As filed with the Securities and Exchange Commission on April 29, 1997
File No. 33-59861
File No. 811-07299
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. ___ ( )
Post-effective Amendment No._2__ ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Amendment No. 5 ( X )
(Check appropriate box or boxes)
-------------------------------
ANNUITY INVESTORS-VARIABLE ACCOUNT A
(Exact Name of Registrant)
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
(Name of Depositor)
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 789-6771
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Mark F. Muething, Esq.
Senior Vice President, Secretary and General Counsel
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Name and Address of Agent for Service)
Copy to:
Catherine S. Bardsley, Esq.
Kirkpatrick & Lockhart LLP
1800 M Street, N.W.
South Lobby - Suite 900
Washington, D.C. 20036
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement
It is proposed that this filing will become effective (check appropriate box):
___ Immediately upon filing pursuant to paragraph (b).
_X_ On May 1, 1997 pursuant to paragraph (b).
___ Sixty days after filing pursuant to paragraph (a).
___ On _________ pursuant to paragraph (a)(1).
___ If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that an indefinite number of its securities is being
registered under the Securities Act of 1933. The Notice required for such rule
for the most recent fiscal year was filed on March 3, 1997.
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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
<TABLE>
<CAPTION>
PART A
ITEM OF FORM N-4 PROSPECTUS CAPTION
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<S> <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 for the
Company and the Separate Account
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;
Reduction or Elimination of
Contract and Certificate Charges
(d) Commissions....................... Distribution of the Contract
(e) Fund Expenses..................... The Funds
(f) Operating Expenses................ Summary of Expenses
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7. General Description of Variable Annuity
Contracts
(a) Persons with Rights............... The Contract; Surrenders;
Contract Loans; Death Benefit;
Voting Rights
(b) (i) Allocation of Premium Enrollment and Purchase Payments
Payments....................
(ii) Transfers................... Transfers
(iii) Exchanges................... Additions, Deletions or
Substitutions
(c) Changes........................... Not Applicable
(d) Inquiries ...................... Contacting the Company
8. Annuity Period.......................... Settlement Options
9. Death Benefit........................... Death Benefit
10. Purchases and Contract Values
(a) Purchases......................... Enrollment and Purchase Payments
(b) Valuation......................... Fixed Account Value; Variable
Account Value
(c) Daily Calculation................. Accumulation Unit Value; Net
Investment Factor
(d) Underwriter....................... Distribution of the Contract
11. Redemptions
(a) By Contract Owners................ Surrender Value; Systematic
Withdrawal Option
By Annuitant...................... Not Applicable
(b) Texas ORP......................... Texas Optional Retirement Program
(c) Check Delay....................... Suspension or Delay in Payment of
Surrender Value
(d) Free Look......................... Not Applicable
12. Taxes................................... Federal Tax Matters
13. Legal Proceedings....................... Legal Proceedings
14. Table of Contents of the Statement of Statement of Additional
Additional Information.................. 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 General Information and History
History.................................
18. Services
(a) Fees and Expenses of Registrant... (Prospectus) Summary of Expenses
(b) Management Contracts.............. Not Applicable
(c) Custodian......................... Not Applicable
Independent Auditors.............. Experts
(d) Assets of Registrant.............. Not Applicable
(e) Affiliated Person................. Not Applicable
(f) Principal Underwriter............. Not Applicable
19. Purchase of Securities Being Offered.... (Prospectus) Distribution of the
Contract
Offering Sales Load..................... (Prospectus) Contingent Deferred
Sales Charge
20. Underwriters............................ Distribution of the Contract
21. Calculation of Performance Data
(a) Money Market Funded Sub-Accounts.. Money Market Sub-Account Yield
Calculation
(b) Other Sub-Accounts................ Other Sub-Account Yield
Calculation
22. Annuity Payments........................ (Prospectus) Fixed Dollar Annuity
Benefit; Variable Dollar Annuity
Benefit
23. Financial Statements.................... Financial Statements
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
</TABLE>
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Part iv
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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ANNUITY INVESTORS[REGISTERED TRADEMARK] VARIABLE ACCOUNT A
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
PROSPECTUS
FOR THE
COMMODORE NAUTICUS[REGISTERED TRADEMARK]
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY
ISSUED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
This Prospectus describes The Commodore Nauticus[REGISTERED TRADEMARK], a
Group Flexible Premium Deferred Annuity Contract (the "Contract") issued by
Annuity Investors Life Insurance Company (the "Company") and the Certificates of
Participation under the Contract ("Certificates").
A Certificate provides for the accumulation of an Account Value on a fixed
or variable basis, or a combination of both. The Certificate also provides for
the payment of periodic annuity payments on a fixed or variable basis, or a
combination of both. If the variable basis is chosen, annuity values will be
held in Annuity Investors Variable Account A (the "Separate Account") and will
vary according to the investment performance of the mutual funds in which the
Sub-Accounts of the Separate Account invest. If the fixed basis is chosen,
periodic annuity payments from the Company's general account will be fixed and
will not vary.
The Separate Account is divided into Sub-Accounts. Each Sub-Account uses
its assets to purchase, at their net asset value, shares of a designated
registered investment company or portfolio thereof (each, a "Fund"). The Funds
available for investment in the Separate Account under the Contract are as
follows: (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 and 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 Contract is available free of
charge by writing to the Company's Administrative Office at P.O. Box 5423,
Cincinnati, Ohio 45201-5423. The Statement of Additional Information, which has
the same date as this Prospectus, as it may be supplemented from time to time,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The table of contents of the Statement of Additional
Information is included at the end of this Prospectus.
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Page 1
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TABLE OF CONTENTS
PAGE
DEFINITIONS....................................................................6
HIGHLIGHTS.....................................................................8
The Contract and Certificates............................................8
The Separate Account.....................................................8
The Fixed Account........................................................9
Transfers Before the Annuity Commencement Date...........................9
Surrenders...............................................................9
Contingent Deferred Sales Charge ("CDSC")................................9
Other Charges and Deductions.............................................9
Annuity Benefits........................................................10
Death Benefit...........................................................10
Federal Income Tax Consequences.........................................10
Right to Cancel.........................................................10
Contacting the Company..................................................10
CONDENSED FINANCIAL INFORMATION...............................................11
SUMMARY OF EXPENSES...........................................................13
Examples................................................................16
FINANCIAL STATEMENTS..........................................................18
THE FUNDS.....................................................................18
Janus Aspen Series......................................................18
Aggressive Growth Portfolio.......................................18
Worldwide Growth Portfolio........................................18
Balanced Portfolio................................................18
Dreyfus Funds...........................................................19
Capital Appreciation Portfolio (Dreyfus Variable
Investment Fund)...............................................19
Growth and Income Portfolio.(Dreyfus Variable
Investment Fund)...............................................19
Small Cap Portfolio.(Dreyfus Variable
Investment Fund)...............................................19
The Dreyfus Socially Responsible Growth Fund, Inc.................19
Dreyfus Stock Index Fund..........................................19
Merrill Lynch Variable Series Funds, Inc................................20
Basic Value Focus Fund............................................20
Global Strategy Focus Fund........................................20
High Current Income Fund..........................................20
Domestic Money Market Fund........................................20
Strong Opportunity Fund II,.Inc.........................................20
Strong Opportunity Fund II........................................20
Morgan Stanley Universal Funds Inc......................................20
U.S. Real Estate Portfolio........................................20
Fixed Income Portfolio............................................21
PBHG Insurance Series Fund, Inc.........................................21
PBHG Growth II Portfolio..........................................21
PBHG Technology & Communications Portfolio........................21
Additions, Deletions, or Substitutions..................................22
PERFORMANCE INFORMATION.......................................................22
Yield Data..............................................................22
Total Return Data.......................................................23
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
AND THE SEPARATE ACCOUNT.................................................23
Annuity Investors Life Insurance Company................................23
Published Ratings.......................................................24
The Separate Account....................................................24
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THE FIXED ACCOUNT.............................................................25
Fixed Account Options...................................................25
Renewal of Fixed Account Options........................................25
THE CONTRACT..................................................................26
Right to Cancel.........................................................26
ENROLLMENT AND PURCHASE PAYMENTS..............................................26
Purchase Payments.......................................................26
Allocation of Purchase Payments.........................................27
ACCOUNT VALUE.................................................................27
Fixed Account Value.....................................................27
Variable Account Value..................................................27
Accumulation Unit Value.................................................28
Net Investment Factor...................................................28
TRANSFERS.....................................................................28
Telephone Transfers.....................................................29
Dollar Cost Averaging...................................................29
Portfolio Rebalancing...................................................30
Interest Sweep..........................................................30
Principal Guaranty Options..............................................31
Changes By the Company..................................................31
SURRENDERS....................................................................31
Surrender Value.........................................................31
Suspension or Delay in Payment of Surrender Value.......................32
Free Withdrawal Privilege...............................................32
Systematic Withdrawal Option............................................33
CONTRACT LOANS................................................................33
DEATH BENEFIT.................................................................33
Death of Participant....................................................33
Death Benefit...........................................................33
Beneficiary.............................................................34
CHARGES AND DEDUCTIONS........................................................35
Contingent Deferred Sales Charge........................................35
Maintenance and Administrative Charges..................................36
Mortality and Expense Risk Charge.......................................37
Premium Taxes...........................................................38
Transfer Fee............................................................38
Fund Expenses...........................................................38
Reduction or Elimination of Contract and Certificate Charges............38
SETTLEMENT OPTIONS............................................................39
Annuity Commencement Date...............................................39
Election of Settlement Option...........................................39
Annuity Benefit.........................................................39
Fixed Dollar Annuity Benefit............................................40
Variable Dollar Annuity Benefit.........................................40
Transfers After the Annuity Commencement Date...........................40
Annuity Transfer Formula................................................41
Settlement Options......................................................41
Minimum Amounts.........................................................42
Settlement Option Tables................................................42
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GENERAL PROVISIONS............................................................43
Non-participating.......................................................43
Misstatement of Age.....................................................43
Proof of Existence and Age..............................................43
Facility of Payment.....................................................43
Transfer and Assignment.................................................43
Annuity Data............................................................43
Annual Report...........................................................43
Incontestability........................................................44
Entire Contract.........................................................44
Changes in the Contract.................................................44
Waiver of the Certificate Maintenance Fee...............................44
Notices and Directions..................................................44
FEDERAL TAX MATTERS...........................................................45
Introduction............................................................45
Taxation of Annuities In General........................................45
Surrenders..............................................................46
Annuity Payments........................................................46
Penalty Tax.............................................................46
Taxation of Death Benefit Proceeds......................................47
Transfers, Assignments, or Exchanges of the Contract....................47
Texas Optional Retirement Program.......................................47
Tax-Sheltered Annuities.................................................47
Pension and Profit Sharing Plans........................................47
Certain Deferred Compensation Plans.....................................47
Withholding.............................................................48
Possible Changes in Taxation............................................48
Other Tax Consequences..................................................48
General.................................................................48
DISTRIBUTION OF THE CONTRACT..................................................48
LEGAL PROCEEDINGS.............................................................49
VOTING RIGHTS.................................................................49
AVAILABLE INFORMATION.........................................................50
STATEMENT OF ADDITIONAL INFORMATION...........................................51
APPENDIX A....................................................................53
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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
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.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY FINANCIAL INSTITUTION, NOR ARE THEY FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
EACH UNDERLYING FUND. BOTH THIS PROSPECTUS AND THE UNDERLYING FUND PROSPECTUSES
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of the Participant's interest in the
Sub-Account(s) and the Fixed Account options as of the end of any Valuation
Period.
ACCUMULATION PERIOD: The period prior to the Annuity Commencement Date during
which the Participant is eligible for benefits under the Contract.
ACCUMULATION UNIT: The unit of measurement used to calculate the value of the
Sub-Account(s) prior to the Annuity Commencement Date.
ADMINISTRATIVE OFFICE: The home office of the Company or any other office the
Company may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: The Annuitant is the Participant and is the person on whose life
Annuity Benefit payments are based.
ANNUITY BENEFIT: Periodic payments made by the Company under a Settlement
Option, which payments commence after the Annuity Commencement Date and continue
during the Annuity Payment Period, for the life of a person or for a specific
period. A Variable Dollar Annuity Benefit will provide payments that vary in
amount. Fixed Dollar Annuity Benefit payments remain constant.
