
designed for use in connection with certain individual non-tax-
qualified annuity purchases, including Contracts purchased by an
employer in connection with a Code Section 457 or non-qualified
deferred compensation plan. The Commodore Americus is available for
arrangements that qualify for favorable tax treatment under Sections
401, 403 or 408 of the Code.
The Owner is the person or persons designated as such on the Contract
Specifications page. Subject to the terms of the Contract and unless
the Owner dies before the Annuity Commencement Date, the Account
Value, after certain adjustments, will be applied to the payment of an
Annuity Benefit under the Settlement Option elected by the Owner.
The Account Value will depend on the investment experience of the
amounts allocated to each Sub-Account of the Separate Account elected
by the Owner and/or interest credited on amounts allocated to the
Fixed Account option(s) elected. All Annuity Benefits and other
values provided under the Contract when based on the investment
experience of the Separate Account are variable and are not guaranteed
as to dollar amount. Therefore, the Owner bears the entire investment
risk with respect to amounts allocated to the Separate Account under
the Contract.
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 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: (1) Janus
Aspen Series Aggressive Growth Portfolio; (2) Janus Aspen Series
Worldwide Growth Portfolio; (3) Janus Aspen Series Balanced Portfolio;
(4) Janus Aspen Series Short-Term Bond Portfolio; (5) Dreyfus Variable
Investment Fund-Capital Appreciation Portfolio; (6) The Dreyfus
Socially Responsible Growth Fund, Inc.; (7) Dreyfus Stock Index Fund;
(8) Merrill Lynch Variable Series Funds Inc., Basic Value Focus Fund;
(9) Merrill Lynch Variable Series Funds Inc., Global Strategy Focus
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Fund; (10) Merrill Lynch Variable Series Funds Inc., High Current
Income Fund; and (11) Merrill Lynch Variable Series Funds Inc.,
Domestic Money Market Fund. Each Fund has distinct investment
objectives and policies which are described in the accompanying
prospectus for the Fund.
Each Fund pays its investment adviser and other service providers
certain fees charged against the assets of the Fund. The Account
Value of a Contract and the amount of any Annuity Benefits will vary
to reflect the investment performance of all the Sub-Accounts elected
by the Owner 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 Owner 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 Contract
Year. (See "Transfers," page __.)
Surrenders
All or part of the Surrender Value of a Contract may be surrendered by
the Owner 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 Contract.
Amounts withdrawn also may be subject to a premium tax or similar tax,
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depending upon the jurisdiction in which the Owner lives. Surrenders
may be subject to a 10% premature distribution penalty tax if made
before the Owner reaches age 59 1/2. Surrenders may further be
subject to federal, state or local income taxes or significant tax law
restrictions. (See "Federal Tax Matters," page __.)
Contingent Deferred Sales Charge ("CDSC")
A CDSC may be imposed on amounts surrendered. The maximum CDSC is 7%
for each Purchase Payment. That percentage decreases by 1% annually
to 0% after year seven.
The CDSC may be reduced or 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 where
the Owner is an active employee of the Company, its subsidiaries
and/or affiliates, the Company may offer a 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. (See "Charges and
Deductions," p. ______.)
The Company also deducts a Contract maintenance charge each year
("Contract Maintenance Fee"). This Fee is currently $25 and is
deducted from an Owner's Variable Account Value on each Contract
Anniversary. The Contract Maintenance Fee may be waived under certain
circumstances. (See "Charges and Deductions," p. _______.)
The Company does not currently intend to deduct a charge to help cover
the costs of administering the Contract 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 0.20% 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 Contract. (See "Charges and Deductions," page
__.)
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Annuity Benefits
Annuity Benefits are paid on a fixed or variable basis, or a
combination of both. (See "Annuity Benefit," page __.)
Death Benefit
The Contract provides for the payment of a Death Benefit if the Owner
dies prior to the Annuity Commencement Date. The Death Benefit may be
paid in one lump sum or pursuant to any available settlement option
offered under the Contract. (See "Death Benefit," page __)
Federal Income Tax Consequences
An Owner generally should not be taxed on increases in the Account
Value until a distribution under the Contract occurs (e.g., a
surrender or Annuity Benefit) or is deemed to occur (e.g., a loan in
default). 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 10%
federal penalty tax may apply to certain distributions. (See "Federal
Tax Matters," page __.)
Right to Cancel
An Owner may cancel the Contract by giving the Company written notice
of cancellation and returning the Contract before midnight of the
twentieth day (or longer if required by state law) after receipt.
(See "Right to Cancel," 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
Contract Number and the Owner'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 AN ENDORSEMENT TO
THE CONTRACT OR LIMITATIONS OR PENALTIES IMPOSED BY THE CODE MAY
IMPOSE ADDITIONAL LIMITS OR RESTRICTIONS ON PURCHASE PAYMENTS,
SURRENDERS, DISTRIBUTIONS, BENEFITS, OR OTHER PROVISIONS OF THE
CONTRACT. THIS PROSPECTUS DOES NOT DESCRIBE SUCH LIMITATIONS OR
RESTRICTIONS. (SEE "FEDERAL TAX MATTERS," PAGE __.)
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SUMMARY OF EXPENSES
Owner Transaction Expenses
Sales Load Imposed on Purchase Payments None
Contingent Deferred Sales Charge (as a percentage of Purchase Payments
surrendered)
Contract Years elapsed since receipt of Purchase
Payment
less than 1 year 7%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 4%
4 years but less than 5 years 3%
5 years but less than 6 years 2%
6 years but less than 7 years 1%
7 years or more 0%
Surrender Fees None
Transfer Fee1/ $25
Annual Contract Maintenance Fee $25
1/ The first twelve transfers in a Contract Year are free. Thereafter, a
$25 fee will be charged on each subsequent transfer.
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<TABLE>
<CAPTION>
Janus A.S. Janus A.S. Dreyfus V.I.F.
Janus A.S. Worldwide Janus A.S. Short-Term Capital Appre-
Separate Account Annual Expenses2/ Aggressive Growth Balanced Bond ciation
(as a percentage of average Separate Growth Portfolio Portfolio Portfolio Portfolio Portfolio
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 Expenses3/
(as a percentage of Fund average net
assets after fee waiver and/or
expense reimbursement, if any)
Management Fees 0.75% 0.68% 0.82% 0.00% 0.73%
Other Expenses 0.11% 0.22% 0.55% 0.70% 0.12%
Total Fund Annual 0.86% 0.90% 1.37% 0.70% 0.85%
Expenses
</TABLE>
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<TABLE>
<CAPTION>
Merrill Merrill
The Dreyfus Lynch Merrill Lynch
Socially Merrill Lynch V.S.F. Lynch V.S.F.
Separate Account Annual Responsible Dreyfus V.S.F. Basic Global V.S.F. High Domestic
Expenses2/ (as a percentage Growth Fund, Stock Value Focus Strategy Current Money
of average Separate Account Inc. Index Fund Fund Focus Fund Income Fund Market Fund
assets) ------------ ---------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mortality and Expense 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
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 Expenses3/ (as a
percentage of Fund average
net assets after fee waiver
and/or expense reimburse-
ment, if any)
Management Fees 0.69% 0.25% 0.60% 0.65% 0.50% 0.50%
Other Expenses 0.58% 0.14% 0.06% 0.07% 0.05% 0.05%
Total Fund Annual 1.27% 0.39% 0.66% 0.72% 0.55% 0.55%
Expenses
</TABLE>
The purpose of this table is to assist an Owner in understanding the
various costs and expenses that the Owner 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
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expenses. Actual expenses may be greater or less than those shown. The
$25 Contract Maintenance Charge is included in the Examples as $1.
------------------------------------
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.
Currently, the Company imposes no charge for participation in the
Dollar Cost Averaging, Portfolio Rebalancing, Interest-Sweep and
Systematic Withdrawal programs. The Company reserves the right to impose
an annual fee not to exceed $25 for participation in each of the foregoing
programs. (See "Transfers," page __.)
The Company deducts a $25 Contract Maintenance Fee from an Owner's
Variable Account Value on each Contract Anniversary. The Company reserves
the right to increase the annual Contract Maintenance Fee up to $40. (See
"Charges and Deductions" page __.)
The Company imposes no Administration Charge but reserves the right to
impose an annual Administration Charge not to exceed 0.20% of the Net
Asset Value of each Sub-Account.
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, 1995. 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 for those Funds 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, 1995: 0.82%, 0.11% and 0.93%, respectively,
for the Janus A.S. Aggressive Growth Portfolio; 0.87%, 0.22% and 1.09%,
respectively, for the Janus A.S. Worldwide Growth Portfolio; 1.00%, 0.55%
and 1.55%, respectively, for the Janus A.S. Balanced Portfolio; and 0.65%,
0.72% and 1.37%, respectively, for the Janus A.S. Short-Term Bond
Portfolio; 0.75%, 0.12% and 0.87%, respectively, for the Dreyfus V.I.F.
Capital Appreciation Portfolio; 0.75%, 0.58% and 1.33%, respectively, for
The Dreyfus Socially Responsible Growth Fund, Inc.; and 0.25%, 0.17% and
0.42%, respectively, for the Dreyfus Stock Index Fund.
Fees and expenses for the Merrill Lynch V.S.F. Basic Value Focus Fund,
the Merrill Lynch V.S.F. Global Strategy Focus Fund, the Merrill Lynch
V.S.F. High Current Income Fund and the Merrill Lynch V.S.F. Domestic
Money Market Fund are based on 1995 fees and expenses but do not take into
account management fee waivers and expense reimbursements because none
were in effect for those Funds in 1995.
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Examples4/
If the Owner surrenders his or her Contract at the end of the
applicable time period, the following expenses will be charged on a
$1,000 investment, assuming a 5% annual return on assets:
Sub-Account 1 Year 3 Years
Janus A.S. Aggressive Growth Portfolio $ 93 $122
Janus A.S. Worldwide Growth Portfolio $ 93 $123
Janus A.S. Balanced Portfolio $ 98 $138
Janus A.S. Short-Term Bond Portfolio $ 91 $116
Dreyfus V.I.F. Capital Appreciation $ 95 $130
Portfolio
The Dreyfus Socially Responsible $113 $184
Growth Fund, Inc.
Dreyfus Stock Index Fund $ 87 $104
Merrill Lynch V.S.F. Basic Value Focus $ 91 $115
Fund
Merrill Lynch V.S.F. Global Strategy $ 91 $117
Focus Fund
Merrill Lynch V.S.F. High Current $ 90 $112
Income Focus Fund
Merrill Lynch V.S.F. Domestic Money $ 90 $112
Market Fund
4/ The examples assume the reinvestment of all dividends and
distributions, no transfers among Sub-Accounts or between Accounts, 5%
annual rate of return as mandated by Securities and Exchange Commission
regulations. Annual Contract Maintenance Fees are based on an estimated
average Account Value for the current fiscal year.
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If the Owner does not surrender his or her Contract, or it is
annuitized, the following expenses would be charged 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 Portfolio $ 23 $ 72
Janus A.S. Worldwide Growth Portfolio $ 23 $ 73
Janus A.S. Balanced Portfolio $ 28 $ 88
Janus A.S. Short-Term Bond Portfolio $ 21 $ 66
Dreyfus V.I.F. Capital Appreciation $ 25 $ 80
Portfolio
The Dreyfus Socially Responsible Growth $ 43 $134
Fund, Inc.
Dreyfus Stock Index Fund $ 17 $ 54
Merrill Lynch V.S.F. Basic Value Focus $ 21 $ 65
Fund
Merrill Lynch V.S.F. Global Strategy $ 21 $ 67
Focus Fund
Merrill Lynch V.S.F. High Current Income $ 20 $ 62
Focus Fund
Merrill Lynch V.S.F. Domestic Money $ 20 $ 62
Market Fund
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 the Owner for
premium taxes.
FINANCIAL STATEMENTS FOR THE COMPANY
The financial statements and report of independent public accountants
for the Company are contained in the Statement of Additional
Information. Because the Contracts registered by this Prospectus had
not yet been issued as of the date of this prospectus, no financial
information for the Separate Account is provided.
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THE FUNDS
The Separate Account currently has eleven Funds that are available for
investment under the Contract. 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
with an emphasis on securities issued by medium-sized companies. 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 issuers. 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 securities selected primarily for
their growth potential and 40-60% of its assets in securities selected
primarily for their income potential. The Portfolio may invest in
debt securities, including 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.
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 principally in common stocks of domestic and
foreign issuers, common stocks with warrants attached and debt
securities of foreign governments.
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The Dreyfus Corporation serves as the investment adviser and Fayez
Sarofim & Co. serves as the sub-investment adviser to this Fund.
The Dreyfus Socially Responsible Growth Fund, Inc. The Dreyfus
Socially Responsible Growth Fund, Inc.'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 investment 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 sub-investment adviser to
this Fund.
Dreyfus Stock Index Fund. The Dreyfus 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.
The Dreyfus Corporation, located at 200 Park Avenue, New York, New
York 10166, acts as the Fund manager and Mellon Equity Associates, an
affiliate to Dreyfus located at 500 Grant Street, Pittsburgh,
Pennsylvania 15258, is the index manager.
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 and therefore represent basic investment value. The
Fund seeks special opportunities in securities that are selling at a
discount, either from book value or historical price-earnings ratios,
or seem capable of recovering from temporarily out-of-favor
considerations. Particular emphasis is placed on securities that
provide an above-average dividend return and sell at a below-average
price-earnings ratio.
Global Strategy Focus Fund. The investment objective of the Fund is
to seek high total investment return by investing primarily in a
portfolio of equity and fixed income securities, including convertible
securities, of U.S. and foreign issuers. The Fund seeks to achieve
its objective by investing primarily in securities of issuers located
in the U.S., Canada, Western Europe and the Far East. Geographical
allocation of the Fund's investments is not limited, and will be made
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on the basis of anticipated total return from investments, considering
various economic, market, and political factors.
High Current Income Fund. The investment objective of the Fund is to
obtain as high a level of current income as is consistent with its
investment policies and prudent investment management, and capital
appreciation to the extent consistent with the foregoing objective.
The Fund seeks to achieve its 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 domestic 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 the 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 of other
insurance companies offering variable annuity and variable life
products, 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 and plans
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 of each Fund and charges of each Fund can be
found in the current prospectus for each Fund which accompany this
Prospectus. THE APPROPRIATE FUNDS' PROSPECTUSES SHOULD BE READ
CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE ALLOCATION OF
PURCHASE PAYMENTS TO, OR TRANSFERS AMONG, THE SUB-ACCOUNTS.
Additions, Deletions, or Substitutions
The Company does not control the Funds and cannot guarantee that any
of the Sub-Accounts or any of the Funds will always be available for
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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 Owner's interest in a
Sub-Account will not be made without prior notice to the Owner 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 Owners.
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
Owners 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 Owners 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 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 Contracts, the
Separate Account may be operated as a management company under the
1940 Act or any other form permitted by law, may be de-registered
under such Act in the event such registration is no longer required,
or may be combined with one or more separate accounts.
PERFORMANCE INFORMATION
From time to time, the Company may advertise yields and/or total
returns for the Sub-Accounts. These figures are based on historical
information and are not intended to indicate future performance. For
a description of the methods used to determine yield and total return,
see the Statement of Additional Information.
Yield Data
The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in that Sub-Account over a specified
seven-day period. The Company may also advertise the effective yield
of the Money Market Sub-Account which is calculated similarly but,
when annualized, the income earned by an investment in that
Sub-Account is assumed to be reinvested. The effective yield will be
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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 Contract which
would reduce the yield of that Contract.
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. Total return data that does not
reflect the CDSC and other nonrecurring charges will be higher than
the total return realized by an investor who incurs the charges.
Reports and promotional literature may contain the ranking of any
Sub-Account derived from rankings of variable annuity separate
accounts or their investment products tracked by Lipper Analytical
Services, Inc., VARDS, IBC/Donoghue's Money Fund Report, Financial
Planning Magazine, Money Magazine, Bank Rate Monitor, Standard &
Poor's Indices, Dow Jones Industrial Average, and other rating
services, companies, publications, or other persons who rank separate
accounts or other investment products on overall performance or other
criteria. The Company may compare the performance of a Sub-Account
with applicable indices and/or industry averages. Performance
information may present the effects of tax-deferred compounding on
Sub-Account investment returns, or returns in general, which may be
illustrated by graphs, charts, or otherwise, and which may include
comparisons of investment return on a tax-deferred basis with
currently taxable investment return.
The Company may also advertise performance figures for the
Sub-Accounts based on the performance of a Fund prior to the time the
Separate Account commenced operations.
ANNUITY INVESTORS 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
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company. It was 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 Great American Life
Insurance Company which is a wholly-owned subsidiary of American
Annuity Group, Inc., a publicly traded insurance holding company.
That company is in turn 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 Owners, 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
Owners. 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 Variable Account A was established by the Company as
an insurance company separate account under the laws of the State of
Ohio on May 26, 1995, pursuant to resolutions of the Company's Board
of Directors. The Separate Account is registered with the Securities
and Exchange Commission under the 1940 Act as a unit investment trust.
However, the Securities and Exchange Commission does not supervise the
management or the investment practices or policies of the Separate
Account.
The assets of the Separate Account are owned by the Company but they
are held separately from the other assets of the Company. The Ohio
Revised Code provides that the assets of a separate account are not
chargeable with liabilities incurred in any other business operation
of the Company. Income, gains and losses incurred on the assets in
the Separate Account, whether or not realized, are credited to or
charged against the Separate Account, without regard to other income,
gains or losses of the Company. Therefore, the investment performance
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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 Owners of, and the persons entitled to
payment 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 Contracts are obligations of the
Company.
The Separate Account is divided into 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. The Company delegates the
investment of the assets of the Fixed Account to American Money
Management Corporation. Allocation of any amounts to the Fixed
Account does not entitle Owners to share directly in the investment
experience of these assets. The Company assumes the risk of
investment gain or loss on the portion of the Account Value allocated
to the Fixed Account. All assets held in the general account are
subject to the Company's general liabilities from business operations.
Fixed Account Options
There are currently four options under the Fixed Account: the Fixed
Accumulation Account option; and the guarantee period options referred
to in the Contract as the Fixed Account Options One-Year, Three-Year
and Five-Year Guarantee Period, respectively. Different 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.
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The Company guarantees a minimum rate of interest for the Fixed
Account options. The guaranteed rate is 3% per year, compounded
annually.
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 Owner 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 Contract (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 such Commencement Date, the only Fixed Account
option available is the Fixed Accumulation Account option.
If the Owner does not specify a new Fixed Account option in accordance
with the preceding paragraph, the Owner will be deemed to have elected
the same Fixed Account option as is expiring, 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 Owner will be deemed to have selected the Fixed
Account option with the longest available guarantee period that
expires prior to the Annuity Commencement Date, or, failing that, the
Fixed Accumulation Account Option.
THE CONTRACT
The Contract is an individual flexible premium deferred annuity. The
rights and benefits are described below and in the Contract. The
Company reserves the right to make any modification to conform the
Contracts to, or give the Owner the benefit of, any applicable law.
The obligations under the Contracts are obligations of the Company.
Fixed Account Values, Variable Account Values, benefits and charges
will be calculated separately for each Contract. The various
administrative rules described below will apply separately to each
Contract, unless otherwise noted. The Company reserves the right to
terminate any Contract at any time the Account Value is less than
$500. Upon the termination of a Contract, the Company will pay the
Owner the Surrender Value.
Right to Cancel
The Owner may cancel the Contract by giving the Company written notice
of cancellation and returning the Contract before midnight of the
twentieth day (or longer if required by state law) following the date
the Owner receives the Contract. The Contract must be returned to the
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Company, and the required notice must be given in person, or to the
agent who sold it to the Owner, or by mail. If by mail, the return of
the Contract or the notice is effective on the date it is postmarked,
with the proper address and with postage paid. If the Owner cancels
the Contract as set forth above, the Contract will be void and the
Company will refund the Purchase Payment(s) plus or minus any
investment gains or losses under the Contract as of the end of the
Valuation Period during which the returned Contract is received by the
Company, or as otherwise required by law.
PURCHASE PAYMENTS
Purchase Payments
The minimum initial Purchase Payment for Qualified Contracts is $50,
and the minimum initial Purchase Payment for Non-Qualified Contracts
is $5,000. Tax-free transfers and rollovers to the Contracts must be
at least $5,000. Both Contracts require subsequent Purchase Payments
of at least $50 per month. Purchase Payments and tax-free transfers
or rollovers may be sent to the Company at its Administrative Office
at any time before the Annuity Commencement Date so long as the
Contract has not been fully surrendered.
Each Purchase Payment will be applied by the Company to the credit of
the Owner's Account. If the application form is in good order, the
Company will apply the initial Purchase Payment to an account for the
Owner within two business days of receipt of the Purchase Payment at
the Administrative Office. If the application form is not in good
order, the Company will attempt to get the application form in good
order within five business days. If the application form is not in
good order at the end of this period, the Company will inform the
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 application form is in
good order. Once the application form is in good order, the Purchase
Payment will be applied to the Owner's Account within two business
days.
Each additional Purchase Payment is credited to a Contract as of the
next Valuation Date following the receipt of such additional Purchase
Payment.
No Purchase Payment for any Contract may exceed $500,000 without prior
approval of the Company.
Allocation of Purchase Payments
The Company will allocate Purchase Payments to the Fixed Account
options and/or to the Sub-Accounts according to instructions received
by Written Request. Allocations must be made in whole percentages.
ACCOUNT VALUE
The Account Value is equal to the aggregate value of the Owner's
interest in the Sub-Account(s) and the Fixed Account options as of the
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end of any Valuation Period. The value of the Owner's interest in all
Sub-Accounts is the "Variable Account Value," and the value of the
Owner's interest in all Fixed Account options is the "Fixed Account
Value."
Fixed Account Value
The Fixed Account Value for the Contract 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
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 value of the Accumulation Unit 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 the Variable Account Value;
(3) payment of a Death Benefit;
(4) application of the Variable Account Value to a Settlement Option;
(5) deduction of the Contract Maintenance Fee; or
(6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation
Period during which the Company receives a Written Request regarding
the event giving rise to such cancellation, or an applicable
Commencement Date, or the end of the Valuation Period on which the
Contract Maintenance Fee or Transfer Fee is due, as the case may be.
The Variable Account Value for a Contract at any time is equal to the
sum of the number of Accumulation Units for each Sub-Account
attributable to that Contract multiplied by the Accumulation Unit
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value ("Accumulation Unit Value") for each Sub-Account at the end of
the preceding 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. 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 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 for each Sub-Account 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 applicable 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 applicable 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 immediately preceding
Valuation Period; and
(3) is the factor representing the Mortality and Expense Risk Charge
and the Administration Charge deducted from the Sub-Account for the
number of days in the applicable Valuation Period.
TRANSFERS
Prior to the applicable Commencement Date, the Owner 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 $1,000 at the time of the
transfer, the entire amount of the Sub-Account balance must be
transferred. The Owner may also transfer amounts from any Fixed
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Account option to any other 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 of Fixed Account Options" provision of
the "THE FIXED ACCOUNT" section of this Prospectus, then the entire
amount of that Fixed Account option subject to renewal at that time
may be transferred to any one or more of the Sub-Accounts. In any
other case, transfers from any Fixed Account option are subject to a
cumulative limit during each Contract Year of 20% of the Fixed Account
option's value as of the most recent Contract anniversary. Fixed
Account transfers are not permitted during the first Contract Year.
The minimum transfer amount from any Fixed Account option is $500.
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 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 Contract Year.
Telephone Transfers
An Owner 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 Contract. 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 which the Company reasonably believes to be genuine, or
for any loss, damage, cost or expense in acting on such telephone
instructions. The Owner or person controlling payments 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 applicable Commencement Date, the Owner may establish
automatic transfers from the Money Market Sub-Account to any other
Sub-Account(s), on a monthly or quarterly basis, by submitting to the
Administrative Office a Dollar Cost Averaging Authorization Form. No
Dollar Cost Averaging transfers may be made to any of the Fixed
Account options. The Dollar Cost Averaging transfers will take place
on the last Valuation Date of each calendar month or quarter as
requested by the Owner.
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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 may be transferred is $500.
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-Account(s) in the same percentage distribution as directed in the
Dollar Cost Averaging Authorization Form.
Dollar Cost Averaging transfers will not count toward the twelve
transfers permitted under the Contract without a Transfer Fee charge.
Before electing Dollar Cost Averaging, an Owner should consider the
risks involved in switching between investments available under the
Contract. Dollar Cost Averaging requires regular investments
regardless of fluctuating price levels and does not guarantee profits
nor prevent losses in a declining market. An Owner should consider
his or her financial ability to continue Dollar Cost Averaging
transfers through periods of changing price levels.
The Owner may terminate Dollar Cost Averaging services at any time,
but must give the Company at least 30 days' notice to change any
automatic transfer instructions that are currently in place.
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 participation in the Dollar Cost Averaging
program.
Portfolio Rebalancing
In connection with the allocation of Purchase Payments to the
Sub-Accounts, and/or the Fixed Accumulation Account, the Owner 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 to maintain the percentage allocations selected
by the Owner.
Prior to the applicable Commencement Date, the Owner may elect
Portfolio Rebalancing, by submitting to the Administrative Office a
Portfolio Rebalancing Authorization Form. In order to be eligible for
the Portfolio Rebalancing program, the Owner must have a minimum
Account Value of $10,000. Portfolio Rebalancing transfers will take
place on the last Valuation Date of each calendar quarter.
Portfolio Rebalancing transfers will not count toward the twelve
transfers permitted under the Contract without a Transfer Fee charge.
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The Owner may terminate Portfolio Rebalancing services at any time,
but must give the Company at least 30 days' notice to change any
automatic transfer instructions that are already in place. 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 participation in the Portfolio Rebalancing program.
Interest Sweep
Prior to the applicable Commencement Date, the Owner may elect
automatic transfers of the income from each Fixed Account option to
the Sub-Account(s), by submitting to the Administrative Office an
Interest Sweep Authorization Form. Interest Sweep transfers will take
place on the last Valuation Date of each calendar quarter.
In order to be eligible for the Interest Sweep program, the value of
each Fixed Account option selected must be at least $5,000. The
maximum amount that may be transferred from each Fixed Account option
selected is 20% of such Fixed Account option's value per year. Any
amounts transferred under the Interest Sweep program reduce the 20%
maximum otherwise allowed.
Interest Sweep transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
The Owner may terminate the Interest Sweep program, at any time, but
must give the Company at least 30 days' notice to change any automatic
transfer instructions that are already in place. The Company reserves
the right to impose an annual fee not to exceed $25 for participation
in the Interest Sweep program.
Changes By the Company
The Company reserves the right, in the Company's sole discretion and
at any time, to terminate, suspend or modify any aspect of the
transfer privileges described above without prior notice to Owners, as
permitted by applicable law.
SURRENDERS
Surrender Value
The Owner may surrender a Contract in full for the Surrender Value,
or, partial surrenders may be made for a lesser amount, by Written
Request at any time prior to the Annuity Commencement Date. The
amount of any partial surrender must be at least $500. A partial
surrender cannot reduce the Surrender Value to less than $500.
Surrenders will be deemed to be withdrawn first from the portion of
the Account Value that represents accumulated earnings and then from
Purchase Payments. For purposes of the Contract, Purchase Payments
are deemed to be withdrawn on a "first-in", first-out" (FIFO) basis.
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The amount available for surrender 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 an amount equal to:
(1) the Account Value as of the end of the applicable
Valuation Period; less
(2) any applicable CDSC; less
(3) any outstanding loans; and less
(4) any applicable premium tax or other taxes not
previously deducted.
On full surrender, a full Contract Maintenance Fee will also be
deducted as part of the calculation of the Surrender Value.
A full or partial surrender may be subject to a CDSC as set forth in
this prospectus. (See "Contingent Deferred Sales Charge ("CDSC"),"
page ____.)
Surrenders will result in the cancellation of Accumulation Units from
each applicable Sub-Account(s) and/or a reduction of the Fixed Account
Value. In the case of a full surrender, the Contract will be
terminated.
Surrenders may be subject to a 10% premature distribution penalty tax
if made before the Owner reaches age 59 1/2, and may further be
subject to federal, state or local income tax, as well as significant
tax law restrictions in the case of Qualified Contracts. (See
"Federal Tax Matters," page ___.)
Suspension or Delay in Payment of Surrender Value
The Company has the right to suspend or delay the date of payment of a
partial or full surrender of the Variable Account Value for any
period:
(1) when the New York Stock Exchange ("NYSE") is closed or trading
on the NYSE is restricted;
(2) when 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
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determine fairly the value of the net assets in the Separate
Account; or
(3) when 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
after the receipt of a Written Request.
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 OWNER ASSUMES THE INVESTMENT RISK AND BECAUSE CERTAIN
SURRENDERS ARE SUBJECT TO A CDSC, THE TOTAL AMOUNT PAID UPON SURRENDER
OF THE CONTRACT (TAKING INTO ACCOUNT ANY PRIOR SURRENDERS) MAY BE MORE
OR LESS THAN THE TOTAL PURCHASE PAYMENTS.
When Contracts offered by this Prospectus are issued in connection
with retirement plans which meet the requirements of Sections 401,
403, 408 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.
Free Withdrawal Privilege
Subject to the provisions of the Contract, the Company will waive the
CDSC, to the extent applicable, on full or partial surrenders as
follows:
(1) during the first Contract Year, on an amount equal to
not more than 10% of all Purchase Payments received;
and
(2) during the second and succeeding Contract Years, on an
amount equal to not more than 10% of the Account Value
as of the last Contract Anniversary.
If the Free Withdrawal Privilege is not exercised during a Contract
Year, it does not carry over to the next Contract Year.
