As filed with the Securities and Exchange Commission on April 29, 1997
File No. 33-65409
File No. 811-07299
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. ___ ( )
Post-effective Amendment No. _1_ ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Amendment No. _3_ (X)
(Check appropriate box or boxes)
ANNUITY INVESTORS(REGISTERED TRADEMARK) 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
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 Massachusetts Avenue, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective:
/_/ Immediately upon filing pursuant to Rule 485(b)
/X/ On MAY 1, 1997 pursuant to Rule 485(b)
/_/ 60 days after filing pursuant to Rule 485(a)(i)
/_/ On pursuant to Rule 485(a)(i)
/_/ 75 days after filing pursuant to Rule 485 (a)(ii)
/_/ On pursuant to Rule 485(a)9ii)
Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The notice required by such rule for the most recent fiscal
year was filed on March 3, 1997.
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CROSS REFERENCE SHEET
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
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
---------------- ------------------
<S> <C> <C> <C>
1. Cover Page.............................. Cover Page
2. Definitions............................. Definitions
3. Synopsis................................ Highlights
4. Condensed Financial Information
(a) Accumulation Unit Values.......... Condensed Financial Information
(b) Performance Data.................. Performance Information
(c) Financial Statements.............. Financial Statements (Statements in SAI)
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
(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
12. Taxes................................... Federal Tax Matters
13. Legal Proceedings....................... Legal Proceedings
14. Table of Contents for the Statement of
Additional Information.................. Statement of Additional Information
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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 History......... General Information and 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
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
</TABLE>
PART C- OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
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ANNUITY INVESTORS(REGISTERED TRADEMARK) VARIABLE ACCOUNT A
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED TRADEMARK)
PROSPECTUS
FOR THE
COMMODORE AMERICUS(SERVICE MARK)
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 Americus(SERVICE MARK) Individual
Flexible Premium Deferred Annuity Contracts (each, a "Contract") issued by
Annuity Investors Life Insurance Company(REGISTERED TRADEMARK) (the "Company").
The Commodore Americus(SERVICE MARK) 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"), and 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. Non-Qualified
Contracts were formerly known as The Commodore Mariner(SERVICE MARK) Flexible
Premium Deferred Annuity Contracts.
The Contracts provide for the accumulation of an Account Value on a fixed or
variable basis, or a combination of both. The Contracts also provide 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) Dreyfus
Variable Investment Fund-Capital Appreciation Portfolio; (5) Dreyfus Variable
Investment Fund-Growth & Income Portfolio; (6) Dreyfus Variable Investment
Fund-Small Cap Portfolio (7) The Dreyfus Socially Responsible Growth Fund, Inc.;
(8) Dreyfus Stock Index Fund; (9) Merrill Lynch Variable Series Funds, Inc.
Basic Value Focus Fund; (10) Merrill Lynch Variable Series Funds, Inc. Global
Strategy Focus Fund; (11) Merrill Lynch Variable Series Funds, Inc. High Current
Income Fund; (12) Merrill Lynch Variable Series Funds, Inc. Domestic Money
Market Fund; (13) PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio;
(14) PBHG Insurance Series Fund, Inc.-PBHG Technology & Communications
Portfolio; (15) Morgan Stanley Universal Funds Inc.-U.S. Real Estate Portfolio;
(16) Morgan Stanley Universal Funds Inc.-Fixed Income Portfolio; and (17) Strong
Opportunity Fund II, Inc.
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 Contracts 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.
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* * *
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 May 1, 1997, as supplemented October 1, 1997.
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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, SALESPERSON, 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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VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY FINANCIAL INSTITUTION, NOR ARE THEY FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
EACH UNDERLYING FUND. BOTH THIS PROSPECTUS AND THE UNDERLYING FUND PROSPECTUSES
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
Page 2
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TABLE OF CONTENTS
Page
DEFINITIONS...................................................................7
HIGHLIGHTS...................................................................10
The Contract...........................................................10
The Separate Account...................................................10
The Fixed Account......................................................11
Transfers Before the Annuity Commencement Date.........................11
Surrenders.............................................................11
Contingent Deferred Sales Charge ("CDSC")..............................11
Other Charges and Deductions...........................................11
Annuity Benefits.......................................................12
Death Benefit..........................................................12
Federal Income Tax Consequences........................................12
Right to Cancel........................................................12
Contacting the Company.................................................12
CONDENSED FINANCIAL INFORMATION..............................................13
SUMMARY OF EXPENSES..........................................................15
Owner Transaction Expenses.............................................15
Examples...............................................................18
FINANCIAL STATEMENTS.........................................................20
THE FUNDS....................................................................20
Janus Aspen Series.....................................................20
Aggressive Growth Portfolio......................................20
Worldwide Growth Portfolio.......................................20
Balanced Portfolio...............................................20
Dreyfus Funds..........................................................21
Capital Appreciation Portfolio...................................21
Growth and Income Portfolio......................................21
Small Cap Portfolio..............................................21
The Dreyfus Socially Responsible Growth Fund, Inc................21
Dreyfus Stock Index Fund.........................................21
Merrill Lynch Variable Series Funds, Inc...............................22
Basic Value Focus Fund...........................................22
Global Strategy Focus Fund.......................................22
High Current Income Fund.........................................22
Domestic Money Market Fund.......................................22
Strong Opportunity Fund, Inc...........................................22
Strong Opportunity Fund II.......................................22
Morgan Stanley Universal Funds Inc.....................................23
U.S. Real Estate Portfolio.......................................23
Fixed Income Portfolio...........................................23
Page 3
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PBHG Insurance Series Fund, Inc:.......................................23
PBHG Growth II Portfolio.........................................23
PBHG Technology & Communications Portfolio.......................23
Additions, Deletions, or Substitutions.................................24
PERFORMANCE INFORMATION......................................................24
Yield Data.............................................................24
