As filed with the Securities and Exchange Commission on April 29, 1998
File No. 33-65409
File No. 811-07299
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 2 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Amendment No. 4 (X)
(Check appropriate box or boxes)
ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT A
(Exact Name of Registrant)
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
(Name of Depositor)
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 789-6771
Mark F. Muething, Esq.
Senior Vice President, Secretary and General Counsel
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Name and Address of Agent for Service)
Copy to:
Catherine S. Bardsley, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment
It is proposed that this filing will become effective:
/_/ Immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ On May 1, 1998 pursuant to paragraph (b) of Rule 485
/_/ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/_/ On _________ pursuant to paragraph (a)(1) of Rule 485
/_/ On pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
/_/ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
Title of Securities being registered:
Shares of beneficial interest
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INDIVIDUAL 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 (Other Information)
of Registration Statement Information Required by Form N-4
<TABLE>
<CAPTION>
PART A
------
ITEM OF FORM N-4 PROSPECTUS CAPTION
---------------- ------------------
<S> <C> <C>
1. Cover Page.......................................... Cover Page
2. Definitions......................................... Definitions
3. Synopsis............................................ Highlights
4. Condensed Financial Information
(a) Accumulation Unit Values................. Condensed Financial Information
(b) Performance Data......................... Performance Information
(c) Financial Statements..................... Financial Statements (Statements in SAI)
5. General Description of Registrant, Depositor and Portfolio Companies
(a) Depositor................................ Annuity Investors Life Insurance Company
(b) Registrant............................... The Separate Account
(c) Portfolio Company........................ The Funds
(d) Fund Prospectus.......................... The Funds
(e) Voting Rights............................ Voting Rights
6. Deductions and Expenses
(a) General.................................. Charges and Deductions
(b) Sales Load %............................. Contingent Deferred Sales Charge
(c) Special Purchase Plan.................... Contingent Deferred Sales Charge
(d) Commissions.............................. Distribution of the Contract
(e) Fund Expenses............................ The Funds
(f) Operating Expenses....................... Summary of Expenses
7. Contracts
(a) Persons with Rights...................... The Contract; Surrenders; Contract
Loans; Death Benefit;Voting Rights
ii
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(b) (i) Allocation of Premium Payments........... Purchase Payments
(ii) Transfers................................ Transfers
(iii) Exchanges................................ Additions, Deletions or Substitutions
(c) Changes.................................. Changes - Waivers
(d) Inquiries................................ Contacting the Company
8. Annuity Period...................................... Settlement Options
9. Death Benefit....................................... Death Benefit
10. Purchases and Contract Values
(a) Purchases................................ Purchase Payments
(b) Valuation................................ Fixed Account Value; Variable Account Value
(c) Daily Calculation........................ Accumulation Unit Value; Net Investment Factor
(d) Underwriter.............................. Distribution of the Contract
11. Redemptions
(a) By Owner................................. Surrender Value; Systematic Withdrawal
By Annuitant............................. Not Applicable
(b) Texas ORP................................ Texas Optional Retirement Program
(c) Check Delay.............................. Suspension or Delay in Payment of Surrender Value
(d) Free Look................................ Right to Cancel
12. Taxes............................................... Federal Tax Matters
13. Legal Proceedings................................... Legal Proceedings
14. Table of Contents for the Statement of Additional
Information......................................... Statement of Additional Information
iii
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PART B
------
Statement of Additional
Item of Form N-4 Information Caption
---------------- -----------------------
15. Cover Page...................................... Cover Page
16. Table of Contents............................... Table of Contents
17. General Information and History................. General Information and History
18. Services
(a) Fees and Expenses of Registrant...... (Prospectus) Summary of Expenses
(b) Management Contracts................. Not Applicable
(c) Custodian............................ Not Applicable
Independent Auditors................. Experts
(d) Assets of Registrant................. Not Applicable
(e) Affiliated Person.................... Not Applicable
(f) Principal Underwriter................ Not Applicable
19. Purchase of Securities Being Offered............ (Prospectus) Distribution of the Contract
Offering Sales Load............................. (Prospectus) Contingent Deferred Sales Charge
20. Underwriters.................................... Distribution of the Contract
21. Calculation of Performance Data
(a) Money Market Funded Sub Accounts..... Money Market Sub-Account Standardized Yield Calculation
(b) Other Sub-Accounts................... Other Sub-Account Standardized Yield Calculations
22. Annuity Payments................................ (Prospectus) Fixed Dollar Benefit; Variable Dollar
Benefit; (SAI) Annuity Payments--Settlement Option Tables
23. Financial Statements............................ Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
iv
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ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT A
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
PROSPECTUS
FOR THE
COMMODORE AMERICUS(SERVICEMARK)
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITIES
ISSUED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
This Prospectus describes The Commodore Americus(SERVICEMARK) Individual
Flexible Premium Deferred Annuity Contracts (each, a "Contract") issued by
Annuity Investors Life Insurance Company(REGISTERED) (the "Company").
The Commodore Americus(SERVICEMARK) is available in connection with arrangements
that qualify for favorable tax treatment ("Qualified Contract(s)") under
sections 401, 403, 408 and 457(g) of the Code, and for non-tax-qualified annuity
purchases ("Non-Qualified Contract(s)"), including Contracts purchased by an
employer in connection with a Code Section 457 (other than 457(g)) or
non-qualified deferred compensation plan. Non-Qualified Contracts were formerly
known as The Commodore Mariner(SERVICEMARK) Flexible Premium Deferred Annuity
Contracts.
The Contracts provide for the accumulation of an Account Value on a fixed or
variable basis, or a combination of both. The Contracts also provide for the
payment of periodic annuity payments on a fixed or variable basis, or a
combination of both. If the variable basis is chosen, Annuity Benefit values
will be held in Annuity Investors(REGISTERED TRADEMARK) Variable Account A (the
"Separate Account") and will vary according to the investment performance of the
mutual funds in which the Separate Account invests. 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. The Separate Account uses its
assets to purchase, at their net asset value, shares of designated registered
investment companies or portfolios 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 Contracts is available free of charge by
writing to the Company's Administrative Office at P.O. Box 5423, Cincinnati,
Ohio 45201-5423. Alternatively, you may access the Statement of Additional
Information (as well as all other documents filed with the Securities and
Exchange Commission with respect to the Contracts or the Company) at the
Securities and Exchange Commission's Web site http://www.sec.gov. 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. The Company may make the Statement of Additional Information
available in one or more formats at any given time, including in electronic
format.
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Page 1
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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 SECURITIES AND EXCHANGE 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, 1998.
This Prospectus may be supplemented from time to time. The Company may make the
Prospectus and/or any supplements thereto available in one or more formats at
any given time, including in electronic format.
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This Prospectus Does Not Constitute An Offering In Any Jurisdiction In Which
Such Offering May Not Lawfully Be Made. No Dealer, Salesperson, Or Other Person
Is Authorized To Give Any Information Or Make Any Representations In Connection
With This Offering Other Than Those Contained In This Prospectus, And, If Given
Or Made, Such Other Information Or Representations Must Not Be Relied Upon.
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Variable Annuity Contracts Are Not Deposits Or Obligations Of, Or Endorsed Or
Guaranteed By, Any Financial Institution, Nor Are They Federally Insured Or
Otherwise Protected By The Federal Deposit Insurance Corporation, The Federal
Reserve Board, Or Any Other Agency; They Are Subject To Investment Risks,
Including Possible Loss Of Principal Investment.
This Prospectus Is Valid Only When Accompanied By The Current Prospectus For
Each Underlying Fund. Both This Prospectus And The Underlying Fund Prospectuses
Should Be Read And Retained For Future Reference.
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TABLE OF CONTENTS
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Page
DEFINITIONS...................................................................6
HIGHLIGHTS ...................................................................8
The Contract.......................................................8
The Separate Account...............................................8
The Fixed Account..................................................8
Transfers Before the Annuity Commencement Date.....................8
Surrenders.........................................................9
Contingent Deferred Sales Charge ("CDSC")..........................9
Other Charges and Deductions.......................................9
Annuity Benefits...................................................9
Death Benefit......................................................9
Federal Income Tax Consequences....................................9
Right to Cancel....................................................9
Contacting the Company.............................................9
CONDENSED FINANCIAL INFORMATION..............................................10
SUMMARY OF EXPENSES..........................................................12
Owner Transaction Expenses........................................12
Annual Expenses...................................................13
Examples..........................................................15
FINANCIAL STATEMENTS.........................................................16
THE FUNDS ..................................................................16
Janus Aspen Series......................................................17
Aggressive Growth Portfolio...................................17
Worldwide Growth Portfolio....................................17
Balanced Portfolio............................................17
Dreyfus Funds...........................................................17
Capital Appreciation Portfolio (Dreyfus Variable
Investment Fund).........................................17
Growth and Income Portfolio (Dreyfus Variable Investment
Fund)....................................................17
Small Cap Portfolio (Dreyfus Variable Investment Fund)........17
The Dreyfus Socially Responsible Growth Fund, Inc.............17
Dreyfus Stock Index Fund......................................17
Merrill Lynch Variable Series Funds, Inc................................18
Basic Value Focus Fund........................................18
Global Strategy Focus Fund....................................18
High Current Income Fund......................................18
Domestic Money Market Fund....................................18
Strong Opportunity Fund II, Inc.........................................18
Strong Opportunity Fund II....................................18
Morgan Stanley Universal Funds, Inc.....................................18
U.S. Real Estate Portfolio....................................18
Fixed Income Portfolio........................................18
PBHG Insurance Series Fund, Inc.........................................19
PBHG Growth II Portfolio......................................19
PBHG Technology & Communications Portfolio....................19
Additions, Deletions, or Substitutions..................................19
PERFORMANCE INFORMATION......................................................20
Yield Data..............................................................20
Total Return Data.......................................................20
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ANNUITY INVESTORS LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT............20
Annuity Investors Life Insurance Company (REGISTERED).............20
Published Ratings.................................................21
Year 2000 ........................................................21
The Separate Account..............................................21
THE FIXED ACCOUNT............................................................21
Fixed Account Options.............................................22
Renewal of Fixed Account Options..................................22
THE CONTRACTS................................................................22
Right to Cancel...................................................22
PURCHASE PAYMENTS............................................................23
Purchase Payments.................................................23
Allocation of Purchase Payments...................................23
ACCOUNT VALUE................................................................23
Fixed Account Value...............................................23
Variable Account Value............................................23
Accumulation Unit Value...........................................24
Net Investment Factor.............................................24
TRANSFERS....................................................................24
Telephone Transfers...............................................25
Dollar Cost Averaging.............................................25
Portfolio Rebalancing.............................................25
Interest Sweep....................................................26
Principal Guarantee Option........................................26
Changes By the Company............................................26
SURRENDERS...................................................................26
Surrender Value...................................................26
Suspension or Delay in Payment of Surrender Value.................27
Free Withdrawal Privilege.........................................27
Systematic Withdrawal.............................................27
CONTRACT LOANS...............................................................28
DEATH BENEFIT................................................................28
When A Death Benefit Will Be Paid.................................28
Death Benefit Values..............................................28
Death Benefit Commencement Date...................................29
Form of Death Benefit.............................................29
Beneficiary.......................................................29
CHARGES AND DEDUCTIONS.......................................................29
Contingent Deferred Sales Charge ("CDSC").........................29
Maintenance and Administrative Charges............................30
Mortality and Expense Risk Charge.................................31
Premium Taxes.....................................................31
Transfer Fee......................................................31
Fund Expenses.....................................................31
SETTLEMENT OPTIONS...........................................................32
Annuity Commencement Date.........................................32
Election of Settlement Option.....................................32
Benefit Payments..................................................32
Fixed Dollar Benefit..............................................32
Variable Dollar Benefit...........................................32
Transfers After the Commencement Date.............................33
Transfer Formula..................................................33
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Settlement Options................................................33
Minimum Amounts...................................................34
Settlement Option Tables..........................................34
GENERAL PROVISIONS...........................................................34
Non-participating.................................................34
Misstatement......................................................34
Proof of Existence and Age........................................34
Discharge of Liability............................................34
Transfer of Ownership.............................................35
Non-Qualified Contract..................................35
Qualified Contract......................................35
Assignment........................................................35
Non-Qualified Contract..................................35
Qualified Contract......................................35
Annual Report.....................................................35
Incontestability..................................................35
Entire Contract...................................................35
Changes -- Waivers................................................35
Notices and Directions............................................35
FEDERAL TAX MATTERS..........................................................36
Introduction......................................................36
Taxation of Annuities In General..................................36
Surrenders........................................................36
Qualified Contracts.....................................36
Non-Qualified Contracts.................................36
Benefit Payments..................................................36
Penalty Tax.......................................................37
Taxation of Death Benefit Proceeds................................37
Transfers, Assignments, or Exchanges of Contracts.................37
Qualified Contracts - General.....................................37
Individual Retirement Annuities.........................37
Tax-Sheltered Annuities.................................37
Texas Optional Retirement Program.......................37
Pension and Profit Sharing Plans........................37
Certain Deferred Compensation Plans...............................38
Withholding.......................................................38
Possible Changes in Taxation......................................38
Other Tax Consequences............................................38
General ........................................................38
DISTRIBUTION OF THE CONTRACT.................................................38
LEGAL PROCEEDINGS............................................................39
VOTING RIGHTS................................................................39
AVAILABLE INFORMATION........................................................39
STATEMENT OF ADDITIONAL INFORMATION..........................................41
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DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of the Owner's interest in the Sub-Account(s)
and the Fixed Account options as of the end of any Valuation Period. The value
of the Owner's interest in all Sub-Accounts is the "Variable Account Value," and
the value of the Owner's interest in all Fixed Account options is the "Fixed
Account Value."
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: The unit of measure used to calculate the value of the
Sub-Account(s) prior to the applicable Commencement Date. The value of an
Accumulation Unit is referred to as an "Accumulation Unit Value" or
"Accumulation UV."
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 person on whose life Annuity Benefit payments are based.
ANNUITY BENEFIT: Periodic payments under a settlement option, which commence on
or after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE: The first day of the first period for which an
Annuity Benefit payment is to be made under a settlement option.
BENEFIT PAYMENT: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
BENEFIT PAYMENT PERIOD: The period commencing with the Commencement Date during
which Benefit Payments are to be made under the Contract.
BENEFIT UNIT: The unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by the
Company. The value of a Benefit Unit is referred to as a "Benefit Unit Value."
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under the Contract, or the Death Benefit Commencement Date if a Death
Benefit is payable under the Contract.
CONTRACT ANNIVERSARY: An annual anniversary of the Contract Effective Date.
CONTRACT EFFECTIVE DATE: The date shown on the Contract Specifications page.
CONTRACT YEAR: Any period of twelve months commencing on the Contract Effective
Date and on each Contract Anniversary thereafter.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
DEATH BENEFIT COMMENCEMENT DATE: The first day of the first period for which a
Death Benefit payment is to be made under a settlement option.
DEATH BENEFIT VALUATION DATE: The date that Due Proof of Death has been received
by the Company and the earlier to occur of:
1) the Company's receipt of a Written Request with instructions
as to the form of Death Benefit; or
2) the Death Benefit Commencement Date.