ANNUITY COMMENCEMENT DATE: The date on which Annuity Benefits are to begin.
ANNUITY PAYMENT PERIOD: The period commencing with the Annuity Commencement
Date, during which Annuity Benefits are payable under the Contract with respect
to a Participant's participation interest.
ANNUITY UNIT: The unit of measurement used to determine the value of any
Variable Dollar Annuity Benefit payments after the first Annuity Benefit payment
is made by the Company.
BENEFICIARY: The person or persons entitled to receive the Death Benefit if the
Participant dies prior to the Annuity Commencement Date.
CERTIFICATE ANNIVERSARY: An annual anniversary of the Certificate Effective
Date.
CERTIFICATE EFFECTIVE DATE: The date shown on the Certificate Specifications
page.
CERTIFICATE YEAR: Any period of twelve months commencing on the Certificate
Effective Date and on each Certificate Anniversary thereafter.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
CONTRACT OWNER: The person shown as such on the Application for the Contract,
the Participant Enrollment Form, the Contract Specifications page and the
Certificate Specifications page.
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DUE PROOF OF DEATH: Any of (1) a certified copy of a death certificate; (2) a
certified copy of a decree of a court of competent jurisdiction as to the
finding of death; (3) a written statement by a medical doctor who attended the
deceased; or (4) any other proof satisfactory to the Company.
FIXED ACCOUNT: An account which is part of the Company's general account, the
values of which are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT VALUE: The value of a Participant's interest in all Fixed Account
options.
FUND: A management investment company or a portfolio thereof, registered under
the Investment Company Act of 1940, in which a Sub-Account of the Separate
Account invests.
NET ASSET VALUE: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
PARTICIPANT: The person identified on the Certificate Specifications page, who
participates in the benefits of the Contract.
PURCHASE PAYMENT: A contribution after the deduction of premium tax, if any,
made to the Company in consideration for the Participant's participation under
the Contract.
SEPARATE ACCOUNT: Annuity Investors Variable Account A (also referred to as the
"Variable Account") which has been established by the Company pursuant to the
laws of the State of Ohio.
SETTLEMENT OPTION: The option elected by the Participant for the payment of
Annuity Benefits.
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which
invests in the shares of a designated Fund.
SURRENDER VALUE: The amount payable under a Certificate if the Certificate is
surrendered.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date and ending at the close of trading
on the next succeeding Valuation Date. "Valuation Date" means each day on which
the New York Stock Exchange is open for business.
VARIABLE ACCOUNT VALUE: The value of a Participant's interest in all
Sub-Accounts.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to the Company and in writing, that is sent to the Company on the
Company's form or in a form satisfactory to the Company, and that is received by
the Company at the Administrative Office. A Written Request is subject to any
payment made or any action the Company takes before the Written Request is
acknowledged by the Company. A Participant may be required to return his or her
Certificate to the Company in connection with a Written Request.
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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HIGHLIGHTS
THE CONTRACT AND CERTIFICATES
The Group Flexible Premium Deferred Annuity Contract described in this
Prospectus is designed for use in connection with certain retirement
arrangements that qualify for favorable tax treatment under Sections 401,
403, or 457 of the Code, and for non-tax qualified deferred compensation
arrangements.
The Contract Owner is the person shown as such on the Application for the
Contract, the Participant Enrollment Form, the Contract Specifications
page and the Certificate Specifications page. The Contract is held by the
Contract Owner for the benefit of Participants and Beneficiaries. Each
participant for whom Purchase Payment(s) are made will participate in the
Contract as a Participant. A Participant account will be established for
each Participant. Subject to the terms of a Certificate, the Account
Value, after certain adjustments, will be applied to the payment of an
Annuity Benefit under the Settlement Option elected by the Participant.
The Account Value will depend on the investment experience of the amounts
allocated to each Sub-Account of the Separate Account elected by the
Participant and/or interest credited on amounts allocated to the Fixed
Account option(s) elected. All Annuity Benefits and other values provided
under the Certificate when based on the investment experience of the
Separate Account are variable and are not guaranteed as to dollar amount.
Therefore, prior to the Annuity Commencement Date the Participant bears
the entire investment risk with respect to amounts allocated to the
Separate Account under the Certificate.
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE WITH RESPECT TO AMOUNTS
ALLOCATED TO THE SEPARATE ACCOUNT, SO THE PROCEEDS OF A SURRENDER COULD BE
LESS THAN THE TOTAL PURCHASE PAYMENTS.
THE SEPARATE ACCOUNT
Annuity Investors Variable Account A is a separate account of the Company
that is divided into Sub-Accounts (See "The Separate Account," page 24.)
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 and 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 has distinct investment
objectives and policies which are described in the accompanying prospectus
for the Fund.
Each Fund pays its investment adviser and other service providers certain
fees charged against the assets of the Fund. The Account Value of a
Certificate and the amount of any Annuity Benefits will vary to reflect
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the investment performance of all the Sub-Accounts elected by the
Participant and the deduction of the charges described under "CHARGES AND
DEDUCTIONS," page 35. For more information about the Funds, see "THE
FUNDS," page 18, and the accompanying Funds' prospectuses.
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 25.)
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the Annuity Commencement Date, the Participant may transfer
values between the Separate Account and the Fixed Account, within the
Fixed Account and 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 28.)
The Company currently charges a fee of $25 for each transfer ("Transfer
Fee") in excess of twelve made during the same Certificate Year. (See
"TRANSFERS," page 28)
For transfers after the Annuity Commencement Date, see "Transfers After
the Annuity Commencement Date," page 40.
SURRENDERS
All or part of the Surrender Value of a Certificate may be surrendered by
the Participant on or before the Annuity Commencement Date by Written
Request to the Company. Amounts surrendered may be subject to a Contingent
Deferred Sales Charge ("CDSC") depending upon how long the Purchase
Payments to be withdrawn have been held under the Certificate. Amounts
withdrawn also may be subject to a premium tax or similar tax, depending
upon the jurisdiction in which the Participant lives. Surrenders may be
subject to a 10% premature distribution penalty tax if made before the
Participant reaches age 59 1/2. Surrenders may further be subject to
federal, state or local income tax. (See "FEDERAL TAX MATTERS," page 45.)
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
A CDSC may be imposed on surrenders. The maximum CDSC is 7% of Purchase
Payments withdrawn during the first year after that Purchase Payment is
received, decreasing by 1% annually to 0% after year seven. The CDSC may
be reduced or waived under certain circumstances. (See "CHARGES AND
DEDUCTIONS," page 35.)
OTHER CHARGES AND DEDUCTIONS
The Company deducts a daily charge ("Mortality and Expense Risk Charge")
at an effective annual rate of 1.25% of the daily Net Asset Value of each
Sub-Account. In connection with certain Contracts that allow the Company
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to reduce administrative expenses, the Company will offer an Enhanced
Contract with a Mortality and Expense Risk Charge at an effective annual
rate of 0.95% of the daily Net Asset Value of each Sub-Account. The
Company may offer an Enhanced Contract to a group of employees of the
Company, its subsidiaries and/or affiliates.
The Company deducts a Certificate maintenance charge each year
("Certificate Maintenance Fee"). This Fee is currently $25 and is deducted
from a Participant's Variable Account Value on each Certificate
Anniversary. The Certificate Maintenance Fee may be waived under certain
circumstances, at the Company's discretion.
Charges for premium taxes may be imposed in some jurisdictions. Depending
on the applicability of such taxes, the charges may be deducted from
Purchase Payments, from surrenders, and from other payments made under the
Certificate. (See "CHARGES AND DEDUCTIONS," page 35.)
ANNUITY BENEFITS
Annuity Benefits are paid on a fixed or variable basis, or a combination
of both. (See "Annuity Benefit," page 39.)
DEATH BENEFIT
The Certificate provides for the payment of a death benefit if the
Participant dies prior to the Annuity Commencement Date. The death benefit
may be paid as either a lump sum or pursuant to one of the Settlement
Options offered under the Certificate. (See "DEATH BENEFIT," page 33.)
FEDERAL INCOME TAX CONSEQUENCES
A Participant generally should not be taxed on increases in the Account
Value until a distribution under the Certificate occurs (E.G., a surrender
or Annuity Benefit) or is deemed to occur (E.G., a loan 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 federal penalty tax may apply
to certain distributions. (See "FEDERAL TAX MATTERS," page 45.)
RIGHT TO CANCEL
Where required by state law, a Participant may cancel his or her
Certificate by giving the Company written notice of cancellation and
returning the Certificate before midnight of the twentieth day (or longer
if required by state law) after receipt. (See, "Right to Cancel," page
26.)
CONTACTING THE COMPANY
All Written Requests and any questions or inquiries should be directed to
the Company's Administrative Office, P.O. Box 5423, Cincinnati, Ohio
45201-5423, (800) 789-6771. All inquiries should include the Certificate
Number and the Participant's name.
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE ACCOMPANYING
PROSPECTUSES FOR THE FUNDS WHICH SHOULD BE REFERRED TO FOR MORE DETAILED
INFORMATION. THE REQUIREMENTS OF A PARTICULAR RETIREMENT PLAN, AN
ENDORSEMENT TO THE CONTRACT OR CERTIFICATE, OR LIMITATIONS OR PENALTIES
IMPOSED BY THE CODE OR THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, MAY IMPOSE ADDITIONAL LIMITS OR RESTRICTIONS ON PURCHASE
PAYMENTS, SURRENDERS, DISTRIBUTIONS, OR BENEFITS, OR ON OTHER PROVISIONS
OF THE CONTRACT OR THE CERTIFICATES THEREUNDER. THIS PROSPECTUS DOES NOT
DESCRIBE SUCH LIMITATIONS OR RESTRICTIONS. (SEE "FEDERAL TAX MATTERS,"
PAGE 45.)
- --------------------------------------------------------------------------------
Page 10
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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.
ACCUMULATION UNIT VALUES AND UNITS OUTSTANDING
<TABLE>
<CAPTION>
STANDARD CONTRACTS ENHANCED CONTRACTS2
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
DREYFUS VARIABLE INVESTMENT
FUND - CAPITAL APPRECIATION
Accumulation UV - beginning 9.944353 10.000000(1) 9.946124 10.000000(1)
Accumulation UV - ending 12.330543 9.944353 12.369954 9.946124
Accumulated units at year 33,424.286 0.000 313.603 0.000
end
THE DREYFUS SOCIALLY
RESPONSIBLE GROWTH FUND,
INC.
Accumulation UV - beginning 9.960199 10.000000(1) 9.962000 10.000000(1)
Accumulation UV - ending 11.924561 9.960199 11.962818 9.962000
Accumulated units at year 15,316.028 0.000 0.000 0.000
end
DREYFUS STOCK INDEX FUND
Accumulation UV - beginning 9.992509 10.000000(1) 9.994303 10.000000(1)
Accumulation UV - ending 12.092195 9.992509 12.130821 9.994303
Accumulated units at year 29,203.177 0.000 600.306 0.000
end
JANUS ASPEN SERIES
AGGRESSIVE GROWTH
Accumulation UV - beginning 10.299246 10.000000(1) 10.301075 10.000000(1)
Accumulation UV - ending 10.979832 10.299246 11.015008 10.301075
Accumulated units at year 52,219.342 0.000 1,910.271 0.000
end
WORLDWIDE GROWTH
Accumulation UV - beginning 10.239284 10.000000(1) 10.241132 10.000000(1)
Accumulation UV - ending 13.048360 10.239284 13.090061 10.241132
Accumulated units at year 50,730.352 0.000 272.267 0.000
end
BALANCED
Accumulation UV - beginning 10.171211 10.000000(1) 10.173040 10.000000(1)
Accumulation UV - ending 11.670308 10.171211 11.707739 10.173040
Accumulated units at year 49,603.384 0.000 1,024.467 0.000
end
- --------------------------------------------------------------------------------
Page 11
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
SHORT-TERM BOND3/
Accumulation UV - beginning 10.061754 10.000000(1) 10.063557 10.000000(1)
Accumulation UV - ending 10.332080 10.061754 10.365199 10.063557
Accumulated units at year 4,216.270 0.000 17.440 0.000
end
MERRILL LYNCH VARIABLE
SERIES FUNDS, INC.