Systematic Withdrawal
Prior to the applicable Commencement Date, the Owner, 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 program, 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
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Free Withdrawal Privilege (See "Charges and Deductions," page __.)
The Owner 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. The Company reserves the right to discontinue
offering systematic withdrawals or to impose an annual fee not to
exceed $25 for participation in the Systematic Withdrawal program.
Systematic withdrawals may have tax consequences or may be limited by
tax law restrictions. (See "Federal Tax Matters," page __.)
CONTRACT LOANS
If permitted under the Contract, an Owner may obtain a loan using his
or her interest under such Contract as the only security for the loan.
Loans are subject to provisions of the Code. A tax adviser should be
consulted prior to exercising loan privileges. Loan provisions are
described in the loan endorsement to the Contract.
The amount of any loan will be deducted from any 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
When A Death Benefit Will Be Paid
A Death Benefit will be paid under the Contract if:
(1) the Owner or the joint owner, if any, dies before the Annuity
Commencement Date and before the Contract is fully
surrendered;
(2) the Death Benefit Valuation Date has occurred; and
(3) a spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
(1) it will be in lieu of all other benefits under the Contract;
and
(2) all other rights under the Contract will be terminated except
for rights related to the Death Benefit.
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Only one Death Benefit will be paid under the Contract.
Death Benefit Values
If the Owner 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 or other taxes not previously
deducted, less any partial surrenders, and less any
outstanding loans;
(2) the total Purchase Payment(s), less any applicable premium tax
or other taxes not previously deducted, less any partial
surrenders, and less any outstanding loans; or
(3) the largest Death Benefit amount on any Contract 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 or other taxes not previously deducted, less any
partial surrenders after such Death Benefit was determined,
and less any outstanding loans.
If the Owner 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 or other taxes not previously
deducted, less any partial surrenders, and less any
outstanding loans;
(2) the total Purchase Payment(s), less any applicable premium tax
or other taxes not previously deducted, less any partial
surrenders, and less any outstanding loans; or
(3) the largest Death Benefit amount on any Contract Anniversary
prior to death that is both an exact multiple of five and
occurs prior to the date on which the Owner attained Age 75,
less any applicable premium tax or other taxes not previously
deducted, less any partial surrenders after such Death Benefit
was determined, and less any outstanding loans.
In any event, if the Contract is issued after any Owner has attained
age 75, and any Owner dies before the Annuity Commencement Date, the
amount of the Death Benefit will be the greater of:
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(1) the Account Value on the Death Benefit Valuation Date, less
any applicable premium tax or other taxes not previously
deducted, less any partial surrenders, and less any
outstanding loans; or
(2) the total Purchase Payment(s), less any applicable premium tax
or other taxes not previously deducted, less any partial
surrenders, and less any outstanding loans.
Death Benefit Commencement Date
The Beneficiary may designate the Death Benefit Commencement Date by
Written Request within one year of the Owner's death. If no designation
is made, then the Death Benefit Commencement Date will be one year after
the Owner's death.
Form of Death Benefit
Death Benefit payments will be Fixed Dollar Benefit payments made
monthly in accordance with the terms of Option A with a period certain
of 48 months under the "SETTLEMENT OPTIONS" section of this
prospectus. (See page ___.)
In lieu of that, the Owner may elect at any time before his or her
death to have Death Benefit payments made in one lump sum or pursuant
to any available settlement option under the "SETTLEMENT OPTIONS"
section of this prospectus. If the Owner does not make any such
election, the Beneficiary may make that election at any time after the
Owner's death and before the Death Benefit Commencement Date.
Beneficiary
Non-Qualified Contracts may be jointly owned by two people. If there
is a joint owner and that joint owner survives the Owner, the joint
owner is the Beneficiary, regardless of any designation made by the
Owner. If there is no surviving joint owner, and in the case of
Qualified Contracts, the Beneficiary is the person or persons so
designated in the application, if any, or under the Change of
Beneficiary provision of the Contract. If the Owner has not
designated a Beneficiary, or if no Beneficiary designated by the Owner
survives the Owner, then the Beneficiary will be the Owner's estate.
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CHARGES AND DEDUCTIONS
There are two types of charges and deductions. First, there are
charges assessed under the Contract. 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 Contract. 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 applies to and is calculated separately for each Purchase
Payment. 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.
Contingent Deferred Sales
Number of Full Years Elapsed Between Charge
Date of Receipt of Purchase Payment as a Percentage of Associated
and Date Written Request for Purchase
Surrender Received Payment Surrendered
----------------------------------- ---------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 or more 0%
In no event shall the CDSC assessed against the Contract 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. The CDSC will not be
imposed on amounts surrendered under the Free Withdrawal Privilege.
(See "Free Withdrawal Privilege," page _________.)
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No CDSC is assessed upon payment of the Death Benefit.
The CDSC will be waived upon surrender 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 noncommutable period of five years or more;
or (ii) the Contract is modified by the Long-Term Care Waiver Rider
and the Owner is confined in a licensed Hospital or Long-Term Care
Facility, as those terms are defined in the Rider, for at least 90
days beginning on or after the first Contract Anniversary. This Rider
may not be available in all jurisdictions.
The CDSC may be reduced or waived for certain Contracts owned by an
employee of the Company, its subsidiaries or affiliates, which are
purchased during the employee's active employment with the Company,
its subsidiaries or affiliates.
For Qualified Contracts only, the CDSC will be waived if the Owner has
been determined by the Social Security Administration to be "disabled"
as that term is defined in the Social Security Act of 1935, as
amended.
In addition, for Contracts qualified under Section 403(b) of the Code,
the CDSC will be waived if (i) the Owner incurs a separation from
service, has attained age 55 and has held the Contract for at least
seven years; or (ii) the Owner has held the Contract for fifteen years
or more.
The Company reserves the right to terminate, suspend or modify waivers
of the CDSC, without prior notice to Owners, as permitted by
applicable law.
Maintenance and Administrative Charges
On each Contract Anniversary, the Company deducts an annual Contract
Maintenance Fee as partial compensation for expenses relating to the
issue and maintenance of the Contract, and the Separate Account. The
annual Contract Maintenance Fee is $25. The Company reserves the
right to increase the Contract Maintenance Fee and guarantees that the
Contract Maintenance Fee will not exceed $40. Any increase in the
Contract Maintenance Fee will apply only to deductions after the
effective date of the change. If the Contract is surrendered in full
on any day other than on the Contract Anniversary, the Contract
Maintenance Fee will be deducted in full at the time of such
surrender. If a Variable Annuity Benefit is elected, a portion of the
$25 Annual Fee will be deducted from each Benefit Payment.
The Company will waive the Contract Maintenance Fee if the Account
Value is equal to or greater than $30,000 on the date of the
assessment of the Charge. The Contract Maintenance Fee may also be
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waived when the Contract is owned by an active employee of the
Company, its subsidiaries, and/or affiliates.
Currently, the Company imposes no Administration Charge to reimburse
the Company for those administrative expenses attributable to the
Contract and the Separate Account which exceed the revenues received
from the Contract 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 Contract Maintenance Fee and any Transfer Fees.
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 Contract Maintenance Fee at a level such that the
Company will recover no more than the anticipated and estimated costs
associated with administering the Contract and Separate Account. The
Company does not expect to make a profit from the administrative
charges of a particular Contract. The Company does not expect to make
a profit from the Contract 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
Contract. 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 owned by an active employee of the Company, its
subsidiaries or affiliates, the Mortality and Expense Risk Charge will
be 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
attributable to expense risks and 0.75% is attributable to mortality
risks. This charge is imposed before the Annuity Commencement Date
and after the Annuity Commencement Date if a Variable Annuity Benefit
is selected. The Company guarantees that the Mortality and Expense
Risk Charge will never increase for a Contract. The Mortality and
Expense Risk Charge is reflected in the Accumulation Unit values for
each Sub-Account.
The mortality risks assumed by the Company arise from its contractual
obligations to make annuity payments (determined in accordance with
the annuity tables and other provisions contained in the Contract) 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 certain
circumstances the Company may be obligated to pay a larger Death
Benefit amount than the then-existing Account Value of the Contract.
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The expense risk assumed by the Company is the risk that the Company's
actual expenses in administering the Contracts and the Separate
Account will exceed the amount recovered through the Contract
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. To the extent that the
CDSC is insufficient to cover the actual cost of Contract
distribution, the deficiency will be met from the Company's general
corporate assets which may include amounts, if any, derived from the
Mortality and Expense Risk Charge.
Premium Taxes
Certain state and local governments impose premium taxes. These taxes
currently range up to 5.0% depending upon the jurisdiction. The
Company, in its sole discretion and in compliance with any applicable
state law, will determine the method used to recover premium tax
expenses incurred. The Company will deduct any applicable premium
taxes from the Account Value either upon death, surrender,
annuitization, or at the time Purchase Payments are made to the
Contract, 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 Contract 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.
The annual expenses of each Fund are set out in the "Summary of
Expenses" tables at the front of this Prospectus. 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 _.)
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SETTLEMENT OPTIONS
Annuity Commencement Date
The Annuity Commencement Date is shown on the Contract Specifications
page. The Owner may change the Annuity Commencement Date by Written
Request made at least 30 days prior to the date that Annuity Benefit
payments are scheduled to begin. In no event can the Annuity
Commencement Date be later than the Contract Anniversary following the
85th birthday of the eldest Owner, or 5 years after the Contract
Effective Date, whichever is later.
Election of Settlement Option
If the Owner 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, the
Company will begin payments based on Settlement Option B (Life Annuity
with Payments for at Least a Fixed Period), described below, with a
fixed period of 120 monthly payments assured.
Benefit Payments
Benefit Payments may be calculated and paid: (1) as a Fixed Dollar
Benefit; (2) as a Variable Dollar Benefit; or (3) as a combination of
both.
If only a Fixed Dollar Benefit is to be paid, the Company will
transfer all of the Account Value to the Company's general account on
the applicable Commencement Date, or on the Death Benefit Valuation
Date (if applicable). Similarly, if only a Variable Dollar Benefit is
elected, the Company will transfer all of the Account Value to the
Sub-Accounts as of the end of the Valuation Period immediately prior
to the applicable 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 Benefit and the
Variable Dollar Benefit will be allowed after the Commencement Date.
However, after the Variable Dollar Benefit has been paid for at least
twelve months, the person controlling payments may, no more than once
each twelve months thereafter, transfer all or part of the Benefit
Units upon which the Variable Dollar Benefit is based from the
Sub-Account(s) then held, to Benefit Units in different Sub--
Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied
under that benefit is the Variable Account Value as of the end of the
Valuation Period immediately preceding the applicable Commencement
Date. If a Fixed Dollar Benefit is to be paid, the amount to be
applied under that benefit is the Fixed Account Value as of the
applicable Commencement Date, or as of the Death Benefit Valuation
Date (if applicable).
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Fixed Dollar Benefit
Fixed Dollar Benefit payments are determined by multiplying the Fixed
Account Value (expressed in thousands of dollars and after deduction
of any fees and charges, loans, or applicable premium tax not
previously deducted) by the amount of the monthly payment per $1,000
of value obtained from the Settlement Option Table for the settlement
option elected. Fixed Dollar Benefit payments will remain level for
the duration of the payment period.
If at the time a Fixed Dollar Benefit is elected, the Company has
available options or rates on a more favorable basis than those
guaranteed, the higher benefits shall be applied and shall not change
for as long as that election remains in force.
Variable Dollar Benefit
The first monthly Variable Dollar Benefit payment is equal to the
Owner's Variable Account Value (expressed in thousands of dollars and
after deduction of any fees and charges, loans, or applicable premium
tax not previously deducted) as of the end of the Valuation Period
immediately preceding the applicable Commencement Date multiplied by
the amount of the monthly payment per $1,000 of value obtained from
the Settlement Option Table for the Benefit Payment option elected
less the pro-rata portion of the Contract Maintenance Fee.
The number of Benefit Units in each Sub-Account held by the Owner is
determined by dividing the dollar amount of the first monthly Variable
Dollar Benefit payment from each Sub-Account by the Benefit Unit Value
for that Sub-Account as of the applicable Commencement Date. The
number of Benefit Units remains fixed during the payment period,
except as a result of any transfers among Sub-Accounts after the
applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar
Benefit payment will reflect the investment performance of the Sub-
Account(s) selected and may vary from month to month. The total
amount of the second and any subsequent Variable Dollar Benefit
payment will be equal to the sum of the payments from each Sub-Account
less a pro-rata portion of the Contract Maintenance Fee. Where an
Owner elects a Variable Dollar Benefit, there is a risk that only one
Benefit Payment will be made under any settlement option, if, at the
end of the applicable Valuation Period, the Owner's Variable Account
Value has declined to zero.
The payment from each Sub-Account is found by multiplying the number
of Benefit Units held in each Sub-Account by the Benefit Unit Value
for that Sub-Account as of the end of the fifth Valuation Period
preceding the due date of the payment.
The Benefit Unit Value for each Sub-Account is originally established
in the same manner as Accumulation Unit values. Thereafter, the
Benefit Unit Value for a Sub-Account is determined by multiplying the
Benefit Unit Value as of the end of the preceding Valuation Period by
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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 3% per year,
compounded annually that is reflected in the Settlement Option Tables.
Settlement Options
Option A: Income for a Fixed Period
_________________________
The Company will make periodic payments for a fixed
period. The first payment will be paid as of the last
day of the initial payment interval. The maximum time
over which payments will be made by the Company or
money will be held by the Company is 30 years. The
Option A Table applies to this Option.
Option B: Life Annuity with Payments for at Least a Fixed Period
-----------------------------------------------
The Company will make periodic payments for at least a
fixed period. If the person on whose life Benefit
Payments are based lives longer than the fixed period,
then the Company will make payments until his or her
death. The first payment will be paid as of the first
day of the initial payment interval. The Option B
Table applies to this Option.
Option C: Joint and One-Half Survivor Annuity
----------------------------------
The Company will make periodic payments until the
death of the primary person on whose life Benefit
Payments are based; thereafter, the Company will make
one-half of the periodic payment until the death of
the secondary person on whose life Benefit Payments
are based. The Company will require Due Proof of
Death of the primary person on whose life Benefit
Payments are based. The first payment will be paid as
of the first day of the initial payment interval. The
Option C Table applies to this Option.
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Option D: Any Other Form
--------------
The Company will make periodic payments in any other
form of settlement option which is acceptable to us at
the time of an election.
Minimum Amounts
Benefit Payments under a settlement option are subject to any minimum
amounts, payment intervals, and other terms or conditions that the
Company may require from time to time. If the Company changes the
minimum amounts, the Company may change any current or future payment
amounts and/or payment intervals to conform with the change. More
than one settlement option may be elected if the requirements for each
settlement option elected are satisfied. Once payment begins under a
settlement option, the settlement option may not be changed.
All factors, values, benefits and reserves under the Contract 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 show the payments that the
Company will make at sample payment intervals for each $1,000 applied
at the guaranteed interest rate.
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, except as a Death Benefit
Settlement Option.
GENERAL PROVISIONS
Non-participating
The Contract does not pay dividends or share in the Company's
divisible surplus.
Misstatement
If the age and/or sex of a person on whose life Benefit Payments are
based is misstated, the payments or other benefits under the Contract
shall be adjusted to the amount which would have been payable based on
the correct age and/or sex. If the Company made any underpayments
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based on any misstatement, the amount of any underpayment with
interest shall be immediately paid in one sum. In addition to any
other remedies that may be available at law or at equity, the Company
may deduct any overpayments made, with interest, from any succeeding
payment(s) due under the Contract.
Proof of Existence and Age
The Company may require proof of age and/or sex of any person on whose
life Benefit Payments are based.
Discharge of Liability
Upon payment of any partial or full surrender, or any Benefit Payment,
the Company shall be discharged from all liability to the extent of
each such payment.
Transfer of Ownership
Non-Qualified Contract
The Owner of a Non-Qualified Contract may transfer ownership at any
time during his or her lifetime. Any such transfer is subject to the
following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will
not cancel a designation of an Annuitant or
Beneficiary or any settlement option election
previously made.
Qualified Contract
The Owner of a Qualified Contract may not transfer ownership.
Assignment
Non-Qualified Contract
The Owner of a Non-Qualified Contract may assign all or any part of
his or her rights under the Contract except rights to:
(1) designate or change a Beneficiary;
(2) designate or change an Annuitant;
(3) transfer ownership; and
(4) elect a settlement option.
The person to whom an assignment is made is called an assignee.
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The Company is not responsible for the validity of any assignment. An
assignment must be in writing and must be received at the
Administrative Office of the Company. The Company will not be bound
by an assignment until the Company acknowledges it. An assignment is
subject to any payment made or any action the Company takes before the
Company acknowledges it. An assignment may be ended only by the
assignee or as provided by law.
Qualified Contract
The Owner of a Qualified Contract may not assign or in any way
alienate his or her interest under the Contract.
Annual Report
At least once each Contract Year, the Company will provide a report of
the Contract's current values and any other information required by
law, until the first to occur of the following:
1) the date the Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the date a Death Benefit becomes payable under the
Contract.
Incontestability
No Contract shall be contestable by the Company.
Entire Contract
The Company issues the Contract in consideration and acceptance of the
payment of the initial Purchase Payment. In those states that require
a written application, a copy of the application will be attached to
and become part of the Contract. Only statements in the application,
if any, or made elsewhere by the Owner in consideration for the
Contract will be used to void the Owner's interest under the Contract,
or to defend a claim based on it. Such statements are representations
and not warranties.
Changes -- Waivers
No changes or waivers of the terms of the Contract are valid unless
made in writing by the Company's President, Vice President, or
Secretary. The Company reserves the right both to administer and to
change the provisions of the Contract to conform to any applicable
laws, regulations or rulings issued by a governmental agency.
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Notices and Directions
The Company will not be bound by any authorization, election or notice
which is not made by Written Request.
Any written notice requirement by the Company to the Owner will be
satisfied by the mailing of any such required written notice, by
first-class mail, to the Owner'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 advisor before initiating any transaction. This discussion is
based upon the Company's understanding of the present federal income
tax laws as they are currently interpreted by the Internal Revenue
Service. No representation is made as to the 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 Contract may be purchased on a tax-qualified or non-tax-qualified
basis. Qualified Contracts are designed for use in connection with
plans entitled to special income tax treatment under Section 401, 403,
or 408 of the Code. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Benefit Payments, and on the
economic benefit to the Owner or the Beneficiary may depend on the
type of Contract and the tax status of the individual concerned.
Certain requirements must be satisfied in purchasing a Qualified
Contract 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
Contracts with the various types of tax-qualified arrangements.
Owners and Beneficiaries are cautioned that the rights of any person
to any benefits may be subject to the terms and conditions of the
tax-qualified arrangement, regardless of the terms and conditions of
the Contract. Some tax-qualified arrangements are subject to
distribution and other requirements that are not incorporated in the
administration of the Contract. Owners are responsible for
determining that contributions, distributions and other transactions
with respect to Qualified Contracts satisfy applicable law.
Therefore, purchasers of Qualified 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 Statement of Additional
Information discusses the requirements for qualifying as an annuity.
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Taxation of Annuities In General
Section 72 of the Code governs taxation of annuities in general. The
Company believes that the Owner 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.)
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 Contract owned by a
natural person.
Surrenders
Qualified Contracts
In the case of a surrender under a Contract, including
withdrawals under the Systematic Withdrawal Option, a pro-rata
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 annuity. The
"investment in the contract" generally equals the amount of
any non-deductible Purchase Payments paid by or on behalf of
any individual. Special tax rules may be available for
certain distributions from a Qualified Contract.
Non-Qualified Contracts
In the case of a surrender under a Non-Qualified Contract, the
amount recovered is taxable to the extent that the Account
Value immediately before the surrender, reduced by any
applicable charges, exceeds the "investment in the contract"
at such time.
Annuity Benefit Payments
Although the tax consequences may vary depending on the Settlement
Option elected under the Contract, in general, only the portion of a
Benefit 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 Benefit Payments is taxable. For Variable Dollar Benefit
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 Benefit 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 Benefit Payments for the term of the payments; however,
the remainder of each Benefit Payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount
of any additional Benefit Payments is taxable. If Benefit Payments
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cease as a result of an Owner'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 the
taxable portion of a distribution from a Contract prior to age 59 1/2.
Exceptions to this penalty tax are available to distributions made on
account of disability, death, and certain payments for life and life
expectancy. Certain other exceptions may apply depending on the tax-
qualification of the Contract involved.
Taxation of Death Benefit Proceeds
Amounts may be distributed under a Contract because of the death of an
Owner. Generally such amounts are includable in the income of the
recipient as follows: (1) if distributed in a lump sum, they are taxed
in the same manner as a full surrender as described above, or (2) if
distributed under a Settlement Option, they are taxed in the same
manner as Benefit Payments, as described above.
Transfers, Assignments, or Exchanges of the Contract
A transfer of ownership or an assignment of a Contract, the
designation of a Beneficiary who is not also the Owner, or the
exchange of a Contract may result in certain tax consequences to the
Owner that are not discussed herein.
Qualified Contracts - General
The Qualified Contract is designed for use with several types of
retirement plans. The tax rules applicable to Owner and Beneficiaries
in retirement plans vary according to the type of plan and the terms
and conditions of the plan.
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.
Individual Retirement Annuities
Code sections 219 and 408 permit individuals or their employers to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" or "IRA". Under applicable limitations, certain
amounts may be contributed to an IRA that are deductible from an
individual's gross income. Employers also may establish Simplified
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Employee Pension (SEP) Plans to provide IRA contributions on behalf of
their employees.
Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c)(3) of the Code.
These qualifying employers may make contributions to the Contracts for
the benefit of their employees. Such contributions are not includable
in the gross income of the employee until the employee receives
distributions under the Contract.
Corporate Pension and Profit Sharing Plans and H.R. 10 Plans
Code section 401 permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals
to establish retirement plans for themselves and their employees.
These retirement plans may permit the purchase of the Contracts to
accumulate retirement savings under the plans.
Certain Deferred Compensation Plans
Under Section 457 of the Code, governmental and certain other tax-
exempt employers may invest in annuity contracts in connection with
deferred compensation plans established for the benefit of their
employees. Other employers may invest in annuity contracts in
connection with non-qualified deferred compensation plans established
for the benefit of their employees. Under these plans, contributions
made for the benefit of the employees will not be includable in the
employees' gross income until distributed from the plan.
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.
Possible Changes in Taxation
There is always the possibility that the tax treatment of 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).
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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 circumstances of each
Owner 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 or
a Non-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
will 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"), an affiliate of the Company,
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. ("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 will sell Contracts through its registered
representatives. In addition, AAG Securities may enter 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
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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.
AAG Securities may pay commissions of up to 8% of the Purchase
Payments made under the Contracts. In addition, certain production,
persistency and managerial bonuses may be paid. 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 Owner, or the person
controlling payments, if different from the Owner. The number of
votes which are available will be calculated separately for each
Sub-Account. Before the Annuity Commencement Date, that number will
be determined by applying the Owner's percentage interest, if any, in
a particular Sub-Account to the total number of votes attributable to
that Sub-Account. The Owner, or the person controlling payments, if
different from the Owner, 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 Contract
decreases.
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 Owners have no beneficial interest will be
voted in proportion to the voting instructions which are received with
respect to all Contracts participating in the Sub-Account. Voting
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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 Contracts 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 or the Contracts.
Statements contained in this Prospectus, as to the content of the
Contracts and other legal instruments, are summaries. For a complete
statement of the terms thereof, reference is made to the instruments
filed as exhibits to the Registration Statement. The Registration
Statement and the exhibits thereto may be inspected and copied at the
office of the Commission, located at 450 Fifth Street, N.W.,
Washington, D.C.
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:
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TABLE OF CONTENTS
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Page
ANNUITY INVESTORS 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 Standardized Yield Calculation . 2
Other Sub-Account Standardized Yield Calculations . . . . 3
Standardized Total Return Calculation . . . . . . . . . . 4
Hypothetical Performance Data . . . . . . . . . . . . . . 4
Other Performance Data . . . . . . . . . . . . . . . . . 5
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . 7
Taxation of the Company . . . . . . . . . . . . . . . . . 7
Tax Status of the Contract . . . . . . . . . . . . . . . 7
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 8
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- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Copies of the Statement of Additional Information dated
_______________, 1996 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 Life Insurance Company, P.O. Box 5423, Cincinnati, Ohio
45201-5423.
Name: __________________________________________________
Address: __________________________________________________
City: __________________________________________________
State: __________________________________________________
Zip: __________________________________________________
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APPENDIX A
Qualified Contracts
OPTION A TABLE -- INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
Terms of Semi- Terms of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
----- ------ ------ --------- ------- -------- ------ ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Years
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89
Terms of Semi-
Payments Annual Annual Quarterly Monthly
-------- ------ ------ --------- -------
<C> <C> <C> <C> <C>
Years
16 79.61 39.51 19.68 6.54
17 75.95 37.70 18.78 6.24
18 72.71 36.09 17.98 5.98
19 69.81 34.65 17.26 5.74
20 67.22 33.36 16.62 5.53
</TABLE>
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OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
60 Months 120 Months 180 Months 240 Months
--------- ---------- ---------- ----------
Age
---
55 $4.42 $4.39 $4.32 $4.22
56 4.51 4.47 4.40 4.29
57 4.61 4.56 4.48 4.35
58 4.71 4.65 4.56 4.42
59 4.81 4.75 4.64 4.49
60 4.92 4.86 4.73 4.55
61 5.04 4.97 4.83 4.62
62 5.17 5.08 4.92 4.69
63 5.31 5.20 5.02 4.76
64 5.45 5.33 5.12 4.83
65 5.61 5.46 5.22 4.89
66 5.77 5.60 5.33 4.96
67 5.94 5.75 5.43 5.02
68 6.13 5.91 5.54 5.08
69 6.33 6.07 5.65 5.14
70 6.54 6.23 5.76 5.19
71 6.76 6.41 5.86 5.24
72 7.00 6.58 5.96 5.28
73 7.26 6.77 6.06 5.32
74 7.53 6.95 6.16 5.35
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OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
<TABLE>
<CAPTION>
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 $4.56 $4.58 $4.61 $4.63 $4.65 $4.67 $4.69 $4.71 $4.73 $4.75 $4.76
61 4.63 4.66 4.69 4.71 4.73 4.76 4.78 4.80 4.82 4.84 4.86
62 4.71 4.74 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96
63 4.79 4.82 4.85 4.88 4.91 4.94 4.97 5.00 5.02 5.05 5.07
64 4.88 4.91 4.94 4.98 5.01 5.04 5.07 5.10 5.13 5.15 5.18
65 4.96 5.00 5.03 5.07 5.11 5.14 5.17 5.20 5.24 5.27 5.30
66 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.32 5.35 5.38 5.42
67 5.14 5.18 5.23 5.27 5.31 5.35 5.39 5.43 5.47 5.51 5.54
68 5.23 5.28 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63 5.67
69 5.33 5.38 5.43 5.48 5.53 5.57 5.62 5.67 5.72 5.76 5.81
70 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.95
</TABLE>
*Payments after the death of the Primary Payee will be one-half of the
amount shown.
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Non-Qualified Contracts
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
Terms of Semi- Terms of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
-------- ------ ------ --------- ------- -------- ------ ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Years
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89
Terms of Semi-
Payments Annual Annual Quarterly Monthly
-------- ------ ------ --------- -------
<C> <C> <C> <C> <C>
Years
16 79.61 39.51 19.68 6.54
17 75.95 37.70 18.78 6.24
18 72.71 36.09 17.98 5.98
19 69.81 34.65 17.26 5.74
20 67.22 33.36 16.62 5.53
</TABLE>
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OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
Male 60 Months 120 Months 180 Months 240 Months
---- --------- ---------- ---------- ----------
Age
---
55 $4.68 $4.62 $4.53 $4.39
56 4.78 4.72 4.61 4.45
57 4.89 4.82 4.69 4.51
58 5.00 4.92 4.78 4.58
59 5.12 5.03 4.87 4.64
60 5.25 5.14 4.96 4.71
61 5.39 5.26 5.06 4.78
62 5.53 5.39 5.16 4.84
63 5.69 5.52 5.26 4.90
64 5.85 5.66 5.36 4.96
65 6.03 5.81 5.46 5.02
66 6.21 5.96 5.56 5.08
67 6.41 6.11 5.66 5.13
68 6.62 6.28 5.76 5.18
69 6.84 6.44 5.86 5.23
70 7.07 6.61 5.96 5.27
71 7.32 6.78 6.05 5.31
72 7.58 6.96 6.14 5.34
73 7.85 7.14 6.23 5.37
74 8.14 7.32 6.31 5.40
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OPTION B TABLES (CONTINUED)
Female 60 Months 120 Months 180 Months 240 Months
------ --------- ---------- ---------- ----------
Age
---
55 $4.25 $4.22 $4.18 $4.10
56 4.33 4.30 4.25 4.17
57 4.41 4.38 4.32 4.23
58 4.50 4.47 4.40 4.30
59 4.60 4.56 4.48 4.37
60 4.70 4.66 4.57 4.44
61 4.81 4.76 4.66 4.51
62 4.93 4.86 4.75 4.58
63 5.05 4.98 4.85 4.65
64 5.18 5.10 4.95 4.72
65 5.32 5.22 5.05 4.79
66 5.47 5.36 5.16 4.86
67 5.63 5.50 5.26 4.93
68 5.80 5.65 5.37 5.00
69 5.98 5.80 5.49 5.06
70 6.18 5.96 5.60 5.12
71 6.39 6.14 5.71 5.18
72 6.62 6.31 5.83 5.23
73 6.86 6.50 5.94 5.28
74 7.12 6.69 6.04 5.32
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OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
<TABLE>
<CAPTION>
Male Female 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 $4.70 $4.73 $4.76 $4.79 $4.82 $4.85 $4.88 $4.91 $4.94 $4.96 $4.99
61 4.78 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.06 5.09
62 4.86 4.89 4.93 4.96 5.00 5.03 5.07 5.10 5.13 5.16 5.19
63 4.94 4.97 5.01 5.05 5.09 5.13 5.16 5.20 5.24 5.27 5.31
64 5.02 5.06 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.42
65 5.10 5.15 5.19 5.24 5.28 5.33 5.37 5.41 5.46 5.50 5.54
66 5.19 5.24 5.28 5.33 5.38 5.43 4.84 5.52 5.57 5.62 5.66
67 5.28 5.33 5.38 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.79
68 5.37 5.42 5.48 5.53 5.59 5.64 5.70 5.75 5.81 5.86 5.92
69 5.46 5.52 5.57 5.63 5.69 5.75 5.81 5.87 5.93 5.99 6.05
70 5.55 5.61 5.67 5.74 5.80 5.86 5.93 5.99 6.06 6.12 6.19
</TABLE>
*Payments after the death of the Primary Payee will be one-half of the
amount shown.