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DUE PROOF OF DEATH: Any of the following: (1) a certified copy of a death
certificate; (2) a certified copy of a decree of a court of competent
jurisdiction as to the finding of death; (3) any other proof satisfactory to the
Company.
FUND: A management investment company or a portfolio thereof, registered under
the Investment Company Act of 1940, in which the Separate Account invests.
NET ASSET VALUE: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
OWNER: The person or persons identified as such on the Contract Specifications
page.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS:
NON-QUALIFIED CONTRACTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments,
a) the Owner, if the Owner has the right to change the
payee; or
b) in all other cases, the payee; and
2) with respect to Death Benefit payments,
a) the Beneficiary, or
b) if the Beneficiary is deceased, the payee.
QUALIFIED CONTRACTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, the Owner; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
PURCHASE PAYMENT: A contribution made to the Company in consideration for the
Contract, after the deduction of any and all of the following that may apply:
1) any fee charged by the person remitting payments for the
Owner;
2) premium taxes; and/or
3) other taxes.
SEPARATE ACCOUNT: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which is
invested in the shares of a designated Fund.
SURRENDER VALUE: The amount payable under a Contract if the Contract is
surrendered.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date and ending at the close of trading
on the next succeeding Valuation Date. "Valuation Date" means each day on which
the New York Stock Exchange is open for business.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to the Company, that is sent to the Company on the Company's form
or in a form satisfactory to the Company, and that is received by the Company at
the Administrative Office. A Written Request is subject to any payment made or
any action the Company takes before the Written Request is acknowledged by the
Company. An Owner may be required to return his or her Contract to the Company
in connection with a Written Request.
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HIGHLIGHTS
THE CONTRACT. The Commodore Americus(SERVICEMARK) Contracts described in this
Prospectus are available for use in connection with certain individual
non-tax-qualified annuity purchases, including Contracts purchased by an
employer in connection with a Code Section 457 (other than 457(g)) or
non-qualified deferred compensation plan, as well as for arrangements that
qualify for favorable tax treatment under Sections 401, 403, 408 or 457(g) of
the Code.
The Owner is the person or persons designated as such on the Contract
Specifications page. Subject to the terms of the Contract and unless the Owner
dies before the Annuity Commencement Date, the Account Value, after certain
adjustments, will be applied to the payment of an Annuity Benefit under the
settlement option elected by the Owner.
The Account Value will depend on the investment experience of the amounts
allocated to each Sub-Account of the Separate Account elected by the Owner
and/or interest credited on amounts allocated to the Fixed Account option(s)
elected. All Annuity Benefits and other values provided under the Contract when
based on the investment experience of the Separate Account Sub-Accounts are
variable and are not guaranteed as to dollar amount. Therefore, the Owner bears
the entire investment risk with respect to amounts allocated to the Separate
Account Sub-Accounts under the Contract.
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE WITH RESPECT TO AMOUNTS
ALLOCATED TO THE SEPARATE ACCOUNT, SO THE PROCEEDS OF A SURRENDER COULD BE LESS
THAN THE TOTAL PURCHASE PAYMENTS.
THE SEPARATE ACCOUNT. Annuity Investors Variable Account A is a Separate Account
of the Company that is divided into Sub-Accounts. (See "The Separate Account,"
page 21.) The Separate 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 pays its investment adviser and other service providers certain fees
charged against the assets of the Fund. The Account Value of a Contract and the
amount of any Annuity Benefits will vary to reflect the investment performance
of all the Sub-Accounts elected by the Owner and the deduction of the charges
described under "CHARGES AND DEDUCTIONS," page 29. For more information about
the Funds, see "THE FUNDS," page 16, and the accompanying Fund 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 21.)
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE. Prior to the Annuity
Commencement Date, the Owner may transfer values between the Separate Account
and the Fixed Account, within the Fixed Account and among the Sub-Accounts, by
Written Request to the Company or by telephone in accordance with the Company's
telephone transfer rules. (See "TRANSFERS," page 24.)
<PAGE>
The Company currently charges a fee of $25 for each transfer ("Transfer Fee") in
excess of twelve made during the same Contract Year. (See "TRANSFERS," page 24.)
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SURRENDERS. All or part of the Surrender Value of a Contract may be surrendered
by the Owner on or before the Annuity Commencement Date by Written Request to
the Company. Amounts surrendered may be subject to a Contingent Deferred Sales
Charge ("CDSC") depending upon how long the Purchase Payments to be withdrawn
have been held under the Contract. Amounts withdrawn also may be subject to a
premium tax or similar tax, depending upon the jurisdiction in which the Owner
lives. Surrenders may be subject to a 10% premature distribution penalty tax if
made before the Owner reaches age 59 1/2. Surrenders may further be subject to
federal, state or local income taxes or significant tax law restrictions. (See
"FEDERAL TAX MATTERS," page 36.)
CONTINGENT DEFERRED SALES CHARGE ("CDSC"). A CDSC may be imposed on amounts
surrendered. The maximum CDSC is 7% for each Purchase Payment. That percentage
decreases by 1% annually to 0% after year seven. The CDSC may be reduced or
waived under certain circumstances. (See "CHARGES AND DEDUCTIONS," page 29.)
OTHER CHARGES AND DEDUCTIONS. The Company deducts a daily charge ("Mortality and
Expense Risk Charge") at an effective annual rate of 1.25% of the daily Net
Asset Value of each Sub-Account. In connection with certain Contracts that allow
the Company to incur reduced sales and servicing expenses, such as Contracts
offered to active employees of the Company or any of its subsidiaries and/or
affiliates, the Company may offer a Contract with a Mortality and Expense Risk
Charge at an effective annual rate of 0.95% of the daily Net Asset Value of each
Sub-Account ("Enhanced Contract"). The Mortality and Expense Risk Charge is not
assessed against Fixed Account options. (See "CHARGES AND DEDUCTIONS," page 29.)
The Company also deducts a Contract maintenance charge each year ("Contract
Maintenance Fee"). This Fee is currently $25 and is deducted from an Owner's
Variable Account Value on each Contract Anniversary. The Contract Maintenance
Fee may be waived under certain circumstances. The Contract Maintenance Fee is
not assessed against Fixed Account options. (See "CHARGES AND DEDUCTIONS," page
29.)
Charges for premium taxes may be imposed in some jurisdictions. Depending on the
applicability of such taxes, the charges may be deducted from Purchase Payments,
from surrenders, and from other payments made under the Contract. (See "CHARGES
AND DEDUCTIONS," page 29.)
ANNUITY BENEFITS. Annuity Benefits are paid on a fixed or variable basis, or a
combination of both. (See "Benefit Payments," page 32.)
DEATH BENEFIT. The Contract provides for the payment of a Death Benefit if the
Owner dies prior to the Annuity Commencement Date. The Death Benefit may be paid
in one lump sum or pursuant to any available settlement option offered under the
Contract. (See "DEATH BENEFIT," page 28.)
FEDERAL INCOME TAX CONSEQUENCES. An Owner generally should not be taxed on
increases in the Account Value until a distribution under the Contract occurs
(E.G., a surrender or Annuity Benefit) or is deemed to occur (E.G., a loan in
default). Generally, a portion (up to 100%) of any distribution or deemed
distribution is taxable as ordinary income. The taxable portion of distributions
is generally subject to income tax withholding unless the recipient elects
otherwise. In addition, a 10% federal penalty tax may apply to certain
distributions. (See "FEDERAL TAX MATTERS," page 36.)
<PAGE>
RIGHT TO CANCEL. An Owner may cancel the Contract by giving the Company written
notice of cancellation and returning the Contract before midnight of the
twentieth day (or longer if required by state law) after receipt. (See "Right to
Cancel," page 22.)
CONTACTING THE COMPANY. All Written Requests and any questions or inquiries
should be directed to the Company's Administrative Office, P.O. Box 5423,
Cincinnati, Ohio 45201-5423, (800) 789-6771. All inquiries should include the
Contract Number and the Owner's name.
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE ACCOMPANYING
PROSPECTUSES FOR THE FUNDS. PLEASE REFER TO THE FUND PROSPECTUSES FOR DETAILED
INFORMATION ABOUT THE FUNDS. THE REQUIREMENTS OF A PARTICULAR RETIREMENT PLAN,
AN ENDORSEMENT TO A CONTRACT, 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, BENEFITS, OR OTHER PROVISIONS OF THE CONTRACT. THIS PROSPECTUS
DOES NOT DESCRIBE SUCH LIMITATIONS OR RESTRICTIONS. (SEE "FEDERAL TAX MATTERS,"
PAGE 36.)
- --------------------------------------------------------------------------------
Page 9
<PAGE>
INDIVIDUAL 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, 1997.
This information should be read in conjunction with the Separate Account
financial statement (including the notes thereto) included in the Statement of
Additional Information. (No Enhanced Contracts were issued as of December 31,
1997.)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
DREYFUS VARIABLE INVESTMENT FUND:
<S> <C> <C> <C>
CAPITAL APPRECIATION PORTFOLIO
Accumulation UV - beginning 12.330543 9.944353 10.000000/1
Accumulation UV - ending 15.594553 12.330543 9.944353
Accumulated units at year end 247,118.575 33,424.286 0.000
GROWTH AND INCOME PORTFOLIO
Accumulation UV - beginning 10.000000/2 N/A N/A
Accumulation UV - ending 11.475350 N/A N/A
Accumulated units at year end 48,865.286 N/A N/A
SMALL CAP PORTFOLIO
Accumulation UV - beginning 10.000000/2 N/A N/A
Accumulation UV - ending 12.145032 N/A N/A
Accumulated units at year end 86,150.930 N/A N/A
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Accumulation UV - beginning 11.924561 9.960199 10.000000/1
Accumulation UV - ending 15.126449 11.924561 9.960199
Accumulated units at year end 132,957.488 15,316.028 0.000
DREYFUS STOCK INDEX FUND
Accumulation UV - beginning 12.092195 9.992509 10.000000/1
Accumulation UV - ending 15.879169 12.092195 9.992509
Accumulated units at year end 324,713.323 29,203.177 0.000
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO
Accumulation UV - beginning 10.979832 10.299246 10.000000/1
Accumulation UV - ending 12.217744 10.979832 10.299246
Accumulated units at year end 207,227.419 52,219.342 0.000
WORLDWIDE GROWTH PORTFOLIO
Accumulation UV - beginning 13.048360 10.239284 10.000000/1
Accumulation UV - ending 15.742391 13.048360 10.239284
Accumulated units at year end 425,739.592 50,730.352 0.000
BALANCED PORTFOLIO
Accumulation UV - beginning 11.670308 10.171211 10.000000/1
Accumulation UV - ending 14.073772 11.670308 10.171211
Accumulated units at year end 409,917.307 49,603.384 0.000
SHORT-TERM BOND PORTFOLIO/3
Accumulation UV - beginning 10.332080 10.061754 10.000000/1
Accumulation UV - ending 10.890671 10.332080 10.061754
Accumulated units at year end 3,967.559 4,216.270 0.000
</TABLE>
1 Effective December 7, 1995 on Separate Account commencement date.
2 Effective May 1, 1997 on effective date of Post-Effective Amendment No. 1 to
Registration Statement.
3 Because this Sub-Account was eliminated effective May 1, 1997, Purchase
Payments may no longer be allocated to it.
- --------------------------------------------------------------------------------
Page 10
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.:
<S> <C> <C> <C>
BASIC VALUE FOCUS FUND
Accumulation UV - beginning 12.094664 10.147434 10.000000/1
Accumulation UV - ending 14.408954 12.094664 10.147434
Accumulated units at year end 68,181.594 6,820.503 0.000
GLOBAL STRATEGY FOCUS FUND
Accumulation UV - beginning 11.294096 10.105242 10.000000/1
Accumulation UV - ending 12.486612 11.294096 10.105242
Accumulated units at year end 17,615.512 2,114.707 0.000
HIGH CURRENT INCOME FUND
Accumulation UV - beginning 11.119068 10.118436 10.000000/1
Accumulation UV - ending 12.189961 11.119068 10.118436
Accumulated units at year end 65,756.981 6,837.357 0.000
DOMESTIC MONEY MARKET FUND
Accumulation UV - beginning 1.041216 1.002475 1.000000/1
Accumulation UV - ending 1.079946 1.041216 1.002475
Accumulated units at year end 697,535.841 325,331.820 0.000
PBHG INSURANCE SERIES FUND, INC.:
PBHG GROWTH II PORTFOLIO
Accumulation UV - beginning 10.000000/2 N/A N/A
Accumulation UV - ending 10.661135 N/A N/A
Accumulated units at year end 15,905.540 N/A N/A
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
Accumulation UV - beginning 10.000000/2 N/A N/A
Accumulation UV - ending 10.323925 N/A N/A
Accumulated units at year end 51,276.959 N/A N/A
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
U.S. REAL ESTATE PORTFOLIO
Accumulation UV - beginning 10.000000/2 N/A N/A
Accumulation UV - ending 12.291156 N/A N/A
Accumulated units at year end 19,438.406 N/A N/A
FIXED INCOME PORTFOLIO
Accumulation UV - beginning 10.000000/2 N/A N/A
Accumulation UV - ending 10.740991 N/A N/A
Accumulated units at year end 7,144.949 N/A N/A
STRONG OPPORTUNITY FUND II, INC.
Accumulation UV - beginning 10.0000002 N/A N/A
Accumulation UV - ending 12.311565 N/A N/A
Accumulated units at year end 35,542.297 N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
Page 11
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES
OWNER TRANSACTION EXPENSES.
<TABLE>
<CAPTION>
<S> <C>
=========================================================================================== ==================
Sales Load Imposed on Purchase Payments NONE
- --------------------------------------------------------------------------------------------------------------
Contingent Deferred Sales Charge (as a percentage of Purchase Payments surrendered)
- --------------------------------------------------------------------------------------------------------------
Contract Years elapsed since receipt of Purchase Payment
- --------------------------------------------------------------------------------------------------------------
less than 1 year 7%
- --------------------------------------------------------------------------------------------------------------
1 year but less than 2 years 6%
- --------------------------------------------------------------------------------------------------------------
2 years but less than 3 years 5%
- --------------------------------------------------------------------------------------------------------------
3 years but less than 4 years 4%
- --------------------------------------------------------------------------------------------------------------
4 years but less than 5 years 3%
- --------------------------------------------------------------------------------------------------------------
5 years but less than 6 years 2%
- --------------------------------------------------------------------------------------------------------------
6 years but less than 7 years 1%
- --------------------------------------------------------------------------------------------------------------
7 years or more 0%
- --------------------------------------------------------------------------------------------------------------
Surrender Fees NONE
- --------------------------------------------------------------------------------------------------------------
Transfer Fee/4 $25
- --------------------------------------------------------------------------------------------------------------
Annual Contract Maintenance Fee/5 $25
=========================================================================================== ==================
</TABLE>
4 The first twelve transfers in a Contract year are free. Thereafter, a $25 fee
will be charged on each subsequent transfer.