BASIC VALUE FOCUS
Accumulation UV - beginning 10.147434 10.000000(1) 10.149258 10.000000(1)
Accumulation UV - ending 12.094664 10.147434 12.133299 10.149258
Accumulated units at year 6,820.503 0.000 96.296 0.000
end
GLOBAL STRATEGY FOCUS
Accumulation UV - beginning 10.105242 10.000000(1) 10.107054 10.000000(1)
Accumulation UV - ending 11.294096 10.105242 11.330202 10.107054
Accumulated units at year 2,114.707 0.000 30.061 0.000
end
HIGH CURRENT INCOME
Accumulation UV - beginning 10.118436 10.000000(1) 10.120248 10.000000(1)
Accumulation UV - ending 11.119068 10.118436 11.148637 10.120248
Accumulated units at year 6,837.357 0.000 255.389 0.000
end
DOMESTIC MONEY MARKET
Accumulation UV - beginning 1.002475 1.000000(1) 1.002655 1.000000(1)
Accumulation UV - ending 1.041216 1.002475 1.045819 1.002655
Accumulated units at year 325,331.820 0.000 1,260.991 0.000
end
</TABLE>
1/ Effective December 7, 1995 on Separate Account commencement date.
2/ Enhanced Contracts have an annual mortality and expense risk change of
0.95%.
3/ Because this Sub-Account has been eliminated, effective May 1, 1997,
Purchase Payments are no longer allocable to it.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES
PARTICIPANT TRANSACTION EXPENSES
Sales Load Imposed on Purchase None
Payments
Contingent Deferred Sales Charge
(as a percentage of Purchase
Payments withdrawn)
Certificate Years since
Purchase Payment Receipt
less than 1 year 7%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 4%
4 years but less than 5 years 3%
5 years but less than 6 years 2%
6 years but less than 7 years 1%
7 years or more 0%
Surrender Fees None
Transfer Fee 1/ $25
ANNUAL CERTIFICATE MAINTENANCE FEE $25
- ----------------------
1/ The first twelve transfers in a Certificate Year are free. Thereafter, a $25
fee will be charged on each subsequent transfer.
- --------------------------------------------------------------------------------
Page 13
<PAGE>
<TABLE>
<CAPTION>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT JANUS A.S. JANUS A.S. JANUS A.S. DREYFUS DREYFUS DREYFUS V.I.F.
ANNUAL EXPENSES2/ AGGRESSIVE WORLDWIDE BALANCED V.I.F. V.I.F. CAPITAL
(as a percentage of GROWTH GROWTH PORTFOLIO4/ GROWTH SMALL CAP APPRECIATION
average Separate PORTFOLIO4/ PORTFOLIO4/ PORTFOLIO PORTFOLIO PORTFOLIO
Account assets) --------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Mortality and 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Expense Risk
Charge
Administration 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 Separate 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Account Annual
Expenses
FUND ANNUAL Expenses3/
(as a percentage of Fund
average net assets after
fee waiver and/or expense
reimbursement, 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
MERRILL MERRILL MERRILL MERRILL
LYNCH LNCH LYNCH LYNCH
SEPARATE ACCOUNT THE DREYFUS V.S.F. V.S.F. V.S.F. V.S.F
ANNUAL EXPENSES2/ SOCIALLY DREYFUS BASIC GLOBAL HIGH DOMESTIC
(as a percentage of RESPONSIBLE STOCK VALUE STRATEGY CURRENT MONEY
average Separate GROWTH FUND INDEX FOCUS FOCUS INCOME MARKET
Account assets) INC.5/ 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
FUND ANNUAL Expenses3/
(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
</TABLE>
- --------------------------------------------------------------------------------
Page 14
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PBHG INSURANCE
SEPARATE ACCOUNT ANNUAL MORGAN PBHF INSURANCE SERIES FUND, INC.
EXPENSES2/ (as a percentage STRONG STANLEY U.S. MORGAN STANLEY SERIES FUND, INC.- PBHG TECHNOLOGY
of average Separate Account OPPORTUNITY REAL ESTATE - FIXED INCOME PBHF GROWTH II COMMUNICATIONS
assets) FUND II, INC. PORTFOLIO PORTFOLIO PORTFOLIO 7/ PORTFOLIO 7/
- ---------------------------- --------------- ------------ -------------- ------------------ -----------------
<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 Expenses 3/
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>
2 Annual expenses are the same for each Sub-Account. These expenses are
based on expenses incurred for the fiscal year ended December 31, 1996.
3 Information regarding each underlying Fund has been provided to the
Company by each Fund, and the Company has not independently verified such
information. Data for each Fund are for its fiscal year ended December 31, 1996.
Actual expenses in future years may be higher or lower.
- --------------------------------------------------------------------------------
Page 15
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
4 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.
5 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.
6 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 16
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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:
SUB-ACCOUNT 1 Year 3 Years 5 Years 10 Years
- ----------- ------ ------- ------- --------
Janus Aspen Series-Aggressive Growth $92 $120 $157 $307
Portfolio
Janus Aspen Series-Worldwide Growth $92 $122 $159 $312
Portfolio
Janus Aspen Series-Balanced Portfolio $94 $126 $167 $330
Dreyfus Variable Investment Fund- $93 $123 $161 $317
Capital 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 $92 $121 $158 $311
Cap Portfolio
Dreyfus Stock Index Fund, Inc. $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. $95 $131 $176 $351
Real Estate Portfolio
Morgan Stanley Universal Funds-Fixed $91 $119 $153 $299
Income Portfolio
PBHG Insurance Series Fund, Inc.-PBHG $96 $133 $179 $357
Growth II Portfolio
PBHG Insurance Series Fund, $96 $135 $182 $363
Inc.-PBHG Technology & Communications
Portfolio
- --------------------------------------------------------------------------------
Page 17
<PAGE>
GROUP 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-PBHG Growth II $26 $83 $149 $357
Portfolio
PBHG Insurance Series Fund-PBHG Technology & $26 $85 $152 $363
Communications Portfolio
</TABLE>
- --------------------------------------------------------------------------------
Page 18
<PAGE>
GROUP 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 35 of this Prospectus and the accompanying
prospectus for the applicable Fund for a more complete description of the
various costs and expenses. In addition to the expenses listed above, premium
taxes may be applicable.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RATES OF RETURN OF ANY FUND. ACTUAL EXPENSES AND ANNUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR THE PURPOSE OF THE
EXAMPLES. THE $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 a Certificate. Each Fund has separate investment objectives and
policies. As a result, each Fund operates as a separate investment portfolio and
the investment performance of one Fund has no effect on the investment
performance of any other Fund. There is no assurance that any of these Funds
will achieve their stated objectives. The Securities and Exchange Commission
does not supervise the management or the investment practices and/or policies of
any of the Funds.
The Separate Account invests exclusively in shares of the Funds listed
below (followed by a brief overview of each Fund's investment objective(s) and
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.
WORLDWIDE GROWTH PORTFOLIO. A diversified portfolio that seeks long-term
growth of capital by investing primarily in common stocks of foreign and
domestic issuers. The Portfolio may invest in debt securities, including
junk bonds.
BALANCED PORTFOLIO. A diversified portfolio that seeks long-term growth of
capital balanced by current income. The Fund normally invests 40-60% of
its assets in securities selected primarily for their growth potential and
40-60% of its assets in securities selected primarily for their income
potential. The Portfolio may invest in junk bonds.
Janus Capital Corporation serves as the investment adviser to each of these
Funds.
- --------------------------------------------------------------------------------
Page 19
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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 PORTLFOLIO (Dreyfus Variable Investment Fund). 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). 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 investments
standards, but also show evidence that they conduct their business in a
manner that contributes to the enhancement of the quality of life in
America. Current income is a secondary goal.
The Dreyfus Corporation serves as the investment adviser and NCM Capital
Management Group, Inc. serves as the 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's manager, and Mellon Equity Associates, an
affiliate of Dreyfus, located at 500 Grant Street, Pittsburgh,
Pennsylvania 15258, is the index manager.
- --------------------------------------------------------------------------------
Page 20
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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 Certificate. 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. 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 21
<PAGE>
GROUP 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 the 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 revenues 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 portfolio managers anticipate changing economic and market
conditions.
THERE IS NO ASSURANCE THAT ANY OF THESE FUNDS WILL ACHIEVE THEIR STATED
OBJECTIVES.
INVESTMENTS IN THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER ENTITY OR PERSON.
Since each of the Funds is available to separate accounts offering
variable annuity and variable life products of other insurance companies and
certain Funds may be available to qualified pension and retirement plans, there
is a possibility that a material conflict may arise between the interests of the
Separate Account and one or more other separate accounts or plans investing in
the Fund. In the event of a material conflict, the affected insurance companies
will take any necessary steps to resolve the matter, including stopping their
separate accounts from investing in the particular Fund. See the Funds'
prospectuses for greater detail.
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Additional information concerning the investment objectives and policies
of each Fund, the investment advisory services and administrative services and
charges can be found in the current prospectus for the Fund which accompanies
this Prospectus. THE APPROPRIATE FUNDS' PROSPECTUSES SHOULD BE READ CAREFULLY
BEFORE ANY DECISION IS MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO,
OR TRANSFERS AMONG, THE SUB-ACCOUNTS.
ADDITIONS, DELETIONS, OR SUBSTITUTIONS
The Company does not control the Funds and cannot guarantee that any of
the Sub-Accounts or any of the Funds will always be available for allocation of
Purchase Payments or transfers. The Company retains the right to make changes in
the Separate Account and its investments.
The Company reserves the right to eliminate the shares of any Fund held by
a Sub-Account and to substitute shares of another investment company for the
shares of any Fund, if the shares of that Fund are no longer available for
investment or if, in the Company's judgment, investment in any Fund would be
inappropriate in view of the purposes of the Separate Account. To the extent
required by the Investment Company Act of 1940, as amended ("1940 Act"), or
other applicable law, a substitution of shares attributable to the Participant's
interest in a Sub-Account will not be made without prior notice to the
Participant and the prior approval of the Securities and Exchange Commission.
Nothing contained herein shall prevent the Separate Account from purchasing
other securities for other series or classes of variable annuity policies, or
from effecting an exchange between series or classes of variable policies on the
basis of requests made by Participants.
New Sub-Accounts may be established when, in the sole discretion of the
Company, marketing, tax, investment or other conditions so warrant. Any new
Sub-Accounts will be made available to existing Participants on a basis to be
determined by the Company. Each additional Sub-Account will purchase shares in a
Fund or in another mutual fund or investment vehicle. The Company may also
eliminate one or more Sub-Accounts, if in its sole discretion, marketing, tax,
investment or other conditions so warrant. In the event any Sub-Account is
eliminated, the Company will notify Participants and request a re-allocation of
the amounts invested in the eliminated Sub-Account.
In the event of any substitution or change, the Company may make such
changes in the Contract and Certificate as may be necessary or appropriate to
reflect such substitution or change. Furthermore, if deemed to be in the best
interests of persons having voting rights under the Certificates, the Separate
Account may be operated as a management company under the 1940 Act or any other
form permitted by law, may be de-registered under such Act in the event such
registration is no longer required, or may be combined with one or more separate
accounts.
PERFORMANCE INFORMATION
From time to time, the Company may advertise yields and/or total returns
for the Sub-Accounts. THESE FIGURES ARE BASED ON HISTORICAL INFORMATION AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. For a description of the methods
used to determine yield and total return, see the Statement of Additional
Information.
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YIELD DATA
The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in that Sub-Account over a specified seven-day
period. The Company may also advertise the effective yield of the Money Market
Sub-Account which is calculated similarly but, when annualized, the income
earned by an investment in that Sub-Account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a Sub-Account other than the Money Market Sub-Account refers
to the annualized income generated by an investment in the Sub-Account over a
specified 30-day period.
The yield calculations do not reflect the effect of any CDSC or premium
taxes that may be applicable to a particular Certificate which would reduce the
yield of that Certificate.
TOTAL RETURN DATA
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for various
periods of time including, but not limited to, a period measured from the date
the Sub-Account commenced operations. When a Sub-Account has been in operation
for one, five and ten years, respectively, the standardized 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.