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<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
--------------------------------------------------------------------------
Monthly payments for each $1,000 of proceeds by ages of persons named*.
<TABLE>
<CAPTION>
Male Female Primary Age
Secondary ------------------
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 $4.46 $4.54 $4.62 $4.71 $4.79 $4.88 $4.98 $5.07 $5.17 $5.27 $5.38
61 4.48 4.56 4.65 4.73 4.82 4.91 5.01 5.11 5.21 5.31 5.42
62 4.50 4.58 4.67 4.75 4.85 4.94 5.04 5.14 5.25 5.36 5.47
63 4.52 4.60 4.69 4.78 4.87 4.97 5.07 5.17 5.28 5.40 5.51
64 4.53 4.62 4.71 4.80 4.90 5.00 5.10 5.21 5.32 5.44 5.56
65 4.55 4.63 4.72 4.82 4.92 5.02 5.13 5.24 5.35 5.48 5.60
66 4.56 4.65 4.74 4.84 4.94 5.05 5.16 5.27 5.39 5.51 5.64
67 4.57 4.66 4.76 4.86 4.96 5.07 5.18 5.30 5.42 5.55 5.68
68 4.59 4.68 4.78 4.88 4.98 5.09 5.21 5.33 5.45 5.59 5.72
69 4.60 4.69 4.79 4.89 5.00 5.11 5.23 5.36 5.48 5.62 5.76
70 4.61 4.70 4.80 4.91 5.02 5.13 5.25 5.38 5.51 5.65 5.80
</TABLE>
*Payments after the death of the Primary Payee will be one-half of the
amount shown.
-------------------------------------------------------------------------
Page 59
<PAGE>
Subject to Completion: Dated _______, 1996
ANNUITY INVESTORS VARIABLE ACCOUNT A
of
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED TRADEMARK)
STATEMENT OF ADDITIONAL INFORMATION
for the
Commodore Mariner(SERVICEMARK) and Commodore Americus(SERVICEMARK)
Individual Flexible Premium Deferred Annuities Issued by
ANNUITY INVESTORS 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 Mariner and Commodore Americus,
Individual Flexible Premium Deferred Annuity Contracts (each, the
"Contract") offered by Annuity Investors Life Insurance Company. A copy
of the Prospectus dated ______________, 1996, as supplemented from time to
time, may be obtained free of charge by writing to Annuity Investors 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.
Dated _____________, 1996
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 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 Standardized Yield
Calculation . . . . . . . . . . . . . . . . . . . . 2
Other Sub-Account Standardized Yield Calculations . 3
Standardized Total Return Calculation . . . . . . . 4
Hypothetical Performance Data . . . . . . . . . . . 4
Other Performance Data . . . . . . . . . . . . . . . 5
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . 6
Taxation of the Company . . . . . . . . . . . . . . 7
Tax Status of the Contract . . . . . . . . . . . . . 7
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 8
<PAGE>
The following information supplements the information in the Prospectus
about the Contracts. Terms used in this Statement of Additional
Information have the same meaning as in the Prospectus.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
General Information and History
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 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 Owner semi-annually at the Owner's last known address.
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 Standardized Yield Calculation
In accordance with rules and regulations adopted by the Securities and
Exchange Commission, the Company computes the Money Market Sub-Account's
current annualized yield for a seven-day period in a manner which does not
take into consideration any realized or unrealized gains or losses on
shares of the Money Market Fund or on its portfolio securities. This
current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) in the value of a hypothetical
account having a balance of one unit of the Money Market Sub-Account at
the beginning of such seven-day period, dividing such net change in the
value of the hypothetical account by the value of the hypothetical account
at the beginning of the period to determine the base period return and
annualizing this quotient on a 365-day basis. The net change in the value
of the hypothetical account reflects the deductions for the Mortality and
Expense Risk and Administration Charges and income and expenses accrued
during the period. Because of these deductions, the yield for the Money
Market Sub-Account of the Separate Account will be lower than the yield
for the Money Market Fund or any comparable substitute funding vehicle.
------------------------------------------------------------------------
- 2 -
<PAGE>
The Securities and Exchange Commission also permits the Company to
disclose the effective yield of the Money Market Sub-Account for the same
seven-day period, determined on a compounded basis. The effective yield
is calculated according to the following formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] - 1
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields. The
Money Market Sub-Account's actual yield is affected by changes in interest
rates on money market securities, average portfolio maturity of the Money
Market Fund or substitute funding vehicle, the types and quality of
portfolio securities held by the Money Market Fund or substitute funding
vehicle, and operating expenses. IN ADDITION, THE YIELD FIGURES DO NOT
REFLECT THE EFFECT OF ANY CONTINGENT DEFERRED SALES CHARGE ("CDSC") (OF UP
TO 7% OF PURCHASE PAYMENTS) THAT MAY BE APPLICABLE ON SURRENDER.
Other Sub-Account Standardized Yield Calculations
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:
a-b 6
YIELD=2[(---- +1) -1]
cd
Where:
a = net investment income earned during the period by the
Portfolio attributable to the shares owned by the
Sub-Account.
b = expenses for the Sub-Account accrued for the period (net
of reimbursements).
c = the average daily number of Accumulation Units
outstanding during the period.
d = the maximum offering price per Accumulation Unit on the
last day of the period.
------------------------------------------------------------------------
- 3 -
<PAGE>
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
Contracts. The yield calculations do not reflect the effect of any CDSC
that may be applicable to a particular Contract. CDSCs range from 7% to
0% of the Purchase Payments withdrawn depending on the elapsed time since
the receipt of such Purchase Payments.
Because of the charges and deductions imposed by the Separate Account, the
yield for a Sub-Account will be lower than the yield for the corresponding
Fund. The yield on amounts held in a Sub-Account normally will fluctuate
over time. Therefore, the disclosed yield for any given period is not an
indication or representation of future yields or rates of return. The
Sub-Account's actual yield will be affected by the types and quality of
portfolio securities held by the Fund and its operating expenses.
Standardized Total Return Calculation
The Company may from time to time also disclose average annual total
returns for one or more of the Sub-Accounts for various periods of time.
Average annual total return quotations are computed by finding the average
annual compounded rates of return over one, five and ten year periods that
would equal the initial amount invested to the ending redeemable value,
according to the following formula:
n
P(1 + T) = ERV
Where
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = "ending redeemable value" of a hypothetical
$1,000 payment made at the beginning of the one,
five or ten- year period at the end of the one,
five, or ten-year period (or fractional portion
thereof).
All recurring fees, such as the Contract Maintenance Fee and the Mortality
and Expense Risk Charge, which 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.
------------------------------------------------------------------------
- 4 -
<PAGE>
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
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 other 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
------------------------------------------------------------------------
- 5 -
<PAGE>
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 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.
------------------------------------------------------------------------
- 6 -
<PAGE>
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
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 is designed for use by individuals as a non-tax-qualified
annuity (including Contracts purchased by an employer in connection with a
Code Section 457 or non-qualified deferred compensation plan), and with
arrangements which qualify for special tax treatment under Sections 401,
403 or 408 of the Code. The ultimate effect of federal taxes on the
Account Value, on Annuity Benefits, and on the economic benefit to the
Owner and/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,
------------------------------------------------------------------------
- 7 -
<PAGE>
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.
Tax Status of the Contract
Section 817(h) of the Code requires that with respect to Non-Qualified
Contracts, the investments of the Funds be "adequately diversified" in
accordance with Treasury regulations in order for the Contracts to qualify
as annuity contracts under federal tax law. The Separate Account, through
the Funds, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
Funds' assets may be invested.
In certain circumstances, Owners of individual 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 Owner), 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 Owner has additional flexibility
in allocating Purchase Payments and Account Value. These differences
could result in an Owner being treated as the owner of a pro-rata portion
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
------------------------------------------------------------------------
- 8 -
<PAGE>
as necessary to attempt to prevent an Owner from being considered the
owner of a pro-rata share of the assets of the Separate Account.
FINANCIAL STATEMENTS
The Company's audited statutory-basis financial statements for the years
ended December 31, 1995 and 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.
------------------------------------------------------------------------
- 9 -
<PAGE>
Statutory Financial Statements
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Years ended December 31, 1995 and 1994
------------------------------------------------------------------------
- 10 -
<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 ("the Company") as of December 31, 1995
and 1994, 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, 1995
and 1994, 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, 1995 and 1994 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
------------------------------------------------------------------------
- 11 -
<PAGE>
Annuity Investors Life Insurance Company at December 31, 1995 and 1994,
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
February 29, 1996
------------------------------------------------------------------------
- 12 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
STATUTORY BASIS
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash and investments:
Fixed Maturities - at amortized cost
(market value: $8,648,412
and $7,545,390) $ 8,554,641 $8,291,079
Short-term investments 15,169,930 425,660
Cash 93,584 79,862
----------- ---------
Total cash and investments 23,818,155 8,796,601
Investment income due and accrued 220,028 150,193
Federal income tax recoverable 0 23,181
----------- -----------
Total assets $24,038,183 $8,969,975
=========== ==========
LIABILITIES, CAPITAL AND SURPLUS
Annuity reserves $ 2,842,013 $2,684,376
Interest maintenance reserve 8 0
Commissions due and accrued 966 0
General expenses due and accrued 7,000 3,445
Taxes, licenses and fees due and accrued 3,000 0
Federal income tax payable 8,952 0
Asset valuation reserve 2,848 0
Payable to parent and affiliate 58,415 11,264
----------- ---------
Total liabilities 2,923,202 2,699,085
----------- ---------
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 18,050,000 3,350,000
Unassigned surplus 1,064,981 920,890
----------- -----------
Total capital and surplus 21,114,981 6,270,890
----------- ---------
Total liabilities, capital and surplus $24,038,183 $8,969,975
=========== ==========
</TABLE>
See notes to statutory financial statements
------------------------------------------------------------------------
- 13 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
SUMMARY OF OPERATIONS
STATUTORY BASIS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1995 1994
---- ----
<S> <C> <C>
Revenues:
Premiums and annuity considerations $ 58,695 $219,308
Deposit type funds 16,107 0
Net investment income 552,141 432,932
------- --------
Total revenue 626,943 652,240
Benefits and expenses:
Increase in aggregate reserves 157,637 61,627
Policyholders' benefits 109,607 280,517
Commissions and expense allowances on reinsurance assumed 49,655 47,023
General insurance expenses 34,588 25,630
Taxes, licenses and fees 53,577 38,951
--------- -------
Total benefits and expenses 405,064 453,748
--------- -------
Income from operations before federal income taxes 221,879 198,492
Provision for federal income taxes 74,941 69,000
-------- -------
Net income after federal income taxes
before net realized capital gains 146,938 129,492
Net realized capital gains (losses):
Gross Realized Capital Gains 15 0
Capital gains tax (5) 0
Interest maintenance reserve transfer (net of tax) (8) 0
------------ ------------
Net realized capital gains transferred to IMR 2 0
------------ ------------
Net income $146,940 $129,492
=========== ===========
</TABLE>
See notes to statutory financial statements
------------------------------------------------------------------------
- 14 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
STATUTORY BASIS
Year ended December 31,
-------------------------
1995 1994
---- ----
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
============ ===========
Surplus paid in 14,700,000 0
---------- ----------
Balance at end of year $18,050,000 $ 3,350,000
=========== ===========
Unassigned funds:
Balance at beginning of year $ 920,890 $ 791,398
Net income 146,940 129,492
Change in asset valuation reserve (2,849) 0
----------- -----------
Balance at end of year $ 1,064,981 $ 920,890
=========== ==========
Total capital and surplus $21,114,981 $ 6,270,890
=========== ===========
See notes to statutory financial statements
------------------------------------------------------------------------
- 15 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
STATUTORY BASIS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------
1995 1994
---- ----
<S> <C> <C>
Operating activities:
Premiums and annuity considerations $ 58,695 $ 219,308
Deposit type funds 16,107 0
Net investment income 512,777 398,729
Surrender benefits paid (109,607) (280,517)
Commissions, expenses and premium and other taxes paid (128,854) (111,604)
Federal income tax paid (42,813) (76,483)
Payments From (to) parent and affiliate 47,151 (29,837)
----------- -----------
Total operating activities 353,456 119,596
Investing activities:
Sale, maturity or repayment of bonds 1,167,103 0
Purchase of bonds (1,462,567) (2,637,891)
----------- -----------
Total investing activities (295,464) (2,637,891)
Financing activities:
Surplus paid in 14,700,000 0
----------- -----------
Total financing activities 14,700,000 0
----------- -----------
Net increase (decrease) in cash and short-term investments 14,757,992 (2,518,295)
Cash and short-term investments at beginning of year 505,522 3,023,817
----------- -----------
Cash and short-term investments at end of year $15,263,514 $ 505,522
=========== ===========
See notes to statutory financial statements
</TABLE>
------------------------------------------------------------------------
- 16 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
BASIS OF PRESENTATION Annuity Investors Life Insurance Company ("AILIC"),
a life insurance company domiciled in the State of Ohio, is an indirectly
owned subsidiary of American Annuity Group, Inc., ("AAG"), a publicly
traded financial services holding company of which American Financial
Group, Inc. ("AFG") owns 81%. On November 29, 1994, AILIC, formerly
Carillon Life Insurance Company, was purchased from Great American
Insurance Company, a wholly-owned subsidiary of AFG.
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 expected remaining
life of the security sold; (c) Asset Valuation Reserves ("AVR") 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.
The preparation of the financial statements of insurance companies
requires management to make estimates and assumptions that affect amounts
reported in the financial statements and accompanying notes. Such
estimates and assumptions could change in the future as more information
becomes known, which could impact the amounts reported and disclosed
herein.
Short-term investments having original maturities of three months or less
when purchased are considered to be cash equivalents for purposes of the
financial statements.
------------------------------------------------------------------------
- 17 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
INVESTMENTS Asset values are generally stated as follows: Bonds not
backed by other loans, where permitted, at amortized cost using the
interest method, all others at association values as determined by the
NAIC Securities Valuation Office ("association value"); loan backed bonds
and structured securities, where permitted, at amortized cost using the
interest method, including anticipated prepayments at the date of
purchase; significant changes in estimated cash flows from the original
purchase assumptions accounted for on a prospective basis, all others at
association value; short-term investments at cost.
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 by the Securities Valuation
Office.
The carrying values of cash and short-term investments approximate their
fair values.
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. The fair market value of the reserves approximates the statement
value.
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.
B. INVESTMENTS
------------------------------------------------------------------------
- 18 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
At December 31, 1995, fixed maturity investments in U.S. Government and
government agencies and authorities had a carrying value and market value
of $7.3 million, gross unrealized gains of $74,700 and gross unrealized
(losses) of ($45,100). All other corporate fixed maturity investments at
December 31, 1995 had a carrying value of $1.3 million, market value of
$1.4 million, gross unrealized gains of $64,700 and gross unrealized
(losses) of ($600). At December 31, 1994, all fixed maturity investments
consisted entirely of publicly traded U.S. Treasury bonds with a carrying
value of $8.3 million, market value of $7.5 million, gross unrealized
gains of $1,000 and gross unrealized (losses) of ($746,000).
Proceeds from sales of fixed maturity investments were $1.2 million in
1995. There were no sales of fixed maturity investments in 1994.
U.S. Treasury Notes with a carrying value of $6.0 million at December 31,
1995, were on deposit as required by the insurance departments of various
states.
C. FEDERAL INCOME TAXES
AILIC's amount of federal income taxes incurred for recoupment in the
event of future losses are approximately $75,000 in 1995, $69,000 in 1994
and $57,000 in 1993.
D. RELATED PARTY TRANSACTIONS
On December 30, 1993, AILIC entered into a reinsurance agreement with
Great American Life Insurance Company ("GALIC"), an affiliated Ohio
domiciled insurance company, which became AILIC's immediate parent in
1995. As a result of the transaction, AILIC assumed $2.6 million in
deferred annuity reserves and received an equivalent amount of assets.
AILIC will continue to assume premiums, surrenders and other transactions
on certain policies directly written and administered by GALIC. The
majority of premium income in 1995 and all premium income in 1994
consisted of assumed reinsurance from GALIC in accordance with the
agreement.
------------------------------------------------------------------------
- 19 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
Certain investment, administrative, management, accounting and data
processing services are provided to AILIC through the use of shared
facilities and personnel or under agreements between AILIC and affiliates.
E. DIVIDEND RESTRICTIONS
The amount of dividends which can be paid by AILIC without prior approval
of regulatory authorities is subject to restrictions relating to capital
and surplus and net income. AILIC may pay approximately $1.1 million in
dividends in 1996 based on capital and surplus, without prior approval.
F. ANNUITY RESERVES
At December 31, 1995, 99% of AILIC's annuity reserves were subject to
discretionary withdrawal without adjustment.
G. OTHER ITEMS
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 deduction 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, 1995 and 1994 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 AILIC's 1995 and 1994 Statutory Annual Statements as filed
with the insurance department of the State of Ohio:
------------------------------------------------------------------------
- 20 -
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS - CONTINUED
1995 1994
---- ----
Gross investment income earned:
Bonds $ 447,488 $ 431,170
Short-term investments 72,980 18,168
Cash on hand and on deposit 41,582 0
Aggregate write-ins for investment income 0 106
------------ ----------
$ 562,050 $ 449,444
============ ==========
Bonds by class
Class "1" $ 8,444,399 $8,291,079
Class "2" 110,242 0
------------ ----------
$ 8,554,641 $8,291,079
============ ==========
Total bonds publicly traded $ 8,554,641 $8,291,079
============ ==========
Short-term investments (book value) $15,169,930 $ 425,660
=========== ==========
Cash on deposit $ 93,584 $ 79,862
=========== ===========
Group annuities not fully paid - account $ 2,842,013 $2,684,376
balance =========== ==========
1995 1995
Carrying Value Market Value
-------------- ------------
Total Bonds by maturity:
Due within 1 year or less $ 100,137 $ 101,687
Over 1 year through 5 years 4,372,211 4,366,586
Over 5 years through 10 years 3,796,802 3,870,899
Over 10 years through 20 years 139,901 150,719
Over 20 years 145,590 158,521
------------ ----------
$8,554,641 $8,648,412
============ ==========
------------------------------------------------------------------------
- 21 -
<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 differences
between net income and surplus as determined in accordance with statutory
accounting practices and GAAP for the years ended December 31, 1995 and
1994:
<TABLE>
<CAPTION>
Net Income Capital and Surplus
--------- ---------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
As reported on a statutory basis $146,940 $129,492 $21,114,981 $6,270,890
Commissions capitalized to DAC and amortized 954 0 954 0
Capital gains transferred to IMR, net of tax 8 0 8 0
Federal income taxes (3,051) 0 (3,051) 0
Unrealized gain (loss) adjustment 0 0 38,109 (485,000)
AVR adjustment 0 0 2,848 0
-------- -------- -------------- -----------
Total GAAP adjustments (2,089) 0 38,868 (485,000)
-------- -------- -------------- -----------
GAAP basis $144,851 $129,492 $21,153,849 $5,785,890
======== ======== ============== ==========
</TABLE>
------------------------------------------------------------------------
- 22 -
<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
Life Insurance Company authorizing establishment of
Annuity Investors Variable Account A.*
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors
Life Insurance Company and AAG Securities, Inc.
(b) Form of Selling Agreement between Annuity
Investors Life Insurance Company, AAG
Securities, Inc. and another Broker-Dealer.
(4) Individual Contract Forms.
(a) Form of Qualified Individual Flexible Premium
Deferred Annuity Contract.
(b) Form of Non-Qualified Individual Contract.
(5) Endorsements to Individual Contracts
(a) Form of Loan Endorsement to Individual Contract.
(b) Form of Tax Sheltered Annuity Endorsement to
Individual Contract.
(c) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Qualified Individual
Contract.
* Filed with Form N-4 on December 27, 1995.
------------------------------------------------------------------------
- 23 -
<PAGE>
(d) Form of Employer Plan Endorsement to Individual
Contract.
(e) Form of Individual Retirement Annuity
Endorsement to Individual Contract.
(f) Form of Texas Optional Retirement Program
Endorsement to Individual Contract.
(g) Form of Long-Term Care Waiver Rider to
Individual Contract.
(6) (a) Form of Application for Individual Flexible
Premium Deferred Annuity Contract.
(7) (a) Articles of Incorporation of Annuity Investors
Life Insurance Company.*
(b) Code of Regulations of Annuity Investors Life
Insurance Company.*
(8) (a) Participation Agreement between Annuity
Investors Life Insurance Company and Dreyfus
Variable Investment Fund.*
(b) Participation Agreement between Annuity
Investors Life Insurance Company and Dreyfus
Stock Index Fund.*
(c) Participation Agreement between Annuity
Investors Life Insurance Company and The Dreyfus
Socially Responsible Fund, Inc.*
(d) Participation Agreement between Annuity
Investors Life Insurance Company and Janus Aspen
Series.
(e) Amended and Restated Participation Agreement
between Annuity Investors Life Insurance Company
and Merrill Lynch Variable Series Funds, Inc.
(f) Agreement between Annuity Investors Life
Insurance Company and Merrill Lynch Asset
Management, L.P.
(g) Service Agreement between Annuity Investors Life
Insurance Company and American Annuity Group,
Inc.*
------------------------------------------------------------------------
- 24 -
<PAGE>
(h) Agreement between AAG Securities, Inc. and AAG
Insurance Agency, Inc.*
(i) Investment Service Agreement between Annuity
Investors Life Insurance Company and American
Annuity Group, Inc.*
(9) Opinion and Consent of Counsel.*
(10) Consent of Independent Auditors.
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
Item 25. Directors and Officers of Annuity Investors 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
------------------------------------------------------------------------
- 25 -
<PAGE>
Principal Positions and Offices
Name Business Address With the Company
---- ---------------- ---------------------
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 Life Insurance Company, is a wholly-
owned subsidiary of Great American Life Insurance Company, which is a
wholly-owned subsidiary of 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.
------------------------------------------------------------------------
- 26 -
<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 Ohio 07/19/83 100 Mgmt-River Transportation Equipment
Corporation
American Financial Corporation Ohio 08/27/63 100 Inactive
American Money Management Ohio 03/01/73 100 Investment Management
Corporation
American Money Management Netherland 05/10/85 100 Securities Management
International, N.V. Antilles
Chiquita Brands International, New Jersey 03/30/99 44.86(2) Production/Processing/Distribution of
Inc. (and subsidiaries) 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 Colorado 12/17/81 100 Satellite Communications
Services, Inc.
Great American Television California 03/19/81 100 Television Program Development
Productions, Inc.
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 New York 09/04/81 100 Inactive
Merchandising Group, Inc.
Location Productions, Inc. California 08/07/68 100 Prod./Motion Picture/Television Films
Location Productions II, California 05/15/75 100 Prod./Motion Picture/Television Films
Inc.
The Sy Fisher Company California 07/31/72 100 Inactive
Agency, Inc.
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
Great American Holding Corporation Ohio 11/30/77 100 Holding Company
Great American Insurance CompanyOhio 3/7/1872 100 Property/Casualty Insurance
A B I Group, Inc. Minnesota 07/27/78 100 Inactive
American Business Risk Minnesota 04/19/78 100 Inactive
Services, Inc.
American Insurance Minnesota 11/16/82 100 Inactive
Management Agency, Inc.
------------------------------------------------------------------------
- 27 -
<PAGE>
% 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>
Consolidated Underwriters, Texas 10/14/80 100 Inactive
Inc.
Agricultural Excess and Delaware 02/28/79 100 Excess & Surplus Lines Insurance
Surplus Insurance Company
Agricultural Insurance Ohio 03/23/05 100 Property/Casualty Insurance
Company
American Alliance Insurance Arizona 09/11/45 100 Property/Casualty Insurance
Company
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 Insurance Agency of Massachusetts 05/25/95 100 Insurance Agency
Massachusetts, Inc.
AAG Securities, Inc. Ohio 12/10/93 100 Broker-Dealer
CSW Management Services, Texas 06/27/85 100 Pre-need Trust Admin. Services
Inc.
GALIC Disbursing Company Ohio 05/31/94 100 Payroll Servicer
Great American Life Ohio 12/15/59 100 Life Insurance
Insurance Company
Annuity Investors Life Ohio 11/31/81 100 Life Insurance Company
Insurance Company
CHATBAR, Inc. Massachusetts 11/02/93 100 Hotel Operator
Driskill Holding, Inc. Texas 06/07/95 beneficial Hotel Management
interest
GALIC Brothers, Inc. Ohio 11/12/93 80 Real Estate Management
GALIC Life Insurance Ohio 06/21/94 100 Life Insurance Co. (License Pending)
Company
Great American Life California 08/10/67 100 Life Insurance Company
Assurance Company
Loyal American Life Alabama 05/18/55 100 Life Insurance Company
Insurance Company
ADL Financial North Carolina 09/10/70 100 Marketing Services
Services, Inc.
Purity Financial Florida 12/21/91 100 Marketing Services
Corporation
Prairie National Life South Dakota 02/11/76 100 Life Insurance Company
Insurance Company
American Memorial South Dakota 03/18/59 100 Life Insurance Company
Life Insurance
Company
Assured Security South Dakota 05/12/78 100 Life Insurance Company
Life Insurance
Company, Inc.
------------------------------------------------------------------------
- 28 -
<PAGE>
% 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>
Great Western Life Montana 05/01/80 100 Life Insurance Company
Insurance Company
Rushmore National South Dakota 04/16/37 100 Life Insurance Company
Life Insurance
Company
International Funeral Delaware 05/07/86 100 Coop. Buying Funeral Dirs.
Associates, Inc.
Laurentian Capital Delaware 04/13/87 100 Inactive
Corporation
Laurentian Credit Services Delaware 10/07/94 100 Inactive
Corporation
Laurentian Investment Delaware 06/15/90 100 Pre-need Trust Services
Services, Inc.
Laurentian Marketing Delaware 12/23/87 100 Marketing Services
Services, Inc.
Laurentian Securities Delaware 01/30/90 100 Inactive
Corporation
Lifestyle Financial Ohio 12/29/93 100 Marketing Services
Investments, Inc.
Lifestyle Financial Ohio 03/07/94 beneficial Life Insurance Agency
Investments Agency of interest
Ohio, Inc.
Lifestyle Financial Alabama 09/22/95 100 Life Insurance Agency
Investments of Alabama,
Inc.
Lifestyle Financial Indiana 02/24/94 100 Life Insurance Agency
Investments of Indiana,
Inc.
Lifestyle Financial Kentucky 10/03/94 100 Insurance Agency
Investments of Kentucky,
Inc.
Lifestyle Financial Minnesota 06/10/85 100 Insurance Agency
Investments of the
Northwest, Inc.
Lifestyle Financial North Carolina 07/13/94 100 Insurance Agency
Investments of the
Southeast, Inc.
Loyal Marketing Services, Alabama 07/20/90 100 Marketing Services
Inc.
Prairie States Marketing Washington 06/19/80 100 Marketing Services
Services, Inc.
Purple Cross Insurance Delaware 11/07/89 100 Insurance Agency
Agency, Inc.
Retirement Resources Group, Indiana 02/07/95 100 Insurance Agency
Inc.
------------------------------------------------------------------------
- 29 -
<PAGE>
% 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>
RRG of Texas, Inc. Texas 06/02/95 100 Life Insurance Agency
SPELCO (UK) Ltd. United Kingdom 00/00/00 99 Inactive
SWTC, Inc. Delaware 00/00/00 100 Inactive
SWTC Hong Kong Ltd. Hong Kong 00/00/00 100 Inactive
Technomil Ltd. Delaware 00/00/00 100 Inactive
American Custom Insurance Ohio 07/27/83 100 Management Holding Company
Services Holding Company
American Custom Insurance California 05/18/92 100 Insurance Agency & Brokerage
Services California, Inc.
Eden Park Insurance California 02/13/90 100 Wholesale Brokerage for Surplus Lines
Brokers, Inc.
Professional Risk Brokers, Illinois 03/01/90 100 Insurance Agency
Inc.
Professional Risk Brokers Massachusetts 04/19/94 100 Surplus Lines Brokerage
insurance, Inc.
Professional Risk Brokers Connecticut 07/09/92 100 Insurance Agency & Brokerage
of Connecticut, Inc.
Professional Risk Brokers Ohio 12/17/86 100 Insurance Agency and Brokerage
of Ohio, Inc.
Utility Insurance Services, Texas 04/06/95 100 (2) Texas Local Recording Agency
Inc.
Utility Management Texas 09/07/65 100 Texas Managing General Agency
Services, Inc.
American Custom Insurance Illinois 07/08/92 100 Underwriting Office
Services Illinois, Inc.