5 The Company will waive the Contract Maintenance Fee if the Account Value is
equal to or greater than $30,000 on the date the Contract Maintenance Fee would
otherwise be assessed.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
ANNUAL EXPENSES. The purpose of these tables 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 tables
reflect expenses of each Sub-Account as well as of the Funds in which the
Separate Account invests. See "CHARGES AND DEDUCTIONS," page 29 of this
Prospectus and the accompanying prospectus for the applicable Fund for a more
complete description of the various costs and expenses. Information regarding
each underlying Fund has been provided to the Company by each Fund, and the
Company has not independently verified such information. In addition to the
expenses listed above, premium taxes may be applicable. The dollar figures
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Separate Account Annual Janus A.S. Janus A.S. Janus A.S. Dreyfus V.I.F. Dreyfus V.I.F. Dreyfus V.I.F.
Expenses/6 (as a Aggressive Worldwide Balanced Growth and Small Cap Capital
Percentage of average Growth Growth Portfolio/7 Income Portfolio Portfolio
Separate Account assets) Portfolio/7 Portfolio/7 ----------- Portfolio ------------- Appreciation
------------------------ ----------- ----------- --------- ------------
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------
Administration Charge 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------
Other Fees and
Expenses of the
Separate Account 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------
Total Separate Account
Annual Expenses 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------
Fund Annual Expenses/8 (as a percentage of Fund average net assets after fee waiver and/or expense reimbursement, if any)
- ------------------------------------------------------------------------------------------------------------------------------
Management Fees 0.73% 0.66% 0.76% 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.03% 0.08% 0.07% 0.05% 0.03% 0.05%
- ------------------------------------------------------------------------------------------------------------------------------
Total Fund Annual
Expenses 0.76% 0.74% 0.83% 0.80% 0.78% 0.80%
==============================================================================================================================
</TABLE>
- ----------------------
6 Annual expenses are the same for each Sub-Account. These expenses are based on
expenses incurred for the fiscal year ended December 31, 1997.
7 The management fee for each of these Portfolios reflects the new rate applied
to net assets as of December 31, 1997. Other expenses are based on gross
expenses of the Shares before expense offset arrangements for the fiscal year
ended December 31, 1997. Fee reductions for the Aggressive Growth, Worldwide
Growth, and Balanced Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Without such reductions, the Management Fee,
Other Expenses and total Operating Expenses for the Shares would have been
0.74%, 0.04% and 0.78% for Aggressive Growth Portfolio; 0.72%, 0.09% and 0.81%
for Worldwide Growth Portfolio; and 0.77%, 0.06% and 0.83% for Balanced
Portfolio, respectively. Janus Capital may modify or terminate the waivers or
reductions at any time upon at least 90 days notice to the Trustees.
8 Data for each Fund are for its fiscal year ended December 31, 1997. Actual
expenses in future years may be higher or lower.
- --------------------------------------------------------------------------------
Page 13
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===========================================================================================================================
Separate Account Annual The Dreyfus Dreyfus Stock Merrill Lynch Merrill Lynch Merrill Lynch Merrill Lynch
Expenses/6 (as a Socially Index Fund V.S.F. Basic V.S.F. Global V.S.F. High V.S.F.
percentage of average Responsible ---------- Value Focus Strategy Current Domestic Money
Growth Fund Focus Fund Income Fund Market Fund
Separate Account assets) Fund, Inc. ------------- ------------- ----------- --------------
- ------------------------- ----------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
- ----------------------------------------------------------------------------------------------------------------------------
Administration Charge 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
Other Fees and
Expenses of the
Separate Account 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
Total Separate Account
Annual Expenses 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
- ----------------------------------------------------------------------------------------------------------------------------
Fund Annual Expenses/8 (as a percentage of Fund average net assets after fee waiver and/or expense reimbursement, if any)
- ----------------------------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.25% 0.60% 0.65% 0.48% 0.50%
- ----------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.07% 0.03% 0.05% 0.08% 0.06% 0.04%
- ----------------------------------------------------------------------------------------------------------------------------
Total Fund Annual
Expenses 0.82% 0.28 % 0.65% 0.73% 0.54% 0.54%
============================================================================================================================
============================================================================================================================
Separate Account Annual Strong Morgan Stanley Morgan Stanley - PBHG Insurance PBHG Insurance Series
Expenses/6 (as a Opportunity U.S. Real Estate Fixed Income Series Fund, Fund, Inc. - Pbhg
Percentage Of Average Fund II, Inc. Portfolio/9 Portfolio/9 Series Growth II Technology &
Separate Account assets) ------------- ---------------- ----------------- Portfolio/10 Communications
----------------------- --------------- Portfolio/10
----------------------
- -----------------------------------------------------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25% 1.25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------------
Administration Charge 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
Other Fees and
Expenses of the
Separate Account 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
Total Separate Account
Annual Expenses 1.25% 1.25% 1.25% 1.25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------------
Fund Annual Expenses/8 (as a percentage of Fund average net assets after fee waiver and/or expense reimbursement, if any)
- -----------------------------------------------------------------------------------------------------------------------------
Management Fees 1.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.15% 1.10% 0.70% 1.20% 1.20%
- -----------------------------------------------------------------------------------------------------------------------------
Total Fund Annual
Expenses 1.15% 1.10% 0.70% 1.20% 1.20%
=============================================================================================================================
</TABLE>
- ------------------
9 The information for each Portfolio is net of fee waivers or reimbursements
from MSAM or MAS. Absent such waivers and reimbursements "Management Fees",
"Other Expenses" and "Total Fund Annual Expenses, " respectively, would have
been as follows: U.S. Real Estate Portfolio - 0.80%, 1.52%, 2.32%; Fixed Income
Portfolio - 0.40%, 1.31%, 1.71%. MSAM or MAS may terminate this voluntary waiver
at any time in their sole discretion.
<PAGE>
10 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, 1998,
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, Management Fees and Total Operating Expenses for the PBHG
Technology & Communication Portfolio would have been 0.85% and 5.09%,
respectively and for the PBHG Growth II Portfolio would have been 0.85% and
4.38%, respectively for the period ended December 31, 1997.
- --------------------------------------------------------------------------------
Page 14
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
EXAMPLES. 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 examples reflect expenses of
the Separate Account as well as of the Funds in which the Separate Account
invests. See "CHARGES AND DEDUCTIONS" on page 29 of this Prospectus and the
accompanying prospectus for the applicable Fund for a more complete description
of the various costs and expenses.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RATES OF RETURN OF ANY SUB-ACCOUNT OR FUND. ACTUAL EXPENSES
AND ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR THE
PURPOSE OF THE EXAMPLES. THE $25 CONTRACT MAINTENANCE FEE IS REFLECTED IN THE
EXAMPLES AS A CHARGE OF $1.00.
The 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 fee table and
examples do not include charges to the Owner for premium taxes.
If the Owner surrenders his or her Contract at the end of the applicable time
period, the following expenses will be charged on a $1,000 investment, assuming
a 5% annual return on assets:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sub-account 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Janus Aspen Series-Aggressive Growth Portfolio $92 $120 $157 $307
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Janus Aspen Series-Worldwide Growth Portfolio $92 $120 $156 $304
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Janus Aspen Series-Balanced Portfolio $92 $123 $161 $316
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Dreyfus Variable Investment Fund-Capital Appreciation Portfolio $92 $122 $159 $312
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
The Dreyfus Socially Responsible Growth Fund, Inc. $92 $122 $160 $314
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Dreyfus Variable Investment Fund-Growth and Income Portfolio $92 $122 $159 $312
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Dreyfus Variable Investment Fund-Small Cap Portfolio $92 $121 $158 $309
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Dreyfus Stock Index Fund $87 $105 $129 $242
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Merrill Lynch Variable Series Funds, Inc.-Basic Value Focus Fund $91 $117 $150 $292
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Merrill Lynch Variable Series Funds, Inc.-Global Strategy Focus Fund $91 $120 $155 $303
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Merrill Lynch Variable Series Funds, Inc.-High Current Income Fund $90 $113 $144 $277
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Merrill Lynch Variable Series Funds, Inc.-Domestic Money Market Fund $90 $113 $144 $277
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Strong Opportunity Fund II, Inc. $96 $133 $179 $357
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio $95 $131 $176 $351
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio $91 $119 $153 $299
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $96 $135 $182 $363
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
PBHG Insurance Series Fund, Inc.-PBHG Technology & Communications
Portfolio $96 $135 $182 $363
- ----------------------------------------------------------------------- ------------ ------------- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
Page 15
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
If the Owner does not surrender his or her Contract, or if 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>
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Janus Aspen Series-Aggressive Growth Portfolio $22 $70 $127 $307
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Janus Aspen Series-Worldwide Growth Portfolio $22 $70 $126 $304
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Janus Aspen Series-Balanced Portfolio $22 $73 $131 $316
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Dreyfus Variable Investment Fund-Capital Appreciation Portfolio $22 $72 $129 $312
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
The Dreyfus Socially Responsible Growth Fund, Inc. $22 $72 $130 $314
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Dreyfus Variable Investment Fund-Growth and Income Portfolio $22 $72 $129 $312
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Dreyfus Variable Investment Fund-Small Cap Portfolio $22 $71 $128 $309
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Dreyfus Stock Index Fund $17 $55 $99 $242
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Merrill Lynch Variable Series Funds, Inc.-Basic Value Focus Fund $21 $67 $120 $292
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Merrill Lynch Variable Series Funds, Inc.-Global Strategy Focus Fund $21 $70 $125 $303
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Merrill Lynch Variable Series Funds, Inc.-High Current Income Fund $20 $63 $114 $277
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Merrill Lynch Variable Series Funds, Inc.-Domestic Money Market Fund $20 $63 $114 $277
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Strong Opportunity Fund II, Inc. $26 $83 $149 $357
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate Portfolio $25 $81 $146 $351
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
Morgan Stanley Universal Funds, Inc.-Fixed Income Portfolio $21 $69 $123 $299
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
PBHG Insurance Series Fund, Inc.-PBGH Growth II Portfolio $26 $85 $152 $363
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
PBHG Insurance Series Fund, Inc.-PBGH Technology & Communications
Portfolio
$26 $85 $152 $363
- ----------------------------------------------------------------------- ------------ ------------- ------------ -------------
</TABLE>
FINANCIAL STATEMENTS
The financial statements and reports of independent public accountants for the
Company and the Separate Account are contained in the Statement of Additional
Information.
THE FUNDS
The Separate Account currently has seventeen Funds that are available for
investment under the Contract. Each Fund has separate investment objectives and
policies. As a result, each Fund operates as a separate investment portfolio and
the investment performance of one Fund has no effect on the investment
performance of any other Fund. There is no assurance that any of these Funds
will achieve their stated objectives. The Securities and Exchange Commission
does not supervise the management or the investment practices and/or policies of
any of the Funds.
The Separate Account invests exclusively in shares of the Funds listed below
(followed by a brief overview of each Fund's investment objective(s) and
policies):
- --------------------------------------------------------------------------------
Page 16
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
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.
WORLDWIDE GROWTH PORTFOLIO. A diversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks
of foreign and domestic issuers.
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.
Janus Capital Corporation serves as the investment adviser to each of
these Portfolios.
DREYFUS FUNDS:
CAPITAL APPRECIATION PORTFOLIO. (Dreyfus Variable Investment Fund).
The Capital Appreciation Portfolio's primary investment objective is
to provide long-term capital growth consistent with the preservation
of capital. Current income is a secondary goal. It seeks to achieve
its goals by investing principally in common stocks of domestic and
foreign issuers, common stocks with warrants attached and debt
securities of foreign governments.
The Dreyfus Corporation serves as the investment adviser and Fayez
Sarofim & Co. serves as the sub-investment adviser to this Fund.
GROWTH AND INCOME PORTFOLIO. (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, and may also invest in 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 investment standards, but also show
evidence that they conduct their business in a manner that
contributes to the enhancement of the quality of life in America.
Current income is a secondary goal.
The Dreyfus Corporation serves as the investment adviser and NCM
Capital Management Group, Inc. serves as the sub-investment adviser
to this Fund.
DREYFUS STOCK INDEX FUND. The Dreyfus Stock Index Fund's investment
objective is to provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite
Stock Price Index. The Stock Index Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation.
The Dreyfus Corporation acts as the Fund manager and Mellon Equity
Associates, an affiliate of Dreyfus, is the index manager.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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MERRILL LYNCH VARIABLE SERIES FUNDS, INC.:
BASIC VALUE FOCUS FUND. The investment objective of the Fund is to
seek capital appreciation and, secondarily, income by investing in
securities, primarily equities, that management of the Fund believes
are undervalued and therefore represent basic investment value. The
Fund seeks special opportunities in securities that are selling at a
discount, either from book value or historical price-earnings ratios,
or seem capable of recovering from temporarily out-of-favor
considerations. Particular emphasis is placed on securities that
provide an above-average dividend return and sell at a below-average
price-earnings ratio.
GLOBAL STRATEGY FOCUS FUND. The investment objective of the Fund is
to seek high total investment return by investing primarily in a
portfolio of equity and fixed income securities, including
convertible securities, of U.S. and foreign issuers. The Fund seeks
to achieve its objective by investing primarily in securities of
issuers located in the U.S., Canada, Western Europe, the Far East and
Latin America. Geographical allocation of the Fund's investments is
not limited, and will be made primarily on the basis of anticipated
total return from investments, considering various factors including
economic, financial, social, national, and political factors.
Investing on an international basis involves special considerations.
See the attached Prospectus for the Fund.
HIGH CURRENT INCOME FUND. The primary investment objective of the
Fund is to obtain as high a level of current income as is consistent
with its investment policies and prudent investment management. As a
secondary objective, the Fund seeks capital appreciation when
consistent with its primary objective. The Fund seeks to achieve its
objective by investing principally in fixed-income securities that
are rated in the lower rating categories of the established rating
services or in unrated securities of comparable quality, including
junk bonds. Investment in such securities entails relatively greater
risk of loss of income or principal. An investment in this Fund may
not be appropriate as the exclusive investment to fund a Contract.
See the attached Prospectus for the Fund.
DOMESTIC MONEY MARKET FUND. The investment objectives of the Fund are
to seek preservation of capital, maintain liquidity and achieve the
highest possible current income consistent with the foregoing
objectives by investing in short-term domestic money market
securities.
Merrill Lynch Asset Management, L.P. serves as the investment adviser
to these Funds.
STRONG OPPORTUNITY FUND II, INC.:
STRONG OPPORTUNITY FUND II. 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.
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 Dean Witter & Co.) serves as the investment adviser to
this 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 and Derivatives.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary
of Morgan Stanley Dean Witter & Co.) serves as the investment adviser
to this Portfolio.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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PBHG INSURANCE SERIES FUND, INC.:
PBHG GROWTH II PORTFOLIO. The investment objective of PBHG Growth II
Portfolio is to seek capital appreciation by investing primarily in
common stocks and convertible securities of small and medium size
growth companies (market capitalization or annual revenue of up to $4
billion) that, in the adviser's opinion, 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.
THERE IS NO ASSURANCE THAT ANY OF THESE FUNDS WILL ACHIEVE THEIR STATED
OBJECTIVES.