Total Return Data......................................................25
ANNUITY INVESTORS LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT............26
Annuity Investors Life Insurance Company(REGISTERED TRADEMARK).........26
Published Ratings......................................................26
The Separate Account...................................................26
THE FIXED ACCOUNT............................................................27
Fixed Account Options..................................................27
Renewal of Fixed Account Options.......................................27
THE CONTRACTS................................................................28
Right to Cancel........................................................28
PURCHASE PAYMENTS............................................................29
Purchase Payments......................................................29
Allocation of Purchase Payments........................................29
ACCOUNT VALUE................................................................29
Fixed Account Value....................................................30
Variable Account Value.................................................30
Accumulation Unit Value................................................31
Net Investment Factor..................................................31
TRANSFERS....................................................................32
Telephone Transfers....................................................32
Dollar Cost Averaging..................................................32
Portfolio Rebalancing..................................................33
Principal Guarantee Option.............................................33
Interest Sweep.........................................................33
Changes By the Company.................................................33
SURRENDERS...................................................................34
Surrender Value........................................................34
Suspension or Delay in Payment of Surrender Value......................34
Free Withdrawal Privilege..............................................35
Systematic Withdrawal..................................................35
CONTRACT LOANS...............................................................35
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DEATH BENEFIT................................................................36
When A Death Benefit Will Be Paid......................................36
Death Benefit Values...................................................37
Death Benefit Commencement Date........................................37
Form of Death Benefit..................................................37
Beneficiary............................................................38
CHARGES AND DEDUCTIONS.......................................................38
Contingent Deferred Sales Charge ("CDSC")..............................38
Maintenance and Administrative Charges.................................40
Mortality and Expense Risk Charge......................................40
Premium Taxes..........................................................41
Transfer Fee...........................................................41
Fund Expenses..........................................................41
SETTLEMENT OPTIONS...........................................................41
Annuity Commencement Date..............................................41
Election of Settlement Option..........................................41
Benefit Payments.......................................................42
Fixed Dollar Benefit...................................................42
Variable Dollar Benefit................................................42
Transfers After the Annuity Commencement Date..........................43
Annuity Transfer Formula...............................................43
Settlement Options.....................................................44
Minimum Amounts........................................................44
Settlement Option Tables...............................................45
GENERAL PROVISIONS...........................................................45
Non-participating......................................................45
Misstatement...........................................................45
Proof of Existence and Age.............................................45
Discharge of Liability.................................................45
Transfer of Ownership..................................................45
Non-Qualified Contract...........................................45
Qualified Contract...............................................46
Assignment.............................................................46
Non-Qualified Contract...........................................46
Qualified Contract...............................................46
Annual Report..........................................................46
Incontestability.......................................................46
Entire Contract........................................................46
Changes -- Waivers.....................................................47
Notices and Directions.................................................47
FEDERAL TAX MATTERS..........................................................47
Introduction...........................................................47
Taxation of Annuities In General.......................................48
Surrenders.............................................................48
Qualified Contracts..............................................48
Non-Qualified Contracts..........................................48
Annuity Benefit Payments...............................................48
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Penalty Tax............................................................49
Taxation of Death Benefit Proceeds.....................................49
Transfers, Assignments, or Exchanges of the Contract...................49
Qualified Contracts - General..........................................49
Texas Optional Retirement Program......................................49
Individual Retirement Annuities........................................49
Tax-Sheltered Annuities................................................50
Pension and Profit Sharing Plans.......................................50
Certain Deferred Compensation Plans....................................50
Withholding............................................................50
Possible Changes in Taxation...........................................50
Other Tax Consequences.................................................51
General................................................................51
DISTRIBUTION OF THE CONTRACT.................................................52
LEGAL PROCEEDINGS............................................................52
VOTING RIGHTS................................................................52
AVAILABLE INFORMATION........................................................53
STATEMENT OF ADDITIONAL INFORMATION..........................................53
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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.
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.
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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.
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.
PAYMENT INTERVAL: The timing and frequency of Benefit Payments under a
settlement option.
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.
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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 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.
Page 9
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HIGHLIGHTS
THE CONTRACT
The Commodore Americus(SERVICE MARK) Contracts described in this
Prospectus are available 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, as well as for arrangements that qualify for favorable
tax treatment under Sections 401, 403 or 408 of the Code. Non-qualified
annuity purchases were previously known as The Commodore Mariner(SERVICE
MARK).
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 26.)