American Dynasty Surplus Delaware 1/12/82 100 Excess & Surplus Lines Insurance
Lines Insurance Company
American Empire Surplus Lines Delaware 07/15/77 100 Excess & Surplus Lines Insurance
Insurance Company
American Empire Insurance Ohio 11/26/79 100 Property/Casualty Insurance
Company
Stonewall Underwriters, Texas 05/19/75 100 Insurance Agency
Inc.
Fidelity Environmental New Jersey 06/30/87 100 Property/Casualty Insurance
Insurance Company
American Financial Connecticut 1871 82.62(2) Closed End Investment Company
Enterprises, Inc.
American Insurance Agency, Kentucky 07/27/67 100 Insurance Agency
Inc.
American National Fire New York 08/22/47 100 Property/Casualty Insurance
Insurance Company
American Special Risk, Inc. Illinois 12/29/81 100 Insurance Broker/Managing General
Agency
------------------------------------------------------------------------
- 30 -
<PAGE>
% 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 Special Risk 1 of Arizona, Inc.Arizona02/06/90 100 Inactive
American Spirit Insurance Indiana 04/05/88 100 Property/Casualty Insurance
Company
Brothers Property Corporation Ohio 09/08/87 80 Real Estate Investment
Brothers Barrington Oklahoma 03/18/94 100 Real Estate Holding Corporation
Corporation
Brothers Cincinnatian Ohio 01/25/94 100 Hotel Manager
Corporation
Brothers Columbine Oklahoma 03/18/94 100 Real Estate Holding Corporation
Corporation
Brothers Landing Louisiana 02/24/94 100 Real Estate Holding Corporation
Corporation
Brothers Pennsylvanian Pennsylvania 12/23/94 100 Real Estate Holding Corporation
Corporation
Brothers Port Richey Florida 12/06/93 100 Apartment Manager
Corporation
Brothers Property Ohio 09/25/87 100 Real Estate Management
Management Corporation
Brothers Railyard Texas 12/14/93 100 Apartment Manager
Corporation
Crop Managers Insurance Kansas 08/09/89 100 Insurance Agency
Agency, Inc.
Dempsey & Siders Agency, Inc. Ohio 05/09/56 100 Insurance Agency
Eagle American Insurance Ohio 07/01/87 100 Property/Casualty Insurance
Company
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
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 Texas 10/09/79 beneficial Lloyd's Plan Insurer
Insurance Company interest
Great American Management Ohio 12/05/74 100 Data Processing and Equipment Leasing
Services, Inc.
American Payroll Services, Ohio 02/20/87 100 Payroll Services
Inc.
Great American Re Inc. Delaware 05/14/71 100 Reinsurance Intermediary
Great American Risk Ohio 04/21/80 100 Insurance Risk Management
Management, Inc.
Great Texas County Mutual Texas 04/29/54 beneficial Property/Casualty Insurance
Insurance Company interest
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
------------------------------------------------------------------------
- 31 -
<PAGE>
% 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>
Key Largo Group, Inc. Florida 07/28/81 100 Land Developer & Resort Operator
Key Largo Group Utility Florida 11/26/84 100 Water & Sewer Utility
Company
Mid-Continent Casualty Oklahoma 02/26/47 100 Property/Casualty Insurance
Company
Mid-Continent Insurance Oklahoma 08/13/92 100 Property/Casualty Insurance
Company
Oklahoma Surety Company Oklahoma 08/05/68 100 Property/Casualty Insurance
Millenium Dynamics, Inc. Ohio 7/31/95 100 Design, Marketing & Servicing of Comp.
Software
National Interstate Ohio 01/26/89 51 Holding Company
Corporation
American Highways Insurance California 05/05/94 100 Insurance Agency
Agency
National Interstate Texas 06/07/89 beneficial Insurance Agency
Insurance Agency of Texas, interest
Inc.
National Interstate Ohio 02/13/89 100 Insurance Agency
Insurance Agency, Inc.
National Interstate Ohio 02/10/89 100 Property/Casualty Insurance
Insurance Company
North America Livestock, Inc. Florida 12/03/82 100 Managing General Agency
OBGC Corporation Florida 11/23/77 80 Real Estate Development
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
Stone Mountain Professional Georgia 08/07/95 100 Insurance Agency
Liability Agency, Inc.
Tamarack American, Inc. Delaware 06/10/86 100 Management Holding Company
Transport Insurance Company Ohio 05/25/76 100 Property/Casualty Insurance
American Commonwealth Texas 07/23/63 100 Real Estate Development
Development Company
ACDC Holdings Texas 05/04/81 100 Real Estate Development
Corporation
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 Texas 05/19/89 100 Managing General Agency
Agency, Inc.
Transport Insurance Agency, Texas 08/21/89 beneficial Insurance Agency
Inc. interest
Transport Underwriters California 05/11/45 100 Holding Company/Agency
Association
One East Fourth, Inc. Ohio 02/03/64 100 Commercial Leasing
Pioneer Carpet Mills, Inc. Ohio 04/29/76 100 Carpet Manufacturing
Provident Travel Corporation Ohio 07/09/84 100 Travel Agency
------------------------------------------------------------------------
- 32 -
<PAGE>
% 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>
TEJ Holdings, Inc. Ohio 12/04/84 100 Real Estate Holdings
TEJ II, Inc. Delaware 10/28/94 100 General Partner
American Financial Warrant Delaware 10/28/94 partnership Securities Holder
Holding Limited Partnership interest
Three East Fourth, Inc. Ohio 08/10/66 100 Commercial Leasing
American Premier Underwriters, Pennsylvania 1846 100 Diversified
Inc.
Pennsylvania Company Delaware 12/05/58 100 Holding Company
Atlanta Casualty Company Illinois 06/13/72 100 (2) Property/Casualty Insurance
American Premier Insurance Indiana 11/30/89 100 Property/Casualty Insurance
Company
Atlanta Specialty Insurance Iowa 02/06/74 100 Property/Casualty Insurance
Company
Mr. Agency of Georgia, Inc. Georgia 04/01/77 100 Insurance Agency
Atlanta Casualty General Texas 03/15/61 100 Managing General Agency
Agency, Inc.
Atlanta Insurance Georgia 02/06/71 100 Insurance Agency
Brokers, Inc.
Treaty House, Ltd. Nevada 11/02/71 100 Insurance Premium Finance
(d/b/a Mr. Budget)
Penn Central U.K. Limited United Kingdom 10/28/92 100 Insurance Holding Company
Insurance (GB) Limited United Kingdom 05/13/92 100 Property/Casualty Insurance
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
Hangar Acquisition Corp. Ohio 10/06/95 100 Aircraft Investment
Infinity Insurance Company Florida 07/09/55 100 Property/Casualty Insurance
Infinity Agency of Texas, Texas 07/15/92 100 Managing General Agency
Inc.
The Infinity Group, Inc. Indiana 07/22/92 100 Insurance Holding Company
Infinity Select Insurance Indiana 06/11/91 100 Property/Casualty Insurance
Company
Infinity Southern Insurance Alabama 08/05/92 100 Property/Casualty Insurance
Corporation
Leader National Insurance Ohio 03/20/63 100 Property/Casualty Insurance
Company
Budget Insurance Premiums, Ohio 02/14/64 100 Premium Finance Company
Inc.
Leader National Agency, Ohio 04/05/63 100 Brokering Agent
Inc.
Leader National Agency of Texas 01/25/94 100 Managing General Agency
Texas, Inc.
------------------------------------------------------------------------
- 33 -
<PAGE>
% 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>
Leader National Insurance Arizona 12/05/73 100 Brokering Agent
Agency of Arizona
Leader Preferred Insurance Ohio 11/07/94 100 Property/Casualty Insurance
Company
Leader Specialty Insurance Indiana 03/10/94 100 Property/Casualty Insurance
Company
PCC Technical Industries, Inc. California 03/07/55 100 Holding Company
ESC, Inc. California 11/02/62 100 Connector Accessories
Marathon Manufacturing Delaware 11/18/83 100 Holding Company
Companies, Inc.
Marathon Manufacturing Delaware 12/07/79 100 Inactive
Company
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
Republic Indemnity Company of California 12/05/72 100 Workers' Compensation Insurance
America
Republic Indemnity Company of California 10/13/82 100 Workers' Compensation Insurance
California
Timberglen Limited United Kingdom 10/28/92 100 Investments
Risico Management Corporation Delaware 01/10/89 100 Risk Management
Windsor Insurance Company Indiana 11/05/87 100 (2) Property/Casualty Insurance
American Deposit Insurance Oklahoma 12/28/66 100 Property/Casualty Insurance
Company
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 Mexico 11/24/94 100 (2) Property/Casualty Insurance
Seguros, S.A. de C.V.
Moore Group Inc. Georgia 12/19/62 100 Insurance Holding Company/Agency
Casualty Underwriters, Inc. Georgia 10/01/54 51 Insurance Agency
Dudley L. Moore Insurance, Louisiana 03/30/78 beneficial Insurance Agency
Inc. interest
Hallmark General Insurance Oklahoma 06/16/72 beneficial Insurance Agency
Agency, Inc. interest
Middle Tennessee Tennessee 11/14/69 100 Insurance Agency
Underwriters, Inc.
Insurance Finance Tennessee 01/03/62 100 Premium Financing
Company
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 Chicago Realty Corp. New York 12/23/86 100 Real Estate Developer
PCC Gun Hill Realty Corp. New York 12/18/85 100 Real Estate Developer
PCC Michigan Realty, Inc. Michigan 11/09/87 100 Real Estate Developer
------------------------------------------------------------------------
- 34 -
<PAGE>
% 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>
PCC Scarsdale Realty Corp. New York 06/01/86 100 Real Estate Developer
Scarsdale Depot Associates, Delaware 05/05/89 80 Real Estate Developer
L.P.
Penn Central Energy Management Delaware 05/11/87 100 Energy Operations Manager
Company
The Ann Arbor Railroad Company Michigan 1895 99 Inactive
The Associates of the Jersey New Jersey 1804 100 Inactive
Company
Delbay Corporation Delaware 12/27/62 100 Inactive
The Indianapolis Union Railway Indiana 1872 100 Inactive
Company
Lehigh Valley Railroad Company Pennsylvania 1846 100 Inactive
The New York and Harlem Railroad New York 1831 97 Inactive
Company
The Owasco River Railway, Inc. New York 1881 100 Inactive
Penn Towers, Inc. Pennsylvania 04/27/59 100 Inactive
Terminal Realty Penn Co. District of 09/23/68 100 Inactive
United Railroad Corp. Delaware 11/25/81 100 Inactive
Detroit Manufacturers Railroad Michigan 01/30/02 82 Inactive
Company
Waynesburg Southern Railroad Pennsylvania 09/01/66 100 Inactive
Company
Pennsylvania-Reading Seashore Line New Jersey 06/14/01 66.67 Inactive
Pittsburgh and Cross Creek Pennsylvania 08/14/70 83 Inactive
Railroad Company
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by
other affiliated company(ies).
</TABLE>
------------------------------------------------------------------------
- 35 -
<PAGE>
Item 27. Number of Contract Owners
Not Applicable.
Item 28. Indemnification
(a) The Code of Regulations of Annuity Investors Life Insurance Company
provides in Article V as 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 persons 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 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, 1996. The primary
policy under the program is with National Union Fire Insurance Company of
Pittsburgh, PA. in the name of American Premier Underwriters, Inc.
------------------------------------------------------------------------
- 36 -
<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
James Lee Henderson (1) Vice 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.
------------------------------------------------------------------------
- 37 -
<PAGE>
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.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Contract offered by the Prospectus, a space that
an applicant can check to request a Statement of Additional Information,
or (2) a post card or similar written communication affixed to or included
in the Prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) Registrant undertakes to deliver any 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.
------------------------------------------------------------------------
- 38 -
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has caused this Pre-
Effective Amendment No. 1 to its Registration Statement to be signed on
its behalf by the undersigned in the City of Cincinnati, State of Ohio on
the 26th day of June, 1996.
ANNUITY INVESTORS 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 LIFE INSURANCE COMPANY
(DEPOSITOR)
By: /s/ Robert Allen Adams
----------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and
on the dates indicated.
/s/ Robert Allen Adams Principal Executive June 26, 1996
---------------------- Officer, Director
Robert Allen Adams
/s/ Robert Eugene Allen Principal Financial June 26, 1996
----------------------- Officer
Robert Eugene Allen
/s/ Lynn Edward Laswell Principal Accounting June 26, 1996
----------------------- Officer
Lynn Edward Laswell
------------------------------------------------------------------------
- 39 -
<PAGE>
/s/ Stephen Craig Lindner Director June 26, 1996
---------------------------
Stephen Craig Lindner
/s/ William Jack Maney, II Director June 26, 1996
---------------------------
William Jack Maney, II
/s/ James Michael Mortensen Director June 26, 1996
---------------------------
James Michael Mortensen
/s/ Mark Francis Muething Director June 26, 1996
--------------------------
Mark Francis Muething
/s/ Jeffrey Scott Tate Director June 26, 1996
--------------------------
Jeffrey Scott Tate
------------------------------------------------------------------------
- 40 -
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
(1) Resolution of the Board of Directors of Annuity Investors Life Insurance Company
authorizing establishment of Annuity Investors Variable Account A*
(3)(a) Distribution Agreement between Annuity Investors Life Insurance Company and AAG
Securities, Inc.
(3)(b) Form of Selling Agreement between Annuity Investors Life Insurance Company, AAG
Securities, Inc. and another Broker-Dealer.
(4)(a) Form of Qualified Individual Flexible Premium Deferred Annuity Contract.
(4)(b) Form of Non-Qualified Individual Contract.
(5)(a) Form of Loan Endorsement to Individual Contract.
(5)(b) Form of Tax Sheltered Annuity Endorsement to Individual Contract.
(5)(c) Form of Qualified Pension, Profit Sharing and Annuity Plan Endorsement to
Qualified Individual Contract.
(5)(d) Form of Employer Plan Endorsement to Individual Contract.
(5)(e) Form of Individual Retirement Annuity Endorsement to Individual Contract.
(5)(f) Form of Texas Optional Retirement Program Endorsement to Individual Contract.
(5)(g) Form of Long-Term Care Waiver Rider to Individual Contract.
(6)(a) Articles of Incorporation of Annuity Investors Life Insurance Company*
(6)(b) Code of Regulations of Annuity Investors Life Insurance Company*
(8)(a) Participation Agreement between Annuity Investors Life Insurance Company and
Dreyfus Variable Investment Fund*
*
Filed with Form N-4 on December 27, 1995.
- i -
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
(8)(b) Participation Agreement between Annuity Investors Life Insurance Company and
Dreyfus Stock Index Fund*
(8)(c) Participation Agreement between Annuity Investors Life Insurance Company and
Dreyfus Socially Responsible Fund*
(8)(d) Participation Agreement between Annuity Investors Life Insurance Company and
Janus Aspen Series
(8)(e) Amended and Restated Participation Agreement between Annuity Investors Life
Insurance Company and Merrill Lynch Variable Series Funds, Inc.
(8)(f) Agreement between Annuity Investors Life Insurance Company and Merrill Lynch
Asset Management, L.P.
(8)(g) Service Agreement between Annuity Investors Life Insurance Company and American
Annuity Group, Inc.*
(8)(h) Agreement between AAG Securities Inc. and AAG Insurance Agency, Inc.*
(8)(i) Investment Service Agreement between Annuity Investors Life Insurance Company and
American Annuity Group, Inc.*
(9) Opinion and Consent of Counsel*
(10) Consent of Independent Auditors
</TABLE>
- ii -
<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
Contract Marketing Name Policy Form Nos. SEC Registration No.
Commodore Nauticus 33-59861; 811-07299
Commodore Mariner
Commodore Americus
<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
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<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
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<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.
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<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.
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<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.
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 (4)(a)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
A stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P.O. Box 5423, Cincinnati, Ohio 45201-5423
Individual Flexible Premium Deferred Variable Annuity Contract
TWENTY DAY EXAMINATION-RIGHT TO CANCEL
You may cancel this contract ("Contract") by returning it and giving
us written notice of cancellation. You have until midnight of the
twentieth day following the date you receive this Contract. This
contract must be returned to us and the required notice must be
given in person, or to the agent who sold it to you, or by mail. If
by mail, the return of the Contract or the notice is effective on
the date it is postmarked, with the proper address and with postage
paid. If you cancel this Contract as set forth above, the Contract
will be void and we will refund the Purchase Payments plus or minus
any investment gains or losses under the Contract as of the end of
the Valuation Period during which the returned Contract is received
by the Company, or as otherwise required by law.
As you read through this Contract, please note that the words "we", "us",
"our", and "Company" refer to Annuity Investors Life Insurance Company.
The words "you" and "your" refer to the Owner.
This is a deferred variable annuity contract. It is a legally
binding agreement between you and us.
PLEASE READ YOUR CONTRACT WITH CARE.
/s/ Betty Kasprowicz /s/ James M. Mortensen
Assistant Secretary Executive Vice President
Nonparticipating - No Dividends
Tax-Qualified
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR
DECREASE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM
CONTRACT VALUE IS GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
-----------------------
OWNER: JOHN DOE
AGE OF PARTICIPANT AS OF CONTRACT EFFECTIVE DATE: 35
CONTRACT NUMBER: 000000000
CERTIFICATE EFFECTIVE DATE: APRIL 01, 1995
ANNUITY COMMENCEMENT DATE: APRIL 01, 2030
__________________________________________________________________________
SEPARATE ACCOUNT: Annuity Investors Variable Account A
----------------
Following is a list of the Funds in which the currently available Sub-
Accounts invest:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Short-term Bond Portfolio]
[Dreyfus Variable Investment Fund's Capital Appreciation Portfolio]
[Dreyfus Socially Responsible Growth Fund]
[Dreyfus Stock Index Fund]
[Merrill Lynch Variable Series Basic Value Focus Fund]
[Merrill Lynch Variable Series Global Strategy Focus Fund]
[Merrill Lynch Variable Series High Current Income Fund]
[Merrill Lynch Variable Series Domestic Money Market Fund]
FIXED ACCOUNT:
-------------
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
The guaranteed rate of interest for the Fixed Account option is three
percent (3%) per year, compounded annually.
TRANSFER FEE: [$25] per transfer in excess of 12 in any
------------ Certificate Year.
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<PAGE>
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or
full surrender of a Purchase Payment, as follows:
Number of full years elapsed
between the date of receipt of a Contingent Deferred Sales Charge
Purchase Payment and date Written as a percentage of the associated
Request for surrender is received Purchase Payment surrendered
------------------------------ --------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
Please see the SURRENDERS section of this Contract for additional
information.
FREE WITHDRAWAL PRIVILEGE:
-------------------------
Contract Year Applicable Percentage
------------- ---------------------
1 10% (based on Purchase Payments)
2 and thereafter 10% (based on Account Value)
Please see the SURRENDERS section of this Contract for additional
information.
CONTRACT MAINTENANCE FEE: [$25] Annually
------------------------
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual
rate of [1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of
[0.00%] of the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate this Contract at any time
the Account Value is less than $500. We will then pay you the Surrender
Value.
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INQUIRIES: For information, or to make a complaint write to:
-------------------------------------------------
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
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TABLE OF CONTENTS Page
--------------------------------------------------------------------------
Definitions 6
General Provisions 8
Entire Contract 8
Changes -- Waivers 8
Nonparticipating 8
Misstatement 8
Required Reports 8
Exclusive Benefit 8
State Law 8
Claims of Creditors 9
Company Liability 9
Voting Rights 9
Incontestability 9
Discharge of Liability 9
Transfer By the Company 9
Purchase Payments 9
Purchase Payments 9
Allocation of Purchase Payments 9
No Termination 9
Fixed Account 9
Fixed Account 9
Fixed Account Options 9
Interest Credited 10
Renewal 10
Fixed Account Value 10
Separate Account 10
General Description 10
Sub-Accounts of the Separate Account 11
Valuation of Assets 11
Variable Account Value 11
Accumulation Unit Value 11
Transfers 12
Fees and Charges 12
Mortality and Expense Risk Charge 12
Administration Charge 12
Contract Maintenance Fee 13
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Surrenders 13
Surrender 13
Surrender Value 13
Contingent Deferred Sales Charge 13
Free Withdrawal Privilege 13
Deferral of Payment 14
Ownership Provisions 14
Ownership of Separate Account 14
Owner 14
Transfer and Assignment 14
Successor Owner 14
Community Property 14
Beneficiary Provisions 15
Beneficiary 15
Change of Beneficiary 15
Benefit on Annuity Commencement Date 15
Annuity Commencement Date 15
Annuity Benefit Payments 15
Form of Annuity Benefit 15
Benefit on Death of Owner 16
Death Benefit 16
Death Benefit Amount 16
Death Benefit Commencement Date 17
Form of Death Benefit 17
Settlement Options 17
Conditions 17
Benefit Payments 18
Fixed Dollar Benefit 18
Variable Dollar Benefit 18
Limitation on Election of Settlement Option 19
Settlement Option Computations 19
Available Settlement Options 19
Settlement Option Tables 20
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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. The value of your interest in all Sub-Accounts is the
"Variable Account Value," and the value of your interest in all Fixed
Account options is the "Fixed Account Value."
Accumulation Period: The period prior to the applicable Commencement Date.
Accumulation Unit: A unit of measurement used to calculate the values of
the Sub-Account(s) prior to the applicable Commencement Date.
Administrative Office: The home office of the Company or any other office
which we may designate for administration.
Age: Age as of most recent birthday.
Annuity Benefit: Periodic payments under a settlement option, which
commence on or after the Annuity Commencement Date.
Annuity Commencement Date: The first day of the first period for which an
Annuity Benefit payment is to be made under a settlement option.
Benefit Payment: The Annuity Benefit or Death Benefit payable under a
settlement option. Variable Dollar Benefit payments may vary in amount.
Fixed Dollar Benefit payments remain constant except under certain joint
and survivor settlement options.
Benefit Payment Period: The period starting with the Commencement Date
during which Benefit Payments are to be made under this Contract.
Benefit Unit: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made
by us.
Commencement Date: The Annuity Commencement Date if an Annuity Benefit is
payable under this Contract, or the Death Benefit Commencement Date if a
Death Benefit is payable under this Contract.
Contract Anniversary: An annual anniversary of the Contract Effective
Date.
Contract Effective Date: The date shown on the Contract Specification
page.
Contract Year: Any period of twelve months, commencing on the Contract
Effective Date and on each Contract Anniversary thereafter.
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Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
Death Benefit Commencement Date: The first day of the first period for
which a Death Benefit payment is to be made under a settlement option.
Death Benefit Valuation Date: The date that Due Proof of Death has been
received by us and the earlier to occur of either:
1) our receipt of a Written Request with instructions as to the Form of
Death Benefit; or
2) the Death Benefit Commencement Date.
Due Proof of Death: Any of the following:
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; or
3) any other proof satisfactory to us.
Fund: A management investment company or 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.
Person controlling payments: The "person controlling payments" means the
following,a s the case may be:
1) with respect to Annuity Benefit payments, you as Owner; and
2) with respect to Death Benefit payments,
a) the Beneficiary, or
b) if the Beneficiary is deceased; the payee.
Purchase Payment: A contribution made to us in consideration for this
Contract, after the deduction of any and all of the following which may
apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
Separate Account: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the
State of Ohio.
Sub-Account: The Separate Account is divided into Sub-Accounts, each of
which invests in the shares of a designated Fund.
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
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of trading on the next succeeding Valuation Date. "Valuation Date" means
each day on which the New York Stock Exchange is open for business.
Written Request: Information provided, or a request made, that is complete
and satisfactory to us and in writing, that is sent to us on our form or
in a form satisfactory to us, and that is received by us at our
Administrative Office. A Written Request is subject to any payment made or
any action we take before we acknowledge it. You may be required to return
this Certificate to us in connection with a Written Request.
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GENERAL PROVISIONS
Entire Contract
We have issued this Contract to the Owner identified on the Contract
Specifications page. The Contract is an individual flexible premium
deferred variable annuity contract. This Contract is restricted by
endorsement as required to obtain favorable tax treatment under the Code,
and is not valid without the requisite endorsement(s) being attached.
This Contract, its endorsements, and the application if any, form the
entire Contract between you and us.
Only statements in the application, if any, or statements made elsewhere
by you in consideration for this Contract will be used to void your
interest under this Contract, or to defend a claim based on it. Such
statements are representations and not warranties.
Changes - Waivers
No changes or waivers of the terms of this Contract are valid unless made
in writing by our President, Vice President, or Secretary. No agent or
other person not named above has authority to change or waive any
provision of this Contract. We reserve the right both to administer and
to change the provisions of this Contract to conform to any applicable
laws, regulations or rulings issued by a governmental agency.
In any event, the Company reserves the right to add or delete Fixed
Account options and Sub-Accounts, to substitute shares of a different Fund
or different class or series of a Funds for shares held in Sub-Account, to
merge or combine Sub-Accounts, to merge or combine the Separate Account
with any other separate account of the Company, to transfer the assets of
the Separate Account to another life insurance company by means of a
merger or reinsurance, to convert the Separate Account into a managed
separate account, and to de-register the Separate Account under the
Investment Company Act of 1940. Any such change will be made in
accordance with applicable insurance and securities laws and after
obtaining any necessary approvals, including those of the Ohio Department
of Insurance and the Securities and Exchange Commission.
Nonparticipating
This Contract does not pay dividends or share in the Company's divisible
surplus.
Misstatement
If the age or sex of a person on whose life Benefit Payment are based is
misstated, the payments or other benefits under this Contract shall be
adjusted to the amount which would have been payable based on the correct
age or sex. If we made any underpayments based on any misstatement, the
amount of any underpayment with interest shall be immediately paid in one
sum. In addition to any other remedies that may be available at law or at
equity, we may deduct any overpayments made, with interest, from any
succeeding payment(s) due under this Contract.
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Required Reports
At least once each Contract Year, we will send you a report of your
current values and any other information required by law, until the first
to occur of the following:
1) the date this Contract is full surrendered;
2) the Annuity Commencement Date; or
3) the date a Death Benefit becomes payable under this Contract.
The report will be mailed to your last known address. The reported value
will be based on the information in our possession at the time the report
is prepared by us. We may adjust the reported values at a later date if
that information proves to be incorrect or has changed.
Exclusive Benefit
This Contract is for the exclusive benefit of you and your Beneficiaries.
Your interest under this Contract is nonforfeitable.
All factors, values, benefits and reserves under this Contract will not be
less than those required by the law of the state in which this Contract is
delivered.
Claims of Creditors
To the extent allowed by law, your Contract and all values and benefits
under it are not subject to the claims of creditors or to legal process.
Company Liability
We will not incur any liability or be responsible for any failure, in
whole or in part, by you or by any person having rights or benefits
arising our of a related to this Contract, to comply with any applicable
laws, regulations or rulings issued by a governmental agency.
Voting Rights
To the extent required by law, we will vote all shares of the Funds held
in the Separate Account, at regular and special shareholder meetings of
the Funds. The shares will be voted in accordance with instructions
received from you, or if applicable, from the person controlling payments.
If there is a change in the law which permits us to vote the shares of the
Funds without such instructions, then we reserve the right to do so.
Incontestability
This Contract shall not be contestable by us.
Discharge of Liability
Upon payment of any partial or full surrender, or any Benefit Payment, we
shall be discharged from all liability to the extent of each such payment.
Transfer By the Company
We reserve the right to transfer our obligations under this policy to
another qualified life insurance company under an assumption reinsurance
arrangement, and without your prior consent.
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<PAGE>
PURCHASE PAYMENTS
Purchase Payments
Each Purchase Payment must be at least the minimum amount that we set for
such from time to time. Purchase Payments may be paid to us at our
Administrative Office at any time before the Annuity Commencement Date so
long as this Contract has not been fully surrendered.
Allocation of Purchase Payments
We will allocate Purchase Payments to the Fixed Account options and/or to
the Sub-Accounts according to the instructions we receive by Written
Request. Allocations must be made in whole percentages.
No Termination
Except as stated elsewhere in this Contract, this Contract will not be
terminated by us due to failure to make additional Purchase Payments.
FIXED ACCOUNT
Fixed Account
The Fixed Account is part of the Company's general account. The values of
the Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
Fixed Account Options. The Fixed Account options available as of the
Contract Effective Date are listed on the Contract Specifications page.
Different Fixed Account options may be offered by us at any time.
Interest Credited. The guaranteed rate of interest for the Fixed Account
options is three percent (3%) per year, compounded annually. We may, at
any time, pay a current interest rate as declared by our Board of
Directors for any of the Fixed Account options that is higher than the
guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to
the Fixed Accumulation Account option will not be changed any sooner than
twelve (12) months following the date on which that Purchase Payment was
received; thereafter, the interest rate credited will not be changed more
frequently than once per calendar quarter. In the case of transfers from
other Fixed Account options or the Sub-Accounts to the Fixed Accumulation
Account option, the interest rate will not be changed more frequently than
once per calendar quarter.
The interest rate credited to amounts allocated to the Fixed Account
options other than the Fixed Accumulation Account option.
At the end of a guarantee period and for the (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under this
Contract (including the various Sub-Accounts within the Separate Account),
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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 such
Commencement Date, the only Fixed Account option available is the Fixed
Accumulation Account option.
Any renewal of a Fixed Account option under this provision will be
effective on the day after the expiration of the guarantee period that is
then expiring.
Fixed Account Value
The Fixed Account Value for this Contract at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in
this Contract.
SEPARATE ACCOUNT
----------------
General Description
The variable benefits under this Contract are provided through the
Separate Account. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment
Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on
the Separate Account will be credited to a charged against the amounts
allocated to such account without regard to other income, gains, or losses
of the Company. The amounts allocated to the Separate Account and the
accumulations thereon remain the property of the Company, but that portion
of the assets of the Separate Account that is equal to the reserves and
other contractual liabilities under all policies, annuities, and other
contracts identified with the Separate Account is not chargeable with
liabilities arising our of any other business of the Company. The Company
is not, and does not hold itself out to be, a trustee in respect of such
amounts.