INVESTMENTS IN THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER ENTITY OR PERSON.
Since each of the Funds is available to separate accounts of other insurance
companies offering variable annuity and variable life products, and certain
Funds may be available to qualified pension and retirement plans, there is a
possibility that a material conflict may arise between the interests of the
Separate Account and one or more other separate accounts or plans investing in
the Fund. In the event of a material conflict, the affected insurance companies
and plans will take any necessary steps to resolve the matter, including
discontinuing investment in the particular Fund.
See the Fund prospectuses for greater detail.
The current Fund prospectuses which accompany this Prospectus contain additional
information concerning the investment objectives and policies of each Fund, the
investment advisory services and administrative services of each Fund and the
charges of each Fund. THE APPROPRIATE FUND PROSPECTUSES SHOULD BE READ CAREFULLY
BEFORE ANY DECISION IS MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO,
OR TRANSFERS AMONG, THE SUB-ACCOUNTS.
ADDITIONS, DELETIONS, OR SUBSTITUTIONS. The Company does not control the Funds
and cannot guarantee that any of the Sub-Accounts or any of the Funds will
always be available for allocation of Purchase Payments or transfers. The
Company retains the right to make changes in the Separate Account and its
investments.
The Company reserves the right to eliminate the shares of any Fund held by a
Sub-Account and to substitute shares of another investment company for the
shares of any Fund, if the shares of that Fund are no longer available for
investment or if, in the Company's judgment, investment in any Fund would be
inappropriate in view of the purposes of the Separate Account. To the extent
required by the Investment Company Act of 1940, as amended ("1940 Act"), or
other applicable law, a substitution of shares attributable to the Owner's
interest in a Sub-Account will not be made without prior notice to the Owner and
the prior approval of the Securities and Exchange Commission. Nothing contained
herein shall prevent the Separate Account from purchasing other securities for
other series or classes of variable annuity policies, or from effecting an
exchange between series or classes of variable policies on the basis of requests
made by Owners.
New Sub-Accounts may be established when, in the sole discretion of the Company,
marketing, tax, investment or other conditions so warrant. Any new Sub-Accounts
will be made available to existing Owners on a basis to be determined by the
Company. Each additional Sub-Account will purchase shares in a Fund or in
another mutual fund or investment vehicle. The Company may also eliminate one or
more Sub-Accounts, if in its sole discretion, marketing, tax, investment or
other conditions so warrant. In the event any Sub-Account is eliminated, the
Company will notify Owners and request a re-allocation of the amounts invested
in the eliminated Sub-Account.
In the event of any substitution or change, the Company may make such changes in
the Contract as may be necessary or appropriate to reflect such substitution or
change. Furthermore, if deemed to be in the best interests of persons having
voting rights under the Contracts, the Separate Account may be operated as a
management company under the 1940 Act or any other form permitted by law, may be
de-registered under the 1940 Act in the event such registration is no longer
required, or may be combined with one or more separate accounts.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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PERFORMANCE INFORMATION
From time to time, the Company may advertise yields and/or total returns for the
Sub-Accounts. THESE FIGURES ARE BASED ON HISTORICAL INFORMATION AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. For performance data and a description
of the methods used to determine yield and total return, see the Statement of
Additional Information.
YIELD DATA. The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in that Sub-Account over a specified seven-day
period. The Company may also advertise the effective yield of the Money Market
Sub-Account which is calculated similarly but, when annualized, the income
earned by an investment in that Sub-Account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a Sub-Account other than the Money Market Sub-Account refers to the
annualized income generated by an investment in the Sub-Account over a specified
30-day period. The yield calculations do not reflect the effect of any CDSC or
premium taxes that may be applicable to a particular Contract which would reduce
the yield with respect to that Contract.
TOTAL RETURN DATA. The average annual total return of a Sub-Account refers to
return quotations assuming an investment has been held in the Sub-Account for
various periods of time including, but not limited to, a period measured from
the date the Sub-Account commenced operations. When a Sub-Account has been in
operation for one, five and ten years, respectively, the average annual total
return presented will be presented for these periods, although other periods may
also be provided. The standardized average annual total return quotations
reflect the deduction of all applicable charges except for premium taxes. In
addition to standardized average annual total return for a Sub-Account, the
Company may provide cumulative total return and/or other non-standardized total
return for the Sub-Account. Total return data that does not reflect the CDSC and
other charges will be higher than the total return realized by an investor who
incurs the charges.
Reports and promotional literature may contain the ranking of any Sub-Account
derived from rankings of variable annuity separate accounts or their investment
products tracked by Lipper Analytical Services, Inc., VARDS, IBC/Donoghue's
Money Fund Report, Financial Planning Magazine, Money Magazine, Bank Rate
Monitor, Standard & Poor's Indices, Dow Jones Industrial Average, and other
rating services, companies, publications, or other persons who rank separate
accounts or other investment products on overall performance or other criteria.
The Company may compare the performance of a Sub-Account with applicable indices
and/or industry averages. Performance information may present the effects of
tax-deferred compounding on Sub-Account investment returns, or returns in
general, which may be illustrated by graphs, charts, or otherwise, and which may
include comparisons of investment return on a tax-deferred basis with currently
taxable investment return.
The Company may also advertise performance figures for the Sub-Accounts based on
the performance of a Fund prior to the time the Separate Account commenced
operations.
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
AND THE SEPARATE ACCOUNT
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED TRADEMARK). Annuity
Investors Life Insurance Company(REGISTERED TRADEMARK) (the "Company") is a
stock life insurance company. It was incorporated under the laws of the State of
Ohio in 1981. The Company is principally engaged in the sale of fixed and
variable annuity policies.
The Company is a wholly owned subsidiary of Great American(REGISTERED) Life
Insurance Company which is a wholly owned subsidiary of American Annuity
Group(SERVICEMARK), Inc., ("AAG") a publicly traded insurance holding company
(NYSE symbol: AAG). AAG is in turn indirectly controlled by American Financial
Group, Inc., a publicly traded holding company (NYSE symbol: AFG).
The home office of the Company is located at 250 East Fifth Street, Cincinnati,
Ohio 45202.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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PUBLISHED RATINGS. The Company may from time to time publish in advertisements,
sales literature and reports to Owners, the ratings and other information
assigned to it by one or more independent rating organizations such as A.M. Best
Company, Standard & Poor's, and Duff & Phelps. The purpose of the ratings is to
reflect the financial strength and/or claims-paying ability of the Company and
should not be considered as reflecting on the investment performance of assets
held in the Separate Account. Each year the A.M. Best Company reviews the
financial status of thousands of insurers, culminating in the assignment of
Best's Ratings. These ratings reflect their current opinion of the relative
financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. In addition, the
claims-paying ability of the Company as measured by Standard & Poor's or Duff &
Phelps may be referred to in advertisements or sales literature or in reports to
Owners. These ratings are opinions of those agencies as to an operating
insurance company's financial capacity to meet the obligations of its insurance
and annuity policies in accordance with their terms. Such ratings do not reflect
the investment performance of the Separate Account or the degree of risk
associated with an investment in the Separate Account.
YEAR 2000. The Company is developing plans to modify or replace software used in
administering variable contracts so that its computer systems will function
properly with respect to dates in the year 2000 and beyond. Should software
modifications and new software installations not be completed on a timely basis,
there could be disruptions in the ability of the company to administer the
Contracts.
THE SEPARATE ACCOUNT. Annuity Investors(REGISTERED) Variable Account A was
established by the Company as an insurance company separate account under the
laws of the State of Ohio on May 26, 1995, pursuant to resolutions of the
Company's Board of Directors. The Separate Account is registered with the
Securities and Exchange Commission under the 1940 Act as a unit investment
trust. However, the Securities and Exchange Commission does not supervise the
management or the investment practices or policies of the Separate Account.
The assets of the Separate Account are owned by the Company but they are held
separately from the other assets of the Company. The Ohio Revised Code provides
that the assets of a separate account are not chargeable with liabilities
incurred in any other business operation of the Company. Income, gains and
losses incurred on the assets in the Separate Account, whether or not realized,
are credited to or charged against the Separate Account, without regard to other
income, gains or losses of the Company. Therefore, the investment performance of
the Separate Account is entirely independent of the investment performance of
the Company's general account assets or any other separate account maintained by
the Company.
Under Ohio law, the assets of the Separate Account will be held for the
exclusive benefit of Owners of, and the persons entitled to payment under, the
Contracts offered by this Prospectus and under all other contracts which provide
for accumulated values or dollar amount payments to reflect investment results
of the Separate Account. The obligations arising under the Contracts are
obligations of the Company.
The Separate Account is divided into Sub-Accounts, each of which is invested
solely in a specific corresponding Fund. (See "THE FUNDS," page 16.) Changes to
the Sub-Accounts may be made at the discretion of the Company. (See "Additions,
Deletions, or Substitutions," page 19.)
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
a prospectus.
<PAGE>
The Company has sole discretion to invest the assets of the Fixed Account,
subject to applicable law. The Company delegates the investment of the assets of
the Fixed Account to American Money Management Corporation. Allocation of any
amounts to the Fixed Account does not entitle Owners to share directly in the
investment experience of these assets. The Company assumes the risk of
investment gain or loss on the portion of the Account Value allocated to the
Fixed Account. All assets held in the general account are subject to the
Company's general liabilities from business operations.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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FIXED ACCOUNT OPTIONS. There are currently five options under the Fixed Account:
the Fixed Accumulation Account Option; and the guarantee period options referred
to in the Contract as the Fixed Account Options One-Year, Three-Year, Five-Year,
and Seven-Year Guarantee Period, respectively. Different Fixed Account options
may be offered by the Company at any time. Purchase Payments allocated and
amounts transferred to the Fixed Account options accumulate interest at the
applicable current interest rate declared by the Company's Board of Directors,
and if applicable, for the duration of the guarantee period selected.
The Company guarantees a minimum rate of interest for the Fixed Account options.
The guaranteed rate is 3% per year, compounded annually.
RENEWAL OF FIXED ACCOUNT OPTIONS. The following provisions apply to all Fixed
Account options except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty days immediately preceding
the end of such guarantee period, the Owner may elect a new option to replace
the Fixed Account option that is then expiring. The entire amount maturing may
be reallocated to any of the then-current options under the Contract (including
the various Sub-Accounts within the Separate Account), except that a Fixed
Account option with a guarantee period that would extend past the Annuity
Commencement Date may not be selected. In particular, in the case of renewals
occurring within one year of such Commencement Date, the only Fixed Account
option available is the Fixed Accumulation Account Option.
If the Owner does not specify a new Fixed Account option in accordance with the
preceding paragraph, the Owner will be deemed to have elected the same Fixed
Account option as is expiring, so long as the guarantee period of such option
does not extend beyond the Annuity Commencement Date. In the event that such a
period would extend beyond the Annuity Commencement Date, the Owner will be
deemed to have selected the Fixed Account option with the longest available
guarantee period that expires prior to the Annuity Commencement Date, or failing
that, the Fixed Accumulation Account Option.
THE CONTRACTS
Each Contract is an individual flexible premium deferred annuity. The rights and
benefits are described below and in each Contract. The Company reserves the
right to make any modification to conform the Contracts to, or give the Owner
the benefit of, any applicable law. The obligations under the Contracts are
obligations of the Company.
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or
regulations, the Contracts will be modified accordingly.
Fixed Account Values, Variable Account Values, benefits and charges will be
calculated separately for each Contract. The various administrative rules
described below will apply separately to each Contract, unless otherwise noted.
The Company reserves the right to terminate any Contract at any time the Account
Value is less than $500. Upon the termination of a Contract, the Company will
pay the Owner the Surrender Value.
RIGHT TO CANCEL. The Owner may cancel the Contract by giving the Company written
notice of cancellation and returning the Contract before midnight of the
twentieth day following the date the Owner receives the Contract. The Contract
must be returned to the Company, and the required notice must be given in
person, or to the agent who sold it to the Owner, or by mail. If by mail, the
return of the Contract or the notice is effective on the date it is postmarked,
with the proper address and with postage paid. If the Owner cancels the Contract
as set forth above, the Contract will be void and the Company will refund the
Purchase Payment(s) plus or minus any investment gains or losses under the
Contract as of the end of the Valuation Period during which the returned
Contract is received by the Company. Where required by state law, the Right to
Cancel provision of a Contract may provide for refund of a different amount, or
a right to cancel for a different period of time, than described above. The
Company may require that Purchase Payments be allocated to the Money Market
Sub-Account or to the Fixed Accumulation Account Option during the Right to
Cancel period.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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PURCHASE PAYMENTS
PURCHASE PAYMENTS. Currently, the minimum initial Purchase Payment for Qualified
Contracts purchased under a periodic payment program is $50; for other Qualified
contracts, $2,000; for Non-Qualified Contracts purchased under a periodic
payment program, $100; and for other Non-Qualified Contracts, $5,000. Subsequent
Purchase Payments (Purchase Payments other than periodic payments or initial
Purchase Payments) must be at least $50 per month under any Contract. Purchase
Payments and tax-free transfers or rollovers may be sent to the Company at its
Administrative Office at any time before the Annuity Commencement Date so long
as the Contract has not been fully surrendered and the Owner is still living.
The Company reserves the right to increase the minimum allowable Purchase
Payment under a periodic payment program, or the minimum allowable subsequent
Purchase Payment, at its discretion and at any time, where permitted by state
law.
Each Purchase Payment will be applied by the Company to the credit of the
Owner's account. If the application form is in good order, the Company will
apply the initial Purchase Payment to an account for the Owner within two
business days of receipt of the Purchase Payment at the Administrative Office.
If the application form is not in good order, the Company will attempt to get
the application form in good order within five business days. If the application
form is not in good order at the end of this period, the Company will inform the
Owner of the reason for the delay and that the Purchase Payment will be returned
immediately unless he or she specifically consents to the Company keeping the
Purchase Payment until the application form is in good order. Once the
application form is in good order, the Purchase Payment will be applied to the
Owner's account within two business days.
Each additional Purchase Payment is credited to a Contract as of the next
Valuation Date following the receipt of such additional Purchase Payment.
No Purchase Payment for any Contract may exceed $500,000 without prior approval
of the Company.
ALLOCATION OF PURCHASE PAYMENTS. The Company will allocate Purchase Payments to
the Fixed Account options and/or to the Sub-Accounts according to instructions
received by Written Request. Allocations must be made in whole percentages. The
minimum amount which may be allocated to the Fixed Accumulation Account Option
or to a Sub-Account is $10. The minimum amount which may be allocated to a Fixed
Account option other than the Fixed Accumulation Account Option is $2,000. The
Company may require that Purchase Payments be allocated to the Money Market
Sub-Account or to the Fixed Accumulation Account Option during the Right to
Cancel period.
ACCOUNT VALUE
The Account Value is equal to the aggregate value of the Owner's interest in the
Sub-Account(s) and the Fixed Account options as of the end of any Valuation
Period. The value of the Owner's interest in all Sub-Accounts is the "Variable
Account Value," and the value of the Owner's interest in all Fixed Account
options is the "Fixed Account Value."