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) Dreyfus Variable
Investment Fund-Capital Appreciation Portfolio; (5) Dreyfus Variable
Investment Fund-Growth & Income Portfolio; (6) Dreyfus Variable Investment
Fund-Small Cap Portfolio; (7) The Dreyfus Socially Responsible Growth
Fund, Inc.; (8) Dreyfus Stock Index Fund; (9) Merrill Lynch Variable
Series Funds, Inc. Basic Value Focus Fund; (10) Merrill Lynch Variable
Series Funds, Inc. Global Strategy Focus Fund; (11) Merrill Lynch Variable
Series Funds, Inc. High Current Income Fund; (12) Merrill Lynch Variable
Series Funds, Inc. Domestic Money Market Fund; (13) PBHG Insurance Series
Fund, Inc.-PBHG Growth II Portfolio; (14) PBHG Insurance Series Fund,
Inc.-PBHG Technology & Communications Portfolio; (15) Morgan Stanley
Universal Funds Inc.-U.S. Real Estate Portfolio; (16) Morgan Stanley
Universal Funds Inc.-Fixed Income Portfolio; and (17) Strong Opportunity
Fund II, Inc.
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 38. For more information about the Funds, see "THE FUNDS," page 20,
and the accompanying Funds' prospectuses.
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THE FIXED ACCOUNT
The Fixed Account is an account within the Company's general account.
There are currently five Fixed Account options available under the Fixed
Account: a Fixed Accumulation Account option and four 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 27.)
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 among the Sub-Accounts, by Written Request to the Company or
by telephone in accordance with the Company's telephone transfer rules.
(See "TRANSFERS," page 32.)
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 32.)
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, 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 47.)
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 38.)
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 Company incurs
reduced sales and servicing expenses, such as Contracts offered to active
employees of the Company or any of 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 ("Enhanced Contract"). (See "CHARGES AND DEDUCTIONS," page
38.)
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," page 38.)
Page 11
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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 38.)
ANNUITY BENEFITS
Annuity Benefits are paid on a fixed or variable basis, or a combination
of both. (See "Benefit Payments," page 42.)
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 36.)
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 47.)
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 28.)
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 A 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 47.)
Page 12
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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CONDENSED FINANCIAL INFORMATION
The following table gives per unit information about the financial history
of each Sub-Account of the Separate Account from inception to December 31,
1996. This information should be read in conjunction with the Separate
Account financial statements (including the notes thereto) included in the
Statement of Additional Information. (No Enhanced Contracts were issued in
the year ended December 31, 1996.)
ACCUMULATION UNIT VALUES AND UNITS OUTSTANDING
1996 1995
-------- ----
DREYFUS VARIABLE INVESTMENT
FUND-CAPITAL APPRECIATION
Accumulation UV - beginning 9.944353 10.000000*
Accumulation UV - ending 12.330543 9.944353
Accumulated units at year end 33,424.286 0.000
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
Accumulation UV - beginning 9.960199 10.000000*
Accumulation UV - ending 11.924561 9.960199
Accumulated units at year end 15,316.028 0.000
DREYFUS STOCK INDEX FUND
Accumulation UV - beginning 9.992509 10.000000*
Accumulation UV - ending 12.092195 9.992509
Accumulated units at year end 29,203.177 0.000
JANUS ASPEN SERIES
AGGRESSIVE GROWTH
Accumulation UV - beginning 10.299246 10.000000*
Accumulation UV - ending 10.979832 10.299246
Accumulated units at year end 52,219.342 0.000
WORLDWIDE GROWTH
Accumulation UV - beginning 10.239284 10.000000*
Accumulation UV - ending 13.048360 10.239284
Accumulated units at year end 50,730.352 0.000
BALANCED
Accumulation UV - beginning 10.171211 10.000000*
Accumulation UV - ending 11.670308 10.171211
Accumulated units at year end 49,603.384 0.000
SHORT-TERM BOND**
Accumulation UV - beginning 10.061754 10.000000*
Accumulation UV - ending 10.332080 10.061754
Accumulated units at year end 4,216.270 0.000
Page 13
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC.
BASIC VALUE FOCUS
Accumulation UV - beginning 10.147434 10.000000*
Accumulation UV - ending 12.094664 10.147434
Accumulated units at year end 6,820.503 0.000
GLOBAL STRATEGY FOCUS
Accumulation UV - beginning 10.105242 10.000000*
Accumulation UV - ending 11.294096 10.105242
Accumulated units at year end 2,114.707 0.000
HIGH CURRENT INCOME
Accumulation UV - beginning 10.118436 10.000000*
Accumulation UV - ending 11.119068 10.118436
Accumulated units at year end 6,837.357 0.000
DOMESTIC MONEY MARKET
Accumulation UV - beginning 1.002475 1.000000*
Accumulation UV - ending 1.041216 1.002475
Accumulated units at year end 325,331.820 0.000
* Effective December 7, 1995 on Separate Account commencement date.
** Because this Sub-Account has been eliminated, effective May 1, 1997,
Purchase Payments are no longer allocable to it.
Page 14
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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 Fee2 $25
____________________-
1 The first twelve transfers in a Contract year are free. Thereafter, a $25
fee will be charged on each subsequent transfer.
2 The Company will waive the Contract Maintenance Fee if the Account Value
is equal to or greater than $30,000 on the date the Contract Maintenance
Fee would otherwise be assessed.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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<TABLE>
<CAPTION>
SEPARATE ACCOUNT DREYFUS
ANNUAL EXPENSES3/ JANUS A.S. JANUS A.S. V.I.F. V.I.F. DREYFUS V.I.F.