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. Total return data that does not
reflect, for example, the CDSC and other charges will be higher than the total
return realized by an investor who incurs charges.
The Company may also advertise performance figures for the Sub-Accounts
based on the performance of a Fund prior to the time the Separate Account
commenced operations.
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
AND THE SEPARATE ACCOUNT
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Annuity Investors Life Insurance Company[REGISTERED TRADEMARK] (the
"Company"), formerly known as Carillon Life Insurance Company, is a stock life
insurance company incorporated under the laws of the State of Ohio in 1981. The
Company is principally engaged in the sale of fixed and variable annuity
policies.
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The Company is a wholly-owned subsidiary of Great American Life Insurance
Company which is a wholly-owned subsidiary of American Annuity Group, Inc., a
publicly traded insurance holding company. That company is in turn indirectly
controlled by American Financial Group, Inc., a publicly traded holding company.
The home office of the Company is located at 250 East Fifth Street,
Cincinnati, Ohio 45202.
PUBLISHED RATINGS
The Company may from time to time publish in advertisements, sales
literature and reports to Contract Owners and Participants, the ratings and
other information assigned to it by one or more independent rating organizations
such as A.M. Best Company, Standard & Poor's, and Duff & Phelps. The purpose of
the ratings is to reflect the financial strength and/or claims-paying ability of
the Company and should not be considered as reflecting on the investment
performance of assets held in the Separate Account. Each year the A.M. Best
Company reviews the financial status of thousands of insurers, culminating in
the assignment of Best's Ratings. These ratings reflect their current opinion of
the relative financial strength and operating performance of an insurance
company in comparison to the norms of the life/health insurance industry. In
addition, the claims-paying ability of the Company as measured by Standard &
Poor's or Duff & Phelps may be referred to in advertisements or sales literature
or in reports to Contract Owners and Participants. These ratings are opinions of
those agencies as to an operating insurance company's financial capacity to meet
the obligations of its insurance and annuity policies in accordance with their
terms. Such ratings do not reflect the investment performance of the Separate
Account or the degree of risk associated with an investment in the Separate
Account.
THE SEPARATE ACCOUNT
Annuity Investors[REGISTERED TRADEMARK] Variable Account A was established
by the Company as an insurance company separate account under the laws of the
State of Ohio on May 26, 1995, pursuant to resolutions of the Company's Board of
Directors. The Separate Account is registered with the Securities and Exchange
Commission under the 1940 Act as a unit investment trust. However, the
Securities and Exchange Commission does not supervise the management or the
investment practices or policies of the Separate Account.
The assets of the Separate Account are owned by the Company but they are
held separately from the other assets of the Company. The Ohio Revised Code
provides that the assets of a separate account are not chargeable with
liabilities incurred in any other business operation of the Company. Income,
gains and losses incurred on the assets in the Separate Account, whether or not
realized, are credited to or charged against the Separate Account, without
regard to other income, gains or losses of the Company. Therefore, the
investment performance of the Separate Account is entirely independent of the
investment performance of the Company's general account assets or any other
separate account maintained by the Company.
Under Ohio law, the assets of the Separate Account will be held for the
exclusive benefit of Contract Owners and Participants under the Contracts
offered by this Prospectus and under all other contracts which provide for
accumulated values or dollar amount payments to reflect investment results of
the Separate Account. The obligations arising under the Contract and
Certificates are obligations of the Company.
The Separate Account has seventeen Sub-Accounts, each of which invests
solely in a specific corresponding Fund. (See "THE FUNDS," page 18.) Changes to
the Sub-Accounts may be made at the discretion of the Company. (See "Additions,
Deletions, or Substitutions," page 22.)
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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 Participants to share directly in
the investment experience of these assets. The Company assumes the risk of
investment gain or loss on the portion of the Account Value allocated to the
Fixed Account. All assets held in the general account are subject to the
Company's general liabilities from business operations.
FIXED ACCOUNT OPTIONS
There are currently five options under the Fixed Account: the Fixed
Accumulation Account option; and the guarantee period options referred to in the
Certificate as the Fixed Account options One-Year, Three-Year, Five-Year and
Seven-Year Guarantee Period, respectively. Additional Fixed Account options may
be offered by the Company at any time. Purchase Payments allocated and amounts
transferred to the Fixed Account options accumulate interest at the applicable
current interest rate declared by the Company's Board of Directors, and if
applicable, for the duration of the guarantee period selected.
The Company guarantees a minimum rate of interest for the Fixed Account
options. The guaranteed rate is 3% per year. For any Fixed Account option, the
Company's Board of Directors may declare and pay current interest higher than
the guaranteed rate at any time. Once declared, such rate will be paid until
changed by the Company for new allocations to that Fixed Account option, but
such change will not be applicable with respect to amounts previously allocated
to such Fixed Account option.
RENEWAL OF FIXED ACCOUNT OPTIONS
The following provisions apply to all Fixed Account Options except the
Fixed Accumulation Account option.
At the end of a guarantee period, and for the thirty days immediately
preceding the end of such guarantee period, the Participant may elect a new
option to replace the Fixed Account option that is then expiring. The entire
amount maturing may be reallocated to any of the then current options under the
Certificate (including the various Sub-Accounts within the Separate Account),
except that a Fixed Account option with a guarantee period that would extend
past the Annuity Commencement Date may not be selected. In particular, in the
case of renewals occurring within one year of the Annuity Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account.
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If the Participant does not specify a new option in accordance with the
preceding paragraph, the Participant will be deemed to have elected the same
Fixed Account option, so long as the guarantee period of such option does not
extend beyond the Annuity Commencement Date. In the event that such a period
would extend beyond the Annuity Commencement Date, the Participant will be
deemed to have selected the Fixed Account option with the longest available
guarantee period that expires prior to the Annuity Commencement Date.
THE CONTRACT
The Contract is a group flexible premium deferred annuity. The rights and
benefits are described below and in the Certificate and the Contract. The
Company reserves the right to make any modification to conform the Contract and
Certificates thereunder to, or give the Participant the benefit of, any
applicable law. The obligations under the Contract and Certificates are
obligations of the Company.
For each Certificate, a different Account will be established and Fixed
Account Values, Variable Account Values, and benefits and charges will be
calculated separately. The various administrative rules described below will
apply separately to each Certificate, unless otherwise noted. The Company
reserves the right to terminate any Certificate for which the Account Value is
less than $500 and no Purchase Payment has been received for at least two years.
RIGHT TO CANCEL (ONLY WHERE REQUIRED BY STATE LAW)
A Participant may cancel his or her Certificate by giving the Company
written notice of cancellation and returning the Certificate before midnight of
the twentieth day (or longer if required by state law) following the date the
Participant receives the Certificate. The Certificate must be returned to the
Company, and the required notice must be given in person, or to the agent who
sold it to the Participant, or by mail. If by mail, the return of the
Certificate or notice is effective on the date it is postmarked, with the proper
address and with postage paid. If the Participant cancels the Certificate as set
forth above, the Certificate will be void and the Company will return the
Purchase Payment(s) for that Participant, plus or minus any investment gains or
losses under the Certificate as of the end of the Valuation Period during which
the returned Certificate is received by the Company, or as otherwise required by
law. Where required by state law, the right to cancel provision of a Certificate
may provide for refund of a different amount, or a right to cancel for a
different time period, than described above.
ENROLLMENT AND PURCHASE PAYMENTS
PURCHASE PAYMENTS
All Purchase Payments must be received at the Administrative Office.
Each Purchase Payment will be applied by the Company to the credit of a
Participant's Account. If the Participant Enrollment Form is in good order, the
Company will apply the initial Purchase Payment to an account for the
Participant within two business days of receipt of the Purchase Payment at the
Administrative Office. If the Enrollment Form is not in good order, the Company
will attempt to get the Enrollment Form in good order within five business days.
If the Enrollment Form is not in good order at the end of this period, the
Company will inform the Contract Owner of the reason for the delay and that the
Purchase Payment will be returned immediately unless he or she specifically
consents to the Company keeping the Purchase Payment until the Enrollment Form
is in good order. Once the Enrollment Form is in good order, the Purchase
Payment will be applied to the Participant's Account within two business days.
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Additional Purchase Payments may be made at any time prior to the Annuity
Commencement Date, as long as the Participant is living. Each additional
Purchase Payment is credited to a Certificate as of the next valuation following
the receipt of such additional Purchase Payment.
No Purchase Payment for any Certificate may exceed $500,000 without prior
approval of the Company.
ALLOCATION OF PURCHASE PAYMENTS
Purchase Payments will be allocated to the Fixed Account and/or to the
Sub-Accounts according to the instructions in the Participant Enrollment Form or
subsequent Written Request. Allocations are made in percentages, and whole
percentages must be used.
ACCOUNT VALUE
Before the Annuity Commencement Date, the Account Value is equal to the
Fixed Account Value plus the Variable Account Value.
FIXED ACCOUNT VALUE
The Fixed Account Value at any time is equal to (a) the Purchase
Payment(s) allocated to the Fixed Account; plus (b) amounts transferred to the
Fixed Account; plus (c) interest credited to the Fixed Account; less (d) any
charges, surrenders, deductions, amounts transferred from the Fixed Account or
other adjustments made in accordance with the provisions of the Contract.
VARIABLE ACCOUNT VALUE
The Variable Account Value for the Certificate at any time is the sum of
the value of each Sub-Account ("Sub-Account Value") selected by the Participant
for the Certificate on the Valuation Date most recently completed.
Purchase Payments may be allocated among, and Account Values may be
transferred to, the various Sub-Accounts within the Separate Account, subject to
the provisions of the Contract governing transfers. For each Sub-Account, the
Purchase Payment(s) or amounts transferred are converted into Accumulation
Units. The number of Accumulation Units credited is determined by dividing the
dollar amount directed to each Sub-Account by the Accumulation Unit Value for
that Sub-Account at the end of the Valuation Period on which the Purchase
Payment(s) or transferred amount is received.
The following events will result in the cancellation of an appropriate
number of Accumulation Units of a Sub-Account:
(1) transfer from a Sub-Account;
(2) full or partial surrender of a Participant's Variable Account Value;
(3) payment of a Death Benefit;
(4) application of a Participant's Variable Account Value to a
Settlement Option;
(5) deduction of the Certificate Maintenance Fee; or
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(6) deduction of a Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period
during which the Company received a Written Request regarding the event giving
rise to such cancellation, or Due Proof of Death and a Written Request regarding
payment of the Death Benefit, or the Valuation Period on which the Certificate
Maintenance Fee is due, as the case may be.
The Variable Account Value for a Certificate at any time is equal to the
sum of the number of Accumulation Units attributable to that Certificate for
each Sub-Account multiplied by the Accumulation Unit value ("Accumulation Unit
Value") for each Sub-Account at the end of the Valuation Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the
exception of the Money Market Sub-Account, was set at $10 when the Sub-Account
was created. The initial Accumulation Unit Value for the Money Market
Sub-Account was set at $1.00. Thereafter, the Accumulation Unit Value at the end
of each Valuation Period is the Accumulation Unit Value at the end of the
previous Valuation Period multiplied by the Net Investment Factor, as described
below.
NET INVESTMENT FACTOR
The Accumulation Unit Value for each Sub-Account for any Valuation Period
is determined by the Net Investment Factor. The Net Investment Factor is a
factor applied to measure the investment performance of a Sub-Account from one
Valuation Period to the next. Each Sub-Account has a Net Investment Factor for
each Valuation Period which may be greater or less than one. Therefore, the
value of an Accumulation Unit may increase or decrease. The Net Investment
Factor for any Sub-Account for any Valuation Period is determined by dividing
(1) by (2) and subtracting (3) from the result, where:
(1) is equal to:
a. the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the current Valuation
Period; plus
b. the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account, if the
"ex-dividend" date occurs during the current Valuation Period;
plus or minus
c. a per share charge or credit for any taxes reserved for,
which is determined by the Company to have resulted from the
investment operations of the Sub-Account;
(2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the most recent Valuation
Period; and
(3) is the factor representing the Mortality and Expense Risk Charge and
the Administration Charge deducted from the Sub-Account for the
number of days in the Valuation Period.