FIXED ACCOUNT VALUE. The Fixed Account Value for a Contract at any time is equal
to: (a) the Purchase Payment(s) allocated to the Fixed Account; plus (b) amounts
transferred to the Fixed Account; plus (c) interest credited to the Fixed
Account; less (d) any charges, surrenders, deductions, amounts transferred from
the Fixed Account or other adjustments made in accordance with the provisions of
the Contract.
VARIABLE ACCOUNT VALUE. The Variable Account Value for a Contract at any time is
equal to the sum of the number of Accumulation Units for each Sub-Account
attributable to that Contract multiplied by the Accumulation Unit Value for the
applicable Sub-Account at the end of the preceding Valuation Period.
Purchase Payments may be allocated among, and amounts 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.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of the Variable Account Value;
3) payment of a Death Benefit;
4) application of the Variable Account Value to a settlement
option;
5) deduction of the Contract Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which the Contract Maintenance Fee or a Transfer Fee is due,
as the case may be.
ACCUMULATION UNIT VALUE. The initial Accumulation Unit Value for each
Sub-Account, with the exception of the Money Market Sub-Account, was set at $10.
The initial Accumulation Unit Value for the Money Market Sub-Account was set at
$1.00. Thereafter, the Accumulation Unit Value at the end of each Valuation
Period is the Accumulation Unit Value at the end of the previous Valuation
Period multiplied by the Net Investment Factor, as described below.
NET INVESTMENT FACTOR. The Net Investment Factor is a factor applied to measure
the investment performance of a Sub-Account from one Valuation Period to the
next. Each Sub-Account has a Net Investment Factor for each Valuation Period
which may be greater or less than one. Therefore, the Accumulation Unit Value
for each Sub-Account may increase or decrease. The Net Investment Factor for any
Sub-Account for any Valuation Period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
(1) is equal to:
a. the Net Asset Value per share of the Fund held in
the Sub-Account, determined at the end of the
applicable Valuation Period; plus
b. the per share amount of any dividend or net
capital gain distributions made by the Fund held
in the Sub-Account, if the "ex-dividend" date
occurs during the applicable Valuation Period;
plus or minus
c. a per share charge or credit for any taxes
reserved for, which is determined by the Company
to have resulted from the investment operations
of the Sub-Account;
(2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately
preceding Valuation Period; and
(3) is the factor representing the Mortality and Expense Risk
Charge and the Administration Charge deducted from the
Sub-Account for the number of days in the applicable
Valuation Period.
TRANSFERS
Prior to the applicable Commencement Date, the Owner may transfer amounts in a
Sub-Account to a different Sub-Account and/or to one or more of the Fixed
Account options. The minimum transfer amount is $500. If the Sub-Account balance
is less than $1,000 at the time of the transfer, the entire amount of the
Sub-Account balance must be transferred. The Owner may also transfer amounts
from any Fixed Account option to any other Fixed Account option and/or one or
more of the Sub-Accounts. If a transfer is being made from a Fixed Account
option pursuant to the "Renewal of Fixed Account Options" provision of the "THE
FIXED ACCOUNT" section of this Prospectus, then the entire amount of the Fixed
Account option subject to renewal at that time may be transferred to any one or
more of the Sub-Accounts. In any other case, transfers from any Fixed Account
option are subject to a cumulative limit during each Contract Year of 20% of the
Fixed Account option's value as of the most recent Contract Anniversary. Fixed
Account transfers are not permitted during the first Contract Year. The minimum
transfer amount from any Fixed Account option is $500. The Company may from time
to time change the amount available for transfer from the Fixed Accumulation
Account Option. Amounts previously transferred from Fixed Account options to the
Sub-Accounts may not be transferred back to the Fixed Account options for a
period of six months from the date of transfer.
<PAGE>
The Company charges a Transfer Fee of $25 for each transfer in excess of twelve
during the same Contract Year.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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TELEPHONE TRANSFERS. An Owner may place a request for all or part of the Account
Value to be transferred by telephone. All transfers must be in accordance with
the terms of the Contract. Transfer instructions are currently accepted on each
Valuation Date between 9:30 a.m. and 4:00 p.m. Eastern Time at (800) 789-6771.
Once instructions have been accepted, they may not be rescinded; however, new
telephone instructions may be given the following day.
The Company will not be liable for complying with telephone instructions which
the Company reasonably believes to be genuine, or for any loss, damage, cost or
expense in acting on such telephone instructions. The Owner or Person
Controlling Payments will bear the risk of such loss. The Company will employ
reasonable procedures to determine that telephone instructions are genuine. If
the Company does not employ such procedures, the Company may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, tape recording telephone instructions.
DOLLAR COST AVERAGING. Prior to the applicable Commencement Date, the Owner may
establish automatic transfers from the Money Market Sub-Account to any other
Sub-Account(s), on a monthly or quarterly basis, by submitting to the
Administrative Office a Dollar Cost Averaging Authorization Form. No Dollar Cost
Averaging transfers may be made to any of the Fixed Account options. The Dollar
Cost Averaging transfers will take place on the last Valuation Date of each
calendar month or quarter as requested by the Owner.
In order to be eligible for Dollar Cost Averaging, the value of the Money Market
Sub-Account must be at least $10,000, and the minimum amount that may be
transferred is $500 per month.
Dollar Cost Averaging will automatically terminate if any Dollar Cost Averaging
transfer would cause the balance of the Money Market Sub-Account to fall below
$500. At that time, the Company will then transfer the balance of the Money
Market Sub-Account to the other Sub-Account(s) in the same percentage
distribution as directed in the Dollar Cost Averaging Authorization Form.
Currently, the Transfer Fee does not apply to Dollar Cost Averaging transfers,
and Dollar Cost Averaging transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
Before electing Dollar Cost Averaging, an Owner should consider the risks
involved in switching between investments available under the Contract. Dollar
Cost Averaging requires regular investments regardless of fluctuating price
levels and does not guarantee profits or prevent losses in a declining market.
An Owner should consider his or her financial ability to continue Dollar Cost
Averaging transfers through periods of changing price levels.
The Owner may terminate Dollar Cost Averaging services at any time, but must
give the Company at least 30 days notice to change any automatic transfer
instructions that are currently in place. Termination and change instructions
will be accepted by telephone at (800) 789-6771. Currently, the Company does not
charge a fee for Dollar Cost Averaging services.
PORTFOLIO REBALANCING. In connection with the allocation of Purchase Payments to
the Sub-Accounts, and/or the Fixed Accumulation Account Option, the Owner may
elect to have the Company perform Portfolio Rebalancing services. The election
of Portfolio Rebalancing instructs the Company to automatically transfer amounts
between the Sub-Accounts and the Fixed Accumulation Account Option to maintain
the percentage allocations selected by the Owner.
Prior to the applicable Commencement Date, the Owner may elect Portfolio
Rebalancing by submitting to the Administrative Office a Portfolio Rebalancing
Authorization Form. In order to be eligible for the Portfolio Rebalancing
program, the Owner must have a minimum Account Value of $10,000. Portfolio
Rebalancing transfers will take place on the last Valuation Date of each
calendar quarter.
Currently, the Transfer Fee does not apply to Portfolio Rebalancing transfers,
and Portfolio Rebalancing transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
The Owner may terminate Portfolio Rebalancing services at any time, but must
give the Company at least 30 days notice to change any automatic transfer
instructions that are already in place. Termination and change instructions will
be accepted by telephone at (800) 789-6771. Currently, the Company does not
charge a fee for Portfolio Rebalancing services.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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INTEREST SWEEP. Prior to the applicable Commencement Date, the Owner may elect
automatic transfers of the income from any Fixed Account option(s) to any
Sub-Account(s), by submitting to the Administrative Office an Interest Sweep
Authorization Form. Interest Sweep transfers will take place on the last
Valuation Date of each calendar quarter.
In order to be eligible for the Interest Sweep program, the value of each Fixed
Account option selected must be at least $5,000. The maximum amount that may be
transferred from each Fixed Account option selected is 20% of such Fixed Account
option's value per year. Any amounts transferred under the Interest Sweep
program will reduce the 20% maximum transfer amount otherwise allowed.
Currently, the Transfer Fee does not apply to Interest Sweep transfers, and
Interest Sweep transfers will not count toward the twelve transfers permitted
under the Contract without a Transfer Fee charge.
The Owner may terminate the Interest Sweep program, at any time, but must give
the Company at least 30 days notice to change any automatic transfer
instructions that are already in place. Termination and change instructions will
be accepted by telephone at (800) 789-6771. Currently, the Company does not
charge a fee for Interest Sweep services.
PRINCIPAL GUARANTEE OPTION. The Owner may elect to have the Company allocate a
portion of a Purchase Payment to the Fixed Account Option 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 Option Seven-Year Guarantee Period such that, based on the
interest rate then in effect, the Seven-Year Guarantee Period 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, in the Company's sole
discretion and at any time, to terminate, suspend or modify any aspect of the
transfer privileges described above without prior notice to Owners, as permitted
by applicable law. The Company may also impose an annual fee or increase the
current annual fee, as applicable, for any of the foregoing services in
amount(s) as the Company may then determine to be reasonable for participation
in the service.
SURRENDERS
SURRENDER VALUE. The Owner may surrender the Contract in full for the Surrender
Value, or partial surrenders may be made for a lesser amount, by Written Request
at any time prior to the Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce the Surrender
Value to less than $500. Surrenders will be deemed to be withdrawn first from
the portion of the Account Value that represents accumulated earnings and then
from Purchase Payments. For purposes of the Contract, Purchase Payments are
deemed to be withdrawn on a "first-in, first-out" basis.
The amount available for surrender will be the Surrender Value at the end of the
Valuation Period in which the Written Request is received. The Surrender Value
at any time is an amount equal to:
1) the Account Value as of the end of the applicable Valuation
Period; less
2) any applicable CDSC; less
3) any outstanding loans; and less
4) any applicable premium tax or other taxes not previously
deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted as part
of the calculation of the Surrender Value. The Contract Maintenance Fee will be
deducted before the application of any CDSC.
A full or partial surrender may be subject to a CDSC as set forth in this
Prospectus. (See "Contingent Deferred Sales Charge ("CDSC")," page 29.)
<PAGE>
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of the Fixed Account Value. In the
case of a full surrender, the Contract will be terminated.
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Surrenders may be subject to a 10% premature distribution penalty tax if made
before the Owner reaches age 59 1/2, and may further be subject to federal,
state or local income tax, as well as significant tax law restrictions in the
case of Qualified Contracts. (See "FEDERAL TAX MATTERS," page 36.)
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE. The Company has the right to
suspend or delay the date of payment of a partial or full surrender of the
Variable Account Value for any period:
1) when the New York Stock Exchange ("NYSE") is closed or trading
on the NYSE is restricted;
2) when an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which (a) the disposal of
securities in the Separate Account is not reasonably
practicable or (b) it is not reasonably practicable to
determine fairly the value of the net assets in the Separate
Account; or
3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of any partial or full
surrender of the Fixed Account Value for up to six months after the receipt of a
Written Request.
A surrender request will be effective when all appropriate surrender request
forms are received. Payments of any amounts derived from a Purchase Payment paid
by check may be delayed until the check has cleared.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK AND BECAUSE CERTAIN SURRENDERS ARE
SUBJECT TO A CDSC, THE TOTAL AMOUNT PAID UPON SURRENDER OF THE CONTRACT (TAKING
INTO ACCOUNT ANY PRIOR SURRENDERS) MAY BE MORE OR LESS THAN THE TOTAL PURCHASE
PAYMENTS.
When Contracts offered by this Prospectus are issued in connection with
retirement plans which meet the requirements of Sections 401, 403, 408 or 457 of
the Code, as applicable, reference should be made to the terms of the particular
plans for any additional limitations or restrictions on surrenders.
FREE WITHDRAWAL PRIVILEGE. Subject to the provisions of the Contract, the
Company will waive the CDSC, to the extent applicable, on full or partial
surrenders as follows:
1) during the first Contract Year, on an amount equal to not more than
10% of all Purchase Payments received; and
2) during the second and succeeding Contract Years, on an amount equal
to not more than the greater of: (a) accumulated earnings as of the
last Contract Anniversary (Account Value in excess of Purchase
Payments); or (b) 10% of the Account Value as of the last Contract
Anniversary.
If the Free Withdrawal Privilege is not exercised during a Contract Year, it
does not carry over to the next Contract Year.
SYSTEMATIC WITHDRAWAL. Prior to the applicable Commencement Date, the Owner, by
Written Request to the Administrative Office, may elect to withdraw money
automatically from the Fixed Account and/or the Sub-Accounts. To be eligible for
the Systematic Withdrawal program, the Account Value must be at least $10,000 at
the time of election. The minimum monthly amount that can be withdrawn is $100.
Systematic withdrawals will be subject to the CDSC to the extent the amount
withdrawn exceeds the Free Withdrawal Privilege. (See "CHARGES AND DEDUCTIONS,"
page 29.) The Owner may begin or discontinue systematic withdrawals at any time
by Written Request to the Company, but at least 30 days notice must be given to
change any systematic withdrawal instructions that are currently in place. The
Company reserves the right to discontinue offering systematic withdrawals at any
time. Currently, the Company does not charge a fee for Systematic Withdrawal
services. However, the Company reserves the right to impose an annual fee in
such amount as the Company may then determine to be reasonable for participation
in the Systematic Withdrawal program.
Systematic withdrawals may have tax consequences or may be limited by tax law
restrictions. (See "FEDERAL TAX MATTERS," page 36.)
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CONTRACT LOANS
If permitted under the Contract, an Owner may obtain a loan using his or her
interest under such Contract as the only security for the loan. Loans are
subject to provisions of the Code. A tax adviser should be consulted prior to
exercising loan privileges. Loan provisions are described in the loan
endorsement to the Contract.
The amount of any loan will be deducted from any Death Benefit. In addition, a
loan, whether or not repaid, will have a permanent effect on the Account Value
because the investment results of the investment options will only apply to the
unborrowed portion of the Account Value. The longer the loan is outstanding, the
greater the effect is likely to be. The effect could be favorable or
unfavorable. If the investment results are greater than the rate being credited
on amounts held in the loan account while the loan is outstanding, the Account
Value will not increase as rapidly as it would if no loan were outstanding. If
investment results are below that rate, the Account Value will be higher than it
would have been if no loan had been outstanding.
DEATH BENEFIT
WHEN A DEATH BENEFIT WILL BE PAID. A Death Benefit will be paid under the
Contract if:
1) the Owner or the joint owner, if any, dies before the Annuity
Commencement Date and before the Contract is fully surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) a spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under the Contract;
and
2) all other rights under the Contract will be terminated except
for rights related to the Death Benefit.