(as a percentage of AGGRESSIVE WORLDWIDE JANUS A.S. GROWTH DREYFUS CAPITAL
average Separate GROWTH GROWTH BALANCED INCOME SMALL CAP APPRECIATION
Account assets) PORTFOLIO5/ PORTFOLIO5/ PORTFOLIO5/ PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mortality and 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Expense Risk
Charge
Administration
Charge 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Fees and 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Expenses of the
Separate Account
Total 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Separate
Account Annual
Expenses
FUND ANNUAL Expenses4/
(as a percentage of
Fund average net
assets after fee
waiver and/or
expense reimburse-
ment, if any)
Management Fees 0.72% 0.66% 0.79% 0.75% 0.75% 0.75%
Other Expenses 0.04% 0.14% 0.15% 0.08% 0.04% 0.09%
Total Fund Annual 0.76% 0.80% 0.94% 0.83% 0.79% 0.84%
Expenses
SEPARATE ACCOUNT MERRILL MERRILL MERRILL
ANNUAL EXPENSES3/ THE DREYFUS LYNCH LYNCH LYNCH
(as a percentage of SOCIALLY V.S.F. V.S.F. V.S.F. MERRILL LYNCH
average Separate RESPONSIBLE BASIC GLOBAL HIGH V.S.F.
Account assets) GROWTH DREYFUS VALUE STRATEGY CURRENT DOMESTIC
FUND, STOCK FOCUS FOCUS INCOME MONEY MARKET
INC.6/ INDEX FUND FUND FUND FUND FUND
------ ---------- ---- ------ -------- ------------
Mortality and 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Expense Risk Charge
Administration 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Charge
Other Fees and 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Expenses of the
Separate Account
Total Separate 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Account Annual
Expenses
</TABLE>
FUND ANNUAL Expenses4/
as a percentage of
Fund average net assets
after fee waiver and/or
expense reimbursement,
if any)
Management Fees 0.72% 0.245% 0.60% 0.65% 0.49% 0.50%
Other Expenses 0.24% 0.055% 0.06% 0.06% 0.05% 0.04%
Total Fund Annual 0.96% 0.30 % 0.66% 0.71% 0.54% 0.54%
Expenses
Page 16
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PBHG INSURANCE
SEPARATE ACCOUNT MORGAN PBHG INSURANCE SERIES FUND,
ANNUAL EXPENSES3/ STRONG STANLEY MORGAN SERIES FUND, INC. - PBHG
(as a percentage of OPPORTUNITY U.S. REAL STANLEY - INC. - PBHG TECHNOLOGY &
average Separate FUND II ESTATE FIXED INCOME GROWTH II COMMUNICATIONS
Account assets) INC. PORTFOLIO PORTFOLIO PORTFOLIO7/ PORTFOLIO7/
---- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Mortality and 1.25% 1.25% 1.25% 1.25% 1.25%
Expense Risk
Charge
Administration 0.00% 0.00% 0.00% 0.00% 0.00%
Charge
Other Fees and 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%
Account Annual
Expenses
Fund Annual
Expenses4/as a
percentage of Fund
average net assets
after fee waiver
and/or expense
reimbursement, if any)
Management Fees 1.00% 0.80% 0.40% 0.85% 0.61%
Other Expenses 0.17% 0.30% 0.30% 0.30% 0.59%
Total Fund Annual 1.17% 1.10% 0.70% 1.15% 1.20%
Expenses
</TABLE>
3 Annual expenses are the same for each Sub-Account. These expenses are based on
expenses incurred for the fiscal year ended December 31, 1996.
4 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, 1996. Actual expenses
in future years may be higher or lower.
5 The fees and expenses in the table above are based on gross expenses of the
shares of each Portfolio before expense offset arrangements for the fiscal year
ended December 31, 1996. The information for each Portfolio is net of fee
waivers or reductions from Janus Capital Corporation. Fee reductions for the
Aggressive Growth, Worldwide Growth and Balanced Portfolios reduce the
management fee to the level of the corresponding Janus retail fund. Other
waivers, if applicable, are first applied against the management fee and then
against other expenses. Without such waivers and reductions, the Management Fee,
Other Expenses and Total Operating Expenses for the Portfolios would have been
0.79%, 0.04% and 0.83%, respectively, for Aggressive Growth Portfolio, 0.77%,
0.14% and 0.91%, respectively, for Worldwide Growth Portfolio and 0.92%, 0.15%
and 1.07%, respectively, for Balanced Portfolio. Janus Capital Corporation may
modify or terminate the waivers or reductions at any time upon at least 90 days'
notice to the Trustees of a Portfolio.
6 Fund expenses are net of management fees and other expenses waived and/or
reimbursed. In the absence of such fee waivers and/or expense reimbursements,
Management Fees, Other Expenses and Total Portfolio Expenses for The Dreyfus
Socially Responsible Growth Fund, Inc. would have been 0.75%, 0.24% and 0.99%
for the fiscal year ended December 31, 1996.
7 The adviser has voluntarily agreed to waive or limit its fees or assume other
expenses of the PBHG Insurance Series Fund, Inc.--PBHG Technology &
Communications Portfolio and PBHG Growth II Portfolio through December 31, 1997,
so that total operating expenses of each Portfolio will not exceed 1.20% of
average daily net assets. Such waiver or expense reimbursements by the adviser
are subject to repayment by the Portfolio in future years if such repayment can
be achieved without an increase in the total operating expenses of the Portfolio
above 1.20% of average daily net assets. Absent such fee waiver or expense
reimbursement, the estimated Management Fees and Total Operating Expenses for
the PBHG Technology & Communication Portfolio would be 0.85% and 1.44%,
respectively. Given the projected asset size of the PBHG Growth II Portfolio, no
expense reimbursement or fee waiver is anticipated with respect to it.