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TRANSFERS
By Written Request prior to the Annuity Commencement Date, the Participant
may transfer amounts in a Sub-Account to a different Sub-Account and/or one or
more of the Fixed Account options. The minimum transfer amount is $500. If the
Sub-Account balance is less than $500 at the time of the transfer, the entire
amount of the Sub-Account balance must be transferred. The Participant may also
transfer amounts from any Fixed Account options to any different Fixed Account
option and/or one or more of the Sub-Accounts. If a transfer is being made from
a Fixed Account option pursuant to the "Renewal" provision of the "FIXED
ACCOUNT" section of this Prospectus, then the entire amount of that Fixed
Account option may be transferred to any one or more of the Sub-Accounts. In any
other case, transfers from any Fixed Account options are subject to a cumulative
limit during each Certificate Year of 20% of the most recent Certificate
Year-end values of that Fixed Account option, and are not permitted during the
first Certificate Year. However, if the Account Value of the Fixed Account
option being transferred is less than $500 at the time of the transfer, then the
entire balance will be transferred. The Company may from time to time change the
amount available for transfer from the Fixed Accumulation Account. Amounts
previously transferred from Fixed Account options to the Sub-Accounts may not be
transferred back to the Fixed Account options for a period of at least six
months from the date of transfer.
The Company charges a Transfer Fee of $25 for each transfer in excess of
twelve during the same Certificate Year.
The Company reserves the right, in the Company's sole discretion and at
any time without prior notice, to terminate, suspend or modify the transfer
privileges described above.
See "Transfers After the Annuity Commencement Date," page 40.
TELEPHONE TRANSFERS
A Participant also may place a request for all or part of the Account
Value to be transferred by telephone. All transfers must be in accordance with
the terms of the Certificate. Transfer instructions are currently accepted on
each Valuation Date between 9:30 a.m. and 4:00 p.m. Eastern Time at (800)
789-6771. Once instructions have been accepted, they may not be rescinded;
however, new telephone instructions may be given the following day.
The Company will not be liable for complying with telephone instructions
the Company reasonably believes to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The Participant will bear the
risk of such loss. The Company will employ reasonable procedures to determine
that telephone instructions are genuine. If the Company does not employ such
procedures, the Company may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, tape
recording telephone instructions.
DOLLAR COST AVERAGING
Prior to the Annuity Commencement Date, the Participant may establish
automatic transfers from the Money Market Sub-Account to any of the other
Sub-Accounts, on a monthly or quarterly basis, by submitting to the
Administrative Office a Dollar Cost Averaging Enrollment Form. No Dollar Cost
Averaging transfers may be made to any of the Fixed Account options. The
transfers will begin within 30 days of the receipt of such Enrollment Form.
In order to be eligible for Dollar Cost Averaging the value of the Money
Market Sub-Account must be at least $10,000 and the minimum amount that can be
transferred is $500 per month.
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Dollar Cost Averaging will automatically terminate if any Dollar Cost
Averaging transfer would cause the balance of the Money Market Sub-Account to
fall below $500. At that time, the Company will then transfer the balance of the
Money Market Sub-Account to the other Sub-Accounts in the same percentage
distribution as directed in the Dollar Cost Averaging Enrollment Form.
Dollar Cost Averaging transfers will not count toward the twelve transfers
permitted under the Certificate without charge.
Before electing Dollar Cost Averaging, a Participant should consider the
risks involved in switching between investments available under the Certificate.
Dollar Cost Averaging requires regular investments regardless of fluctuating
price levels and does not guarantee profits or prevent losses in a declining
market. A Participant should consider his or her financial ability to continue
Dollar Cost Averaging transfers through periods of changing price levels.
The Participant may terminate Dollar Cost Averaging services, at any time,
by Written Request to the Company. In addition, the Company reserves the right
to terminate, modify or suspend the Dollar Cost Averaging option at any time.
PORTFOLIO REBALANCING
In connection with the allocation of Purchase Payments to the Sub-Accounts
and/or the Fixed Accumulation Account, the Participant may elect to have the
Company perform Portfolio Rebalancing services. The election of Portfolio
Rebalancing instructs the Company to automatically transfer amounts between the
Sub-Accounts and the Fixed Accumulation Account in percentage allocations
selected by the Participant.
The Participant may elect Portfolio Rebalancing by Written Request. In
order to elect Portfolio Rebalancing after the Certificate has been issued, the
Participant must submit a Written Request for Portfolio Rebalancing to the
Company and the Participant must have a minimum Account Value of $10,000.
Portfolio Rebalancing will be performed on a quarterly basis.
The Participant may terminate Portfolio Rebalancing services, at any time,
by Written Request to the Company. In addition, the Company reserves the right
to terminate, modify or suspend the Portfolio Rebalancing option at any time.
INTEREST SWEEP
Prior to the Annuity Commencement Date, the Participant may establish
automatic transfers of the income from each Fixed Account option selected on the
Interest Sweep Enrollment Form to the Sub-Accounts, on a quarterly basis.
Transfers will begin on the next quarterly Interest Sweep date that is at least
30 days after receipt of such Enrollment Form at the Administrative Office. The
Company may, at its sole discretion, set the quarterly interest Sweep date.
In order to be eligible for the Interest Sweep option the value of each
Fixed Account option selected on the Interest Sweep Enrollment Form must be at
least $5,000 and the maximum amount that can be transferred from each Fixed
Account option so selected is 20% of such Fixed Account option's value per year.
Interest Sweep transfers will not count toward the twelve transfers
permitted under the Certificate without charge.
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The Participant may terminate participation in the Interest Sweep option,
at any time, by Written Request to the Company. In addition, the Company
reserves the right to terminate, modify or suspend the Interest Sweep option at
any time.
PRINCIPAL GUARANTEE OPTION
The Participant 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 than in effect, the Seven-Year Guarantee
account will grow to equal the full amount of the Purchase Payment after seven
years. The remainder of the Purchase Payment will be allocated according to the
Owner's Instructions. The minimum Purchase Payment eligible for the Principal
Guarantee program is $5,000.
CHANGES BY THE COMPANY
The Company reserves the right, at any time, to terminate, suspend or
modify the transfer privileges described above without prior notice to
Participants, as permitted by applicable law. The Company may also impose an
annual fee or increase the current fee for any of the foregoing services in
amount(s) as the Company may then determine to be reasonable for participation
for the service.
SURRENDERS
SURRENDER VALUE
The Participant may surrender all or part of the Surrender Value of a
Certificate. Full or partial surrenders of the Surrender Value may be made by
Written Request at any time prior to the Annuity Commencement Date; the
Surrender Value will be the Surrender Value at the end of the Valuation Period
in which the Written Request is received. The Surrender Value at any time is
equal to the Account Value as of that Valuation Period less any applicable
Contingent Deferred Sales Charge ("CDSC"), less any outstanding loans and less
any applicable premium tax not previously deducted. On full surrender, an annual
Certificate Maintenance Fee also will be deducted as part of the calculation of
the Surrender Value. A full or partial surrender prior to the Annuity
Commencement Date may be subject to a CDSC as set forth in this prospectus,
except that such charge will not apply to: (1) any portion of the Account Value
in excess of total Purchase Payments; (2) any portion of the Account Value
attributable to Purchase Payment(s) that are no longer subject to the charge; or
(3) payment of the Death Benefit.
The CDSC is calculated separately for each Purchase Payment. Surrenders
will be deemed to be withdrawn first from the portion of the Account Value in
excess of total Purchase Payments and then from Purchase Payments. For this
purpose, Purchase Payment(s) are deemed to be withdrawn on a "first-in,
first-out" (FIFO) basis. Surrenders will result in the cancellation of
Accumulation Units from each applicable Sub-Account(s) and/or a reduction of the
Participant's Fixed Account Value. In the case of a full surrender, the
Participant's participation interest under the Contract and the Certificate will
be canceled. The CDSC may be waived in whole or in part under certain
circumstances.
The Company reserves the right to terminate a Certificate if a partial
surrender would reduce a Participant's Account Value to less than the $500
minimum balance and no Purchase Payments have been received by the Company for
at least two years.
The Certificate Maintenance Fee, unless waived, will be deducted from a
full surrender before the application of any CDSC. (See "CHARGES AND
DEDUCTIONS," page 35.)
Surrenders may be subject to a 10% premature distribution penalty tax if
made before the Participant reaches age 59 1/2, and may further be subject to
federal, state or local income tax. (See "FEDERAL TAX MATTERS," page 45.)
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SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE
The Company may suspend or delay the date of payment of a partial or full
surrender of the Variable Account Value for any period if:
(1) the New York Stock Exchange ("NYSE") is closed or trading on the
NYSE is restricted;
(2) an emergency exists (as determined by the Securities and Exchange
Commission) as a result of which (a) the disposal of securities in
the Separate Account is not reasonably practicable; or (b) it is not
reasonably practicable to determine fairly the value of the net
assets in the Separate Account; or
(3) the Securities and Exchange Commission so permits for the protection
of security holders.
The Company further reserves the right to delay payment of any partial or
full surrender of the Fixed Account Value for up to six months.
A surrender request will be effective when all appropriate surrender
request forms are received. Payments of any amounts derived from a Purchase
Payment paid by check may be delayed until the check has cleared.
SINCE THE PARTICIPANT ASSUMES THE INVESTMENT RISK AND BECAUSE CERTAIN
SURRENDERS ARE SUBJECT TO A CDSC, THE TOTAL AMOUNT PAID UPON SURRENDER OF THE
CERTIFICATE (TAKING INTO ACCOUNT ANY PRIOR SURRENDERS) MAY BE MORE OR LESS THAN
THE TOTAL PURCHASE PAYMENTS.
Since the qualified contracts offered by this Prospectus will be issued in
connection with retirement plans which meet the requirements of Sections 401,
403 or 457 of the Code, as applicable, reference should be made to the terms of
the particular plans for any additional limitations or restrictions on
surrenders.
FREE WITHDRAWAL PRIVILEGE
In accordance with the provisions of the Contract, and subject to the
terms of a Participant's plan, the Company will waive the CDSC, to the extent
applicable, on full or partial surrenders during the second and succeeding
Certificate Years, on an amount equal to not more than the greater of: (1)
accumulated earnings as of the last Certificate Anniversary (Account Value in
excess of Purchase Payments); or (2) 10% of the Account Value as of the last
Certificate Anniversary.
If the Free Withdrawal Privilege is not exercised during a Certificate
Year, it does not carry over to the next Certificate Year.
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SYSTEMATIC WITHDRAWAL OPTION
Prior to the Annuity Commencement Date, the Participant, by Written
Request to the Administrative Office, may elect to automatically withdraw money
from the Fixed Account and/or the Sub-Accounts. To be eligible for the
Systematic Withdrawal Option, the Account Value must be at least $10,000 at the
time of election. The minimum monthly amount that can be withdrawn is $100.
Systematic withdrawals will be subject to the CDSC to the extent the amount
withdrawn exceeds the Free Withdrawal Allowance (See "CHARGES AND DEDUCTIONS,"
page 35.) The Participant may begin or discontinue systematic withdrawals at any
time by Written Request to the Company, but at least 30 days' notice must be
given to change any systematic withdrawal instructions that are currently in
place.
Systematic withdrawals may have tax consequences. (See "FEDERAL TAX
MATTERS," page 45.)
CONTRACT LOANS
Certain Contracts may contain a loan provision issued in connection with
certain qualified plans. Participants under such Contracts may obtain loans
using their interest under such Contract as the only security for the loan.
Loans are subject to provisions of the Code and to applicable retirement program
rules. Tax advisers and retirement plan fiduciaries should be consulted prior to
exercising loan privileges. Loan provisions are described in the loan
endorsement.
The amount of any loan will be deducted from the minimum death benefit. In
addition, a loan, whether or not repaid, will have a permanent effect on the
Account Value because the investment results of the investment options will only
apply to the unborrowed portion of the Account Value. The longer the loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the investment results are greater than the rate
being credited on amounts held in the loan account while the loan is
outstanding, the Account Value will not increase as rapidly as it would if no
loan were outstanding. If investment results are below that rate, the Account
Value will be higher than it would have been if no loan had been outstanding.