We have the right to transfers to our general account, in our sole
discretion and at any time without prior written notice, any assets of the
Separate Account which are in excess of the required reserved and other
contractual liabilities under all policies, annuities, and other contracts
identified with the Separate Account.
Sub-Accounts of the Separate Account
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
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Contract Specifications page. Each Sub-Account invests exclusively in
shares of an underlying Fund as shown on the Contract Specifications page.
Any amounts of income and any gains on the shares of a Fund will be
reinvested in additional shares of that Fund at its Net Asset Value.
Valuation of Assets
Shares of Funds held by each Sub-Account will be valued at their Net Asset
Value at the end of each Valuation Period, as reported by each such Fund.
Variable Account Value
Purchase Payments may be allocated among and, as described elsewhere in
this Contract, Account Values may be transferred to the various Sub-
Accounts within the Separate Account. 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 value of the
Accumulation Unit for that Sub-Account at the end of the Valuation Period
during which the Purchase Payment 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;
3) payment of a Death Benefit;
4) application of any values under this Contract to a settlement
option;
5) deduction of the Contract Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period
during which the Company receives a Written Request regarding the event
giving rise to such cancellation, or an applicable Commencement Date, or
the end of the Valuation Period on which the Contract Maintenance Fee or
Transfer Fee is due, as the case may be.
The Variable Account Value for this Contract at any time is equal to the
sum of the number Accumulation Units for each Sub-Account attributable to
this Contract multiplied by the Accumulation Unit Value for each Sub-
Account at the end of the preceding Valuation Period.
Accumulation Unit Value
The initial Accumulation Unit Value for each Sub-Account, with the
exceptio of the Money market Sub-Account, was set at $10.00. 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.
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
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may be greater or less than one. Therefore, the value of an Accumulation
Unit value for each Sub-Account 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 applicable
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 applicable 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 immediately
preceding Valuation Period; and
3) is the factor representing the Mortality and Expense Risk
Charge and the Administration Charge deducted from the
Sub-Account for the number of days in the applicable
Valuation Period.
TRANSFERS
---------
Prior to the applicable Commencement Date, you 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 $1,000 at the time of the transfer, the entire amount
of the SubAccount balance must be transferred. You may also transfer
amounts from any Fixed Account option to any other 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 Fl)(ED
ACCOUNT section above, then the entire amount of that Fixed Account option
subject to renewal at that time may be transferred to any one or more of
the Sub-Accounts. In any other case, transfers from any Fixed Account
option are subject to a cumulative limit during each Contract Year of
twenty percent (20%) of the Fixed Account option's value as of the most
recent Contract Anniversary. Fixed Account transfers are not permitted
during the first Contract Year. The minimum transfer amount from any Fixed
Account option is $500. 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 six (6) months from the date of transfer.
The number of transfers per year over which we will charge a Transfer Fee
on each additional transfer, and the amount of the Transfer Fee, are shown
on the Contract Specifications page.
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<PAGE>
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described
above.
FEES AND CHARGES
----------------
Mortality and Expense Risk Charge
The Mortality and Expense Risk Charge is shown on the Contract
Specifications page and is deducted daily from each Sub-Account. This
deduction is made to compensate the Company for assuming the mortality and
expense risks under this Contract.
Administration Charge
The Administration Charge is shown on the Contract Specifications page and
is deducted daily from each Sub-Account. This deduction is made to
reimburse the Company for expenses incurred in the administration of this
Contract and the Separate Account.
Contract Maintenance Fee
The Contract Maintenance Fee ("Fee") is shown on the Contract
Specifications page and is deducted as of the Valuation Period next
following each Contract Anniversary prior to the applicable Commencement
Date. In addition, the full annual Fee will be deducted at the time of a
full surrender. The Fee will be allocated to each Sub-Account in the same
proportion as each Sub-Account's value is to the total Variable Account
Value as of the end of such Valuation Period. The Fee does not apply to
the Fixed Account. The Fee may be waived in whole or in part in our sole
discretion.
After the applicable Commencement Date, if a Variable Dollar Benefit is
elected, the Fee will be deducted pro-rata from each Benefit Payment and
will result in a reduction in the amount of such payment.
SURRENDERS
----------
Surrenders
You may surrender this Contract in full for the Surrender Value, or,
partial surrenders may be made for a lesser amount, by Written Request at
any time prior to the Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce your
Surrender Value to less than [$500/flex, $5,000/SP]. Surrenders will be
deemed to be withdrawn first from the portion of the Account Value that
represents your accumulated earnings and then from Purchase Payments. For
purposes of this Contract, Purchase Payments are deemed to be withdrawn on
a "first-in, first out" (FIFO) basis.
The amount available for surrender will be the Surrender Value at the end
of the Valuation Period in which the Written Request is received.
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Surrender Value
The Surrender Value at any time is an amount equal to:
1) the Account Value as of the end of the applicable Valuation
Period; less
2) any applicable Contingent Deferred Sales Charge; less
3) any outstanding loans; and less
4) any applicable premium tax or other taxes not previously
deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted
as part of the calculation of the Surrender Value.
Contingent Deferred Sales Charge
A full or partial surrender may be subject to a Contingent Deferred Sales
Charge as set forth on the Contract Specifications page. The Contingent
Deferred Sales Charge applies to and is calculated separately for each
Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value.
In the case of a full surrender, this Contract will be terminated. The
Contingent Deferred Sales Charge may be waived in whole or in part in our
sole discretion.
Free Withdrawal Privilege
Subject to the provisions of this Contract, we will waive the Contingent
Deferred Sales Charge, to the extent applicable, on full or Partial
surrenders as follows:
1) during the first Contract Year, on an amount equal to not
more than the applicable percentage (shown on the Contract
Specifications page) of all Purchase Payments received; and
2) during the second and succeeding Contract Years, on an amount
equal to not more than the applicable percentage (shown on
the Contract Specifications page) of the Account Value as of
the last Contract Anniversary.
The Free Withdrawal Privilege will be applied in each case to monies in
the order in which they are deemed withdrawn, as described in the
Surrenders provision of this Contract.
Deferral of Payment
The Company has the right to suspend or delay the date of payment of a
partial or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when trading
on the New York Stock Exchange is restricted; or
2) when 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
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<PAGE>
determine fairly the value of the net assets in the Separate
Account; or
3) when the Securities and Exchange Commission, by order, so
permits for the protection of security holders.
The Company further reserves the right to delay payment of a partial or
full surrender of the Fixed Account Value for up to six months after we
receive your Written Request.
OWNERSHIP PROVISIONS
Ownership of Separate Account
The Company has absolute ownership of the assets in the Separate Account.
The Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
Owner
The Owner of this Contract is the person shown as Owner on the Contract
Specifications page.
Unless otherwise stated, the Owner may exercise all ownership rights under
this Contract.
Transfer and Assignment
You may not transfer, sell, assign, pledge, charge, encumber or in any way
alienate your interest under this Contract.
Successor Owner
By Written Request, your spouse may, in some cases, succeed to the
ownership of this Contract after your death. Specifically, if you die and
your spouse is the sole surviving Beneficiary under this Contract, he or
she will become the Successor Owner of this Contract if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request
within one year of your death and before the Death Benefit
Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of
ownership under this Contract except the right to name another Successor
Owner.
Community Property
If you live in a community property state and have a spouse at any time
while you own this Contract, the laws of that state may vary your
ownership rights.
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<PAGE>
BENEFICIARY PROVISIONS
Beneficiary
The Beneficiary is the person or persons so designated in the application,
if any, or under the Change of Beneficiary provision of this Contract. If
you have not designated a Beneficiary, or if no Beneficiary designated by
you survives you, then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies
within 30 days after your death.
A beneficiary designation may be joint or contingent or both. Unless
otherwise stated, joint Beneficiaries will be entitled to equal shares. A
contingent Beneficiary will be entitled to a benefit only if there is no
surviving primary Beneficiary.
Change of Beneficiary
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement
Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel any settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
Annuity Commencement Date
The Annuity Commencement Date is shown on the Contract Specifications
page. You may change the Annuity Commencement Date by Written Request made
at least thirty (30) days prior to the date that Annuity Benefit payments
are scheduled to begin. In no event can the Annuity Commencement Date be
later than the Contract Anniversary following your 85th birthday or five
(5) years after the Contract Effective Date, whichever is later
Annuity Benefit Payments
An amount equal to the Account Value (after deduction of any fees and
charges, loans, or applicable premium tax or other taxes not previously
deducted) will be used to provide Annuity Benefit payments under this
Contract commencing on or after the Annuity Commencement Date.
Annuity Benefit payments will be made to you as payee. Any Annuity Benefit
amounts remaining payable on your death will be paid to the contingent
payee designated by you by Written Request. You will be the person on
whose life any Annuity Benefit payments are based.
If no contingent payee designated by you is surviving at the time payment
is to be made, then after your death any Annuity Benefit amounts remaining
payable will be paid to the person or persons designated as contingent
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payee by Written Request by the last payee who received payments. Failing
that, any such amounts will be paid to the estate of the last payee who
received payments.
Form of Annuity Benefit
Annuity Benefit payments will be Fixed Dollar Benefit payments, made
monthly in accordance with the terms of Option B with a fixed period of
120 months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, you may elect to have Annuity Benefit payments made
pursuant to any other available settlement option under the SETTLEMENT
OPTIONS section of this Contract. Any such election must be made by
Written Request before the Annuity Commencement Date. You may change your
election of a settlement option by Written Request made at least thirty
(30) days prior to the date that Annuity Benefit payments are scheduled to
begin.
BENEFIT ON DEATH OF OWNER
Death Benefit
A Death Benefit will be paid under this Contract if:
1) you die before the Annuity Commencement Date and before this
Contract is fully surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) your spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under this Contract;
and
2) all other rights under this Contract will be terminated
except for rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee.
The Beneficiary will be the person on whose life any Death Benefit
payments under a settlement option are based.
Any Death Benefit amounts remaining payable on the death of the
Beneficiary will be paid:
1) to any contingent payee designated by you as part of any
Death Benefit settlement option election made by you, or if
none is surviving at the time payment is to be made, then
2) to any contingent payee designated by the Beneficiary by
Written Request, or if none is surviving at the time payment
is to be made, then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid under this Contract.
- 20 -
<PAGE>
Death Benefit Amount
If you die 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 or other taxes not previously
deducted, less any partial surrenders, and less any
outstanding loans;
2) the total Purchase Payments, less any applicable premium tax
or other taxes not previously deducted, less any partial
surrenders, and less any outstanding loans; or
3) the largest Death Benefit amount on any Contract 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 or other taxes not previously
deducted, less any partial surrenders after such Death
Benefit was determined, and less any outstanding loans.
If you die 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 or other taxes not previously
deducted, less any partial surrenders, and less any
outstanding loans;
2) the total Purchase Payments, less any applicable premium tax
or other taxes not previously deducted, less any partial
surrenders, and less any outstanding loans; or
3) the largest Death Benefit amount on any Contract Anniversary
prior to death that is both an exact multiple of five and
occurs prior to the date on which you attained Age 75, less
any applicable premium tax or other taxes not previously
deducted, less any partial surrenders after such Death
Benefit was determined, and less any outstanding loans.
In any event, if this Contract was issued to you after age 75, and you die
before the Annuity Commencement Date, the amount of the Death Benefit will
be the greater of:
1) the Account Value on the Death Benefit Valuation Date, less
any applicable premium tax or other taxes not previously
deducted, less any partial surrenders, and less any
outstanding loans;
or
2) the total Purchase Payments, less any applicable premium tax
or other taxes not previously deducted, less any partial
surrenders, and less any outstanding loans.
As of the Death Benefit Valuation Date, the amount of the Death Benefit
will be allocated among the Subaccount and Fixed Account options in the
same proportion as each account's value to the total Account Value as of
- 21 -
<PAGE>
the end of the Valuation Period immediately preceding the Death Benefit
Valuation Date.
Between the Death Benefit Valuation Date and the Death Benefit
Commencement Date, the Beneficiary may transfer funds among Sub-Accounts
and Fixed Account options as described under the TRANSFERS section of this
Contract.
Death Benefit Commencement Date
The Beneficiary may designate the Death Benefit Commencement Date by
Written Request within one year of your death. If no designation is made,
then the Death Benefit Commencement Date will be one year after your
death.
Form of Death Benefit
Payments under the Death Benefit provision of this Contract will be Fixed
Dollar Benefit payments made monthly in accordance with the terms of
Option A with a period certain of 48 months under the SETTLEMENT OPTIONS
section of this Contract.
In lieu of that, you may elect at any time before your death to have
payments under the Death Benefit provision of this Contract made in one
lump sum or pursuant to any available settlement option under the
SETTLEMENT OPTIONS section of this Contract. If you do not make any such
election, the Beneficiary may make that election at any time after your
death and before the Death Benefit Commencement Date.
You may change your election of a settlement option at any time before
your death.
If a Beneficiary elects a settlement option as noted above, he or she may
change his or her own election of a settlement option by Written Request
made at least thirty (30) days prior to the date that Death Benefit
payments are scheduled to begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
Conditions
Benefit Payments under a settlement option are subject to any minimum
amounts, payment intervals, and other terms or conditions that we may from
time to time require. If we change our minimums, we may change any current
or future payment amounts and/or payment intervals to conform with the
change. More than one settlement option may be elected if the requirements
for each settlement option elected are satisfied. Once payment begins
under a settlement option, the settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
- 22 -
<PAGE>
If more than one person is the payee under a settlement option, payments
will be made to the payees jointly. No more than two persons may be
initial payees under any joint and survivor settlement option.
If payment under a settlement option depends on whether a specified person
is still alive, we may at any time require proof that such person is still
living. We will require proof of the age and/or sex of any person on whose
life Benefit Payments are based.
Benefit Payments
Benefit Payments may be calculated and paid:
1) as a Fixed Dollar Benefit;
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Account Value to the Company's general account on the applicable
Commencement Date, or on the Death Benefit Valuation Date (if applicable).
Similarly, if only a Variable Dollar Benefit is elected, we will transfer
all of the Account Value to the Sub-Accounts as of the end of the
Valuation Period immediately prior to the applicable Commencement Date; we
will allocate the amount transferred among the Sub-Accounts in accordance
with a Written Request. No transfers between the Fixed Dollar Benefit and
the Variable Dollar,Benefit will be allowed after the Commencement Date.
However, after the Variable Dollar Benefit has been paid for at least
twelve months, the person controlling payments may, no more than once each
twelve months thereafter, transfer all or part of the Benefit Units upon
which the Variable Dollar Benefit is based from the Sub-Account(s) then
held, to Benefit Units in different Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under
that benefit is the Variable Account Value as of the end of the Valuation
Period immediately preceding the applicable Commencement Date. If a Fixed
Dollar Benefit is to be paid, the amount to be applied under that benefit
is the Fixed Account Value as of the applicable Commencement Date, or as
of the Death Benefit Valuation Date (if applicable).
Fixed Dollar Benefit
Fixed Dollar Benefit payments are determined by multiplying the Fixed
Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes not
previously deducted) by the amount of the monthly payment per $1,000 of
value obtained from the Settlement Option Table for the settlement option
elected. Fixed Dollar Benefit payments will remain level for the duration
of the payment period.
If at the time a Fixed Dollar Benefit is elected, v~e have available
options or rates on a more favorable basis than those guaranteed, the
higher benefits shall be applied and shall not change for as long as that
election remains in force.
- 23 -
<PAGE>
Variable Dollar Benefit
The first monthly Variable Dollar Benefit payment is equal to your
Variable Account Value (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium tax or
other taxes not previously deducted) as of the end of the Valuation Period
immediately preceding the applicable Commencement Date multiplied by the
amount of the monthly payment per $1,000 of value obtained from the
Settlement Option Table for the Benefit Payment option elected less the
pro-rata portion of the Contract Maintenance Fee.
The number of Benefit Units in each Sub-Account held by you is determined
by dividing the dollar amount of the first monthly Variable Dollar Benefit
payment from each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the applicable Commencement Date. The number of Benefit
Units remains fixed during the payment period, except as a result of any
transfers among Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s)
selected and may vary from month to month. The total amount of the second
and any subsequent Variable Dollar Benefit payment will be equal to the
sum of the payments from each Sub-Account less a pro-rata portion of the
Contract Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of
Benefit Units held in each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the end of the fifth Valuation Period preceding the due
date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in
the same manner as Accumulation Unit values. Thereafter, the value of a
Benefit Unit for a Sub-Account is determined by multiplying the Benefit
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%) per year, compounded annually,
that is reflected in the Settlement Option Tables.
Limitation on Election of Settlement Option
Fixed periods shorter than five years are not available, except as a Death
Benefit settlement option.
Settlement Option Computations
The 1983 Individual Annuity Mortality Table for the sex of the person on
whose life Benefit Payments are based, with interest at three percent (3%)
per year, compounded annually, is used to compute all guaranteed
settlement option factors, values, and benefits under this Contract.
- 24 -
<PAGE>
Available Settlement Options
The available settlement options are set out below.
Option A Income for a Fixed Period
We will make periodic payments for a fixed period. The first payment
will be paid as of the last day of the initial payment interval. The
maximum time over which payments will be made by us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
Option B Life Annuity with Payments for at Least a Fixed Period
We will make periodic payments for at least a fixed period. If the
person on whose life Benefit Payments are based lives longer than
the fixed period, then we will make payments until his or her death.
The first payment will be paid as of the first day of the initial
payment interval. The Option B Table applies to this Option.
Option C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person
on whose life Benefit Payments are based; thereafter, we will make
one-half of the periodic payment until the death of the secondary
person on whose life Benefit Payments are based. We will require Due
Proof of Death of the primary person on whose life Benefit Payments
are based. The first payment will be paid as of the first day of the
initial payment interval. The Option C Table applies to this Option.
Option D Any Other Form
We will make periodic payments in any other form of settlement
option which is acceptable to us at the time of an election.
Settlement Option Tables
The Option Tables show the payments we will make at sample payment
intervals for each $1,000 applied at the guaranteed interest rate. Amounts
may vary with the payment interval and the age of the person on whose life
Benefit Payments are based.
- 25 -
<PAGE>
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
Terms of Semi- Terms of Semi- Terms of Semi-
Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <c.> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 53.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
</TABLE>
OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
60 Months 120 Months 180 Months 240 Months
Age
55 $4.42 $4.39 $4.32 $4.22
56 4.51 4.47 4.40 4.29
57 4.61 4.56 4.48 4.35
58 4.71 4.65 4.56 4.42
59 4.81 4.75 4.64 4.49
60 4.92 4.86 4.73 4.55
61 5.04 4.97 4.83 4.62
62 5.17 5.08 4.92 4.69
63 5.31 5.20 5.02 4.76
64 5.45 5.33 5.12 4.83
65 5.61 5.46 5.22 4.89
66 5.77 5.60 5.33 4.96
67 5.94 5.75 5.43 5.02
68 6.13 5.91 5.54 5.08
69 6.33 6.07 5.65 5.14
- 26 -
<PAGE>
70 6.54 6.23 5.76 5.19
71 6.76 6.41 5.86 5.24
72 7.00 6.58 5.96 5.28
73 7.26 6.77 6.06 5.32
74 7.53 6.95 6.16 5.35
<TABLE>
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
Secondary Age
Primary 60 61 62 63 64 65 66 67 68 69 70
Age
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.56 $4.58 $4.61 $4.63 $4.65 $4.67 $4.69 $4.71 $4.73 $4.75 $4.76
61 4.63 4.66 4.69 4.71 4.73 4.76 4.78 4.80 4.82 4.84 4.86
62 4.71 4.74 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96
63 4.79 4.82 4.85 4.88 4.91 4.94 4.97 5.00 5.02 5.05 5.07
64 4.88 4.91 4.94 4.98 5.01 5.04 5.07 5.10 5.13 5.15 5.18
65 4.96 5.00 5.03 5.07 5.11 5.14 5.17 5.20 5.24 5.27 5.30
66 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.32 5.35 5.38 5.42
67 5.14 5.18 5.23 5.27 5.31 5.35 5.39 5.43 5.47 5.51 5.54
68 5.23 5.28 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63 5.67
69 5.33 5.38 5.43 5.48 5.53 5.57 5.62 5.67 5.72 5.76 5.81
70 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.95
*Payments after the death of the Primary Payee will be one-half of the amount shown.
</TABLE>
- 27 -
<PAGE>
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
Individual Flexible Premium Deferred Variable Annuity Contract
Nonparticipating - No Dividends
Tax-Qualified
- 28 -
<PAGE>
<PAGE>
EXHIBIT (4)(b)
Annuity Investors(SERVICEMARK)
LIFE INSURANCE COMPANY
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P.O. Box 5423, Cincinnati, Ohio 45201-5423
Individual Flexible Premium Deferred Variable Annuity Contract
TWENTY DAY EXAMINATION-RIGHT TO CANCEL
You may cancel this contract ("Contract") by returning it and
giving us written notice of cancellation. You have until midnight
of the twentieth day following the date you receive this
Contract. This Contract must be returned to us and the required
notice must be given in person, or to the agent who sold it to
you, or by mail. If by mail, the return of the Contract or the
notice is effective on the date it is postmarked, with the proper
address and with postage paid. If you cancel this Contract as set
forth above, the Contract will be void and we will refund the
Purchase Payments plus or minus any investment gains or losses
under the Contract as of the end of the Valuation Period during
which the returned Contract is received by the Company, or as
otherwise required by law.
As you read through this Contract, please note that the words
"we", "us", "our", and "Company" refer to Annuity Investors Life
Insurance Company. The words "you" and "your" refer to the Owner,
including any joint owner.
This is a deferred variable annuity contract. It is a legally binding
agreement between you and us.
PLEASE READ YOUR CONTRACT WITH CARE.
/s/ Betty Kasprowicz /s/ James M. Mortensen
Assistant Secretary Executive Vice President
Nonparticipating - No Dividends
Non-Tax-Qualified
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR
DECREASE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM
CONTRACT VALUE IS GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
OWNER: JOHN DOE
AGE OF OWNER AS OF CONTRACT EFFECTIVE DATE: 35
[JOINT OWNER:]
[AGE OF JOINT OWNER AS OF CONTRACT EFFECTIVE DATE:]
ANNUITANT:
[AGE OF ANNUITANT AS OF CONTRACT EFFECTIVE DATE:]
CONTRACT NUMBER: 000000000
CONTRACT EFFECTIVE DATE: APRIL 01, 1996
ANNUITY COMMENCEMENT DATE: APRIL 01, 2031
-------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account A
----------------
Following is a list of the Funds in which the currently available
Sub-Accounts invest:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Short-term Bond Portfolio]
[Dreyfus Variable Investment Fund's Capital Appreciation Portfolio]
[Dreyfus Socially Responsible Growth Fund]
[Dreyfus Stock Index Fund]
[Merrill Lynch Variable Series Basic Value Focus Fund]
[Merrill Lynch Variable Series Global Strategy Focus Fund]
[Merrill Lynch Variable Series High Current Income Fund]
[Merrill Lynch Variable Series Domestic Money Market Fund]
FIXED ACCOUNT:
-------------
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
- 2 -
<PAGE>
The guaranteed rate of interest for the Fixed Account options is three
percent (3%) per year, compounded annually.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Contract
Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or
full surrender of a Purchase Payment, as follows:
Number of full years elapsed
between the date of receipt of a Contingent Deferred Sales Charge
Purchase Payment and date Written as a percentage of the associated
Request for surrender is received Purchase Payment Surrendered
--------------------------------- --------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
Please see the SURRENDERS section of this Contract for additional
information.
FREE WITHDRAWAL PRIVILEGE:
--------------------------
Contract Year Applicable Percentage
------------- ---------------------
1 10 % (based on Purchase Payments)
2 and thereafter 10% (based on Account Value)
Please see the SURRENDERS section of this Contract for additional
information.
CONTRACT MAINTENANCE FEE: [$25] Annually
------------------------
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual
rate of [1.25]% of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of
[0.00%] of the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate this Contract at any time
the Account Value is less than $500. We will then pay you the Surrender
Value.
- 3 -
<PAGE>
INQUIRIES: For information, or to make a complaint, call or write:
---------- -------------------------------------------------------
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
- 4 -
<PAGE>
TABLE OF CONTENTS Page
--------------------------------------------------------------------------
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 8
Entire Contract . . . . . . . . . . . . . . . . . . . . . . 8
Changes -- Waivers . . . . . . . . . . . . . . . . . . . . . 8
Nonparticipating . . . . . . . . . . . . . . . . . . . . . . 8
Misstatement . . . . . . . . . . . . . . . . . . . . . . . . 8
Required Reports . . . . . . . . . . . . . . . . . . . . . . 8
Exclusive Benefit . . . . . . . . . . . . . . . . . . . . . 9
State Law . . . . . . . . . . . . . . . . . . . . . . . . . 9
Claims of Creditors . . . . . . . . . . . . . . . . . . . . 9
Company Liability . . . . . . . . . . . . . . . . . . . . . 9
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . 9
Incontestability . . . . . . . . . . . . . . . . . . . . . . 9
Discharge of Liability . . . . . . . . . . . . . . . . . . . 9
Transfer By the Company . . . . . . . . . . . . . . . . . . 9
Purchase Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Purchase Payments . . . . . . . . . . . . . . . . . . . . . 9
Allocation of Purchase Payments . . . . . . . . . . . . . . 9
No Termination . . . . . . . . . . . . . . . . . . . . . . . 10
Fixed Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fixed Account . . . . . . . . . . . . . . . . . . . . . . . 10
Fixed Account Options . . . . . . . . . . . . . . . . . . . 10
Interest Credited . . . . . . . . . . . . . . . . . . . . . 10
Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fixed Account Value . . . . . . . . . . . . . . . . . . . . 11
Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . . 11
General Description . . . . . . . . . . . . . . . . . . . . 11
Sub-Accounts of the Separate Account . . . . . . . . . . . . 11
Valuation of Assets . . . . . . . . . . . . . . . . . . . . 11
Variable Account Value . . . . . . . . . . . . . . . . . . . 11
Accumulation Unit Value . . . . . . . . . . . . . . . . . . 12
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Fees and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Mortality and Expense Risk Charge . . . . . . . . . . . . . 13
Administration Charge . . . . . . . . . . . . . . . . . . . 13
Contract Maintenance Fee . . . . . . . . . . . . . . . . . . 13
- 5 -
<PAGE>
Surrenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Surrenders . . . . . . . . . . . . . . . . . . . . . . . . . 13
Surrender Value . . . . . . . . . . . . . . . . . . . . . . 14
Contingent Deferred Sales Charge . . . . . . . . . . . . . . 14
Free Withdrawal Privilege . . . . . . . . . . . . . . . . . 14
Deferral of Payment . . . . . . . . . . . . . . . . . . . . 14
Ownership Provisions . . . . . . . . . . . . . . . . . . . . . . . . 15
Ownership of Separate Account . . . . . . . . . . . . . . . 15
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Joint Ownership . . . . . . . . . . . . . . . . . . . . . . 15
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 15
Transfer of Ownership . . . . . . . . . . . . . . . . . . . 15
Successor Owner . . . . . . . . . . . . . . . . . . . . . . 16
Community Property . . . . . . . . . . . . . . . . . . . . . 16
Annuitant Provisions . . . . . . . . . . . . . . . . . . . . . . . . 16
Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . 16
Death of Annuitant . . . . . . . . . . . . . . . . . . . . . 16
Change of Annuitant . . . . . . . . . . . . . . . . . . . . 16
Beneficiary Provisions . . . . . . . . . . . . . . . . . . . . . . . 17
Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . 17
Change of Beneficiary . . . . . . . . . . . . . . . . . . . 17
Benefit on Annuity Commencement Date . . . . . . . . . . . . . . . . 17
Annuity Commencement Date . . . . . . . . . . . . . . . . . 17
Annuity Benefit Payments . . . . . . . . . . . . . . . . . . 17
Form of Annuity Benefit . . . . . . . . . . . . . . . . . . 18
Benefit on Death of Owner . . . . . . . . . . . . . . . . . . . . . . 18
Death Benefit . . . . . . . . . . . . . . . . . . . . . . . 18
Death Benefit Amount . . . . . . . . . . . . . . . . . . . . 19
Death Benefit Commencement Date . . . . . . . . . . . . . . 20
Form of Death Benefit . . . . . . . . . . . . . . . . . . . 20
Contract Distribution Rules . . . . . . . . . . . . . . . . . . . . . 20
Rules Before Annuity Commencement Date . . . . . . . . . . . 20
Rules On or After Annuity Commencement Date . . . . . . . . 21
Rules On or After Death Benefit Commencement Date . . . . . 21
Settlement Options . . . . . . . . . . . . . . . . . . . . . . . . . 21
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 21
Benefit Payments . . . . . . . . . . . . . . . . . . . . . . 21
- 6 -
<PAGE>
Fixed Dollar Benefit . . . . . . . . . . . . . . . . . . . . 22
Variable Dollar Benefit . . . . . . . . . . . . . . . . . . 22
Limitation on Election of Settlement Option . . . . . . . . 22
Settlement Option Computations . . . . . . . . . . . . . . . 23
Available Settlement Options . . . . . . . . . . . . . . . . 23
Settlement Option Tables . . . . . . . . . . . . . . . . . . 23
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<PAGE>
DEFINITIONS
Account(s): The Sub-Account(s) and/or the Fixed Account options.
Account Value: The aggregate value of your interest in the Sub-Account(s)
and the Fixed Account options as of the end of any Valuation Period. The
value of your interest in all Sub-Accounts is the "Variable Account
Value," and the value of your interest in all Fixed Account options is the
"Fixed Account Value."
Accumulation Period: The period prior to the applicable Commencement Date.