Page 17
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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EXAMPLES
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:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 Year 3 Years 5 Years 10 Years
- ----------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Janus Aspen Series-Aggressive Growth $92 $120 $157 $307
Portfolio
Janus Aspen Series-Worldwide Growth Portfolio $92 $122 $159 $312
Janus Aspen Series-Balanced Portfolio $94 $126 $167 $330
Dreyfus Variable Investment Fund-Capital $93 $123 $161 $317
Appreciation Portfolio
The Dreyfus Socially Responsible Growth $94 $127 $168 $333
Fund, Inc.
Dreyfus Variable Investment Fund-Growth & $92 $123 $161 $316
Income Portfolio
Dreyfus Variable Investment Fund-Small Cap $92 $121 $158 $311
Portfolio
Dreyfus Stock Index Fund $87 $105 $130 $244
Merrill Lynch Variable Series Funds, $91 $117 $151 $293
Inc.-Basic Value Focus Fund
Merrill Lynch Variable Series Funds, $91 $119 $154 $300
Inc.-Global Strategy Focus Fund
Merrill Lynch Variable Series Funds, $90 $113 $144 $277
Inc.-High Current Income Fund
Merrill Lynch Variable Series Funds, $90 $113 $144 $277
Inc.-Domestic Money Market Fund
Strong Opportunity Fund II, Inc. $96 $134 $180 $359
Morgan Stanley Universal Funds-U.S. Real $95 $131 $176 $351
Estate Portfolio
Morgan Stanley Universal Funds-Fixed Income $91 $119 $153 $299
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth $96 $133 $179 $357
II Portfolio
PBHG Insurance Series Fund, $96 $135 $182 $363
Inc.-PBHGTechnology & Communications
Portfolio
</TABLE>
Page 18
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 Year 3 Years 5 Years 10 Years
- ----------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Janus Aspen Series-Aggressive Growth Portfolio $22 $70 $127 $307
Janus Aspen Series-Worldwide Growth Portfolio $22 $72 $129 $312
Janus Aspen Series-Balanced Portfolio $24 $76 $137 $330
Dreyfus Variable Investment Fund-Capital $23 $73 $140 $317
Appreciation Portfolio
The Dreyfus Socially Responsible Growth Fund, $24 $77 $138 $333
Inc.
Dreyfus Variable Investment Fund-Growth & $22 $73 $131 $316
Income Portfolio
Dreyfus Variable Investment Fund-Small Cap $22 $71 $128 $311
Portfolio
Dreyfus Stock Index Fund $17 $55 $100 $244
Merrill Lynch Variable Series Funds, $21 $67 $121 $293
Inc.-Basic Value Focus Fund
Merrill Lynch Variable Series Funds, $21 $69 $124 $300
Inc.-Global Strategy Focus Fund
Merrill Lynch Variable Series Funds, $20 $63 $114 $277
Inc.-High Current Income Fund
Merrill Lynch Variable Series Funds, $20 $63 $114 $277
Inc.-Domestic Money Market Fund
Strong Opportunity Fund II, Inc. $26 $84 $150 $359
Morgan Stanley Universal Funds-U.S. Real $25 $81 $146 $351
Estate Portfolio
Morgan Stanley Universal Funds-Fixed Income $21 $69 $123 $299
Portfolio
PBHG Insurance Series Fund, Inc.-PBGH Growth $26 $83 $149 $357
II Portfolio
PBHG Insurance Series Fund, Inc.-PBGH $26 $85 $152 $363
Technology & Communications Portfolio
</TABLE>
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
The examples assume the reinvestment of all dividends and distributions, no
transfers among Sub-Accounts or between Accounts and a 5% annual rate of return
as mandated by Securities and Exchange Commission regulations.
The purpose of the Examples 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 38 of this Prospectus and the accompanying
prospectus for the applicable Fund for a more complete description of the
various costs and expenses.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RATES OF RETURN OF ANY SUB-ACCOUNT OR FUND. ACTUAL EXPENSES
AND ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR THE
PURPOSE OF THE EXAMPLES. THE $25 CONTRACT MAINTENANCE FEE IS REFLECTED IN THE
EXAMPLES AS A CHARGE OF $1.00.
The fee table and Examples do not include charges to the Owner for premium
taxes.
FINANCIAL STATEMENTS
The financial statements and reports of independent public accountants for the
Company and the Separate Account are contained in the Statement of Additional
Information.
THE FUNDS
The Separate Account currently has seventeen 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 certain
investment 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. For further
discussion of the risks associated with investment in junk bonds, please
see the attached Janus Aspen Series prospectus.
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. For further discussion of the risks associated with investment
in junk bonds, please see the attached Janus Aspen Series prospectus.
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. For further discussion of the risks associated with investment in
junk bonds, please see the attached Janus Aspen Series prospectus.
Page 20
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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.
The Dreyfus Corporation serves as the investment adviser and Fayez Sarofim
& Co. serves as the sub-investment adviser to this Fund.