Only one Death Benefit will be paid under the Contract
DEATH BENEFIT VALUES. If the Owner dies before his or her 75th birthday and
before the Annuity Commencement Date, the Death Benefit is an amount equal to
the greatest of:
1) the Account Value on the Death Benefit Valuation Date, less any
applicable premium tax or other taxes not previously deducted,
less any partial surrenders, and less any outstanding loans;
2) the total Purchase Payment(s), less any applicable premium tax
or other taxes not previously deducted, less any partial
surrenders, and less any outstanding loans; or
3) the largest Death Benefit amount on any Contract Anniversary
prior to death that is an exact multiple of five and occurs
prior to the Death Benefit Valuation Date, less any applicable
premium tax or other taxes not previously deducted, less any
partial surrenders after such Death Benefit was determined, and
less any outstanding loans.
If the Owner dies on or after his or her 75th birthday and before the Annuity
Commencement Date, the Death Benefit is an amount equal to the greatest of:
1) the Account Value on the Death Benefit Valuation Date, less any
applicable premium tax or other taxes not previously deducted,
less any partial surrenders, and less any outstanding loans;
2) the total Purchase Payment(s), less any applicable premium tax or
other taxes not previously deducted, less any partial surrenders,
and less any outstanding loans; or
3) the largest Death Benefit amount on any Contract Anniversary
prior to death that is both an exact multiple of five and occurs
prior to the date on which the Owner attained age 75, less any
applicable premium tax or other taxes not previously deducted,
less any partial surrenders after such Death Benefit was
determined, and less any outstanding loans.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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In any event, if the Contract is issued on or after the eldest Owner's 75th
birthday, and any Owner dies before the Annuity Commencement Date, the amount of
the Death Benefit will be the greater of:
1) the Account Value on the Death Benefit Valuation Date, less any
applicable premium tax or other taxes not previously deducted, less
any partial surrenders, and less any outstanding loans; or
2) the total Purchase Payment(s), less any applicable premium tax or
other taxes not previously deducted, less any partial surrenders,
and less any outstanding loans.
DEATH BENEFIT COMMENCEMENT DATE. The Beneficiary may designate the Death Benefit
Commencement Date by Written Request within one year of the Owner's death. If no
designation is made, then the Death Benefit Commencement Date will be one year
after the Owner's death.
FORM OF DEATH BENEFIT. Death Benefit payments will be Fixed Dollar Benefit
payments made monthly in accordance with the terms of Option A with a period
certain of 48 months under the "SETTLEMENT OPTIONS" section of this prospectus.
(See page 32.)
In lieu of that, the Owner may elect at any time before his or her death to have
Death Benefit payments made in one lump sum or pursuant to any available
settlement option under the "SETTLEMENT OPTIONS" section of this prospectus. If
the Owner does not make any such election, the Beneficiary may make that
election at any time after the Owner's death and before the Death Benefit
Commencement Date.
BENEFICIARY. Non-Qualified Contracts may be jointly owned by two people. If
there is a joint owner and that joint owner survives the Owner, the joint owner
is the Beneficiary, regardless of any designation made by the Owner. If there is
no surviving joint owner, and in the case of Qualified Contracts, the
Beneficiary is the person or persons so designated in the application, if any,
or under the Change of Beneficiary provision of the Contract. If the Owner has
not designated a Beneficiary, or if no Beneficiary designated by the Owner
survives the Owner, then the Beneficiary will be the Owner's estate.
CHARGES AND DEDUCTIONS
There are two types of charges and deductions. First, there are charges assessed
under the Contract. These charges include the CDSC, the Administration Charge,
the Mortality and Expense Risk Charge, Premium Taxes and Transfer Fees. All of
these charges are described below and some may not be applicable to every
Contract. Second, there are Fund expenses for fund management fees and
administration expenses. These fees are described in the prospectus and
statement of additional information for each Fund.
CONTINGENT DEFERRED SALES CHARGE ("CDSC"). No deduction for front-end sales
charges is made from Purchase Payments. However, the Company may deduct a CDSC
of up to 7% of Purchase Payments on certain surrenders to partially cover
certain expenses incurred by the Company relating to the sale of the Contract,
including commissions paid, the costs of preparation of sales literature and
other promotional costs and acquisition expenses.
The CDSC applies to and is calculated separately for each Purchase Payment. The
CDSC percentage varies according to the number of full years elapsed between the
date of receipt of a Purchase Payment and the date a Written Request for
surrender is made. The amount of the CDSC is determined by multiplying the
amount withdrawn subject to the CDSC by the CDSC percentage in accordance with
the following table. Surrenders will be deemed to be withdrawn first from
accumulated earnings (which may be surrendered without charge) and then to
Purchase Payments on a first-in, first-out basis.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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================================================================================
Number of Full Years Elapsed Between Contingent Deferred Sales Charge
Date of Receipt of Purchase Payment as a Percentage of Associated Purchase
and Date Written Request for Payment Surrendered
Surrender Received
- ---------------------------------- -------------------------------------
0 7%
- ---------------------------------- -------------------------------------
1 6%
- ---------------------------------- -------------------------------------
2 5%
- ---------------------------------- -------------------------------------
3 4%
- ---------------------------------- -------------------------------------
4 3%
- ---------------------------------- -------------------------------------
5 2%
- ---------------------------------- -------------------------------------
6 1%
- ---------------------------------- -------------------------------------
7 or more 0%
================================ =======================================
In no event shall the CDSC assessed against the Contract exceed 7% of the
aggregate Purchase Payment(s).
Any Purchase Payments that have been held by the Company for at least seven
years may be surrendered free of any CDSC. The CDSC will not be imposed on
amounts surrendered under the Free Withdrawal Privilege. (See "Free Withdrawal
Privilege," page 27.)
No CDSC is assessed upon payment of the Death Benefit.
The CDSC will be waived upon surrender if the Contract is modified by the
Long-Term Care Waiver Rider and the Owner is confined in a licensed Hospital or
Long-Term Care Facility, as those terms are defined in the Rider, for at least
90 days beginning on or after the first Contract Anniversary. This Rider may not
be available in all jurisdictions.
The CDSC may be reduced or waived in connection with certain Contracts where the
Company incurs reduced sales and servicing expenses, such as Contracts offered
to active employees of the Company or any of its subsidiaries and/or affiliates.
For Qualified Contracts only, the CDSC will be waived if the Owner has been
determined by the Social Security Administration to be "disabled" as that term
is defined in the Social Security Act of 1935, as amended.
In addition, for Contracts qualified under the Code, the CDSC will be waived if
(i) the Owner incurs a separation from service, has attained age 55 and has held
the Contract for at least seven years; or (ii) the Owner has held the Contract
for fifteen years or more.
The Company reserves the right to terminate, suspend or modify waivers of the
CDSC, without prior notice to Owners, as permitted by applicable law.
The CDSC may be reduced or waived on partial or full surrenders to the extent
required to satisfy state law.
MAINTENANCE AND ADMINISTRATIVE CHARGES. On each Contract Anniversary, the
Company deducts an annual Contract Maintenance Fee as partial compensation for
expenses relating to the issue and maintenance of the Contract, and the Separate
Account. The annual Contract Maintenance Fee is $25. The Contract Maintenance
Fee is deducted pro-rata from the Sub-Accounts and is not assessed against Fixed
Account options. If the Contract is surrendered in full on any day other than on
the Contract Anniversary, the Contract Maintenance Fee will be deducted in full
at the time of such surrender. If a Variable Dollar Benefit is elected, a
portion of the $25 Annual Fee will be deducted from each Benefit Payment.
The Company will waive the Contract Maintenance Fee if the Account Value is
equal to or greater than $30,000 on the date of the assessment of the Charge.
The Company will waive the Contract Maintenance Fee after the applicable
Commencement Date if the amount applied to a Variable Dollar Benefit exceeds
$30,000. The Company may waive the Contract Maintenance Fee in connection with
certain Contracts which allow the Company to incur reduced Contract issuance and
maintenance expenses, such as Contracts offered to active employees of the
Company or any of its subsidiaries, and/or affiliates.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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The Company has not imposed an Administration Charge and has set the Contract
Maintenance Fee at a level such that the Company will recover no more than the
anticipated and estimated costs associated with administering the Contracts and
Separate Account. The Company does not expect to make a profit from the
administrative charges of a particular Contract. The Company does not expect to
make a profit from the Contract Maintenance Fee.
MORTALITY AND EXPENSE RISK CHARGE. The Company imposes a Mortality and Expense
Risk Charge as compensation for bearing certain mortality and expense risks
under the Contract. For assuming these risks, the Company makes a daily charge
equal to .003403% corresponding to an effective annual rate of 1.25% of the
daily Net Asset Value of each Sub-Account in the Separate Account. The Company
estimates that the mortality risk component of this charge is 0.75% of the daily
Net Asset Value of each Sub-Account and the expense risk component is 0.50%. In
connection with certain Contracts that allow the Company to incur reduced sales
and servicing expenses, such as Contracts offered to active employees of the
Company or any of its subsidiaries and/or affiliates, the Company may offer 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 for these Contracts, the mortality risk component of this charge
is 0.75% of the daily Net Asset Value of each Sub-Account and the expense risk
component is 0.20%. The Mortality and Expense Risk Charge is imposed before the
applicable Commencement Date and after the applicable Commencement Date if a
Variable Dollar Benefit is selected. The Company guarantees that the Mortality
and Expense Risk Charge will never increase for a Contract after it has been
issued. The Mortality and Expense Risk Charge is reflected in the Accumulation
Unit Values for each Sub-Account. The Mortality and Expense Risk Charge is not
assessed against Fixed Account options.
The mortality risks assumed by the Company arise from its contractual
obligations to make Benefit Payments (determined in accordance with the annuity
tables and other provisions contained in the Contracts). The Company also bears
substantial risk in connection with payment of the Death Benefit before the
Annuity Commencement Date, since in certain circumstances the Company may be
obligated to pay a larger Death Benefit amount than the then-existing Account
Value of a Contract.
The expense risk assumed by the Company is the risk that the Company's actual
expenses in administering the Contracts and the Separate Account will exceed the
amount recovered through the Contract Maintenance Fees and Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to cover actual costs
and risks assumed, the loss will fall on the Company. Conversely, if this charge
is more than sufficient, any excess will be profit to the Company. Currently,
the Company expects a profit from this charge.
The Company recognizes that the CDSC may not generate sufficient funds to pay
the cost of distributing the Contracts. To the extent that the CDSC is
insufficient to cover the actual cost of Contract distribution, the deficiency
will be met from the Company's general corporate assets which may include
amounts, if any, derived from the Mortality and Expense Risk Charge.
PREMIUM TAXES. Certain state and local governments impose premium taxes. These
taxes currently range up to 5.0% depending upon the jurisdiction. The Company,
in its sole discretion and in compliance with any applicable state law, will
determine the method used to recover premium tax expenses incurred. The Company
will deduct any applicable premium taxes from the Account Value either upon
death, surrender, annuitization, or at the time Purchase Payments are made to a
Contract, but no earlier than when the Company has a tax liability under state
law.
TRANSFER FEE. The Company currently imposes a $25 fee for each transfer in
excess of twelve in a single Contract Year. The Company will deduct the charge
from the amount transferred. Currently, transfers associated with Dollar Cost
Averaging, Interest Sweep and Portfolio Rebalancing programs do not incur a
Transfer Fee and do not count toward the twelve annual transfers currently
permitted under the Contract without a Transfer Fee.
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 16.)
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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SETTLEMENT OPTIONS
ANNUITY COMMENCEMENT DATE. The Annuity Commencement Date is shown on the
Contract Specifications page. The Owner may change the Annuity Commencement Date
by Written Request made at least 30 days prior to the date that Annuity Benefit
payments are scheduled to begin. In no event can the Annuity Commencement Date
be later than the Contract Anniversary following the 85th birthday of the eldest
Owner, or 5 years after the Contract Effective Date, whichever is later.
ELECTION OF SETTLEMENT OPTION. If the Owner is alive on the Annuity Commencement
Date and unless otherwise directed, the Company will apply the Account Value,
less premium taxes, if any, according to the settlement option elected. If no
election has been made on the Annuity Commencement Date, the Company will begin
payments based on Settlement Option B (Life Annuity with Payments for at Least a
Fixed Period), described below, with a fixed period of 120 monthly payments
assured.
BENEFIT PAYMENTS. Benefit Payments may be calculated and paid: (1) as a Fixed
Dollar Benefit; (2) as a Variable Dollar Benefit; or (3) as a combination of
both.
If only a Fixed Dollar Benefit is to be paid, the Company will transfer all of
the Account Value to the Company's general account on the applicable
Commencement Date, or on the Death Benefit Valuation Date (if applicable).
Similarly, if only a Variable Dollar Benefit is elected, the Company will
transfer all of the Account Value to the Sub-Accounts as of the end of the
Valuation Period immediately prior to the applicable Commencement Date; the
Company will allocate the amount applied to a Variable Dollar Benefit among the
Sub-Accounts in accordance with a Written Request. No transfers between the
Fixed Dollar Benefit and the Variable Dollar Benefit will be allowed after the
Commencement Date. However, after the Variable Dollar Benefit has been paid for
at least twelve months, the Person Controlling Payments may, no more than once
each twelve months thereafter, transfer all or part of the Benefit Units upon
which the Variable Dollar Benefit is based from the Sub-Account(s) then held to
Benefit Units in different Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the applicable Commencement Date. If a Fixed Dollar
Benefit is to be paid, the amount to be applied under that benefit is the Fixed
Account Value as of the applicable Commencement Date, or as of the Death Benefit
Valuation Date (if applicable).
FIXED DOLLAR BENEFIT. Fixed Dollar Benefit payments are determined by
multiplying the Fixed Account Value (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium tax not
previously deducted) by the amount of the monthly payment per $1,000 of value
obtained from the Settlement Option Table for the settlement option elected.
Fixed Dollar Benefit payments will remain level for the duration of the Benefit
Payment Period.
If at the time a Fixed Dollar Benefit is elected, the Company has available
options or rates on a more favorable basis than those guaranteed, the higher
benefits shall be applied and shall not change for as long as that election
remains in force.
VARIABLE DOLLAR BENEFIT. The first monthly Variable Dollar Benefit payment is
equal to the Owner's Variable Account Value (expressed in thousands of dollars
and after deduction of any fees and charges, loans, or applicable premium tax
not previously deducted) as of the end of the Valuation Period immediately
preceding the applicable Commencement Date multiplied by the amount of the
monthly payment per $1,000 of value obtained from the Settlement Option Table
for the Benefit Payment option elected less the pro-rata portion of the Contract
Maintenance Fee.
The number of Benefit Units in each Sub-Account held by the Owner is determined
by dividing the dollar amount of the first monthly Variable Dollar Benefit
payment from each Sub-Account by the Benefit Unit Value for that Sub-Account as
of the applicable Commencement Date. The number of Benefit Units remains fixed
during the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
<PAGE>
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s) selected
and may vary from month to month. The total amount of the second and any
subsequent Variable Dollar Benefit payment will be equal to the sum of the
payments from each Sub-Account less a pro-rata portion of the Contract
Maintenance Fee. Where an Owner elects a Variable Dollar Benefit, there is a
risk that only one Benefit Payment will be made under any settlement option, if:
(i) at the end of the applicable Valuation Period, the Owner's Variable Account
Value has declined to zero; or (ii) the person on whose life Benefit Payments
are based dies prior to the second Benefit Payment.