Accumulation Unit: A unit of measure used to calculate the values of the
Sub-Account(s) prior to the applicable Commencement Date.
Administrative Office: The home office of the Company or any other office
which we may designate for administration.
Age: Age as of most recent birthday.
Annuity Benefit: Periodic payments under a settlement option, which
commence on or after the Annuity Commencement Date.
Annuity Commencement Date: The first day of the first period for which an
Annuity Benefit payment is to be made under a settlement option.
Benefit Payment: The Annuity Benefit or Death Benefit payable under a
settlement option. Variable Dollar Benefit payments may vary in amount.
Fixed Dollar Benefit payments remain constant except under certain joint
and survivor settlement options.
Benefit Payment Period: The period starting with the Commencement Date
during which Benefit Payments are to be made under this Contract.
Benefit Unit: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made
by us.
Commencement Date: The Annuity Commencement Date if an Annuity Benefit is
payable under this Contract, or the Death Benefit Commencement Date if a
Death Benefit is Payable under this Contract.
Contract Anniversary: An annual anniversary of the Contract Effective
Date.
Contract Effective Date: The date shown on the Contract Specifications
page.
Contract Year: Any period of twelve months, commencing on the Contract
Effective Date and on each Contract Anniversary thereafter.
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Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
Death Benefit Commencement Date: The first day of the first period for
which a Death Benefit payment is to be made under a settlement option.
Death Benefit Valuation Date: The date that Due Proof of Death has been
received by us and the earlier to occur of either:
1) our receipt of a Written Request with instructions as to
the Form of Death Benefit; or
2) the Death Benefit Commencement Date.
Due Proof of Death: Any of the following:
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; or
3) any other proof satisfactory to us.
Fund: A management investment company or 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.
Person controlling payments: The "person controlling payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments,
a) the Owner, if the Owner has the right to change
the payee; or
b) in all other cases, the payee; and
2) with respect to Death Benefit payments,
a) the Beneficiary, or
b) if the Beneficiary is deceased, the payee.
Purchase Payment: A contribution made to us in consideration for this
Contract, after the deduction of any and all of the following which may
apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
Separate Account: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the
State of Ohio.
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Sub-Account: The Separate Account is divided into Sub-Accounts, each of
which invests in the shares of a designated Fund.
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.
Written Request: Information provided, or a request made, that is complete
and satisfactory to us, that is sent to us on our form or in a form
satisfactory to us, and that is received by us at our Administrative
Office. A Written Request is subject to any payment made or any action we
take before we acknowledge it. You may be required to return this Contract
to us in connection with a Written Request.
GENERAL PROVISIONS
Entire Contract
We have issued this Contract to the Owner identified on the Contract
Specifications page. This Contract is an individual flexible premium
deferred variable annuity contract. This Contract is restricted as
required to obtain favorable tax treatment under the Code. This Contract,
any endorsements thereto and the application for it, if any, form the
entire Contract between you and us.
Only statements in the application, if any, or statements made elsewhere
by you in consideration for this Contract will be used to void your
interest under this Contract, or to defend a claim based on it. Such
statements are representations and not warranties.
Changes -- Waivers
No changes or waivers of the terms of this Contract are valid unless made
in writing by our President, Vice President, or Secretary. No agent or
other person not named above has authority to change or waive any
provision of this Contract. We reserve the right both to administer and to
change the provisions of this Contract to conform to any applicable laws,
regulations or rulings issued by a governmental agency.
In any event, the Company reserves the right to add or delete Fixed
Account options and Sub-Accounts, to substitute shares of a different Fund
or different class or series of a Fund for shares held in a Sub-Account,
to merge or combine Sub-Accounts, to merge or combine the Separate Account
with any other separate account of the Company, to transfer the assets of
the Separate Account to another life insurance company by means of a
merger or reinsurance, to convert the Separate Account into a managed
separate account, and to de-register the Separate Account under the
Investment Company Act of 1940. Any such change will be made in accordance
with applicable insurance and securities laws and after obtaining any
necessary approvals, including those of the Ohio Department of Insurance
and the Securities and Exchange Commission.
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Nonparticipating
This Contract does not pay dividends or share in the Company's divisible
surplus.
Misstatement
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be
adjusted to the amount which would have been payable based on the correct
age or sex. If we made any underpayments based on any misstatement, the
amount of any underpayment with interest shall be immediately paid in one
sum. In addition to any other remedies that may be available at law or at
equity, we may deduct any overpayments made, with interest, from any
succeeding payment(s) due under this Contract.
Required Reports
At least once each Contract Year, we will send you a report of your
current values and any other information required by law, until the first
to occur of the following:
1) the date this Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the date a Death Benefit becomes payable under this
Contract.
The report will be mailed to your last known address. The reported values
will be based on the information in our possession at the time the report
is prepared by us. We may adjust the reported values at a later date if
that information proves to be incorrect or has changed.
Exclusive Benefit
This Contract is for the exclusive benefit of you and your Beneficiaries.
Your interest under this Contract is nonforfeitable.
State Law
All factors, values, benefits and reserves under this Contract will not be
less than those required by the law of the state in which this Contract is
delivered.
Claims of Creditors
To the extent allowed by law, your Contract and all values and benefits
under it are not subject to the claims of creditors or to legal process.
Company Liability
We will not incur any liability or be responsible for any failure, in
whole or in part, by you or by any person having rights or benefits
arising out of or related to this Contract, to comply with any applicable
laws, regulations or rulings issued by a governmental agency.
Voting Rights
To the extent required by law, we will vote all shares of the Funds held
in the Separate Account, at regular and special shareholder meetings of
the Funds. The shares will be voted in accordance with instructions
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received from you, or if applicable, from the person controlling payments.
If there is a change in the law which permits us to vote the shares of the
Funds without such instructions, then we reserve the right to do.
Incontestability
This Contract shall not be contestable by us.
Discharge of Liability
Upon payment of any partial or full surrender, or any Benefit Payment, we
shall be discharged from all liability to the extent of each such payment.
Transfer By the Company
We reserve the right to transfer our obligations under this policy to
another qualified life insurance company under an assumption reinsurance
arrangement, and without your prior consent.
PURCHASE PAYMENTS
Purchase Payments
Each Purchase Payment must be at least the minimum amount that we set for
such from time to time. Purchase Payments may be paid to us at our
Administrative Office at any time before the Annuity Commencement Date so
long as this Contract has not been fully surrendered.
Allocation of Purchase Payments
We will allocate Purchase Payments to the Fixed Account options and/or to
the Sub-Accounts according to the instructions we receive by Written
Request. Allocations must be made in whole percentages.
No Termination
Except as stated elsewhere in this Contract, this Contract will not be
terminated by us due to failure to make additional Purchase Payments.
FIXED ACCOUNT
Fixed Account
The Fixed Account is part of the Company's general account. The values of
the Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
Fixed Account Options. The Fixed Account options available as of the
Contract Effective Date are listed on the Contract Specifications page.
Different Fixed Account options may be offered by us at any time.
Interest Credited. The guaranteed rate of interest for the Fixed Account
options is three percent (3%) per year, compounded annually. We may, at
any time, pay a current interest rate as declared by our Board of
Directors for any of the Fixed Account options that is higher than the
guaranteed rate.
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The interest rate initially credited to each Purchase Payment(s) allocated
to the Fixed Accumulation Account option will not be changed any sooner
than twelve (12) months following the date on which that Purchase Payment
was received; thereafter, the interest rate credited will not be changed
more frequently than once per calendar quarter. In the case of transfers
from other Fixed Account options or the Sub-Accounts to the Fixed
Accumulation Account Option, the interest rate will not be changed more
frequently than once per calendar quarter.
The interest rate credited to amounts allocated to the Fixed Account
options other than the Fixed Accumulation Account Option will not be
changed during the duration of the applicable guarantee period.
Renewal. The following Renewal provisions apply to all Fixed Account
options except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under this
Contract (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 such
Commencement Date, the only Fixed Account option available is the Fixed
Accumulation Account option.
If you do not specify a new Fixed Account option in accordance with the
preceding paragraph, you will be deemed to have selected the same Fixed
Account option as is expiring, 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, you
will be deemed to have selected the Fixed Account option with the longest
available guarantee period that expires prior to the Annuity Commencement
Date, or, failing that, the Fixed Accumulation Account option.
Any renewal of a Fixed Account option under this provision will be
effective on the day after the expiration of the guarantee period that is
then expiring.
Fixed Account Value
The Fixed Account Value for this Contract at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account;
plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred
from the Fixed Account or other adjustments made as
described elsewhere in this Contract.
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SEPARATE ACCOUNT
General Description
The variable benefits under this Contract are provided through the
Separate Account. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment
Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on
the Separate Account will be credited to or charged against the amounts
allocated to such account without regard to other income, gains, or losses
of the Company. The amounts allocated to the Separate Account and the
accumulations thereon remain the property of the Company, but that portion
of the assets of the Separate Account that is equal to the reserves and
other contractual liabilities under all policies, annuities, and other
contracts identified with the Separate Account is not chargeable with
liabilities arising out of any other business of the Company. The Company
is not, and does not hold itself out to be, a trustee in respect of such
amounts.
We have the right to transfer to our general account, in our sole
discretion and at any time without prior written notice, any assets of the
Separate Account which are in excess of the required reserves and other
contractual liabilities under all policies, annuities, and other contracts
identified with the Separate Account.
Sub-Accounts of the Separate Account
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account invests exclusively in
shares of an underlying Fund as shown on the Contract Specifications page.
Any amounts of income and any gains on the shares of a Fund will be
reinvested in additional shares of that Fund at its Net Asset Value.
Valuation of Assets
Shares of Funds held by each Sub-Account will be valued at their Net Asset
Value at the end of each Valuation Period, as reported by each such Fund.
Variable Account Value
Purchase Payment(s) may be allocated among and, as described elsewhere in
this Contract, Account Values may be transferred to the various
Sub-Accounts within the Separate Account. 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 value of the
Accumulation Unit for that Sub-Account at the end of the Valuation Period
during which the Purchase Payment or transferred amount is received.
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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;
3) payment of a Death Benefit;
4) application of any values under this Contract to a
settlement option;
5) deduction of the Contract Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period
during which the Company receives a Written Request regarding the event
giving rise to such cancellation, or an applicable Commencement Date, or
the end of the Valuation Period on which the Contract Maintenance Fee or
Transfer Fee is due, as the case may be.
The Variable Account Value for this Contract at any time is equal to the
sum of the number of Accumulation Units for each Sub-Account attributable
to this Contract multiplied by the Accumulation Unit Value for each
Sub-Account at the end of the preceding 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 $10.00. 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.
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 value for each Sub-Account 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 applicable
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 applicable
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;
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2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately preceding
Valuation Period; and
3) is the factor representing the Mortality and Expense Risk Charge
and the Administration Charge deducted from the Sub-Account for
the number of days in the applicable Valuation Period.
TRANSFERS
Prior to the applicable Commencement Date, you 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 $1,000 at the time of the transfer, the entire amount
of the Sub-Account balance must be transferred. You may also transfer
amounts from any Fixed Account option to any other 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 above, then the entire amount of that Fixed Account option
subject to renewal at that time may be transferred to any one or more of
the Sub-Accounts. In any other case, transfers from any Fixed Account
option are subject to a cumulative limit during each Contract Year of
twenty percent (20%) of the Fixed Account option's value as of the most
recent Contract Anniversary. Fixed Account transfers are not permitted
during the first Contract Year. The minimum transfer amount from any Fixed
Account option is $500. 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 six (6) months from the date of transfer.
The number of transfers per year over which we will charge a Transfer Fee
on each additional transfer, and the amount of the Transfer Fee, are shown
on the Contract Specifications page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described
above.
FEES AND CHARGES
Mortality and Expense Risk Charge
The Mortality and Expense Risk Charge is shown on the Contract
Specifications page and is deducted daily from each Sub-Account. This
deduction is made to compensate the Company for assuming the mortality and
expense risks under this Contract.
Administration Charge
The Administration Charge is shown on the Contract Specifications page and
is deducted daily from each Sub-Account. This deduction is made to
reimburse the Company for expenses incurred in the administration of this
Contract and the Separate Account.
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Contract Maintenance Fee
The Contract Maintenance Fee ("Fee") is shown on the Contract
Specifications page and is deducted as of the Valuation Period next
following each Contract Anniversary prior to the applicable Commencement
Date. In addition, the full annual Fee will be deducted at the time of a
full surrender. The Fee will be allocated to each Sub-Account in the same
proportion as each Sub-Account's value is to the total Variable Account
Value as of the end of such Valuation Period. The Fee does not apply to
the Fixed Account. The Fee may be waived in whole or in part in our sole
discretion.
After the applicable Commencement Date, if a Variable Dollar Benefit is
elected, the Fee will be deducted pro-rata from each Benefit Payment and
will result in a reduction in the amount of such payment.
SURRENDERS
Surrenders
You may surrender this Contract in full for the Surrender Value, or,
partial surrenders may be made for a lesser amount, by Written Request at
any time prior to the Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce your
Surrender Value to less than [$500/flex, $5,000/SP]. Surrenders will be
deemed to be withdrawn first from the portion of the Account Value that
represents your accumulated earnings and then from Purchase Payments. For
purposes of this Contract, Purchase Payments are deemed to be withdrawn on
a "first-in, first out" (FIFO) basis.
The amount available for surrender will be the Surrender Value at the end
of the Valuation Period in which the Written Request is received.
Surrender Value
The Surrender Value at any time is an amount equal to:
1) the Account Value as of the end of the applicable
Valuation Period; less
2) any applicable Contingent Deferred Sales Charge; less
3) any outstanding loans; and less
4) any applicable premium tax or other taxes not previously
deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted
as part of the calculation of the Surrender Value.
Contingent Deferred Sales Charge
A full or partial surrender may be subject to a Contingent Deferred Sales
Charge as set forth on the Contract Specifications page. The Contingent
Deferred Sales Charge applies to and is calculated separately for each
Purchase Payment.
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Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value.
In the case of a full surrender, this Contract will be terminated. The
Contingent Deferred Sales Charge may be waived in whole or in part in our
sole discretion.
Free Withdrawal Privilege
Subject to the provisions of this Contract, we will waive the Contingent
Deferred Sales Charge, to the extent applicable, on full or partial
surrenders as follows:
1) during the first Contract Year, on an amount equal to not
more than the applicable percentage (shown on the
Contract Specifications page) of all Purchase Payments
received; and
2) during the second and succeeding Contract Years, on an
amount equal to not more than the applicable percentage
(shown on the Contract Specifications page) of the
Account Value as of the last Contract Anniversary.
The Free Withdrawal Privilege will be applied in each case to monies in
the order in which they are deemed withdrawn, as described in the
Surrenders provision of this Contract.
Deferral of Payment
The Company has the right to suspend or delay the date of payment of a
partial or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when
trading on the New York Stock Exchange is restricted; or
2) when 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) when the Securities and Exchange Commission, by order, so
permits for the protection of security holders.
The Company further reserves the right to delay payment of a partial or
full surrender of the Fixed Account Value for up to six months after we
receive your Written Request.
OWNERSHIP PROVISIONS
Ownership of Separate Account
The Company has absolute ownership of the assets in the Separate Account.
The Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
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Owner
The Owner of this Contract is the person or persons shown as Owner on the
Contract Specifications page, or the person or persons you designate under
the Transfer of Ownership provision of this Contract.
Unless otherwise stated, the Owner may exercise all ownership rights under
this Contract.
If you or the joint owner is a non-natural person, then the age of the
eldest Annuitant will be treated as the age of such Owner for all Purposes
under this Contract.
Joint Ownership
Two owners may jointly own this Contract. Joint owners may independently
exercise transfers among the Sub-Accounts and the Fixed Account options.
In addition, joint owners may independently designate Purchase Payment
allocations. All other rights of ownership must be exercised by joint
action.
Assignment
You may assign all or any part of your rights under this Contract except
your rights to:
1) designate or change a Beneficiary;
2) designate or change an Annuitant;
3) transfer ownership; and
4) elect a settlement option.
The person to whom you make an assignment is called an assignee.
We are not responsible for the validity of any assignment. An assignment
must be in writing and must be received at our Administrative Office. We
will not be bound by an assignment until we acknowledge it. An assignment
is subject to any payment made or any action we take before we acknowledge
it. An assignment may be ended only by the assignee or as provided by law.
The rights of an assignee, including the right to any distribution under
this Contract, come before the rights of any Owner, Annuitant, Beneficiary
or other payee.
Transfer of Ownership
You may transfer ownership at any time during your lifetime. Any such
transfer is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel a designation of an Annuitant or Beneficiary or
any settlement option election previously made.
Successor Owner
By Written Request, your spouse may, in some cases, succeed to the
ownership of this Contract after your death. Specifically, if you die and
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your spouse is the surviving joint owner or sole surviving Beneficiary
under this Contract, he or she will become the Successor Owner of this
Contract if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request
within one year of your death and before the Death
Benefit Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of
ownership under this Contract except the right to name another Successor
Owner.
Community Property
If you live in a community property state and have a spouse at any time
while you own this Contract, the laws of that state may vary your
ownership rights.
ANNUITANT PROVISIONS
Annuitant
The Annuitant is the person or persons designated on the Contract
Specifications page, or under the Change of Annuitant provision of this
Contract.
Death of Annuitant (Other than Owner)
If an Annuitant who is not an Owner dies before the Annuity Commencement
Date, then:
1) if there is one or more surviving joint Annuitant(s),
such survivor or survivors will continue as the sole or
joint Annuitant(s) under the Contract, as the case may
be; or
2) if there is no surviving joint Annuitant(s), any
surviving contingent Annuitant(s) will become the sole or
joint Annuitant(s) under the Contract, as the case may
be; or
3) if there is no surviving joint or contingent
Annuitant(s), the Owner or joint owners will become the
sole or joint Annuitant(s), as the case may be.
If you or the joint owner, if any, is a non-natural person, then the death
of an Annuitant before the Annuity Commencement Date will be treated as
the death of the Owner for all purposes under this Contract.
Change of Annuitant
You may change the Annuitant at any time before the Annuity Commencement
Date, except that no change of Annuitant may be made if you or the joint
owner, if any, is a non-natural person.
Any such change is subject to the following:
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1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel a designation of a Beneficiary or any settlement
option election previously made.
BENEFICIARY PROVISIONS
Beneficiary
If there is a joint owner and that joint owner survives you, that joint
owner is the Beneficiary, regardless of any designation made by you. If
there is no surviving joint owner, the Beneficiary is the person or
persons so designated in the application, if any, or under the Change of
Beneficiary provision of this Contract. If you have not designated a
Beneficiary, or if no Beneficiary designated by you survives you, then the
Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies
within 30 days after your death.
A beneficiary designation may be joint or contingent or both. Unless
otherwise stated, joint Beneficiaries will be entitled to equal shares. A
contingent Beneficiary will be entitled to a benefit only if there is no
surviving primary Beneficiary.
Change of Beneficiary
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement
Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel a designation of an Annuitant or any settlement
option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
Annuity Commencement Date
The Annuity Commencement Date is shown on the Contract Specifications
page. You may change the Annuity Commencement Date by Written Request made
at least thirty (30) days prior to the date that Annuity Benefit payments
are scheduled to begin. In no event can the Annuity Commencement Date be
later than the Contract Anniversary following the 85th birthday of the
eldest of you or the joint owner, if any, or five (5) years after the
Contract Effective Date, whichever is later.
Annuity Benefit Payments
An amount equal to the Account Value (after deduction of any fees and
charges, loans, or applicable premium tax or other taxes not previously
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deducted) will be used to provide Annuity Benefit payments under this
Contract commencing on or after the Annuity Commencement Date.
Annuity Benefit payments will be made to the Annuitant as payee. In lieu
of that, you may elect by Written Request to have Annuity Benefit payments
made to you as payee. Any Annuity Benefit amounts remaining payable on the
death of the payee will be paid to the contingent payee designated by you
by Written Request. You may designate or change the payee or contingent
payee after the Annuity Commencement Date only if:
1) you are the payee, or
2) you reserve that right, by Written Request, on or before
the Annuity Commencement Date; or
3) you reserve that right, by Written Request, when
designating another person as payee or contingent payee.
In any event, the Annuitant will be the person on whose life any Annuity
Benefit payments are based, and no change of payee or contingent payee at
any time will change this.
If no payee or contingent payee designated by you is surviving at the time
payment is to be made, then any Annuity Benefit amounts remaining payable
will be paid to the person or persons designated as contingent payee by
Written Request by the last payee who received payments. Failing that, any
such amounts will be paid to the estate of the last payee who received
payments.
Form of Annuity Benefit
Annuity Benefit payments will be Fixed Dollar Benefit payments, made
monthly in accordance with the terms of Option B with a fixed period of
120 months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, you may elect to have Annuity Benefit payments made
pursuant to any other available settlement option under the SETTLEMENT
OPTIONS section of this Contract. Any such election must be made by
Written Request before the Annuity Commencement Date, and is subject to
the CONTRACT DISTRIBUTION RULES section of this Contract. You may change
your election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Annuity Benefit payments are
scheduled to begin.
BENEFIT ON DEATH OF OWNER
Death Benefit
A Death Benefit will be paid under this Contract if:
1) you or the joint owner, if any, dies before the Annuity
Commencement Date and before this Contract is fully
surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) a spouse does not become the Successor Owner.
- 22 -
<PAGE>
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under this
Contract; and
2) all other rights under this Contract will be terminated
except for rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee. In lieu
of that, after the death of the Owner, a Beneficiary which is a
non-natural person may elect to have Death Benefit payments made to a
payee to whom the Beneficiary is obligated to make corresponding payments
of a death benefit. Any such election by a non-natural person as
Beneficiary shall be by Written Request, and may be made or changed at any
time.
The Beneficiary will be the person on whose life any Death Benefit
payments under a settlement option are based. However, if the Beneficiary
is a non-natural person, then any payments under a life option will be
based on the life of a person to whom the Beneficiary is obligated, who
must be designated by the Beneficiary by Written Request before the Death
Benefit Commencement Date.
Any Death Benefit amounts remaining payable on the death of the
Beneficiary will be paid:
1) to any contingent payee designated by you as part of any
Death Benefit settlement option election made by you, or
if none is surviving at the time payment is to be made,
then
2) to any contingent payee designated by the Beneficiary by
Written Request, or if none is surviving at the time
payment is to be made, then
3) to the estate of the last payee who received payments.
In any event, if the Beneficiary is a non-natural person, any Death
Benefit amounts remaining payable on the death of the payee will be paid
to any contingent payee designated by the Beneficiary by Written Request,
or if none is surviving at the time payment is to be made, then to the
Beneficiary:
Only one Death Benefit will be paid under this Contract.
Death Benefit Amount
If you die 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 or other taxes not
previously deducted, less any partial surrenders, and
less any outstanding loans;
- 23 -
<PAGE>
2) the total Purchase Payments, less any applicable premium
tax or other taxes not previously deducted, less any
partial surrenders, and less any outstanding loans; or
3) the largest Death Benefit amount on any Contract
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 or other taxes not
previously deducted, less any partial surrenders after
such Death Benefit was determined, and less any
outstanding loans.
If you die 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 or other taxes not
previously deducted, less any partial surrenders, and
less any outstanding loans;
2) the total Purchase Payments, less any applicable premium
tax or other taxes not previously deducted, less any
partial surrenders, and less any outstanding loans; or
3) the largest Death Benefit amount on any Contract
Anniversary prior to death that is both an exact multiple
of five and occurs prior to the date on which you
attained Age 75, less any applicable premium tax or other
taxes not previously deducted, less any partial
surrenders after such Death Benefit was determined, and
less any outstanding loans.
In any event, if this Contract was issued to you after age 75, and you die
before the Annuity Commencement Date, the amount of the Death Benefit will
be the greater of:
1) the Account Value on the Death Benefit Valuation Date,
less any applicable premium tax or other taxes not
previously deducted, less any partial surrenders, and
less any outstanding loans; or
2) the total Purchase Payments, less any applicable premium
tax or other taxes not previously deducted, less any
partial surrenders, and less any outstanding loans.
As of the Death Benefit Valuation Date, the amount of the Death Benefit
will be allocated among the Sub-Accounts and Fixed Account options in the
same proportion as each account's value to the total Account Value as of
the end of the Valuation Period immediately preceding the Death Benefit
Valuation Date.
Between the Death Benefit Valuation Date and the Death Benefit
Commencement Date, the Beneficiary may transfer funds among Sub-Accounts
and Fixed Account options as described under the TRANSFERS section of this
Contract:
- 24 -
<PAGE>
Death Benefit Commencement Date
The Beneficiary may designate the Death Benefit Commencement Date by
Written Request within one year of your death. If no designation is made,
then the Death Benefit Commencement Date will be one year after your
death.
Form of Death Benefit
Payments under the Death Benefit provision of this Contract will be Fixed
Dollar Benefit payments made monthly in accordance with the terms of
Option A with a period certain of 48 months under the SETTLEMENT OPTIONS
section of this Contract.
In lieu of that, you may elect at any time before your death to have
payments under the Death Benefit provision of this Contract made in one
lump sum or pursuant to any available settlement option under the
SETTLEMENT OPTIONS section of this Contract. If you do not make any such
election, the Beneficiary may make that election at any time after your
death and before the Death Benefit Commencement Date.
You may change your election of a settlement option at any time before
your death.
If a Beneficiary elects a settlement option as noted above, he or she may
change his or her own election of a settlement option by Written Request
made at least thirty (30) days prior to the date that Death Benefit
payments are scheduled to begin.
Any election or change of election must be made by Written Request, and is
subject to the CONTRACT DISTRIBUTION RULES section of this Contract.
CONTRACT DISTRIBUTION RULES
Rules Before Annuity Commencement Date
If you or the joint owner, if any, dies before the Annuity Commencement
Date, the Death Benefit under the BENEFIT ON DEATH OF OWNER section of
this Contract must be paid either:
1) in full within 5 years of such death; or
2) over the life of the Beneficiary or over a period certain
not exceeding his or her life expectancy, with payments
at least annually starting within one year of such death.
However, if your spouse becomes the Successor Owner of this Contract after
your death, then:
1) this rule will not apply at the time of your death; and
2) if your spouse later dies before the Annuity Commencement
Date, this rule will apply upon the death of your spouse,
with your spouse being treated as the Owner for purposes
of this rule.
- 25 -
<PAGE>
Rules On or After Annuity Commencement Date
If the person controlling payments under this Contract on or after the
Annuity Commencement Date dies on or after that date, any amount remaining
payable under this Contract at the time of his or her death must be paid
at least as rapidly as payments were being made at the time of such death.
Rules On or After Death Benefit Commencement Date
If the Beneficiary dies on or after the Death Benefit Commencement Date,
any amount remaining payable under this Contract at the time of his or her
death must be paid at least as rapidly as payments were being made at the
time of such death.
SETTLEMENT OPTIONS
Conditions
Benefit Payments under a settlement option are subject to any minimum
amounts, payment intervals, and other terms or conditions that we may from
time to time require. If we change our minimums, we may change any current
or future payment amounts and/or payment intervals to conform with the
change. More than one settlement option may be elected if the requirements
for each settlement option elected are satisfied. Once payment begins
under a settlement option, the settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments
will be made to the payees jointly. No more than two persons may be
initial payees under any joint and survivor settlement option.
If payment under a settlement option depends on whether a specified person
is still alive, we may at any time require proof that such person is still
living. We will require proof of the age and/or sex of any person on whose
life Benefit Payments are based.
Benefit Payments
Benefit Payments may be calculated and paid:
1) as a Fixed Dollar Benefit;
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Account Value to the Company's general account on the applicable
Commencement Date, or on the Death Benefit Valuation Date (if applicable).
Similarly, if only a Variable Dollar Benefit is elected, we will transfer
all of the Account Value to the Sub-Accounts as of the end of the
Valuation Period immediately prior to the applicable Commencement Date; we
will allocate the amount transferred among the Sub-Accounts in accordance
with a Written Request. No transfers between the Fixed Dollar Benefit and
the Variable Dollar Benefit will be allowed after the Commencement Date.
- 26 -
<PAGE>
However, after the Variable Dollar Benefit has been paid for at least
twelve months, the person controlling payments may, no more than once each
twelve months thereafter, transfer all or part of the Benefit Units upon
which the Variable Dollar Benefit is based from the Sub-Account(s) then
held, to Benefit Units in different Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under
that benefit is the Variable Account Value as of the end of the Valuation
Period immediately preceding the applicable Commencement Date. If a Fixed
Dollar Benefit is to be paid, the amount to be applied under that benefit
is the Fixed Account Value as of the applicable Commencement Date, or as
of the Death Benefit Valuation Date (if applicable).
Fixed Dollar Benefit
Fixed Dollar Benefit payments are determined by multiplying the Fixed
Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes not
previously deducted) by the amount of the monthly payment per $1,000 of
value obtained from the Settlement Option Table for the settlement option
elected. Fixed Dollar Benefit payments will remain level for the duration
of the payment period.
If at the time a Fixed Dollar Benefit is elected, we have available
options or rates on a more favorable basis than those guaranteed, the
higher benefits shall be applied and shall not change for as long as that
election remains in force.
Variable Dollar Benefit
The first monthly Variable Dollar Benefit payment is equal to your
Variable Account Value (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium tax or
other taxes not previously deducted) as of the end of the Valuation Period
immediately preceding the applicable Commencement Date multiplied by the
amount of the monthly payment per $1,000 of value obtained from the
Settlement Option Table for the Benefit Payment option elected less the
pro-rata portion of the Contract Maintenance Fee.
The number of Benefit Units in each Sub-Account held by you is determined
by dividing the dollar amount of the first monthly Variable Dollar Benefit
payment from each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the applicable Commencement Date. The number of Benefit
Units remains fixed during the payment period, except as a result of any
transfers among Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s)
selected and may vary from month to month. The total amount of the second
and any subsequent Variable Dollar Benefit payment will be equal to the
sum of the payments from each Sub-Account less a pro-rata portion of the
Contract Maintenance Fee.