GROWTH AND INCOME PORTFOLIO The Growth and Income Portfolio's goal is to
provide long-term capital growth, current income and growth of income,
consistent with reasonable investment risk. This Portfolio invests
primarily in equity securities, debt securities and money market
instruments of domestic and foreign issuers.
SMALL CAP PORTFOLIO (Dreyfus Variable Investment Fund). (Dreyfus Variable
Investment Fund). The Small Cap Portfolio's goal is to maximize capital
appreciation. This Portfolio invests primarily in common stocks of
domestic and foreign issuers. This Portfolio will be particularly alert to
companies that The Dreyfus Corporation considers to be emerging
smaller-sized companies which are believed to be characterized by new or
innovative products, services or processes which should enhance prospects
for growth in future earnings.
The Dreyfus Corporation serves as investment adviser to the Growth and
Income and Small Cap Portfolios.
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
of Dreyfus located at 500 Grant Street, Pittsburgh, Pennsylvania 15258, is
the index manager.
Page 21
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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, the Far East and Latin America. Geographical allocation of
the Fund's investments is not limited, and will be made primarily on the
basis of anticipated total return from investments, considering various
factors including economic, financial, social, national, and political
factors. Investing on an international basis involves special
considerations. See the attached Prospectus for the Fund.
HIGH CURRENT INCOME FUND. The primary 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. As a secondary
objective, the Fund seeks capital appreciation when consistent with its
primary 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. Investment in such securities
entails relatively greater risk of loss of income or principal. An
investment in this Fund may not be appropriate as the exclusive investment
to fund a Contract. See the attached Prospectus for the Fund.
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.
STRONG OPPORTUNITY FUND II, INC.
STRONG OPPORTUNITY FUND II, INC. The investment objective of the Strong
Opportunity Fund II is to seek capital growth. It currently emphasizes
medium-sized companies that the Fund's adviser believes are
under-researched and attractively valued.
Strong Capital Management, Inc. serves as the investment adviser to this
Fund.
Page 22
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
MORGAN STANLEY UNIVERSAL FUNDS INC. :
U.S. REAL ESTATE PORTFOLIO. The investment objective of the U.S. Real
Estate Portfolio is above average current income and long-term capital
appreciation by investing primarily in equity securities of U.S. and
non-U.S. companies principally engaged in the U.S. real estate industry,
including Real Estate Investment Trusts (REITs).
Morgan Stanley Asset Management Inc. (a wholly owned subsidiary of Morgan
Stanley Group, Inc.) serves as investment adviser to the U.S. Real Estate
Portfolio.
FIXED INCOME PORTFOLIO. The investment objective of the Fixed Income
Portfolio is to seek above-average total return over a market cycle of
three to five years by investing primarily in a diversified portfolio of
securities issued by the U.S. Government and its Agencies, Corporate
Bonds, Mortgage-Backed Securities, Foreign Bonds and other Fixed Income
Securities.
Miller Anderson & Sherrard, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Group, Inc.) serves as the investment adviser to the Fixed
Income Portfolio.
PBHG INSURANCE SERIES FUND, INC:
PBHG GROWTH II PORTFOLIO. The investment objective of PBHG Growth II
Portfolio is to seek capital appreciation by investing primarily in common
stocks and convertible securities of small and medium size growth
companies (market capitalization or annual revenue of up to $4 billion)
that are considered to have an outlook for strong earnings growth and the
potential for significant capital appreciation.
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO. The investment objective of
the PBHG Technology & Communications Portfolio is to seek long-term growth
of capital by investing primarily in common stocks of companies which rely
extensively on technology or communications in their product development
or operations, or which may be experiencing exceptional growth in sales
and earnings driven by technology or communications-related products and
services.
Pilgrim Baxter & Associates, Ltd. serves as the investment adviser to each
of these Portfolios.
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.
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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 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 performance data and 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
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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Sub-Account which is calculated similarly but, when annualized, the income
earned by an investment in that Sub-Account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a Sub-Account other than the Money Market Sub-Account refers to the
annualized income generated by an investment in the Sub-Account over a specified
30-day period.
The yield calculations do not reflect the effect of any CDSC or premium taxes
that may be applicable to a particular 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 standardized average annual total return quotations reflect the
deduction of all applicable charges except for premium taxes. In addition to
standardized 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
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.
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ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED TRADEMARK)
AND THE SEPARATE ACCOUNT
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED TRADEMARK)
Annuity Investors Life Insurance Company(REGISTERED TRADEMARK) (the "Company"),
formerly known as CarilloN Life Insurance Company, is a stock life insurance
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(REGISTERED TRADEMARK)
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 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.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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The Separate Account is divided into Sub-Accounts, each of which invests solely
in a specific corresponding Fund. (See "THE FUNDS," page 20.) Changes to the
Sub-Accounts may be made at the discretion of the Company. (See "Additions,
Deletions, or Substitutions," page 24.)
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 five 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, Five-Year, and Seven-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.
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
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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 CONTRACTS
Each Contract is an individual flexible premium deferred annuity. The rights and
benefits are described below and in each 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
following the date the Owner receives the Contract. The Contract must be
returned to the 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. Where required by state law, the right to cancel provision of a
Contract may provide for refund of a different amount, or a right to cancel for
a different period of time, than described above.