DEATH BENEFIT
DEATH OF PARTICIPANT
If a Participant dies before the Annuity Commencement Date, a death
benefit will be paid to the primary Beneficiary(ies) then living at the time of
the Participant's death. If no primary Beneficiary is living at the time of the
Participant's death or if the primary Beneficiary dies within 30 days after the
Participant's death and no death benefit has been paid, the death benefit will
be paid to the person(s) named as contingent Beneficiary(ies). If no primary or
contingent Beneficiary is living at the time of the Participant's death, the
death benefit will be paid to the Participant's estate. No death benefit is
payable on or after the Annuity Commencement Date. Only one death benefit is
payable with respect to a Participant's participation interest under the
Contract.
DEATH BENEFIT
The Death Benefit will be determined as of the Death Benefit Valuation
Date. The Death Benefit Valuation Date is the Valuation Period during which the
Company receives both Due Proof of Death of the Participant and a Written
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Request regarding payment of the Death Benefit. If both documents are not
received at the same time, the Death Benefit Valuation Date is the Valuation
Period during which the Company receives the latter of Due Proof of Death or a
Written Request regarding payment of the Death Benefit.
If a Participant dies before attaining age 75 and before the Annuity
Commencement Date, the death benefit is an amount equal to the greatest of:
(1) the Account Value on the Death Benefit Valuation Date, less any
applicable premium tax not previously deducted, and less any
outstanding loans;
(2) the total Purchase Payments, less any applicable premium tax not
previously deducted, less any partial surrenders, and less any
outstanding loans; or
(3) the largest death benefit amount on any Certificate Anniversary
prior to death that is an exact multiple of five and occurs prior to
the Death Benefit Valuation Date, less any applicable premium tax
not previously deducted, less any partial surrenders after such
death benefit was determined and less any outstanding loans.
If the Participant dies after attaining age 75 and before the Annuity
Commencement Date, the death benefit is an amount equal to the greatest of:
(1) the Account Value on the Death Benefit Valuation Date, less any
applicable premium tax not previously deducted, and less any
outstanding loans;
(2) the total Purchase Payments, less any applicable premium tax not
previously deducted, less any partial surrenders, and less any
outstanding loans; or
(3) the largest death benefit amount on any Certificate Anniversary
prior to death that is both an exact multiple of five and occurs
prior to the date on which the Participant attained age 75, less any
applicable premium tax not previously deducted, less any partial
surrenders after such death benefit was determined and less any
outstanding loans.
Payment of the death benefit is not subject to a CDSC.
BENEFICIARY
The primary Beneficiary(ies) and contingent Beneficiary(ies) are named on
the Participant Enrollment Form. The Beneficiaries may be changed at any time
prior to the Participant's death. The Company must receive a Written Request to
change a Beneficiary. Any such change will relate back to and take effect on the
date the Written Request was signed. The Company will not be liable for any
payment it makes before such Written Request has been received and acknowledged
at the Administrative Office.
In determining the identity or non-existence of any Beneficiary not
identified by name, the Company may rely on an affidavit by any person whom the
Company reasonably believes to be a reliable source for that information.
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CHARGES AND DEDUCTIONS
There are two types of charges and deductions. First, there are charges
assessed under the Certificate. These charges include the CDSC, the
Administration Charge, the Mortality and Expense Risk Charge, Premium Taxes and
Transfer Fees. All of these charges are described below and some may not be
applicable to every Certificate. Second, there are Fund expenses for fund
management fees and administration expenses. These fees are described in the
prospectus and statement of additional information for each Fund.
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
No deduction for front-end sales charges is made from Purchase Payments.
However, the Company may deduct a CDSC of up to 7% of Purchase Payments on
certain surrenders to partially cover certain expenses incurred by the Company
relating to the sale of the Contract, including commissions paid, the costs of
preparation of sales literature and other promotional costs and acquisition
expenses.
The CDSC percentage varies according to the number of full years elapsed
between the date of receipt of a Purchase Payment and the date a Written Request
for surrender is made. The amount of the CDSC is determined by multiplying the
amount withdrawn subject to the CDSC by the CDSC percentage in accordance with
the following table. Surrenders will be 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; surrenders will be made from
the oldest Purchase Payment first.
NUMBER OF FULL YEARS
ELAPSED BETWEEN DATE CONTINGENT DEFERRED
OF RECEIPT OF PURCHASE SALES CHARGE AS A
PAYMENT AND DATE PERCENTAGE OF
WRITTEN REQUEST FOR ASSOCIATED PURCHASE
SURRENDER RECEIVED PAYMENT SURRENDERED
------------------- -------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
In no event shall the CDSC assessed against the Certificate exceed 7% of
the aggregate Purchase Payment(s).
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Any Purchase Payments that have been held by the Company for at least
seven years may be surrendered free of any CDSC. In addition, during any
Certificate Year after the first Certificate Year for Certificates qualified
under Section 403(b) of the Code, the CDSC will not be imposed on the surrender
of up to 10% of the Account Value as of the last day of the previous Certificate
Year ("Free Withdrawal Allowance"). If the Free Withdrawal Allowance is not
withdrawn during a Certificate Year, it does not carry over to the next
Certificate Year.
No CDSC is assessed upon payment of the death benefit. Any applicable
CDSC will be deducted from the amount requested for partial and full surrenders.
The CDSC arising from a surrender of the Certificate will be waived in all
cases if: (i) all or part of the Account Value is applied to the purchase of an
annuity from the Company for life or for a non-commutable period of five years
or more; or (ii) the Participant is "disabled" as that term is defined in the
Social Security Act of 1935, as amended.
The CDSC arising from a surrender of the Certificate will be waived for
Certificates held by Participants in plans qualified under the Code that are
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and regulations thereunder, or qualified under Section 401 of the
Code, if the Participant incurs a separation from service.
The CDSC arising from a surrender of the Certificate will be waived for
Certificates held by Participants in plans qualified under the Code that are not
subject to ERISA if: (i) the Participant incurs a separation from service, has
attained age 55 and has held the Certificate for at least seven years, provided
the Account Value is not transferred on a tax-free basis to another insurance
carrier; or (ii) the Participant has held the Certificate for fifteen years or
more.
The CDSC also will be waived in all cases if the Participant is confined
in a licensed Hospital or Long-Term Care Facility, as those terms are defined in
the Long Term-Care Waiver Rider, for at least 90 days beginning on or after the
first Certificate Anniversary. This Rider may not be available in all
jurisdictions.
The Company may reduce or eliminate the CDSC under the Contract and
Certificates when certain sales of the Contract and Certificates result in
savings or reduction of sales expenses. The entitlement to such a reduction in
the CDSC will be based on: (i) the size and type of the group to which sales are
to be made; (ii) the anticipated total amount of Purchase Payments to be
received; and/or (iii) any prior or existing relationship with the Company. The
CDSC may be reduced or waived in connection with a Contract offered to a group
of employees of the Company, its subsidiaries and/or affiliates. There may be
other circumstances, of which the Company is not presently aware, which could
result in reduced sales expenses. In no event will reduction or elimination of
the CDSC be permitted where such reduction or elimination will be unfairly
discriminatory to any purchaser.
The Company reserves the right to terminate, suspend or modify waivers of
the CDSC, without prior notice to Participants, as permitted by applicable law.
MAINTENANCE AND ADMINISTRATIVE CHARGES
On each Certificate Anniversary, the Company deducts an annual Certificate
Maintenance Fee as partial compensation for expenses relating to the issue and
maintenance of the Certificate, and the Separate Account. The annual Certificate
Maintenance Fee is $25. If the Certificate is surrendered on any day other than
on the Certificate Anniversary, the Certificate Maintenance Fee will be deducted
in full at the time of such surrender. Before the Annuity Commencement Date and
after the Annuity Commencement Date, if a Variable Annuity Benefit is elected,
the Certificate Maintenance Fee will be deducted on a pro rata basis from each
Sub-Account in which the Participant's Account is invested.
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The Certificate Maintenance Fee may be waived for sales of Contracts to a
trustee, employer or similar entity representing a group where the Company
determines that such sales result in savings of sales and/or administrative
expenses. The Certificate Maintenance Fee also may be waived with respect to a
Contract offered to a group of employees of the Company, its subsidiaries and/or
affiliates.
The Company has not imposed an Administration Charge and has set the
Certificate Maintenance Fee at a level such that the Company will recover no
more than the anticipated and estimated costs associated with administering the
Certificate and Separate Account. The Company does not expect to make a profit
from the actual administrative costs of a particular Certificate. The Company
does not expect to make a profit from the Certificate Maintenance Fee.
MORTALITY AND EXPENSE RISK CHARGE
The Company imposes a Mortality and Expense Risk Charge as compensation
for bearing certain mortality and expense risks under the Certificate. For
assuming these risks, the Company makes a daily charge equal to .003403%
corresponding to an effective annual rate of 1.25% of the daily Net Asset Value
of each Sub-Account in the Separate Account. The approximate portion of this
charge estimated to be attributable to mortality risks is 0.75%; the approximate
portion of this charge attributable to expense risks is 0.50%. In connection
with certain Contracts that allow the Company to reduce administrative expenses,
the Company will issue an Enhanced Contract with a Mortality and Expense Risk
Charge equal to an effective annual rate of 0.95%. This is equal to a daily
charge of 0.002590%. The Company estimates that 0.20% is for expense risks and
0.75% is for mortality risks. The Company's decision to offer an Enhanced
Contract to a particular group will be based primarily on whether the Company is
designated as a preferred variable annuity contract provider by the employer or
by the trustee of the employee benefit plan. Where the Company is so designated,
the Company anticipates that it will recognize administrative expense savings
from various economies of scale and routine operations. In addition, the Company
may offer an Enhanced Contract to a group of employees of the Company, its
subsidiaries and/or affiliates. 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
applicable charge will never increase for a Contract. The Mortality and Expense
Risk Charge is reflected in the Accumulation Unit values for each Sub-Account.
The mortality risks assumed by the Company arise from its contractual
obligations to make annuity payments (determined in accordance with the annuity
tables and other provisions contained in the Certificate) and to pay death
benefits prior to the Annuity Commencement Date.
The Company also bears substantial risk in connection with the Death
Benefit before the Annuity Commencement Date, since in connection with the death
of a Participant who dies prior to attaining age 75, the Company will pay a
Death Benefit at least equal to the greatest of: (i) the Account Value on the
Death Benefit Valuation Date, less any applicable premium tax not previously
deducted, and less any outstanding loans; (ii) the total Purchase Payments, less
any applicable premium tax not previously deducted, less any partial surrenders,
and less any outstanding loans; or (iii) the largest Death Benefit on any
Certificate Anniversary prior to death that is an exact multiple of five and
occurs prior to the Death Benefit Valuation Date, less any applicable premium
tax not previously deducted, less any partial surrenders after the Death Benefit
was determined, and less any outstanding loans. In connection with the death of
a Participant who dies after attaining age 75, the Company will pay a Death
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Benefit at least equal to the greatest of: (i) the Account Value on the Death
Benefit Valuation Date, less any applicable premium tax not previously deducted,
and less any outstanding loans; (ii) the total Purchase Payments, less any
applicable premium tax not previously deducted, less any partial surrenders, and
less any outstanding loans; or (iii) the largest Death Benefit on any
Certificate Anniversary prior to death that is both an exact multiple of five
and occurs prior to the date on which the Participant attained age 75, less any
applicable premium tax not previously deducted, less any partial surrenders
after the Death Benefit was determined, and less any outstanding loans.
The expense risk assumed by the Company is the risk that the Company's
actual expenses in administering the Certificates and the Separate Account will
exceed the amount recovered through the Certificate Maintenance Fees and
Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to cover actual
costs and risks assumed, the loss will fall on the Company. Conversely, if this
charge is more than sufficient, any excess will be profit to the Company.
Currently, the Company expects a profit from this charge.
The Company recognizes that the CDSC may not generate sufficient funds to
pay the cost of distributing the Contracts and Certificates thereunder. To the
extent that the CDSC is insufficient to cover the actual cost of Contract and
Certificate distribution, the deficiency will be met from the Company's general
corporate assets which may include amounts, if any, derived from the Mortality
and Expense Risk Charge.
PREMIUM TAXES
Certain state and local governments impose premium taxes. These taxes
currently range up to 5.0% depending upon the jurisdiction. The Company, in its
sole discretion and in compliance with any applicable state law, will determine
the method used to recover premium tax expenses incurred. The Company will
deduct any applicable premium taxes from the Account Value either upon death,
surrender, annuitization, or at the time Purchase Payments are made to the
Certificate, but no earlier than when the Company has a tax liability under
state law.