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INDIVIDUAL FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by the Benefit Unit Value for that Sub-Account as
of the end of the fifth Valuation Period preceding the due date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the Benefit Unit Value for
a Sub-Account is determined by multiplying the Benefit Unit Value as of the end
of the preceding Valuation Period by the Net Investment Factor, determined as
set forth above under "Net Investment Factor", for the Valuation Period just
ended. The product is then multiplied by the assumed daily investment factor
(0.99991781), for the number of days in the Valuation Period. The factor is
based on the assumed net investment rate of 3% per year, compounded annually
that is reflected in the Settlement Option Tables.
TRANSFERS AFTER THE COMMENCEMENT DATE. After the applicable Commencement Date,
no transfers between the Fixed Account and the Separate Account are permitted.
However, after a Variable Dollar Benefit has been paid for at least twelve
months, the Participant may, by Written Request to the Administrative Office,
transfer Benefit Units between Sub-Accounts no more than once during a
twelve-month period.
TRANSFER FORMULA. Transfers after the applicable 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/BUV1
(2) Determine the number of Benefit Units remaining in such
Sub-Account (after the transfer):
=UNIT1-AT/BUV1
(3) Determine the number of Benefit Units in the transferee
Sub-Account (after the transfer):
=UNIT2 + AT/BUV2
(4) Subsequent Variable Dollar Benefit payments will reflect the
changes in Benefit Units in each Sub-Account as of the next
Variable Dollar Benefit payment's due date.
Where:
(BUV1) is the Benefit Unit Value of the Sub-Account that the transfer
is being made from as of the end of the Valuation Period in which the
transfer request is received.
(BUV2) is the Benefit Unit Value of the Sub-Account that the transfer
is being made from as of the end of the Valuation Period in which the
transfer request is received.
(UNIT1) is the number of Benefit Units in the Sub-Account that the
transfer is being made from, before the transfer.
(UNIT2) is the number of Benefit Units in the Sub-Account that the
transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the Sub-Account.
SETTLEMENT OPTIONS.
OPTION A: INCOME FOR A FIXED PERIOD
The Company will make periodic payments for a fixed period.
The first payment will be paid as of the last day of the
initial Payment Interval. The maximum time over which
payments will be made by the Company or money will be held
by the Company is 30 years. The Option A Tables set forth
in the Statement of Additional Information (and in the
Contracts) apply to this Option.
OPTION B: LIFE ANNUITY WITH PAYMENTS FOR AT LEAST A FIXED PERIOD
The Company will make periodic payments for at least a
fixed period. If the person on whose life Benefit Payments
are based lives longer than the fixed period, then the
Company will make payments until his or her death. The
first payment will be paid as of the first day of the
initial Payment Interval. The Option B Tables set forth in
the Statement of Additional Information (and in the
Contracts) apply to this Option.
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OPTION C: JOINT AND ONE-HALF SURVIVOR ANNUITY
The Company will make periodic payments until the death of
the primary person on whose life Benefit Payments are
based; thereafter, the Company will make one-half of the
periodic payment until the death of the secondary person on
whose life Benefit Payments are based. The Company will
require Due Proof of Death of the primary person on whose
life Benefit Payments are based. The first payment will be
paid as of the first day of the initial Payment Interval.
The Option C Tables set forth in the Statement of
Additional Information (and in the Contracts) apply to this
Option.
OPTION D: ANY OTHER FORM
The Company will make periodic payments in any other form
of settlement option which is acceptable to it at the time
of an election.
MINIMUM AMOUNTS. Presently, the minimum amount of a Benefit Payment under any
settlement option is $50. If an Owner selects a Payment Interval under which a
Benefit Payment would be less than $50, the Company will advise the Owner that a
new Payment Interval must be selected so that the Benefit Payment will be at
least $50. In general, monthly, quarterly, semi-annual and annual Payment
Intervals are available. From time to time, the Company may require Benefit
Payments to be made by direct deposit or wire transfer to the account of a
designated payee.
Minimum amounts, Payment Intervals and other terms and conditions may be
modified by the Company at any time without prior notice to Owners, as permitted
by applicable law. If the Company changes the minimum amounts, the Company may
change any current or future payment amounts and/or Payment Intervals to conform
with the change. More than one settlement option may be elected if the
requirements for each settlement option elected are satisfied. Once payment
begins under a settlement option, the settlement option may not be changed.
All factors, values, benefits and reserves under the Contract will not be less
than those required by the law of the state in which the Contract is delivered.
SETTLEMENT OPTION TABLES. The Settlement Option Tables set forth in the
Statement of Additional Information and in the Contracts show the guaranteed
payments that the Company will make at sample Payment Intervals for each $1,000
applied at the guaranteed interest rate of three percent (3%) per year,
compounded annually.
Rates for monthly payments for ages or fixed periods not shown in the Settlement
Option Tables will be calculated on the same basis as those shown and may be
obtained from the Company. Fixed periods shorter than five years are not
available, except as a Death Benefit settlement option.
GENERAL PROVISIONS
NON-PARTICIPATING. The Contracts do not pay dividends or share in the Company's
divisible surplus.
MISSTATEMENT. If the age and/or sex of a person on whose life Benefit Payments
are based is misstated, the payments or other benefits under the Contract shall
be adjusted to the amount which would have been payable based on the correct age
and/or sex. If the Company made any underpayments based on any misstatement, the
amount of any underpayment with interest shall be immediately paid in one sum.
In addition to any other remedies that may be available at law or at equity, the
Company may deduct any overpayments made, with interest, from any succeeding
payment(s) due under the Contract.
PROOF OF EXISTENCE AND AGE. The Company may require proof of age and/or sex of
any person on whose life Benefit Payments are based. The Company may also
require proof that any such person is still living.
DISCHARGE OF LIABILITY. Upon payment of any partial or full surrender, or any
Benefit Payment, the Company shall be discharged from all liability to the
extent of each such payment.
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TRANSFER OF OWNERSHIP.
NON-QUALIFIED CONTRACT. The Owner of a Non-Qualified Contract may
transfer ownership at any time during his or her lifetime. Any such
transfer is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel a designation of an Annuitant or Beneficiary or any
settlement option election previously made.
QUALIFIED CONTRACT. The Owner of a Qualified Contract may not
transfer ownership.
ASSIGNMENT.
NON-QUALIFIED CONTRACT. The Owner of a Non-Qualified Contract may
assign all or any part of his or her rights under the Contract except
rights to:
1) designate or change a Beneficiary;
2) designate or change an Annuitant;
3) transfer ownership; and
4) elect a settlement option.
The person to whom an assignment is made is called an assignee.
The Company is not responsible for the validity of any assignment. An
assignment must be in writing and must be received at the
Administrative Office of the Company. The Company will not be bound
by an assignment until the Company acknowledges it. An assignment is
subject to any payment made or any action the Company takes before
the Company acknowledges it. An assignment may be ended only by the
assignee or as provided by law.
QUALIFIED CONTRACT. The Owner of a Qualified Contract may not assign
or in any way alienate his or her interest under the Contract.
ANNUAL REPORT. At least once each Contract Year, the Company will provide a
report of the Contract's current values and any other information required by
law, until the first to occur of the following:
1) the date the Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
INCONTESTABILITY. No Contract shall be contestable by the Company.
ENTIRE CONTRACT. The Company issues the Contracts in consideration and
acceptance of the payment of the initial Purchase Payment. In those states that
require a written application, a copy of the application will be attached to and
become part of the Contract. Only statements in the application, if any, or made
elsewhere by the Owner in consideration for the Contract will be used to void
the Owner's interest under the Contract, or to defend a claim based on it. Such
statements are representations and not warranties.
CHANGES -- WAIVERS. No changes or waivers of the terms of the Contract are valid
unless made in writing by the Company's President, Vice President, or Secretary.
The Company reserves the right both to administer and to change the provisions
of the Contract to conform to any applicable laws, regulations or rulings issued
by a governmental agency.
NOTICES AND DIRECTIONS. The Company will not be bound by any authorization,
election or notice which is not made by Written Request.
Any written notice requirement by the Company to the Owner will be satisfied by
the mailing of any such required written notice, by first-class mail, to the
Owner's last known address as shown on the Company's records.
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FEDERAL TAX MATTERS
INTRODUCTION. The following discussion is a general description of federal tax
considerations relating to the Contracts and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under a Contract. Any person concerned about tax implications
should consult a competent tax advisor before initiating any transaction. This
discussion is based upon the Company's understanding of the present federal
income tax laws as they are currently interpreted by the Internal Revenue
Service. No representation is made as to the likelihood of the continuation of
the present federal income tax laws or of the current interpretation by the
Internal Revenue Service. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
A Contract may be purchased on a tax-qualified or non-tax-qualified basis.
Qualified Contracts are designed for use in connection with plans entitled to
special income tax treatment under Section 401, 403, 408 or 457(g) of the Code.
The ultimate effect of federal income taxes on the amounts held under a
Contract, on Benefit Payments, and on the economic benefit to the Owner or the
Beneficiary may depend on the type of Contract and the tax status of the
individual concerned. Certain requirements must be satisfied in purchasing a
Qualified Contract and receiving distributions from such a Contract in order to
continue to receive favorable tax treatment. The Company makes no attempt to
provide more than general information about use of Contracts with the various
types of tax-qualified arrangements. Owners and Beneficiaries are cautioned that
the rights of any person to any benefits may be subject to the terms and
conditions of the tax-qualified arrangement, regardless of the terms and
conditions of the applicable Contract. Some tax-qualified arrangements are
subject to distribution and other requirements that are not incorporated in the
administration of the Contract. Owners are responsible for determining that
contributions, distributions and other transactions with respect to Qualified
Contracts satisfy applicable law. Therefore, purchasers of Qualified Contracts
should seek competent legal and tax advice regarding the suitability of a
Contract for their situation, the applicable requirements, and the tax treatment
of the rights and benefits of a Contract. 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 Owner who is a natural
person generally is not taxed on increases in the value of an Account until
distribution occurs by withdrawing all or part of the Account Value (E.G.,
surrenders or annuity payments under the settlement option elected.) The taxable
portion of a distribution (in the form of a single sum payment or an annuity) is
generally taxable as ordinary income. The following discussion generally applies
to a Contract owned by a natural person.
SURRENDERS.
QUALIFIED CONTRACTS. In the case of a surrender under a Contract, a
pro rata portion of the amount received is taxable, generally based
on the ratio of the "investment in the contract" to the individual's
total accrued benefit under the annuity. The "investment in the
contract" generally equals the amount of any non-deductible and/or
non-excludable Purchase Payments paid by or on behalf of any
individual. Special tax rules may be available for certain
distributions from a Qualified Contract.
NON-QUALIFIED CONTRACTS. In the case of a partial surrender under a
Non-Qualified Contract, the amount recovered is taxable to the extent
that the Account Value immediately before the surrender exceeds the
"investment in the contract" at such time. In the case of a full
surrender under a Non-Qualified Contract, the amount recovered is
taxable to the extent it exceeds the "investment in the contract" at
such time.
<PAGE>
BENEFIT PAYMENTS. Although the tax consequences may vary depending on the
settlement option elected under the Contract, in general, only the portion of a
Benefit Payment that exceeds the allocable share of the "investment in the
contract" will be taxed; after the "investment in the contract" is recovered,
the full amount of any additional Benefit Payments is taxable. For Variable
Dollar Benefit Payments, the taxable portion is generally determined by an
equation that establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. For Fixed Dollar
Benefit Payments, in general there is no tax on the portion of each payment
which represents the same ratio that the "investment in the contract" bears to
the total expected value of the Benefit Payments for the term of the payments;
however, the remainder of each Benefit Payment is taxable. Special allocation
rules apply if Benefit Payments are made for life with a minimum number of
payments guaranteed. In any case, once the "investment in the contract" has been
fully recovered, the full amount of any additional Benefit Payments is taxable.
If Benefit Payments cease before full recovery of the "investment in the
contract," in some circumstances the unrecovered amount may be claimed as a tax
deduction.
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PENALTY TAX. In general, a 10% premature distribution penalty tax applies to the
taxable portion of a distribution from a Contract prior to age 59 1/2 .
Exceptions to this penalty tax are available for distributions made on account
of disability, death, and certain payments for life and life expectancy. Certain
other exceptions may apply depending on the tax-qualification of the Contract
involved. The premature distribution penalty tax is increased to 25% for
distributions from a Savings Incentive Match Plan for Employees (SIMPLE) IRA
described in Section 408(p) of the Code during the first two years of
participation in the plan.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed under a Contract
because of the death of an Owner. Generally such amounts are includable in the
income of the recipient as follows: (1) if distributed in a lump sum, they are
taxed in the same manner as a full surrender as described above, or (2) if
distributed under a settlement option, they are taxed as Benefit Payments, as
described above.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF CONTRACTS. When permitted, a transfer of
ownership or an assignment of a Contract, the designation of an Annuitant who is
not also the Owner, or the exchange of a Contract may result in certain tax
consequences to the Owner that are not discussed herein.
QUALIFIED CONTRACTS -- GENERAL. Qualified Contracts are designed for use with
several types of retirement plans. The tax rules applicable to Owners and
Beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan.
INDIVIDUAL RETIREMENT ANNUITIES. Code Sections 219 and 408 permit
individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or
"IRA". Under applicable limitations, certain amounts may be
contributed to an IRA that are deductible from an individual's gross
income. Employers also may establish a Simplified Employee Pension
(SEP) Plan or Savings Incentive Match Plan for Employees (SIMPLE) to
provide IRA contributions on behalf of their employees.
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.
TEXAS OPTIONAL RETIREMENT PROGRAM. The Texas Optional Retirement
Program ("ORP") provides for the purchase of tax sheltered annuities.
In addition to the normal rules and restrictions of Section 403(b),
Section 830.105 of the Texas Government Code permits ORP participants
to withdraw their interests in a Contract 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
ORP benefits 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.
PENSION AND PROFIT SHARING PLANS. Code section 401 permits employers
to establish various types of retirement plans for employees, and
permits self-employed individuals to establish retirement plans for
themselves and their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the
plans.
Purchasers of a Contract for use with such plans should seek
competent advice regarding the suitability of the proposed plan
documents and the Contract to their specific needs.
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CERTAIN DEFERRED COMPENSATION PLANS. Governmental and other tax-exempt employers
may invest in annuity contracts in connection with deferred compensation plans
established for the benefit of their employees under Section 457 of the Code.
Other employers may invest in annuity contracts in connection with non-qualified
deferred compensation plans established for the benefit of their employees. In
most cases, these plans are designed so that contributions made for the benefit
of the employees generally will not be includable in the employees' gross income
until distributed from the plan.
WITHHOLDING. Pension and annuity distributions generally are subject to
withholding for the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status. Federal
withholding at a flat 20% of the taxable part of the distribution is required if
the distribution is eligible for rollover and the distribution is not paid as a
direct rollover. In other cases, recipients generally are provided the
opportunity to elect not to have tax withheld from distributions.
POSSIBLE CHANGES IN TAXATION. There is always the possibility that the tax
treatment of annuities could change by legislation or other means (such as IRS
regulations, revenue rulings, judicial decisions, etc.). Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change).