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PURCHASE PAYMENTS
PURCHASE PAYMENTS
The minimum initial Purchase Payment for Qualified Contracts purchased under a
periodic payment program is $50; for other Qualified contracts, $2,000; for
Non-Qualified Contracts purchased under a periodic payment program, $100; and
for other Non-Qualified Contracts, $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 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."
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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 value ("Accumulation Unit Value") for each
Sub-Account at the end of the preceding Valuation Period.
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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.
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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
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.
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.
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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 or 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.
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.
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.
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.
PRINCIPAL GUARANTEE OPTION
The Owner may elect to have the Company allocate a portion of a Purchase Payment
to the Fixed Account Seven-Year Guarantee Period such that, at the end of the
Seven-Year Guarantee Period, that account will grow to an amount equal to the
total Purchase Payment. The Company determines the portion of the Purchase
payment which must be allocated to the Fixed Account Seven-Year Guarantee Period
such that, based on the interest rate then in effect, the Seven-Year Guarantee
account will grow to equal the full amount of the Purchase Payment after seven
years. The minimum Purchase Payment eligible for the Principal Guarantee program
is $5,000.
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
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described above without prior notice to Owners, as permitted by applicable law.
The Company may also impose an annual fee or increase the current annual fee, as
applicable, for any of the foregoing services in amount(s) as the Company may
then determine to be reasonable for participation in the service.
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" 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.
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 38.)
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 47.)
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 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.
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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 the greater of: (a) accumulated earnings as of the last
Contract Anniversary (Account Value in excess of Purchase Payments); or (b) 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 withdraw money automatically 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 Free
Withdrawal Privilege (See "CHARGES AND DEDUCTIONS," page 38.) 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.
Systematic withdrawals may have tax consequences or may be limited by tax law
restrictions. (See "FEDERAL TAX MATTERS," page 47.)
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.
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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.
Only one Death Benefit will be paid under the Contract
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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:
(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 41.)
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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.
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 deemed to be withdrawn first from
accumulated earnings (which may be surrendered without charge) and then to
Purchase Payments on a first-in, first-out basis.
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Number of Full Years Elapsed Between Contingent Deferred Sales
Date of Receipt of Purchase Payment Charge as a Percentage of
and Date Written Request for Surrender Associated Purchase Payment
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 35.)
No CDSC is assessed upon payment of the Death Benefit.
The CDSC will be waived upon surrender if 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 in connection with certain Contracts where the
Company incurs reduced sales and servicing expenses, such as Contracts offered
to active employees of the Company or any of its subsidiaries and/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 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.
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The CDSC may be reduced or waived on partial or full surrenders from a Fixed
Account option to the extent required to satisfy state 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. 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 waived in connection with certain
Contracts where the Company incurs reduced Contract issuance and maintenance
expenses, such as Contracts offered to active employees of the Company or any of
its subsidiaries, and/or affiliates.
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 Contracts 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 Company estimates that the mortality
risk component of this charge is 0.75% of the daily Net Asset Value of each
Sub-Account and the expense risk component is 0.50%. In connection with certain
Contracts where the Company incurs reduced sales and servicing expenses, such as
Contracts offered to active employees of the Company or any of its subsidiaries
and/or affiliates, the Company may offer a Contract with a Mortality and Expense
Risk Charge equal to an effective annual rate of 0.95%. This is equal to a daily
charge of 0.002590%. The Company estimates that for these Contracts, the
mortality risk component of this charge is 0.75% of the daily Net Asset Value of
each Sub-Account and the expense risk component is 0.20%. The Mortality and
Expense Risk 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 Contracts 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 a 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 a
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 20.)
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.
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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).
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.
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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:
(i) at the end of the applicable Valuation Period, the Owner's Variable Account
Value has declined to zero; or (ii) the person on whose life Benefit Payments
are based dies prior to the second Benefit Payment.
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 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.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
After the Annuity Commencement Date, no transfers between the Fixed Account and
the Separate Account are permitted. However, after a Variable Dollar Annuity
Benefit has been paid for at least twelve months, the Participant may, by
Written Request to the Administrative Office, transfer Annuity Units between
Sub-Accounts no more than once during a twelve-month period.
ANNUITY TRANSFER FORMULA
Transfers after the Annuity Commencement Date are implemented according to the
following formulas:
(1) Determine the number of units to be transferred from the Sub-Account
as follows:
= AT/AUV1
(2) Determine the number of Annuity Units remaining in such Sub-Account
(after the transfer):
=UNIT1-AT/AUV1
(3) Determine the number of Annuity Units in the transferee Sub-Account
(after the transfer):
=UNIT2 + AT/AUV2
(4) Subsequent Variable Dollar Annuity Benefit payments will reflect the
changes in Annuity Units in each Sub-Account as of the next Variable Dollar
Annuity Benefit payment's due date.
Where:
(AUV1) is the Annuity Unit Value of the Sub-Account that the transfer is being
made from as of the end of the Valuation Period in which the transfer request is
received.
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(AUV2) is the Annuity Unit Value of the Sub-Account that the transfer is being
made from as of the end of the Valuation Period in which the transfer request is
received.
(UNIT1) is the number of Annuity Units in the Sub-Account that the transfer is
being made from, before the transfer.
(UNIT2) is the number of Annuity Units in the Sub-Account that the transfer is
being made to, before the transfer.