TRANSFER FEE
The Company currently imposes a $25 fee for each transfer in excess of
twelve in a single Certificate Year. The Company will deduct the charge from the
amount transferred.
FUND EXPENSES
The value of the assets in the Separate Account reflects the value of Fund
shares and therefore the fees and expenses paid by each Fund. 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 18.)
REDUCTION OR ELIMINATION OF CONTRACT AND CERTIFICATE CHARGES
The CDSC and the administrative charges under the Contract and
Certificates may be reduced or eliminated when certain sales of the Contract and
Certificates result in savings or reduction of sales expenses. The entitlement
to such a reduction in the CDSC or the administrative charges will be based on
the following: (1) the size and type of the group to which sales are to be made;
(2) the total amount of Purchase Payments to be received; and (3) any prior or
existing relationship with the Company. There may be other circumstances, of
which the Company is not presently aware, which could result in fewer sales
expenses. In no event will reduction or elimination of the CDSC or the
administrative charge be permitted where such reduction or elimination will be
unfairly discriminatory to any person.
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SETTLEMENT OPTIONS
ANNUITY COMMENCEMENT DATE
Unless otherwise specified, the Annuity Commencement Date will be the
Participant's 70th birthday. The Annuity Commencement Date may be changed by the
Participant or by the Contract Owner by Written Request at least 30 days prior
to the then-current Annuity Commencement Date. The Annuity Commencement Date may
be changed to any date not later than such date as may be required or permitted
by law or by any applicable retirement plan.
ELECTION OF SETTLEMENT OPTION
If the Participant is alive on the Annuity Commencement Date and unless
otherwise directed, the Company will apply the Account Value, less premium
taxes, if any, according to the Settlement Option elected.
If the payee of a Settlement Option is not a human being, the Company may
reject the election of a Settlement Option. If payment under a Settlement Option
depends on whether a payee is living, that payee must be a human being.
If no election has been made on the Annuity Commencement Date and if the
Participant is living and has a spouse, the Company will begin payments based on
the life of the Participant as primary payee and the spouse as secondary payee,
in accordance with Settlement Option 3 (Joint and One Half Survivor Annuity)
described below. If no election has been made on the Annuity Commencement Date
and if the Participant is living and does not have a spouse, the Company will
begin payments based on the life of the Participant in accordance with
Settlement Option 1 (Life Annuity with Payments for at Least a Fixed Period),
described below, with a fixed period of 120 monthly payments assured.
ANNUITY BENEFIT
The Annuity Benefit may be calculated and paid: (1) as a Fixed Dollar
Annuity Benefit; (2) as a Variable Dollar Annuity Benefit; or (3) as a
combination of both.
If a Fixed Dollar Annuity Benefit only is elected, the Company will
transfer all of the Separate Account Value to the Fixed Account prior to the
Annuity Commencement Date. Similarly, if a Variable Dollar Annuity Benefit only
is elected, the Company will transfer all of the Fixed Account Value to the
Sub-Accounts prior to the Annuity Commencement Date. The Company will allocate
the amount transferred among the Sub-Accounts in accordance with a Written
Request. No transfers between the Fixed Dollar Annuity Benefit and the Variable
Dollar Annuity Benefit will be allowed after the Annuity Commencement Date.
However, after the Variable Dollar Annuity Benefit has been paid for at least
twelve months, the Participant may, no more than once each twelve months,
transfer all or part of the Annuity Units upon which the Variable Dollar Annuity
Benefit is based from the Sub-Account(s) held to Annuity Units in different
Sub-Accounts.
If a Variable Dollar Annuity Benefit is elected, the amount applied under
that benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the Annuity Commencement Date. If a Fixed Dollar Annuity
Benefit is elected, the amount applied under that benefit is the Fixed Account
Value as of the Annuity Commencement Date.
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FIXED DOLLAR ANNUITY BENEFIT
Fixed Dollar Annuity Benefits are determined by multiplying the Fixed
Account Value (expressed in thousands of dollars and after deduction of any
premium taxes not previously deducted) by the amount of the monthly payment per
$1,000 of value obtained from the Settlement Option Table for the Annuity
Benefit elected. The Fixed Dollar Annuity Benefit will remain level for the
duration of the Annuity.
VARIABLE DOLLAR ANNUITY BENEFIT
The first monthly Variable Dollar Annuity Benefit payment is equal to a
Participant's Variable Account Value (expressed in thousands of dollars and
after deduction of any fees and charges, loans, or applicable premium tax or
other taxes not previously deducted) as of the end of the Valuation Period
immediately preceding the Annuity Commencement Date multiplied by the amount of
the monthly payment per $1,000 of value obtained from the Settlement Option
Table for the Settlement Option elected less the pro-rata portion of the
Contract Maintenance Fee.
The number of Annuity Units in each Sub-Account held by a Participant is
determined by dividing the dollar amount of the first monthly Variable Dollar
Annuity Benefit payment from each Sub-Account by the value of an Annuity Unit
("Annuity Unit Value") for that Sub-Account as of the Annuity Commencement Date.
The number of Annuity Units remains fixed during the Annuity Payment Period,
except as a result of any transfers among Sub-Accounts after the Annuity
Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Annuity
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 Annuity Benefit payment will be equal to the sum
of the payments from each Sub-Account less a pro-rata portion of the Contract
Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of
Annuity Units held in each Sub-Account by the Annuity Unit Value for that
Sub-Account as of the end of the fifth Valuation Period preceding the due date
of the payment.
The Annuity Unit Value for each Sub-Account is originally established in
the same manner as Accumulation Unit values. Thereafter, the value of a Annuity
Unit for a Sub-Account is determined by multiplying the Annuity Unit Value as of
the end of the preceding Valuation Period by the Net Investment Factor,
determined as set forth above under "Accumulation Unit Value", for the Valuation
Period just ended. The product is then multiplied by the assumed daily
investment factor (0.99991781), for the number of days in the Valuation Period.
The factor is based on the assumed net investment rate of three percent (3%) 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.
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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 was received.
(AUV2) is the Annuity Unit Value of the Sub-Account that the transfer is
being made to as of the end of the Valuation Period in which the transfer
request was received.
(UNIT1) is the number of 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 1: LIFE ANNUITY WITH PAYMENTS FOR AT LEAST A FIXED PERIOD. The
Company will make a monthly payment for at least a fixed
period. If the Annuitant lives longer than the fixed period,
then the Company will make payments until the Annuitant's
death. The fixed periods available are reflected in Annuity
Table 1.
If, at the death of the Annuitant, payments have been made for
less than the fixed period elected, the Company will continue
to make payments: (i) to the contingent payee designated on
the Settlement Option election form; and (ii) during the
remainder of the fixed period.
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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OPTION 2: LIFE ANNUITY. The Company will make annuity payments until the
Annuitant's death. Annuity Table 2 applies to this Option.
OPTION 3: JOINT AND ONE-HALF SURVIVOR ANNUITY. The Company will provide
a monthly payment to an Annuitant during his/her lifetime;
thereafter, upon the death of the Annuitant and receipt by the
Company of Due Proof of Death, one-half of the monthly
payments will continue to a designated survivor, if living,
and until his/her death. Annuity Table 3 applies to this
Option.
OPTION 4: INCOME FOR A FIXED PERIOD. The Company will make payments for
a fixed period. Payment intervals and amounts are shown in
Annuity Table 4 and are based on a 3% guaranteed interest
rate.
If, at the death of the Annuitant, payments have been made for
less than the fixed period elected, the Company will continue
to make payments: (i) to the contingent payee designated on
the Settlement Option election form; and (ii) during the
remainder of the fixed period.
OPTION 5: ANY OTHER FORM. The Company will make payments in the form of
any other annuity which is acceptable to the Company.
MINIMUM AMOUNTS
If the Participant's Account Value is less than $5,000 on the Annuity
Commencement Date, the Company reserves the right to pay that amount in one lump
sum. If monthly payments under a Settlement Option would be less than $100, the
Company may make payments quarterly, semi-annually or annually at its
discretion.
All elected Settlement Options must comply with current applicable laws,
regulations and rulings issued by any governmental agency. If at the time a
Fixed Dollar Annuity Benefit is elected, the Company has available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and guaranteed for as long as that election remains in force.
To the extent applicable, all factors, values, benefits and reserves will
not be less than those required by the law of the state in which the Contract is
delivered.
SETTLEMENT OPTION TABLES
The Settlement Option Tables in Appendix A reflect the dollar amount of
the monthly payments for each $1,000 applied.
Rates for monthly payments for ages or fixed periods not shown in the
Settlement Option Tables will be calculated on the same basis as those shown and
may be obtained from the Company. Fixed periods shorter than five years are not
available.
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GENERAL PROVISIONS
NON-PARTICIPATING
The Contract and the Certificates thereunder are non-participating.
Neither the Contract nor the Certificates thereunder are eligible to share in
the profits or surplus earnings of the Company's general account and will not
receive dividends from the general account.
MISSTATEMENT OF AGE
If the age of the Participant has been misstated in the Certificate
Application, Annuity Benefit payments under the Certificate will be whatever the
Account Value on the Annuity Commencement Date would purchase on the basis of
the correct age of the Participant. If the Company has made underpayments based
on any misstatement, the Company shall promptly pay the amount of any
underpayment, with interest, in one lump sum. Any overpayments made shall be
charged, with interest, against the next Annuity Benefit payment or succeeding
Annuity Benefit payments due under the Certificate. The interest rate used will
not be less than 3% per year.
PROOF OF EXISTENCE AND AGE
The Company may require proof of age of the Annuitant and, if applicable, any
joint payee, before any Annuity Benefit involving lifetime payments will be
made. [The Company may also require proof that such person(s) are still living.]
FACILITY OF PAYMENT
If any person receiving payments under a Certificate is incapable of
giving valid receipt of payment, the Company may make such payment to the person
who has legally assumed responsibility for his or her care and principal
support. Any such payment shall fully discharge the Company to the extent of
that payment.
TRANSFER AND ASSIGNMENT
Neither any one Participant nor the Contract Owner may transfer, sell,
assign, pledge, charge, encumber or in any way alienate his or her interest
under a Certificate or the Contract, respectively. To the extent permitted by
law, no benefits payable under the Contract or a Certificate will be subject to
the claims of creditors.
ANNUITY DATA
The Company will not be liable for obligations which depend on the Company
receiving information from a Participant until such information is received by
the Company in a satisfactory form.
ANNUAL REPORT
At least once each Certificate Year prior to the Annuity Commencement
Date, the Participant will be given a report of the current Account Value
allocated to each Sub-Account, and each Fixed Account option. This report will
also include any other information required by law or regulation, including all
transactions which have occurred during the accounting period shown in the
report.
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INCONTESTABILITY
Each Certificate shall not be contestable by the Company.
ENTIRE CONTRACT
The Company issues the Certificate in consideration and acceptance of the
payment of the initial Purchase Payment and, where state law requires, the
Participant Enrollment Form. In those states that require a written application,
a copy of the Enrollment Form will be attached to and become part of the
Certificate and along with the Certificate constitutes the entire Certificate.
All statements made by the Participant will be considered representations and
not warranties. The Company will not use any statement in defense of a claim
unless it is made in the Participant Enrollment Form (or other application form)
and a copy of the Participant Enrollment Form (or other application form) is
attached to the Certificate when issued.
CHANGES IN THE CONTRACT
Only the Company's President, Vice President and Secretary have the
authority to bind the Company or to make any change in the Contract or the
Certificates thereunder and then only in writing. The Company will not be bound
by any promise or representation made by any other persons.
The Company may not change or amend the Contract or Certificates
thereunder, except as expressly provided therein, without the Participant's
consent. However, the Company may change or amend the Contract or Certificates
thereunder if such change or amendment is necessary for the Contract or
Certificates thereunder to comply with any state or federal law, rule or
regulation.