- 27 -
<PAGE>
The payment from each Sub-Account is found by multiplying the number of
Benefit Units held in each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the end of the fifth Valuation Period preceding the due
date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in
the same manner as Accumulation Unit values. Thereafter, the value of a
Benefit Unit for a Sub-Account is determined by multiplying the Benefit
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%) per year, compounded annually,
that is reflected in the Settlement Option Tables.
Limitation on Election of Settlement Option
Fixed periods shorter than five years are not available, except as a Death
Benefit settlement option.
Settlement Option Computations
The 1983 Individual Annuity Mortality Table for the sex of the person on
whose life Benefit Payments are based, with interest at three percent (3%)
per year, compounded annually, is used to compute all guaranteed
settlement option factors, values, and benefits under this Contract.
Available Settlement Options
The available settlement options are set out below.
Option A Income for a Fixed Period
We will make periodic payments for a fixed period. The first
payment will be paid as of the last day of the initial payment
interval. The maximum time over which payments will be made by us
or money will be held by us is thirty (30) years. The Option A
Table applies to this Option.
Option B Life Annuity with Payments for at Least a Fixed Period
We will make periodic payments for at least a fixed period. If
the person on whose life Benefit Payments are based lives longer
than the fixed period, then we will make payments until his or
her death. The first payment will be paid as of the first day of
the initial payment interval. The Option B Table applies to this
Option.
Option C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary
person on whose life Benefit Payments are based; thereafter, we
will make one-half of the periodic payment until the death of the
secondary person on whose life Benefit Payments are based. We
- 28 -
<PAGE>
will require Due Proof of Death of the primary person on whose
life Benefit Payments are based. The first payment will be paid
as of the first day of the initial payment interval. The Option C
Table applies to this Option.
Option D Any Other Form
We will make periodic payments in any other form of settlement
option which is acceptable to us at the time of an election.
Settlement Option Tables
The Option Tables show the payments we will make at sample payment
intervals for each $1,000 applied at the guaranteed interest rate. Amounts
may vary with the payment interval and the sex and age of the person on
whose life Benefit Payments are based.
OPTION A TABLE -- INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
Terms
Terms Semi- of Semi-
of Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Years
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89
</TABLE>
- 29 -
<PAGE>
<TABLE>
<CAPTION>
Semi-
Terms of Payments Annual Annual Quarterly Monthly
<S> <C> <C> <C> <C>
Years
16 79.61 39.51 19.68 6.54
17 75.95 37.70 18.78 6.24
18 72.71 36.09 17.98 5.98
19 69.81 34.65 17.26 5.74
20 67.22 33.36 16.62 5.53
</TABLE>
- 30 -
<PAGE>
OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
Male 60 Months 120 Months 180 Months 240 Months
Age
55 $4.68 $4.62 $4.53 $4.39
56 4.78 4.72 4.61 4.45
57 4.89 4.82 4.69 4.51
58 5.00 4.92 4.78 4.58
59 5.12 5.03 4.87 4.64
60 5.25 5.14 4.96 4.71
61 5.39 5.26 5.06 4.78
62 5.53 5.39 5.16 4.84
63 5.69 5.52 5.26 4.90
64 5.85 5.66 5.36 4.96
65 6.03 5.81 5.46 5.02
66 6.21 5.96 5.56 5.08
67 6.41 6.11 5.66 5.13
68 6.62 6.28 5.76 5.18
69 6.84 6.44 5.86 5.23
70 7.07 6.61 5.96 5.27
71 7.32 6.78 6.05 5.31
72 7.58 6.96 6.14 5.34
73 7.85 7.14 6.23 5.37
74 8.14 7.32 6.31 5.40
- 31 -
<PAGE>
Female 60 Months 120 Months 180 Months 240 Months
Age
55 $4.25 $4.22 $4.18 $4.10
56 4.33 4.30 4.25 4.17
57 4.41 4.38 4.32 4.23
58 4.50 4.47 4.40 4.30
59 4.60 4.56 4.48 4.37
60 4.70 4.66 4.57 4.44
61 4.81 4.76 4.66 4.51
62 4.93 4.86 4.75 4.58
63 5.05 4.98 4.85 4.65
64 5.18 5.10 4.95 4.72
65 5.32 5.22 5.05 4.79
66 5.47 5.36 5.16 4.86
67 5.63 5.50 5.26 4.93
68 5.80 5.65 5.37 5.00
69 5.98 5.80 5.49 5.06
70 6.18 5.96 5.60 5.12
71 6.39 6.14 5.71 5.18
72 6.62 6.31 5.83 5.23
73 6.86 6.50 5.94 5.28
74 7.12 6.69 6.04 5.32
- 32 -
<PAGE>
<TABLE>
<CAPTION>
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
Male Female Secondary Age
Primary 60 61 62 63 64 65 66 67 68 69 70
Age
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.70 $4.73 $4.76 $4.79 $4.82 $4.85 $4.88 $4.91 $4.94 $4.96 $4.99
61 4.78 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.06 5.09
62 4.86 4.89 4.93 4.96 5.00 5.03 5.07 5.10 5.13 5.16 5.19
63 4.94 4.97 5.01 5.05 5.09 5.13 5.16 5.20 5.24 5.27 5.31
64 5.02 5.06 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.42
65 5.10 5.15 5.19 5.24 5.28 5.33 5.37 5.41 5.46 5.50 5.54
66 5.19 5.24 5.28 5.33 5.38 5.43 4.84 5.52 5.57 5.62 5.66
67 5.28 5.33 5.38 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.79
68 5.37 5.42 5.48 5.53 5.59 5.64 5.70 5.75 5.81 5.86 5.92
69 5.46 5.52 5.57 5.63 5.69 5.75 5.81 5.87 5.93 5.99 6.05
70 5.55 5.61 5.67 5.74 5.80 5.86 5.93 5.99 6.06 6.12 6.19
*Payments after the death of the Primary Payee will be one-half of the amount shown.
</TABLE>
<TABLE>
<CAPTION>
Monthly payments for each $1,000 of proceeds by ages of persons named*.
Male
Secondary Female Primary Age
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 $4.46 $4.54 $4.62 $4.71 $4.79 $4.88 $4.98 $5.07 $5.17 $5.27 $5.38
61 4.48 4.56 4.65 4.73 4.82 4.91 5.01 5.11 5.21 5.31 5.42
62 4.50 4.58 4.67 4.75 4.85 4.94 5.04 5.14 5.25 5.36 5.47
63 4.52 4.60 4.69 4.78 4.87 4.97 5.07 5.17 5.28 5.40 5.51
64 4.53 4.62 4.71 4.80 4.90 5.00 5.10 5.21 5.32 5.44 5.56
65 4.55 4.63 4.72 4.82 4.92 5.02 5.13 5.24 5.35 5.48 5.60
66 4.56 4.65 4.74 4.84 4.94 5.05 5.16 5.27 5.39 5.51 5.64
67 4.57 4.66 4.76 4.86 4.96 5.07 5.18 5.30 5.42 5.55 5.68
68 4.59 4.68 4.78 4.88 4.98 5.09 5.21 5.33 5.45 5.59 5.72
69 4.60 4.69 4.79 4.89 5.00 5.11 5.23 5.36 5.48 5.62 5.76
70 4.61 4.70 4.80 4.91 5.02 5.13 5.25 5.38 5.51 5.65 5.80
*Payments after the death of the Primary Payee will be one-half of the amount shown.
</TABLE>
- 33 -
<PAGE>
Annuity Investors(SERVICEMARK)
LIFE INSURANCE COMPANY
Individual Flexible Premium Deferred Variable Annuity Contract
Nonparticipating - No Dividends
Non-Tax-Qualified
<PAGE>
<PAGE>
EXHIBIT (5)(a)
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
LOAN ENDORSEMENT
The policy is changed as set out below to permit loans:
LOAN AMOUNT AND CONDITIONS. So long as you have not commenced
distributions under a payment option (or any other systematic
payment program), we may allow you to borrow an amount (the "new
policy loan") if all of the following requirements are met:
1) the sum of the new policy loan plus the highest
balance of each other policy loan, if any, at any
time during the one-year period ending on the
date of the new policy loan, cannot exceed
$50,000; and
2) the sum of the new policy loan plus the current
balance of each other policy loan, if any, cannot
exceed the greater of (i) $10,000, or (ii)
one-half of the net amount payable to you upon a
full surrender of this policy; and
3) the net amount payable to you upon a full
surrender of this policy, less the sum of the new
policy loan and the current balance of each other
policy loan, if any, cannot be less than the
minimum amount required to avoid an involuntary
surrender under the other provisions of this
policy.
An application for a loan must be made on our form. We may delay
granting the loan for up to six months after we receive your
request for it. We may also limit the frequency at which loans
may be made, the minimum amount of a loan, and the minimum amount
of loan payments to be made to us.
TERM; REPAYMENT. The principal and interest of each loan must be
repaid to us within five years of the date such loan is made.
This five year limit will not apply to any loan used to acquire a
dwelling unit that is to be used as a principal residence by you.
Regular substantially equal periodic payments must be made at
least quarterly over the term of a loan until fully paid.
LIEN -- DEEMED SURRENDER AND DISTRIBUTION. A policy loan is a
first lien on this policy. Your interest in this policy will be
the sole security for a loan. We may pay off the loan (by
<PAGE>
treating an amount equal to the balance of a loan as surrendered,
and applying it to pay off the loan) if:
1) this policy is fully surrendered; or
2) distributions begin under a payment option (or
any other systematic payment program); or
3) you die and your spouse is not the sole person
entitled to your interest in this policy.
If there is a default on repayment, then we may also pay off the
loan (as described above), unless a distribution to you is
prohibited by the other provisions of this policy.
INTEREST. The interest rate on a policy loan will not be more
than 8% per year, unless otherwise provided under any other
provision of this policy covering employee benefit plan loans.
Any unpaid interest will be added to a loan; in effect, then, it
will be compounded and will be part of the loan.
This is part of your policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the
other terms of the policy, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
-------------------- ------------------------
Secretary Executive Vice President
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
- 2 -
<PAGE>
<PAGE>
EXHIBIT (5)(b)
Annuity Investors(SERVICEMARK)
Life Insurance Company
TAX SHELTERED ANNUITY ENDORSEMENT
The policy is changed as set out below to add provisions for a Tax
Sheltered Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This policy is intended to
receive contributions that qualify for deferred tax treatment
under Internal Revenue Code ("IRC") Section 403(b). It is
restricted as required by federal tax law. We may change the
terms of this policy or administer this policy at any time as
needed to comply with that law. Any such change may be applied
retroactively.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer
your interest in this policy. You cannot pledge it to secure a
loan or the performance of an obligation, or for any other
purpose. The only exceptions to these rules are:
1) you may use this policy to secure a loan
made under any loan provisions of this
policy;
2) an interest in this policy may be
transferred under a Qualified Domestic
Relations Order as defined in IRC
Section 414(p); and
3) you may designate another person to
receive payments with you based on joint
lives or joint life expectancies, but
any such designation shall not give that
other person any present rights under
the policy during your lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any
contribution to this policy that does not qualify for deferred
tax treatment under IRC Section 403(b) and section 415.
Contributions made for you to this policy and any other plan,
contract, or arrangement under salary reduction agreement(s) with
your employer(s) cannot exceed the limits of IRC Section 402(g).
You cannot make more than one new salary reduction agreement with
your current employer for contributions to this policy in any
single calendar year. You and your employer shall ensure
compliance with these limits.
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND
CUSTODIAL ACCOUNTS TRANSFERS. To comply with federal tax law,
<PAGE>
distribution restrictions apply to amounts under this policy that
represent:
1) contributions made after December 31,
1988 under any salary reduction
agreement with an employer;
2) income earned after December 31, 1988 on
salary reduction contributions whenever
made; or
3) transfers from a custodial account
described in IRC Section 403(b)(7) and
all income attributable to the amount
transferred.
Any such amount cannot be distributed from this policy unless you
have:
1) reached age 59-1/2; or
2) separated from service with your
employer; or
3) become disabled (as defined in IRC
Section 72(m)(7)); or
4) in the case of salary reduction
contributions (including salary
reduction contributions to a custodial
account), incurred a hardship as defined
under the IRC.
A withdrawal made by reason of a hardship cannot include any
income earned after December 31, 1988 attributable to salary
reduction contributions.
IRC Section 72(m)(7) states that: "An individual shall be
considered to be disabled if he is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or to be of long-continued and indefinite
duration. An individual shall not be considered to be disabled
unless he furnishes proof of the existence thereof in such form
and manner as the Secretary [of the Treasury] may require."
DIRECT ROLLOVERS. To the extent required under IRC Section
401(a)(31), you or your surviving spouse may elect to have any
portion of an eligible rollover distribution (as defined in IRC
Section 403(b)(8)) paid directly to another Individual Retirement
Annuity or Individual Retirement Account (as defined in IRC
Section 408) or, if allowed, to another Tax Sheltered Annuity (as
- 2 -
<PAGE>
defined in IRC Section 403(b)), specified by you or your
surviving spouse and which accepts such distribution. Any direct
rollover election must be made on our form, and must be received
at our office before the date of payment.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following
the calendar year in which you reach age 70-1/2:
1) your interest in this policy must be
paid to you in full; or
2) distribution of your interest must begin
in the form of substantially equal
payments made at least once per year (i)
for your life or as joint and survivor
payments to you and one other person, or
(ii) over a period certain not to exceed
your life expectancy or the joint and
last survivor life expectancy of you and
one other person named to receive any
remaining payments after your death.
If distributions are to be made under clause 2) of this
provision, the present value of the payments likely to be made to
you during your expected life must be more than half of the
present value of all payments expected to be made. For this
purpose, the present value of payments is determined as of the
date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before
distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS
provision, any amount remaining payable under this policy must be
paid either:
1) in full by December 31 of the fifth
calendar year after your death; or
2) over the life of the person entitled to
such amount, or over a period certain
not to exceed his or her life
expectancy, with substantially equal
payments made at least once per year
starting by December 31 of the first
calendar year after your death
However, if your spouse is the sole person entitled to such
amount, then during your spouse's lifetime the starting date for
payments under clause 2) of this provision may be delayed to a
date not later than December 31 of the calendar year in which you
would have reached age 70-1/2. If your spouse dies before
payments commence, then this provision will apply upon the death
- 3 -
<PAGE>
of your spouse, with your spouse being treated as the owner of
this policy for purposes of this provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or
after distributions commence under the REQUIRED MINIMUM
DISTRIBUTIONS provision, any amount remaining payable under this
policy must be paid as follows:
1) if you die before April 1 following the
year in which you reach or would have
reached age 70-1/2 and you could have
slowed or suspended payments before
death, then such amount must be paid
under the DEATH BEFORE REQUIRED MINIMUM
DISTRIBUTIONS provision as if you died
before such distributions commenced; or
2) in all other cases, such amount must be
paid at least as rapidly as payments
were being made at the time of your
death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS
provision and the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS
provision, life expectancies will be determined under Section
1.72-9 of the Federal Income Tax Regulations. The life
expectancy of you and your spouse may be recalculated not more
often than once each year. The life expectancy of any other
person cannot be recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS
provision, DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision,
and DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS provision shall be
applied in accordance with IRC Section 401(a)(9), including the
incidental death benefit rules of IRC Section 401(a)(9)(G), and
the related Federal Income Tax Regulations, including the minimum
distribution incidental death benefit rules of Section
1.401(a)(9)-2 of the Proposed Federal Income Tax Regulations.
This is part of your policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the
other terms of the policy, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
-------------------- ------------------------
Secretary Executive Vice President
- 4 -
<PAGE>
Annuity Investors(SERVICE MARK)
Life Insurance Company
- 5 -
<PAGE>
<PAGE>
EXHIBIT (5)(c)
ANNUITY INVESTORS(SERVICEMARK)
LIFE INSURANCE COMPANY
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
The policy is changed as set out below to add provisions for a qualified
pension, profit sharing, or annuity plan. This endorsement and the policy
to which it is attached are not valid without additional endorsement(s)
defining the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This policy is intended to
receive contributions pursuant to a pension, profit sharing, or
annuity plan qualified under Internal Revenue Code ("IRC")
Section 401(a) or 403(a). It is restricted as required by federal
tax law. We may change the terms of this policy or administer
this policy at any time as needed to comply with that law. Any
such change may be applied retroactively.
EXCLUSIVE BENEFIT. This policy is for the exclusive benefit of
you and your beneficiaries. No amounts held under this policy may
be used for or diverted to any other purpose (by distribution or
otherwise) except as and to the extent that the Plan
Administrator shall determine that such is allowed both by
applicable law and by the Plan.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer
your interest in this policy. You cannot pledge it to secure a
loan or the performance of an obligation, or for any other
purpose. The only exceptions to these rules are:
1) you may use this policy to secure a loan made
under any loan provisions of this policy;
2) an interest in this policy may be transferred
under a Qualified Domestic Relations Order as
defined in IRC Section 414(p); and
3) you may designate another person to receive
payments with you based on joint lives or joint
life expectancies, but any such designation shall
not give that other person any present rights
under this policy during your lifetime.
LIMITS ON CONTRIBUTIONS. Contributions made to this policy for
you must not exceed the limits set forth in IRC Section 415.
Contributions made to this policy for you under salary reduction
agreement(s) with your employer(s) cannot exceed the limits of
IRC Section 402(g). Additional limits may apply under the terms
<PAGE>
of the Plan. The Plan Administrator shall ensure compliance with
these IRC limits and any Plan limits.
DISTRIBUTION RESTRICTIONS ON 401(k) EMPLOYEE ELECTIVE
CONTRIBUTIONS. Any amounts under this policy which represent
employee elective contributions made pursuant to salary reduction
agreement(s) under IRC Section 401(k) and any income earned on
such amounts, cannot be distributed any earlier than allowed
under IRC Section 401(k)(2)(B). Additional limits may apply under
the terms of the Plan. The Plan Administrator shall determine
when a distribution is allowed under this IRC section and the
Plan.
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts
under this policy which represent contributions to a money
purchase pension plan or a defined benefit pension plan, and any
income earned on such amounts, cannot be distributed any earlier
than allowed under Treasury Regulations Section 1.401-1(b)(1)(i).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall determine when a distribution is allowed
under this regulation and the Plan.
DIRECT ROLLOVERS. To the extent required under IRC Section
401(a)(31), you or your surviving spouse may elect to have any
portion of an eligible rollover distribution (as defined in IRC
Section 402(c)(4)) paid directly to another Individual Retirement
Annuity or Individual Retirement Account (as defined in IRC
Section 408) or, if allowed, to another qualified pension, profit
sharing, or annuity plan (as defined in IRC Section 401(a) or
403(a)), specified by you or your surviving spouse and which
accepts such distribution. Any direct rollover election must be
made on our form, and must be received at our office before the
date of payment.
DATE BENEFITS TO BEGIN. Unless you elect to delay the payment of
your benefits, a distribution of your interest in this policy
shall begin no later than 60 days after the end of the Plan year
in which the last of the following occurs:
1) you have reached the earlier of age 65 or the
normal retirement age stated in the Plan;
2) the 10th anniversary of the date you joined the
Plan; or
3) your separation from service with the employer.
The Plan Administrator shall make any determination required
under this provision.
- 2 -
<PAGE>
In no event can the payment of your benefits be delayed beyond
the date stated in the REQUIRED MINIMUM DISTRIBUTIONS provision,
below.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following
the calendar year in which you reach age 70-1/2:
1) your interest in this policy must be paid to you
in full; or
2) distribution of your interest must begin in the
form of substantially equal payments made at
least once per year (i) for your life or as joint
and survivor payments to you and one other
person, or (ii) over a period certain not to
exceed your life expectancy or the joint and last
survivor life expectancy of you and one other
person named to receive any remaining payments
after your death.
If distributions are to be made under clause 2) of this
provision, the present value of the payments likely to be made to
you during your expected life must be more than half of the
present value of all payments expected to be made. For this
purpose, the present value of payments is determined as of the
date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before
distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS
provision, any amount remaining payable under this policy must be
paid either:
1) in full by December 31 of the fifth calendar year
after your death; or
2) over the life of the person entitled to such
amount, or over a period certain not to exceed
his or her life expectancy, with substantially
equal payments made at least once per year
starting by December 31 of the first calendar
year after your death.
However, if your spouse is the sole person entitled to such
amount, then during your spouse's lifetime, the starting date for
payments under clause 2) of this provision may be delayed to a
date not later than December 31 of the calendar year in which you
would have reached age 70-1/2. If your spouse dies before
payments commence, then this provision will apply upon the death
of your spouse, with your spouse being treated as the owner of
this policy for purposes of this provision.
- 3 -
<PAGE>
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or
after distributions commence under the REQUIRED MINIMUM
DISTRIBUTIONS provision, any amount remaining payable under this
policy must be paid as follows:
1) if you die before April 1 following the year in
which you reach or would have reached age 70-1/2
and you could have slowed or suspended payments
before death, then such amount must be paid under
the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS
provision as if you died before such
distributions commenced; or
2) in all other cases, such amount must be paid at
least as rapidly as payments were being made at
the time of your death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS
provision and the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS
provision, life expectancies will be determined under Section
1.72-9 of the Federal Income Tax Regulations. The life expectancy
of you and your spouse may be recalculated not more often than
once each year. The life expectancy of any other person cannot be
recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS
provision, DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision,
and DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS provision shall be
applied in accordance with IRC Section 401(a)(9), including the
incidental death benefit rules of IRC Section 401(a)(9)(G), and
the related Federal Income Tax Regulations, including the minimum
distribution incidental death benefit rules of Section 1.401
(a)(9)-2 of the Proposed Federal Income Tax Regulations.
This is part of your policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the
other terms of the policy, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
----------------------- -------------------------
Secretary Executive Vice President
ANNUITY INVESTORS(SERVICEMARK)
LIFE INSURANCE COMPANY
- 4 -
<PAGE>
<PAGE>
EXHIBIT (5)(d)
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
EMPLOYER PLAN
ENDORSEMENT
The policy is changed as set out below to adapt it for use with an
employee benefit plan:
PLAN. "Plan" means the employee benefit plan named on your
application or any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and
named on your application, or any other employer which succeeds
to its rights under the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person
designated as such to us in writing by the Employer. If no person
has been designated, "Plan Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of this policy, the Plan
Administrator shall interpret the Plan and decide all questions
about what is allowed or required by the Plan. We have no duty to
review or interpret the Plan, or to review or approve any
decision of the Plan Administrator. We are entitled to rely on
the written directions of the Plan Administrator on such matters.
APPLICABLE RESTRICTIONS. This policy may be restricted by federal
and/or state laws related to employee benefit plans. We may
change the terms of this policy or administer this policy at any
time as needed to comply with such laws.
PLAN DISTRIBUTION PROVISIONS. Distributions allowed under this
policy may be made only at a time allowed by the Plan or required
by this policy. The form of any distribution shall be determined
under the Plan from among those forms of distribution available
under this policy. No distribution may be made without the
written direction of the Plan Administrator unless required by
this policy. Distributions may be made without your consent when
required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any amount under this policy
attributable to contributions by the Employer (excluding any
contributions made under a salary reduction agreement with your
employer) is subject to the vesting provisions of the Plan. If at
any time the Plan provides for a forfeiture of an amount that is
not vested, then such amount may be withdrawn and paid as
directed by the Plan Administrator.
<PAGE>
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to this policy
for you are subject to any limits on contributions and
nondiscrimination provisions of the Plan. If the Plan
Administrator determines that excess or discriminatory
contributions were made, then amounts attributable to such
contributions may be withdrawn and paid as directed by the Plan
Administrator.
INVOLUNTARY CASH OUT. If at any time the Plan provides for an
involuntary cash out of your benefits, then this policy may be
surrendered as a whole as directed by the Plan Administrator. No
amounts may be withdrawn under this provision or any other
involuntary surrender provision if any total policy value for
this policy has ever exceeded $3,500 (not counting any amount
paid under the RETURN OF EXCESS CONTRIBUTIONS provision).
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to
any amount remaining payable under this policy after your death
shall be determined under the Plan. No distribution of any such
amount shall be made without the written direction of the Plan
Administrator.
INVESTMENT ALLOCATIONS AND TRANSFERS. If this policy provides
that amounts held under it are allocated among separate
investment funds or fixed accounts, then any such allocations
and/or subsequent transfers shall be made only as required or
allowed by the Plan, or as required by this policy to secure a
loan. No such allocation or transfer shall be made without the
written direction of the Plan Administrator unless required by
this policy to secure a loan. Allocations or transfers may be
made without your consent when required by the Plan or the
policy.
PLAN LOAN PROVISIONS. If loans are allowed under this policy, no
such loan may be made unless also allowed by the Plan. Any such
loan will be subject to any additional limits and conditions
which apply under the Plan. No loan may be made without the
written direction of the Plan Administrator. The rate of interest
to be paid by you on any such loan will be fixed by the Plan
Administrator, but will be at least three percentage points
higher than the minimum guaranteed rate of interest, if any, that
applies to your interest in this policy used as security for the
loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to
the other payment options available under this policy, payments
may be made in the form of a Qualified Joint and 50% Survivor
Annuity. Under this payment option, we will make equal payments
to you for life at least once per year. If the person who is your
spouse at the time payments commence survives you, then after
your death we will make payments to such spouse at the same
intervals equal to one-half of the amount of the prior payments,
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<PAGE>
with such payments continuing to such spouse until his or her
death. The first payment under this payment option will be made
on the effective date of the payment option. The amount of the
payments we will make under this payment option is based on the
intervals for payments, which are subject to our approval.
Amounts vary with the ages, as of the first payment date, of you
and your spouse. We will require proof of the ages of you and
your spouse. Monthly payments that we will make under this
payment option for each $1,000 of proceeds applied will be
furnished at your request. Once payments begin under this payment
option, the value of future payments may not be withdrawn as a
commutation of benefits.
This is a part of your policy. It is not a separate contract. It changes
the policy only as and to the extent stated. In all cases of conflict with
the other terms of the policy, the provisions of this endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
---------------------------- -------------------------------
Secretary Executive Vice President
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
- 3 -
<PAGE>
<PAGE>
EXHIBIT (5)(e)
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The policy is changed as set out below to make it an Individual Retirement
Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This policy is intended to
receive premiums that qualify for deferred tax treatment under
Internal Revenue Code ("IRC") Section 408(b). It is restricted as
required by federal tax law. We may change the terms of this
policy or administer this policy at any time as needed to comply
with that law. Any such change may be applied retroactively.
EXCLUSIVE BENEFIT. This policy is for the exclusive benefit of
you and your beneficiaries. Your interest in this policy is
nonforfeitable.
NON-PARTICIPATING. This policy does not pay dividends or share
in our surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer
your interest in this policy. You cannot pledge it to secure a
loan or the performance of an obligation, or for any other
purpose. The only exceptions to these rules are:
1) an interest in this policy may be
transferred to a spouse or former spouse
under a divorce or separation instrument
described in IRC Section 71(b)(2)(A);
and
2) you may designate another person to
receive payments with you based on joint
lives or joint life expectancies, but
any such designation shall not give that
other person any present rights under
the policy during your lifetime.
PREMIUM REQUIREMENTS. This policy does not require fixed
premiums, but we may decline to accept any premium payment of
less than $50. This policy will not lapse if you do not pay
premiums. This policy will remain subject to cancellation under
any involuntary surrender or termination provision of this
policy; provided, however, that in no event shall any such
- 1 -
<PAGE>
cancellation occur unless, at a minimum, premiums have not been
paid for at least two full years and the value of this policy
(increased by any guaranteed interest) would provide a benefit at
age 70-1/2 of less than $20 a month under the regular settlement
option.
All premium payments to us must be made in cash BY CHECK OR MONEY
ORDER MADE PAYABLE TO US.
Total premium payments made to this policy with respect to any
one tax year may not exceed $2,000, excluding any payment which
is:
1) allowed as a rollover under IRC Section
402(c), 403(a)(4), 403(b)(8), or
408(d)(3); or
2) made through a Simplified Employee
Pension (SEP) program under IRC Section
408(k).
ANNUAL REPORT. Following the end of each calendar year, we will
send you a report concerning the status of your policy. This
report will include (i) the amount of all premiums received as
regular contributions during or after the calendar year which
relate to such calendar year, (ii) the amount of all premiums
received as rollover contributions during such calendar year,
(iii) the policy value(s) determined as of the end of such
calendar year, and (iv) such other information as may be required
under federal tax law.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following
the calendar year in which you reach age 70-1/2:
1) your interest in this policy must be
paid to you in full; or
2) distribution of your interest must begin
in the form of substantially equal
payments made at least once per year (i)
for your life or as joint and survivor
payments to you and one other person, or
(ii) over a period certain not to exceed
your life expectancy or the joint and
last survivor life expectancy of you and
one other person named to receive any
remaining payments after your death.
If distributions are to be made under clause 2) of this
provision, the present value of the payments likely to be made to
you during your expected life must be more than half of the
present value of all payments expected to be made. For this
- 2 -
<PAGE>
purpose, the present value of payments is determined as of the
date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before
distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS
provision, any amount remaining payable under this policy must be
paid either:
1) in full by December 31 of the fifth
calendar year after your death; or
2) over the life of the person entitled to
such amount, or over a period certain
not to exceed his or her life
expectancy, with substantially equal
payments made at least once per year
starting by December 31 of the first
calendar year after your death.