(AT) is the dollar amount being transferred from the Sub-Account.
SETTLEMENT OPTIONS
OPTION 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 Tables apply 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 Tables apply to this Option.
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
Presently, the minimum amount of a Benefit Payment under any settlement option
is $50. If an Owner selects a Payment Interval under which a Benefit Payment
would be less than $50, the Company will advise the Owner that a new Payment
Interval must be selected so that the Benefit Payment will be at least $50.
Generally, monthly, quarterly, semi-annual and annual Payment Intervals are
available. From time to time, the Company may require Benefit Payments to be
made by direct deposit or wire transfer to the account of a designated payee.
Minimum amounts, Payment Intervals and other terms and conditions may be
modified by the Company at any time without prior notice to Owners, as permitted
by applicable law. If the Company changes the minimum amounts, the Company may
change any current or future payment amounts and/or Payment Intervals to conform
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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 Contracts do 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 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. The Company may also require proof that any such
person is still living.
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.
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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.
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 Death Benefit Commencement Date.
INCONTESTABILITY
No Contract shall be contestable by the Company.
ENTIRE CONTRACT
The Company issues the Contracts 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.
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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.
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 a 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.
A 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, other than Systematic Withdrawal
Option payments treated as Annuity Benefit Payments for tax purposes, 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 and/or non-excludable 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. In either case, once the
"investment in the contract" has been fully recovered, the full amount of any
additional Benefit Payments is taxable. If Benefit Payments 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.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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. A 25% premature distribution penalty applies to certain distributions
from a Savings Incentive Match Plan for Employees (SIMPLE) IRA described in
Section 408(p) of the Code.
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)
attainment of age 70 1/2; or (4) death. Section 830.205 of the Texas Government
Code provides that benefits under the optional retirement program ("ORP") vest
after one year of participation. Accordingly, an Account Value cannot be
withdrawn or distributed without written certification from the employer of the
ORP participant's vesting status and, if the participant is living and under age
70 1/2, the participant's retirement or other termination from employment.
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 a Simplified Employee Pension (SEP) Plan or Savings Incentive Match
Plan for Employees (SIMPLE) to provide IRA contributions on behalf of their
employees.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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. Subject to
certain limits, such contributions are not includable in the gross income of the
employee until the employee receives distributions under the Contract. Amounts
attributable to contributions made under a salary reduction agreement cannot be
distributed until the employee attains age 59 1/2, separates from service,
becomes disabled, incurs a hardship or dies.
PENSION AND PROFIT SHARING 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. Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the Contract
for their specific needs.
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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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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 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.
The Company or AAG Securities may pay commissions to registered representatives
of AAG securities and other broker-dealers of up to 8.5% of Purchase Payments
made under the Contracts ("Commissions"). These Commissions are reduced by
one-half for contracts issued to Owners over age 75. When permitted by state law
and in exchange for lower initial Commissions, AAG Securities and/or the Company
may pay trail commissions to registered representatives of AAG Securities and to
other broker-dealers. Trail commissions are not expected to exceed 1% of the
Account Value of a Contract on an annual basis. To the extent permissible under
current law, the company and/or AAG Securities may pay production, persistency
and managerial bonuses as well as other promotional incentives, in cash or other
compensation, to registered representatives of AAG Securities and/or other
broker-dealers.
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
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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 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
PAGE
ANNUITY INVESTORS - LIFE INSURANCE COMPANY(REGISTERED TRADEMARK) 1
General Information and History 2
State Regulation 2
SERVICES 3
Safekeeping of Separate Account Assets 3
Records and Reports 3
Experts 3
DISTRIBUTION OF THE CONTRACTS 3
CALCULATION OF PERFORMANCE INFORMATION 4
Money Market Sub-Account Standardized Yield Calculation 4
Other Sub-Account Standardized Yield Calculation 5
Standardized Total Return Calculation 6
Hypothetical Performance Data 7
Other Performance Data 8
FEDERAL TAX MATTERS 10
Taxation of the Company 10
Tax Status of the Contract 11
FINANCIAL STATEMENTS 12
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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--------------------------------------------------------------------------
Copies of the Statement of Additional Information dated May 1, 1997 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 Terms Terms
of of of
Pay- Semi Quar- Pay- Semi Quar- Pay- Semi- Quar-
ments Annual Annual terly Monthly ments Annual Annual terly Monthly ments Annual Annual terly Monthly
- ----------------------------------------------------------------------------------------------------------------
Years Years Years
<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 63.74 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>
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
------------------------------------------------
60 MONTHS 120 180 240 MONTHS
MONTHS 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>
- ----------------------------------------------------------------------------------
PRIMARY SECONDARY 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 $4.56 $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.
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 Terms Terms
of of of
Pay- Semi Quar- Pay- Semi Quar- Pay- Semi- Quar-
ments Annual Annual terly Monthly ments Annual Annual terly Monthly ments Annual Annual terly Monthly
- ----------------------------------------------------------------------------------------------------------------
Years Years Years
<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 63.74 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>
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
------------------------------------------------
60 120 180 240
MALE MONTHS MONTHS MONTHS 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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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
OPTION B TABLES (CONTINUED)
-------------------------------------------------
60 120 180 240
FEMALE MONTHS MONTHS MONTHS 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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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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> <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.
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> <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 61