WAIVER OF THE CERTIFICATE MAINTENANCE FEE
The Company may waive the Certificate Maintenance Fee in certain
situations where the Company expects to realize significant economies of scale
with respect to sales of Contracts and Certificates. This is possible because
sales costs do not increase in proportion to the Purchase Payments under the
Contracts and Certificates sold; for example, the per dollar transaction cost
for a sale of a Contract and Certificates with $500,000 of Purchase Payments is
generally much higher than the per dollar cost for a sale of a Contract and
Certificates with $1,000,000 of Purchase Payments. Thus, the applicable sales
costs decline as a percentage of the Purchase Payments as the amount of Purchase
Payments increases. In such a situation, the Company may be designated as a
preferred variable annuity contract provider by the employer or trustee or the
employee benefit plan.
NOTICES AND DIRECTIONS
The Company will not be bound by any authorization, election or notice
which is not in writing and received at the Company's Administrative Office.
Any written notice requirement by the Company to the Participant will be
satisfied by the mailing of any such required written notice, by first-class
mail, to the Participant's last known address as shown on the Company's records.
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FEDERAL TAX MATTERS
INTRODUCTION
The following discussion is a general description of federal tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about tax implications
should consult a competent tax adviser before initiating any transaction. This
discussion is based upon the Company's understanding of the present federal
income tax laws as they are currently interpreted by the Internal Revenue
Service. No representation is made as to the likelihood of the continuation of
the present federal income tax laws or of the current interpretation by the
Internal Revenue Service. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The ultimate effect of federal income taxes on the amounts held under a
Contract, on Annuity Payments, and on the economic benefit to the Participant or
the Beneficiary may depend on the type of retirement plan, and on the tax status
of the individual concerned. Certain requirements must be satisfied in
purchasing a Contract for a qualified plan and receiving distributions from such
a Contract in order to continue to receive favorable tax treatment. The Company
makes no attempt to provide more than general information about use of the
Contracts with the various types of retirement plans. Participants under
retirement plans and Beneficiaries are cautioned that the rights of any person
to any benefits may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contract issued in
connection with such a plan. Some retirement plans are subject to distribution
and other requirements that are not incorporated in the administration of the
Contracts. Participants are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts satisfy
applicable law. Therefore, purchasers of Contracts should seek competent legal
and tax advice regarding the suitability of the Contract for their situation,
the applicable requirements, and the tax treatment of the rights and benefits of
the Contract. The following discussion assumes that a Contract is purchased with
proceeds from and/or contributions under retirement plans that qualify for the
intended special federal income tax treatment ("Qualified Contracts").
The following discussion also is based on the assumption that the Contract
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the requirements for qualifying as an
annuity.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities in general. The
Company believes that the Participant who is a natural person generally is not
taxed on increases in the value of an Account until distribution occurs by
withdrawing all or part of the Account Value (E.G., surrenders or annuity
payments under the Settlement Option elected). For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the Account Value or any
portion of an interest in the qualified plan generally will be treated as a
distribution. The taxable portion of a distribution (in the form of a single sum
payment or an annuity) is generally taxable as ordinary income.
The following discussion generally applies to a Certificate owned by a
natural person under a group Contract.
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SURRENDERS
QUALIFIED CONTRACTS
In the case of surrender under a Contract, other than Systematic
Withdrawal Option payments treated as Annuity Benefit Payments under a Contract,
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-excludible 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 PAYMENTS
Although the tax consequences may vary depending on the Annuity Payment
and Settlement Option elected under the Contract, in general, only the portion
of the Annuity Payment that represents the amount by which the Account Value
exceeds the "investment in the contract" will be taxed; after the "investment in
the contract" is recovered, the full amount of any additional Annuity Payments
is taxable. For Variable Dollar Annuity Payments, the taxable portion is
generally determined by an equation that establishes a specific dollar amount of
each payment that is not taxed. The dollar amount is determined by dividing the
"investment in the contract" by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her "investment in the contract." For
Fixed Dollar Annuity Payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Annuity Payments for the term of the
payments; however, the remainder of each Annuity Payment is taxable. In either
case, once the "investment in the contract" has been fully recovered, the full
amount of any additional Annuity Payments is taxable. If Annuity Payments cease
as a result of a Participant's death before full recovery of the "investment in
the contract," consult a competent tax adviser regarding deductibility of the
unrecovered amount.
PENALTY TAX
In general, a 10% premature distribution penalty tax applies to
distributions unless: (1) made on or after the date on which the Participant
attains age 59 1/2; (2) made as a result of death or disability of the
Participant; (3) received in substantially equal periodic payments as a life
annuity or a joint and one-half survivor annuity for the lives or life
expectancies of the Participant and a "designated beneficiary;" (4) made to the
Participant after separation from service and attainment of age 55; (5) made
under a qualified domestic relations order; or (6) to the extent they do not
exceed the Participant's allowable deduction for medical care for that year.
Other tax penalties may apply to certain distributions under a qualified plan.
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TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from the Account because of the death of a
Participant. Generally such amounts are 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 Annuity Payments, as
described above.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT
A transfer of ownership of a Contract, the designation of a Beneficiary
who is not also the Participant, or the exchange of a Contract may result in
certain tax consequences to the Participant that are not discussed herein.
TEXAS OPTIONAL RETIREMENT PROGRAM
Section 36.105 of the Texas Educational Code permits participants in the
Texas Optional Retirement Program ("ORP") to withdraw their interests in a
variable annuity policy issued under the ORP only upon: (1) termination of
employment in the Texas public institutions of higher education; (2) retirement;
(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.
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(a) permits employers to establish various types of
retirement plans for employees, and permit self-employed individuals to
establish retirement plans for themselves and their employees. These retirement
plans may permit the purchase of the Contracts to accumulate retirement savings
under the plans.
Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the Contract
to their specific needs.
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
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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
Although as of the date of this prospectus, Congress is not actively
considering any legislation regarding the taxation of annuities issued in
connection with a qualified plan, there is always the possibility that the tax
treatment of such annuities could change by legislation or other means (such as
IRS regulations, revenue rulings, judicial decisions, etc.). Moreover, it is
also possible that any change could be retroactive (that is, effective prior to
the date of the change).
OTHER TAX CONSEQUENCES
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this Prospectus. Further, the federal
income tax consequences discussed herein reflect the Company's understanding of
current law and the law may change. Federal estate tax consequences and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the Contract depend on the individual
circumstances of each Participant or recipient of the distribution. A competent
tax adviser should be consulted for further information.
GENERAL
At the time the initial Purchase Payment is paid, a prospective purchaser
must specify whether the purchase is a Qualified Contract. If the initial
purchase payment is derived from an exchange or surrender of another annuity
contract, the Company may require that the prospective purchaser provide
information with regard to the federal income tax status of the previous annuity
contract. The Company will require that persons purchase separate Contracts if
they desire to invest monies qualifying for different annuity tax treatment
under the Code. Each such separate Contract would require the minimum initial
Purchase Payment stated above. Additional Purchase Payments under a Contract
must qualify for the same federal income tax treatment as the Initial Purchase
Payment under the Contract; the Company will not accept an additional Purchase
Payment under a Contract if the federal income tax treatment of such Purchase
Payment would be different from that of the Initial Purchase Payment.
DISTRIBUTION OF THE CONTRACT
AAG Securities, Inc. ("AAG Securities") is the principal underwriter and
distributor of the Contracts. AAG Securities may also serve as an underwriter
and distributor of other contracts issued through the Separate Account and
certain other Separate Accounts of the Company and any affiliates of the
Company. AAG Securities is a wholly owned subsidiary of American Annuity Group,
Inc., a publicly-traded company which is an indirect subsidiary of American
Financial Group, Inc. AAG Securities is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
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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 has entered into sales agreements with other broker-dealers
to solicit applications for the Contracts through registered representatives who
are licensed to sell securities and variable insurance products. These
agreements provide that applications for the Contracts may be solicited by
registered representatives of the broker-dealers appointed by the Company to
sell its variable life insurance and variable annuities. These broker-dealers
are registered with the Securities and Exchange Commission and are members of
the NASD. The registered representatives are authorized under applicable state
regulations to sell variable annuities.
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 Participant. The number of
votes which are available to a Participant will be calculated separately for
each Sub-Account. Before the Annuity Commencement Date, that number will be
determined by applying his or her percentage interest, if any, in a particular
Sub-Account to the total number of votes attributable to that Sub-Account. The
Participant holds a voting interest in each Sub-Account to which the Account
Value is allocated. After the Annuity Commencement Date, the number of votes
decreases as Annuity Payments are made and as the number of Accumulation Units
for a Certificate decreases.
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.
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Shares as to which no timely instructions are received and shares held by
the Company as to which Participants have no beneficial interest will be voted
in proportion to the voting instructions which are received with respect to all
Certificates participating in the Sub-Account. Voting instructions to abstain on
any item will be applied on a pro-rata basis to reduce the votes eligible to be
cast.
Each person or entity having a voting interest in a Sub-Account will
receive proxy material, reports and other material relating to the appropriate
Fund.
It should be noted that the Funds are not required to hold annual or other
regular meetings of shareholders.
AVAILABLE INFORMATION
The Company has filed a registration statement (the Registration
Statement) with the Securities and Exchange Commission under the Securities Act
of 1933 relating to the Contract and Certificates thereunder offered by this
Prospectus. This Prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and exhibits thereto, and reference is hereby made to
such Registration Statement and exhibits for further information relating to the
Company, the Contract and the Certificates. Statements contained in this
Prospectus, as to the content of the Contract, the Certificates and other legal
instruments, are summaries. For a complete statement of the terms thereof,
reference is made to the instruments filed as exhibits to the Registration
Statement. The Registration Statement and the exhibits thereto may be inspected
and copied at the office of the Commission, located at 450 Fifth Street, N.W.,
Washington, D.C.
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STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
PAGE
ANNUITY INVESTORS LIFE INSURANCE COMPANY................................... 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 Yield Calculation........................... 4
Other Sub-Account 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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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 Code: ________________
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APPENDIX A
SETTLEMENT OPTION TABLES
The Settlement Option Tables show the guaranteed dollar amount, based on
unisex rates, of the monthly payments under various Settlement options for each
$1,000 applied.
OPTION 1 TABLES -- LIFE ANNUITY
WITH PAYMENTS FOR AT LEAST A FIXED PERIOD
60 120 180 240
MONTHS MONTHS MONTHS MONTHS
---------------------------------------------
AGE
---------------------------------------------
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
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OPTION 2 TABLE - LIFE ANNUITY
60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
-------------------------------------------------------------------------
AGE AGE AGE AGE
-------------------------------------------------------------------------
55 $4.65 60 $5.14 65 $5.95 70 $7.08
56 4.67 61 5.28 66 6.14 71 7.36
57 4.77 62 5.43 67 6.35 72 7.66
58 4.89 63 5.59 68 6.58 73 7.98
59 5.01 64 5.76 69 6.82 74 8.33
OPTION 3 TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
MONTHLY PAYMENTS FOR EACH $1,000 OF PROCEEDS BY AGES OF PERSONS NAMED.*
Secondary Age
----------------------------------------------------------------------------
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
----------------------------------------------------------------------------
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
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* Payments after the death of the Primary Payee will be one-half of the amount
shown.
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<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
OPTION 4 TABLE - INCOME FOR A FIXED PERIOD PAYMENTS FOR
FIXED NUMBER OF YEARS FOR EACH $1,000 APPLIED.
------------------------------------------------
TERMS OF ANNUAL SEMI- QUARTERLY MONTHLY
PAYMENTS ANNUAL
------------------------------------------------
YEARS
------------------------------------------------
6 $184.60 $91.62 $45.64 $15.18
7 160.51 79.68 39.68 13.20
8 142.46 70.70 35.22 11.71
9 128.43 63.74 31.75 10.56
10 117.23 58.18 28.98 9.64
11 108.08 53.64 26.72 8.88
12 100.46 49.86 24.84 8.26
13 94.03 46.67 23.25 7.73
14 88.53 43.94 21.89 7.28
15 83.77 41.57 20.71 6.89
16 79.61 39.51 19.68 6.54
17 75.95 37.70 18.78 6.24
18 72.71 36.09 17.98 5.98
19 69.81 34.65 17.26 5.74
20 67.22 33.36 16.82 5.53
------------------------------------------------
Rates for monthly payments for ages or fixed periods not shown in the above
tables will be calculated on the same basis as those shown and may be obtained
from the Company. Fixed periods shorter than five years are not available.
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