However, if your spouse is the sole person entitled to such
amount, then during your spouse's lifetime the starting date for
payments under clause 2) of this provision may be delayed to a
date not later than December 31 of the calendar year in which you
would have reached age 70-1/2. If your spouse dies before
payments commence, then this provision will apply upon the death
of your spouse, with your spouse being treated as the owner of
this policy for purposes of this provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or
after distributions commence under the REQUIRED MINIMUM
DISTRIBUTIONS provision, any amount remaining payable under this
policy must be paid as follows:
1) if you die before April 1 following the
year in which you reach or would have
reached age 70-1/2 and you could have
slowed or suspended payments before
death, then such amount must be paid
under the DEATH BEFORE REQUIRED MINIMUM
DISTRIBUTIONS provision as if you died
before such distributions commenced; or
2) in all other cases, such amount must be
paid at least as rapidly as payments
were being made at the time of your
death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS
provision and the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS
provision, life expectancies will be determined under Section
1.72-9 of the Federal Income Tax Regulations. The life expectancy
of you and your spouse may be recalculated not more often than
- 3 -
<PAGE>
once each year. The life expectancy of any other person cannot be
recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS
provision, DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision,
and DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS provision shall be
applied in accordance with IRC Section 401(a)(9), including the
incidental death benefit rules of IRC Section 401(a)(9)(G), and
the related Federal Income Tax Regulations, including the minimum
distribution incidental death benefit rules of Section
1.401(a)(9)-2 of the Proposed Federal Income Tax Regulations.
This is part of your policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with
the other terms of the policy, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
--------------------------- -----------------------------
Secretary Executive Vice President
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
- 4 -
<PAGE>
<PAGE>
EXHIBIT (5)(f)
ANNUITY INVESTORS(SERVICEMARK)
LIFE INSURANCE COMPANY
Box 5423, Cincinnati, Ohio 45201-5423 (800)789-6771
TEXAS OPTIONAL RETIREMENT PROGRAM ENDORSEMENT
The policy is changed as set out below to adapt it for use with the Texas
Optional Retirement Program:
ORP. "ORP" means the Texas Optional Retirement Program.
EMPLOYER. "Employer" means the employer named on the group
policy application or any other Texas public institution of
higher education through which a participant has subsequently
continued employment and ORP participation.
ORP INTERPRETATION. The Employer shall interpret the ORP
provisions and decide all questions about what is allowed or
required by the ORP, except for administration of qualified
domestic relations orders. We have no duty to review or
interpret the ORP provisions other than for qualified domestic
relations orders, and we have no duty to review or approve any
decision of the Employer. We are entitled to rely on the written
directions of the Employer on such matters.
APPLICABLE STATE LAW RESTRICTIONS. This policy is restricted as
required by Texas law provisions applicable to the ORP. We may
change the terms of this policy or administer this policy at any
time as needed to comply with such state law provisions.
CONTRIBUTIONS LIMITED; NO MINIMUM REQUIRED. Only amounts paid
under the ORP may be contributed to the policy. There is no
minimum regular required contribution that must be paid to us
under the policy.
ORP DISTRIBUTION PROVISIONS. Distributions of a participant's
interest allowed under this policy may be made to the participant
or the participant's beneficiaries only after the return of any
non-vested amounts, and only after (1) the participant terminates
employment with all Texas public institutions of higher
education, (2) the participant attains age 70-1/2, or (3) the
participant dies. No such distribution may be made without the
written certification of the Employer of the participant's
vesting status and, if the participant is living and under age
70-1/2, the termination date of the participant's employment.
RETURN OF NON-VESTED AMOUNTS. Contributions by the Employer that
were not based on a reduction in the participant's salary are
<PAGE>
subject to the vesting provisions of the ORP. If at any time the
ORP provides for a forfeiture of such Employer contributions,
then amounts may be surrendered from the participant's interest
under the policy to repay such contributions, as directed by the
Employer.
ORP LOAN PROVISIONS. If loans are allowed under this policy, a
loan may be made to a participant only after the return of any
non-vested amounts held with respect to such participant and only
after (1) the participant terminates employment with all Texas
public institutions of higher education, or (2) the participant
attains age 70-1/2. No loan may be made without the written
certification of the Employer of the participant's vesting status
and, if the participant is under age 70-1/2, the termination date
of the participant's employment.
This is a part of the policy. It is not a separate contract. It changes
the policy only as and to the extent stated. In all cases of conflict
with the other terms of the policy, the provisions of this endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
-------------------- -----------------------
Assistant Secretary Executive Vice President
- 2 -
<PAGE>
<PAGE>
EXHIBIT (5)(g)
ANNUITY INVESTORS
LIFE INSURANCE COMPANY
LONG-TERM CARE WAIVER RIDER
This rider is made part of the policy contract to which it is attached.
THE BENEFIT. Prior to the date distributions commence under a
payment option (or any other systematic payment program), we will
waive any charge imposed if you surrender this policy contract in
part or as a whole, or on the commencement of distributions under
a payment option (or any other systematic payment program)
according to the policy contract provisions, if:
1. The Annuitant becomes confined to a Long-Term
Care Facility or Hospital for at least 90
consecutive days;
2. The initial date of confinement is one or more
years after the date of issue of this policy
contract;
3. A surrender request and adequate proof of
confinement are received by us either while the
Annuitant is confined or within 90 days of the
Annuitant's discharge from the Long-Term Care
Facility or Hospital; and
4. Confinement in a Long-Term Care Facility is
prescribed by a Physician and is Medically
Necessary.
DEFINITIONS
"Long-Term Care Facility" means a Skilled Nursing Facility or an
Intermediate Care Facility.
Long-Term Care Facility does not mean:
1. A place that primarily treats drug addicts or
alcoholics;
2. A home for the aged or mentally ill, a community
living center, or a place that primarily provides
domiciliary, residency or retirement care; or
- 1 -
<PAGE>
3. A place owned or operated by a member of the
Annuitant's immediate family (including any
spouse, children, parents, grandparents,
grandchildren, siblings, or in-laws of the
Annuitant).
"Skilled Nursing Facility" is a facility which:
1. Is located in the United States or its
territories;
2. Is licensed and operated as a Skilled Nursing
Facility according to the laws of the
jurisdiction in which it is located;
3. Provides skilled nursing care under the
supervision of a licensed physician;
4. Provides continuous 24 hours a day nursing
services by, or under the supervision of, a
registered graduate professional nurse (R.N.);
and
5. Maintains a daily medical record of each patient.
"Intermediate Care Facility" is a facility which:
1. Is located in the United States or its
territories;
2. Is licensed and operated as an Intermediate Care
Facility according to the laws of the
jurisdiction in which it is located;
3. Provides continuous 24 hours a day nursing
service by, or under the supervision of, a
registered graduate professional nurse (R.N.) or
licensed practical nurse (L.P.N.); and
4. Maintains a daily medical record of each patient.
"Hospital" is a facility which:
1. Is located in the United States or its
territories;
2. Is licensed as a hospital by the jurisdiction in
which it is located;
3. Is supervised by a staff of licensed physicians;
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<PAGE>
4. Provides nursing services 24 hours a day by, or
under the supervision of, a registered nurse
(R.N.);
5. Operates primarily for the care and treatment of
sick and injured persons as inpatients for a
charge; and
6. Has access to medical, diagnostic and major
surgical facilities.
"Physician" is a licensed medical doctor (M.D.) or a licensed doctor of
osteopathy (D.O.) practicing within the scope of his or her license. The
term "physician" does not include the Annuitant, or a member of the
Annuitant's immediate family (including any spouse, children, parents,
grandparents, grandchildren, siblings or in-laws of the Annuitant).
"Medically Necessary" means appropriate and consistent with the diagnosis
in accord with accepted standards of practice, and which could not have
been omitted without adversely affecting the individual's condition.
TERMINATION. This rider will terminate without value when the charge
imposed on surrenders in part or as a whole or on the commencement of
distributions under payment option (or any other systematic payment
program) according to the policy contract provisions, equals 0%, or upon
the date distributions commence under a payment option (or any other
systematic payment program), or upon termination of the policy contract,
whichever comes first.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspronicz /s/ James M. Mortensen
------------------------- ------------------------------
Secretary Executive Vice President
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT (6)(a)
ANNUITY INVESTORS[SERVICEMARK]
Life Insurance Company
PO Box 5423, CINCINNATI, OH 45201-5423 (800) 789-6771
INDIVIDUAL CONTRACT APPLICATION
OWNER/ANNUITANT INFORMATION
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<S> <C>
CONTRACT OWNER
Name ________________________________________________ Sex: [ ]M [ ]F
Address______________________________________________ Date of Birth:_________________________________________
City, State Zip______________________________________ Daytime Phone #(_____)_________________________________
Social Security #____________________________________ Evening Phone #(_____)_________________________________
JOINT CONTRACT OWNER (If Applicable)
Name_________________________________________________ Sex: [ ]M [ ]F
Social Security #____________________________________ Date of Birth:_________________________________________
ANNUITANT (If other than owner)
Name_________________________________________________ Sex: [ ]M [ ]F Date of Birth: ______________________
Primary Beneficiary Contingent Beneficiary
Name ________________________________________________ Name__________________________________________________
Address______________________________________________ Address_______________________________________________
City, State Zip______________________________________ City, State Zip _______________________________________
Relationship to Owner: ______________________________ Relationship to Owner: ________________________________
CONTRIBUTIONS
---------------------------------------------------------------------------------------------------------------------
[ ] Single Premium Amount $___________
[ ] Salary Reduction/Flex Premium First Payment Date _______ Frequency _______ Modal Payment $______________________
Name of Employer (TSA/SEP-IRA Only) _____________________________________________ Case Number ______________________
Tax Qualification [ ]TSA [ ]IRA [ ] SEP-IRA [ ]Nonqualified [ ]Other_____________________________________________
PURCHASE PAYMENT ALLOCATION: (Please check the selected account(s). Allocations must be whole percentages.)
---------------------------------------------------------------------------------------------------------------------------
Variable Accounts: Allocation Allocation
[Merrill Lynch/VSF] [Dreyfus]
[ ] [Basic Value Focus] _______% [ ] [Socially Responsible Growth] _________%
[ ] [Global Strategy Focus] _______% [ ] [Stock Index] _________%
[ ] [High Current Income] _______% [ ] [VIF Capital Appreciation] _________%
[ ] [Domestic Money Market Fund] _______%
[Janus/Aspen Series] Fixed Accounts:
[ ] [Aggressive Growth] _______% [ ] [Fixed Accumulation Account] _________%
[ ] [Worldwide Growth] _______% [ ] [Fixed Option One-Year] _________%
[ ] [Balanced] _______% [ ] [Fixed Option Three-Year] _________%
[ ] [Short-Term Bond] _______% [ ] [Fixed Option Five-Year] _________%
Total Allocation 100%
Form #3009 AP aiapp
<PAGE>
REPLACEMENT
Will the proposed contract replace any existing annuity or life insurance contract or certificate? [ ] Yes [ ] No
SUITABILITY REVIEW (To be completed by the Owner)
SEC/NASD rules require that all registered representatives have reasonable grounds for believing that an investment is
suitable for you. This decision is made upon the facts disclosed by you. If you are not certain of a particular value,
please make a reasonable estimate.
Tax Bracket: ________% Investment Risk Tolerance: [ ] Low [ ] Moderate [ ] High
Investment Objectives: [ ] Growth [ ] Income [ ] Growth and Income [ ] Capital Preservation
Purpose of Investment: [ ] Retirement [ ] Diversification [ ] Other (Specify) _______________________________________
Aggregate Family Net Worth (Excluding Real Estate and Furnishings): $_________________
Annual Family Income: $________________
The information as stated above is true to the best of my knowledge.
_______________________________________________
AGENT'S SIGNATURE (Agent must sign here)
I understand the representative has requested suitability information as required by the SEC, but I choose not to provide
it.
___________________________________________________________________________
SIGNATURE OF OWNER (Owner must sign if Suitability Review is not completed)
SIGNATURE
______________________________________________________________________________________________________
I hereby apply for the individual annuity contract as set forth above. I have read and understand each of the statements
and answers on this form. I HAVE RECEIVED CURRENT PROSPECTUSES FOR ANNUITY INVESTORS VARIABLE ACCOUNT A AND THE FUNDS. I
UNDERSTAND THAT ANNUITY PAYMENTS OR SURRENDER VALUES, WHEN BASED UPON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT.
SIGNED AT: _____________________________________, this ___________ day of ____________________, 19______
City State
__________________________________________ ___________________________________________________________
Signature of Owner Signature of Joint Owner (If Applicable)
AGENT'S STATEMENT
______________________________________________________________________________________________________
To the best of my knowledge and belief, the annuity applied for [ ] is [ ] is not intended to replace insurance or an
annuity on the proposed Owner with this or any other company. I also certify that an appropriate exclusion allowance was
calculated (if applicable) for the named Owner, in accordance with current tax laws and regulations.
Signature of Agent _______________________ Agent Name (Please Print) ______________________________________
Agent Number ___________________________ Agent Phone Number ______________________________________________
Date ________ Principal Signature _____________________________________________
FOR HOME OFFICE USE ONLY:
</TABLE>
<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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<PAGE>
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
- 3 -
<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.
- 4 -
<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.
- 5 -
<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
- 9 -
<PAGE>
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
- 10 -
<PAGE>
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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<PAGE>
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
Date Established by Board of Contract Funded
Directors By Separate Account
---------------------------- --------------------
Annuity Investors Variable Group Flexible Premium
Account A Deferred Annuity
May 26, 1995
Tax-Qualified Individual Flexible
Premium
Deferred Annuity
Non-Tax-Qualified Individual
Flexible Premium Deferred
Annuity
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<PAGE>
<PAGE>
EXHIBIT (8)(e)
AMENDED AND RESTATED
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of the 8th day of December, 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 attached hereto, as such schedule 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
"Underwriter") 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"), is a member in good standing of The National
Association of Securities Dealers, Inc. (the "NASD") and acts as principal
underwriter of the shares of the Fund; 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 several 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 received an order from the SEC 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");
<PAGE>
WHEREAS, Merrill Lynch Asset Management, L.P. ("MLAM") is duly
registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and any applicable state securities law, and acts as the
Fund's investment adviser and
WHEREAS, the Company has registered or will register under the
1933 Act certain variable life insurance policies and/or variable annuity
contracts funded or to be funded through one or more of the Accounts (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 (the "Shares" ) on behalf of the Accounts to fund the
Contracts, and the Fund intends to sell such Shares to the relevant
Accounts at such Shares' net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE 1
Sale of the Fund Shares
-----------------------
1.1 Subject to Section 1.3 of this Agreement, the Fund shall
cause the Underwriter to make Shares of the Portfolios available to the
Accounts at such Shares' most recent net asset value provided to the
Company prior to receipt of such purchase order by the Fund (or the
Underwriter as its agent), in accordance with the operational procedures
mutually agreed to by the Underwriter and the Company from time to time
and 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 Subject to Section 1.3 of this Agreement, the Fund will
redeem any full or fractional Shares of any Portfolio when requested by
the Company on behalf of an Account at such Shares' most recent net asset
value provided to the Company prior to receipt by the Fund (or the
Underwriter as its agent) of the request for redemption, as established in
accordance with the operational procedures mutually agreed to by the
Underwriter and the Company from time to time and the provisions of the
then current-prospectus of the Fund. The Fund shall make payment for such
- 2 -
<PAGE>
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
Business Day, provided that such orders are received prior to 9:00 a.m. on
such Business Day 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 (such
Portfolio's "valuation time") on the prior Business Day. Any purchase or
redemption order for Shares of any Portfolio received, on any Business
Day, after such Portfolio's valuation time on such Business Day shall be
deemed received prior to 9:00 a.m. on the next succeeding 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. Purchase and redemption orders shall be
provided by the Company to the Underwriter as agent for the Fund in such
written or electronic form (including, facsimile) as may be mutually
acceptable to the Company and the Underwriter. The Underwriter may reject
purchase and redemption orders that are not in proper form. In the event
that the Company and the Underwriter agree to use a form of written or
electronic communication which is not capable of recording the time, date
and recipient of any communication and confirming good transmission, the
Company agrees that it shall be responsible (i) for confirming with the
Underwriter that any communication sent by the Company was in fact
received by the Underwriter in proper form, and (ii) for the effect of any
delay in the Underwriter's receipt of such communication in proper form.
The Fund and its agents shall be entitled to rely, and shall be fully
protected from all liability in acting, upon the instructions of the
persons named in the list of authorized individuals attached hereto as
Schedule C, or any subsequent list of authorized individuals provided to
the Fund or its agents by the Company in such form, without being required
to determine the authenticity of the authorization or the authority of the
persons named therein.
1.4 Purchase orders that are transmitted to the Fund in
accordance with Section 1.3 of this Agreement shall be paid for no later
than 12:00 noon on the same Business Day that the Fund receives notice of
the order. Payments shall be made in federal funds transmitted by wire. In
the event that the Company shall fail to pay in a timely manner for any
purchase order validly received by the Underwriter on behalf of the Fund
pursuant to Section 1.3 of this Agreement (whether or not such failure is
the fault of the Company), the Company shall hold the Fund harmless from
any losses reasonably sustained by the Fund as the result of acting in
reliance on such purchase order.
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
to any Account. Shares ordered from the Fund will be recorded in the
appropriate title for each Account.
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<PAGE>
1.6 The Fund shall furnish prompt notice to the Company of
any income, dividends or capital gain distribution payable on Shares of
any Portfolio. 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 such net asset value per share is calculated
and shall use its best efforts to make such net asset value per share
available by 6:30 p.m., New York time.
1.8 The Company agrees that it will not take any action to
operate any 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
Contracts and Accounts listed in Schedule A, as such schedule may be
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 2.10 and Article 4 of this Agreement.
1.11 So 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
day on which (a) the net asset value per share of the Shares is
determined, (b)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 by MLAM to
the Company of such certificate, (a) the Company's ownership interest in
the Shares so to be returned shall immediately cease, (b) such Shares
shall be deemed to have been canceled and to be no longer outstanding, and
(c) all rights in respect of such Shares shall cease.
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<PAGE>
ARTICLE 2
Obligation 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 or
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 ) 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.
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
- 5 -
<PAGE>
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 prospectus for the Contracts or
statement of additional information for the Contracts 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
statement, 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 by 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 registration statement for each 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 and insurance
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).
- 6 -
<PAGE>
2.10 Solely with respect to Contracts and Accounts that are
subject to the 1940 Act, 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 Contracts - or 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 Contract or policyowners are received, as well as
Shares held by the Account that are owned by the Company for its general
account, in the same proportion as the Company votes Shares held by the
Account for which timely voting instructions are received from Contract -
or policyowners; 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 issuance of
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 will all applicable federal and state
laws; and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
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.
- 7 -
<PAGE>
3.5 The Fund represents and warrants that it is duly
organized and validly existing under the laws of the State of Maryland.
3.6 The Fund represents and warrants that the sale of the
Fund Shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and that 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
affect the continuous offering of its shares. The Company shall advise the
Fund of any state requirements to register 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.
3.7 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; (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 Directors 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 Fund 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.
- 8 -
<PAGE>
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 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 Fund's election, to
withdraw the affected Account's or Accounts' investment in the Fund and
terminate this Agreement with respect to such Account(s); 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
will withdraw the affected Account's (or Accounts') investment in the Fund
and terminate this Agreement with respect to such Account(s) 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
Agreement, a majority of the Disinterested Directors shall determine
- 9 -
<PAGE>
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 affected Account's (or Accounts') investment in the Fund and
terminate this Agreement with respect to such Account(s) within 30 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 Fund 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.
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 such Indemnified
- 10 -
<PAGE>
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) below) 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 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 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,
- 11 -
<PAGE>
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 such 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 statement 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
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 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 statement or
representations (other than statements or representations
contained in and accurately derived from Company
Documents) or wrongful conduct of the Fund 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 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
- 12 -
<PAGE>
(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 any Indemnified Party
to the extent such Losses arise out of or result 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 party against whom
indemnification is sought 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 that 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
Indemnified Party independently in connection with the defense thereof
other than reasonable costs of investigation.
ARTICLE 6
Termination
-----------
6.1 This Agreement may be terminated by either party for any
reason by six (6) months' advance written notice to the other party, and
may be terminated by the Fund pursuant to Sections 6.2 through 6.4 below
upon written notice to the Company.
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 department of any state, or any other
- 13 -
<PAGE>
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 that 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 by the Fund, at its
option, if the Fund shall determine, in its 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 that 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 Shares
available after such termination;if the Underwriter and the Fund will
continue to make Shares so available, the provisions of this Agreement
shall remain in effect except for Section 6.1 hereof and thereafter either
the 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 so long as Shares of
the Fund are held on behalf of Contract owners in accordance with Section
6.5.
- 14 -
<PAGE>
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 45202
Attention: Mark F. Muething
ARTICLE 8
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 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
- 15 -
<PAGE>
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.
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: /s/ Mark F. Muething
----------------------------------
Title: Senior Vice President
----------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
By: /s/ Terry K. Glenn
------------------------------------
Name: /s/ Terry K. Glenn
-----------------------------------
Title: Executive Vice President
----------------------------------
- 16 -
<PAGE>
Schedule A
Segregated Accounts of Annuity Investors Life Insurance Company
Participating in Portfolios of Merrill Lynch Variable Series Funds, Inc.
Name of Separate Account Date Established
------------------------ ----------------
Annuity Investors Variable Account A May 26, 1995
- 17 -
<PAGE>
Schedule B
Portfolios of Merrill Lynch Variable Series Funds, Inc.
Offered to Segregated Accounts of Annuity Investors Life Insurance Company
High Current Income Fund
Domestic Money MarketFund
Basic Value Focus Fund
Global Strategy Focus Fund
- 18 -
<PAGE>
Schedule C
Persons Authorized to Act on Behalf of Annuity Investors Life Insurance
Company
The Fund, the Underwriter and their respective agents are authorized to
rely on instructions from the following individuals on behalf of Annuity
Investors Life Insurance Company:
Robert E. Allen /s/ Robert E. Allen
------------------------------
Lynn Laswell /s/ Lynn Laswell
------------------------------
Arthur Chin /s/ Arthur Chin
------------------------------
Stanley Poon /s/ Stanley Poon
------------------------------
Brian Sponaugle /s/ Brian Sponaugle
------------------------------
Laura Lally /s/ Laura Lally
------------------------------
- 19 -
<PAGE>
<PAGE>
EXHIBIT (8)(f)
AGREEMENT
ANNUITY INVESTORS LIFE INSURANCE COMPANY (the "Insurer") and
MERRILL LYNCH ASSET MANAGEMENT, L.P. ("MLAM") mutually agree to the
arrangements set forth in this Agreement (the "Agreement") dated as of
December 8th, 1995.
WHEREAS, MLAM is the investment adviser to the Merrill Lynch Variable
Series Funds, Inc. (the "Fund"); and
WHEREAS, the Insurer issues variable annuities (the "Policies"); and
WHEREAS, amounts invested in the Policies by policy holders are
deposited in separate accounts of the Insurer which will in turn purchase
shares of certain portfolios of the Fund, each of which is an investment
option offered by the Policies; and
WHEREAS, the Fund expects to derive substantial savings in
administrative expenses by virtue of having separate accounts of the
Insurer as shareholders of record of Fund shares, rather than numerous
public shareholders, and having the Insurer perform certain administrative
services for the Fund (which are identified on SCHEDULE A hereto); and
WHEREAS, neither MLAM nor the Insurer has any contractual or
other legal obligation to perform such administrative services for the
Fund; and
WHEREAS, the Insurer desires to be compensated for providing such
administrative services to the Fund; and
WHEREAS, MLAM desires that the Fund benefit from the lower
administrative expenses expected to result from the administrative
services performed by the Insurer; and
WHEREAS, MLAM accordingly would prefer to compensate the Insurer
for providing administrative services to the Fund from its own funds,
derived from its bona fide profits, rather than request that the Fund bear
the costs of such compensation:
NOW, THEREFORE, the parties agree as follows:
1. Administration Expense Payments.
-------------------------------
(a) MLAM agrees to pay the Insurer an amount equal to
the percent identified on SCHEDULE B hereto of that portion of
the gross annual investment advisory fees paid by the Fund to
MLAM attributable to investments in portfolios of the Fund by
separate accounts of the Insurer.
<PAGE>
(b) MLAM shall calculate the payment contemplated by
this Section 1 at the end of each fiscal quarter and will make
such payment to the Insurer, without demand or notice by the
Insurer, reasonably promptly thereafter.
2. Nature of Payments.
------------------
The parties to this Agreement recognize and agree that
MLAM's payments to the Insurer are for administrative services
only and do not constitute payment in any manner for investment
advisory services or for costs of distribution of Policies or of
Fund shares and are not otherwise related to investment advisory
or distribution services or expenses. The amount of
administration expense payments made by MLAM to the Insurer
pursuant to Section 1 (a) of this Agreement are not intended to
be, and shall not be deemed to be, indicative of MLAM's bona fide
profits from serving as investment adviser to the Fund.
3. Term.
----
This Agreement shall remain in full force and effect for
a period of one year from the date hereof and shall be
automatically renewed thereafter for successive one-year periods,
unless otherwise terminated in accordance with Section 4 hereof.
4. Termination.
-----------
(a) This Agreement will be terminated upon mutual
agreement of the parties hereto in writing.
(b) Either party to this Agreement may, by notice to
the other party delivered more than thirty (30)
days prior to the expiration of any one-year term
of this Agreement, elect to terminate this
Agreement as of the end of such term.
(c) This Agreement shall automatically terminate upon
(i) the termination of the Participation
Agreement between the Insurer and Merrill Lynch
Variable Series Funds, Inc., or (ii) the
dissolution or bankruptcy of any party hereto, or
in the event that any party hereto is placed in
receivership
or
- 2 -
<PAGE>
rehabilitation, or in the event that the
management of its affairs is assumed by any
governmental, regulatory or judicial authority.
5. Amendment.
---------
This Agreement may be amended only upon mutual agreement
of the parties hereto in writing.
6. Notices.
-------
All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if delivered
(a) to MLAM at 800 Scudders Mill Road, Plainsboro,
New Jersey 08536, attention: Philip L. Kirstein;
and
(b) to the Insurer, at 250 East Fifth Street, 10th
Floor, Cincinnati, Ohio 46202, attention: General
Counsel.
7. Miscellaneous.
-------------
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the parties hereto and their
transferees, successors and assigns. The benefits
of and the right to enforce this Agreement shall
accrue to the parties and their transferees,
successors and assigns.
(b) ASSIGNMENT. Neither this Agreement nor any of the
rights, obligations or liabilities of either
party hereto shall be assigned without the
written consent of the other party.
(c) INTENDED BENEFICIARIES. Nothing in this Agreement
shall be construed to give any person or entity
other than the parties hereto any legal or
equitable claim, right or remedy. Rather, this
Agreement is intended to be for the sole and
exclusive benefit of the parties hereto.
(d) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an
original but all of which shall together
constitute one and the same instrument.
- 3 -
<PAGE>
(e) APPLICABLE LAW. This Agreement shall be
interpreted, construed, and enforced in
accordance with the laws of the State of New
York, without reference to the conflict of law
thereof.
(f) SEVERABILITY. If any portion of this Agreement
shall be found to be invalid or unenforceable by
a court or tribunal or regulatory agency of
competent jurisdiction, the remainder shall not
be affected thereby, but shall have the same
force and effect as of the invalid or
unenforceable portion had not been inserted.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By: /s/ Mark F. Muething
-------------------------
Name: /s/ Mark F. Muething
-----------------------
Title: Senior Vice President
-----------------------
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By: Princeton Services, Inc.
its General Partner
/s/ Terry K. Glenn
---------------------------------
Terry K. Glenn
Executive Vice President
- 4 -
<PAGE>
Schedule A
ADMINISTRATIVE SERVICES FOR THE FUND
Maintenance of books and records
. Maintaining an inventory of share purchases to assist
transfer agent in recording issuance of shares.
. Performing miscellaneous accounting services to assist
transfer agent in recording transfers of shares (via net
purchase orders).
. Reconciliation and balancing of the separate account at
the Fund level in the general ledger and reconciliation
of cash accounts at general account.
Purchase Orders
. Determination of net amount of cash flow into Fund.
. Reconciliation and deposit of receipts at Fund and
confirmation thereof.
Redemption Orders
. Determination of net amount required for redemptions by
Fund.
. Notification to Fund of cash required to meet payments.
. Cost of share redemptions.
Reports
. Periodic information reporting to the Fund.
Fund-Related Contract Owner Services
. Telephonic support for contract owners with respect to
inquiries about the Fund (not including information about
performance or related to sales.)
Other Administrative Support
. Sub-Accounting services.
. Providing other administrative support to the Fund as
mutually agreed between the Insurer and the Fund.
. Relieving the Fund of other usual or incidental
administrative services provided to individual
shareholders.
. Preparation of reports to certain third-party reporting
services.
- 5 -
<PAGE>
Schedule B
<TABLE>
<CAPTION>
<S> <C>
Applicable % of Fee
-------------------
Gross annual investment advisory fees
paid by the Fund to MLAM attributable 15 basis points (0.15%)
to aggregate investments of $100
million or less in portfolios of the
Fund by separate accounts of the
Insurer.
Gross annual investment advisory fees
paid by the Fund to MLAM attributable 20 basis points (0.20%)
to aggregate investments of any amounts
in excess of $100 million in portfolios
of the Fund by separate accounts of the
Insurer.
</TABLE>
- 6 -
<PAGE>
<PAGE>
EXHIBIT (10)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 29, 1996, with respect to the
financial statements of Annuity Investors Life Insurance Company included
in the Pre-effective Amendment No. 1 of the Registration Statement (Form
N-4 File No. 33-65409) and related Statement of Additional Information of
Annuity Investors Variable Account A.
/s/ Ernst & Young
-------------------
Ernst & Young LLP
Cincinnati, Ohio
June 25, 1996
<PAGE>