The federal administration's 1999 budget proposal contains provisions to tax the
exchange of a fixed annuity contract for a variable contract, the exchange of a
variable contract for a fixed annuity contract, or the reallocation of
investments within a variable annuity contract. While there has been
considerable opposition to this proposal in Congress, it is too early to predict
whether this proposal will be adopted.
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 and gift tax
consequences and state and local estate, inheritance, and other tax consequences
of ownership or receipt of distributions under the Contract depend on the
circumstances of each Owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
GENERAL. At the time the initial Purchase Payment is paid, a prospective
purchaser must specify whether the purchase is a Qualified Contract or a
Non-Qualified Contract. If the initial Purchase Payment is derived from an
exchange or surrender of another annuity contract, the Company may require that
the prospective purchaser provide information with regard to the federal income
tax status of the previous annuity contract. The Company will require that
persons purchase separate Contracts if they desire to invest monies qualifying
for different annuity tax treatment under the Code. Each such separate Contract
will require the minimum initial Purchase Payment stated above. Additional
Purchase Payments under a Contract must qualify for the same federal income tax
treatment as the initial Purchase Payment under the Contract; the Company will
not accept an additional Purchase Payment under a Contract if the federal income
tax treatment of such Purchase Payment would be different from that of the
initial Purchase Payment.
DISTRIBUTION OF THE CONTRACT
AAG Securities, Inc. ("AAG Securities"), an affiliate of the Company, is the
principal underwriter and distributor of the Contracts. AAG Securities may also
serve as an underwriter and distributor of other contracts issued through the
Separate Account and certain other Separate Accounts of the Company and any
affiliates of the Company. AAG Securities is a wholly-owned subsidiary of
American Annuity Group, Inc., a publicly traded company which is an indirect
subsidiary of American Financial Group, Inc. AAG Securities is registered with
the Securities and Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Its principal offices
are located at 250 East Fifth Street, Cincinnati, Ohio 45202. The Company pays
AAG Securities for acting as underwriter under a distribution agreement.
<PAGE>
AAG Securities will sell Contracts through its registered representatives. In
addition, AAG Securities may enter into sales agreements with other
broker-dealers to solicit applications for the Contracts through registered
representatives who are licensed to sell securities and variable insurance
products. These agreements provide that applications for the Contracts may be
solicited by registered representatives of the broker-dealers appointed by the
Company to sell its variable life insurance and variable annuities. These
broker-dealers are registered with the Securities and Exchange Commission and
are members of the NASD. The registered representatives are authorized under
applicable state regulations to sell variable annuities.
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The Company or AAG Securities may pay commissions to registered representatives
of AAG securities and other broker-dealers of up to 8.5% of Purchase Payments
made under the Contracts ("Commissions"). These Commissions are reduced by
one-half for Contracts issued to Owners over age 75. When permitted by state law
and in exchange for lower initial Commissions, AAG Securities and/or the Company
may pay trail commissions to registered representatives of AAG Securities and to
other broker-dealers. Trail commissions are not expected to exceed 1% of the
Account Value of a Contract on an annual basis. To the extent permissible under
current law, the Company and/or AAG Securities may pay production, persistency
and managerial bonuses as well as other promotional incentives, in cash or other
compensation, to registered representatives of AAG Securities and/or other
broker-dealers.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account or AAG
Securities. The Company is involved in various kinds of routine litigation
which, in management's judgment, are not of material importance to the Company's
assets or the Separate Account.
VOTING RIGHTS
To the extent required by applicable law, all Fund shares held in the Separate
Account will be voted by the Company at regular and special shareholder meetings
of the respective Funds in accordance with instructions received from persons
having voting interests in the corresponding Sub-Account. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or if the Company determines that it is
allowed to vote all shares in its own right, the Company may elect to do so.
The person with the voting interest is the Owner, or the Person Controlling
Payments, if different from the Owner. The number of votes which are available
will be calculated separately for each Sub-Account. Before the applicable
Commencement Date, that number will be determined by applying the Owner's
percentage interest, if any, in a particular Sub-Account to the total number of
votes attributable to that Sub-Account. The Owner, or the Person Controlling
Payments, if different from the Owner, holds a voting interest in each
Sub-Account to which the Account Value is allocated. After the applicable
Commencement Date, the number of votes decreases as Benefit Payments are made
and as the number of Accumulation Units for a Contract decreases.
The number of votes of a Fund will be determined as of the date coincident with
the date established by that Fund for shareholders eligible to vote at the
meeting of the Fund. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established by
the respective Funds.
Shares as to which no timely instructions are received and shares held by the
Company as to which Owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Contracts participating in the Sub-Account. Voting instructions to abstain on
any item will be applied on a pro-rata basis to reduce the votes eligible to be
cast.
Each person or entity having a voting interest in a Sub-Account will receive
proxy material, reports and other material relating to the appropriate Fund. It
should be noted that the Funds are not required to hold annual or other regular
meetings of shareholders.
AVAILABLE INFORMATION
The Company has filed a registration statement (the Registration Statement) with
the Securities and Exchange Commission under the Securities Act of 1933 relating
to the Contracts offered by this Prospectus. This Prospectus has been filed as a
part of the Registration Statement and does not contain all of the information
set forth in the Registration Statement and exhibits thereto, and reference is
hereby made to such Registration Statement and exhibits for further information
relating to the Company or the Contracts. Statements contained in this
Prospectus, as to the content of the Contracts and other legal instruments, are
<PAGE>
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 Securities and Exchange Commission, located at 450 Fifth
Street, N.W., Washington, D.C., and may also be accessed at the Commission's Web
site http://www.sec.gov.
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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:
TABLE OF CONTENTS
-----------------
PAGE
----
ANNUITY INVESTORS - LIFE INSURANCE COMPANY(REGISTERED) 3
General Information and History 3
State Regulation 3
SERVICES 3
Safekeeping of Separate Account Assets 3
Records and Reports 3
Experts 3
DISTRIBUTION OF THE CONTRACTS 4
CALCULATION OF PERFORMANCE INFORMATION 4
Money Market Sub-Account Standardized Yield Calculation 4
Other Sub-Account Standardized Yield Calculation 5
Standardized Annual Total Return Calculation 5
Standardized Annual Total Return 6
Other Performance Data 8
Nonstandardized Annual Total Return 10
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES 11
FEDERAL TAX MATTERS 17
Taxation of the Company 17
Tax Status of the Contract 17
FINANCIAL STATEMENTS 18
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Copies of the Statement of Additional Information dated May 1, 1998 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:___________________________________________________________________________
_______________________________________________________________________________
Page 41
<PAGE>
ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT A
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
COMMODORE NAUTICUS(REGISTERED)
AND THE
COMMODORE AMERICUS(SERVICEMARK)
The Statement of Additional Information expands upon subjects discussed in the
current Prospectus for The Commodore Nauticus(REGISTERED) Group Flexible Premium
Deferred Variable Annuity Contract and the current Prospectus for The Commodore
Americus(SERVICEMARK) Individual Flexible Premium Deferred Variable Annuity
Contracts (each, the "Contract") offered by Annuity Investors Life Insurance
Company(REGISTERED). A copy of either Prospectus dated May 1, 1998, as
supplemented from time to time, may be obtained free of charge by writing to
Annuity Investors Life Insurance Company, Administrative Office, P.O. Box 5423,
Cincinnati, Ohio 45201-5423. Terms used in the current Prospectus for each
Contract are incorporated in this Statement of Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE APPLICABLE CONTRACT.
Dated May 1, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)...........................3
General Information and History..............................................3
State Regulation.............................................................3
SERVICES.......................................................................3
Safekeeping of Separate Account Assets.......................................3
Records and Reports..........................................................3
Experts......................................................................3
DISTRIBUTION OF THE CONTRACTS..................................................4
CALCULATION OF PERFORMANCE INFORMATION.........................................4
Money Market Sub-Account Standardized Yield Calculation......................4
Other Sub-Account Standardized Yield Calculations............................5
Standardized Annual Total Return Calculation.................................5
Standardized Annual Total Return.............................................6
Other Performance Data.......................................................8
Non-Standardized Annual Total Return........................................10
ANNUITY PAYMENTS-SETTLEMENT OPTION TABLES.....................................11
Commodore Americus Qualified Contracts......................................11
Commodore Americus Non-Qualified Contracts..................................12
Commodore Nauticus Group Contract and Certificates..........................15
FEDERAL TAX MATTERS...........................................................17
Taxation of the Company.....................................................17
Tax Status of the Contracts.................................................17
FINANCIAL STATEMENTS..........................................................18
2
<PAGE>
The following information supplements the information in the Prospectuses about
the Contracts and Certificates. Terms used in this Statement of Additional
Information have the same meaning as to a Contract as in the Prospectus for that
Contract.
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
GENERAL INFORMATION AND HISTORY
Annuity Investors Life Insurance Company(REGISTERED) (the "Company"), formerly
known as Carillon Life Insurance Company, is a stock life insurance company
incorporated under the laws of the State of Ohio in 1981. The name change
occurred in the state of domicile on April 12, 1995. The Company is principally
engaged in the sale of fixed and variable annuity policies.
The Company was acquired in November, 1994, by American Annuity
Group(SERVICEMARK), Inc. ("AAG") a Delaware corporation that is a publicly
traded insurance holding company. Great American Insurance Company ("GAIC"), an
Ohio corporation, owns 80% of the common stock of AAG. GAIC is a multi-line
insurance carrier and a wholly owned subsidiary of Great American Holding
Company ("GAHC"), an Ohio corporation. GAHC is a wholly owned subsidiary of
American Financial Corporation ("AFC"), an Ohio corporation. AFC is a wholly
owned subsidiary of American Financial Group, Inc. ("AFG"), an Ohio corporation
that owns 1% of the common stock of AAG. AFG is a publicly traded holding
company which is engaged, through its subsidiaries, in financial businesses that
include annuities, insurance and portfolio investing, and non-financial
businesses.
STATE REGULATION
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or regulation,
the Contracts will be modified accordingly.
SERVICES
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The Separate
Account assets are segregated from the Company's general account assets. Records
are maintained of all purchases and redemptions of Fund shares held by each of
the Sub-Accounts.
Title to assets of the Fixed Account is held by the Company together with the
Company's general account assets.
RECORDS AND REPORTS
All records and accounts relating to the Fixed Account and the Separate Account
are maintained by the Company. As presently required by the provisions of the
Investment Company Act of 1940, as amended ("1940 Act"), and rules and
regulations promulgated thereunder which pertain to the Separate Account,
reports containing such information as may be required under the 1940 Act or by
other applicable law or regulation will be sent to each Owner semi-annually at
the Owner's last known address.
EXPERTS
The financial statements of the Separate Account and the statutory-basis
financial statements of the Company at December 31, 1997 and 1996, and for the
two years in the period ended December 31, 1997, appearing in this Statement of
Additional Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
3
<PAGE>
DISTRIBUTION OF THE CONTRACTS
The offering of the Contracts is expected to be continuous. Although the Company
does not anticipate discontinuing the offering of the Contracts, the Company
reserves the right to discontinue the offering of the Contracts.
During the fiscal year ended December 31, 1996, AAG Securities, Inc. ("AAG
Securities"), the principal underwriter and distributor of the Contracts,
received $192,085 in commissions with respect to the Contracts, of which $4,538
was retained by AAG Securities.
During the fiscal year ended December 31, 1997, AAG Securities received
approximately $1,868,000 in commissions with respect to the Contracts, of which
approximately $116,000 was retained by AAG Securities.
CALCULATION OF PERFORMANCE INFORMATION
MONEY MARKET SUB-ACCOUNT STANDARDIZED YIELD CALCULATION
In accordance with rules and regulations adopted by the Securities and Exchange
Commission, the Company computes the Money Market Sub-Account's current
annualized yield for a seven-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the Money
Market Fund or on its portfolio securities. This current annualized yield is
computed by determining the net change (exclusive of realized gains and losses
on the sale of securities and unrealized appreciation and depreciation) in the
value of a hypothetical account having a balance of one unit of the Money Market
Sub-Account at the beginning of such seven-day period, dividing such net change
in the value of the hypothetical account by the value of the hypothetical
account at the beginning of the period to determine the base period return and
annualizing this quotient on a 365-day basis. The net change in the value of the
hypothetical account reflects the deductions for the Mortality and Expense Risk
and Administration Charges and income and expenses accrued during the period.
Because of these deductions, the yield for the Money Market Sub-Account of the
Separate Account will be lower than the yield for the Money Market Fund or any
comparable substitute funding vehicle.
The Securities and Exchange Commission also permits the Company to disclose the
effective yield of the Money Market Sub-Account for the same seven-day period,
determined on a compounded basis. The effective yield is calculated according to
the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)(SUPERSCRIPT)365/7] - 1
The effective yield and yields for the Money Market Sub-Account for the
seven-day period ended December 31, 1997 are as follows:
Money Market Sub-account Yield Effective Yield
------------------------ ----- ---------------
Standard Contract 4.09% 4.18%
Enhanced Contract 4.39% 4.48%
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields. The Money Market
Sub-Account's actual yield is affected by changes in interest rates on money
market securities, average portfolio maturity of the Money Market Fund or
substitute funding vehicle, the types and quality of portfolio securities held
by the Money Market Fund or substitute funding vehicle, and operating expenses.
IN ADDITION, THE YIELD FIGURES DO NOT REFLECT THE EFFECT OF ANY CONTINGENT
DEFERRED SALES CHARGE ("CDSC") (OF UP TO 7% OF PURCHASE PAYMENTS) THAT MAY BE
APPLICABLE ON SURRENDER.
4
<PAGE>
OTHER SUB-ACCOUNT STANDARDIZED YIELD CALCULATIONS
The Company may from time to time disclose the current annualized yield of one
or more of the Sub-Accounts (other than the Money Market Sub-Account) for 30-day
periods. The annualized yield of a Sub-Account refers to the income generated by
the Sub-Account over a specified 30-day period. Because this yield is
annualized, the yield generated by a Sub-Account during the 30-day period is
assumed to be generated each 30-day period. The yield is computed by dividing
the net investment income per Accumulation Unit earned during the period by the
price per unit on the last day of the period, according to the following
formula:
YIELD = 2[(a-b(OVER)cd + 1)(SUPERSCRIPT)6 -1]
Where:
a = net investment income earned during the period by the Portfolio
attributable to the shares owned by the Sub-Account.
b = expenses for the Sub-Account accrued for the period (net of
reimbursements).
c = the average daily number of Accumulation Units outstanding during
the period.
d = the maximum offering price per Accumulation Unit on the last day
of the period.
Net investment income will be determined in accordance with rules and
regulations established by the Securities and Exchange Commission. Accrued
expenses will include all recurring fees that are charged to all Contracts. The
yield calculations do not reflect the effect of any CDSC that may be applicable
to a particular Contract. CDSCs range from 7% to 0% of the Purchase Payments
withdrawn depending on the elapsed time since the receipt of such Purchase
Payments.
Because of the charges and deductions imposed by the Separate Account, the yield
for a Sub-Account will be lower than the yield for the corresponding Fund. The
yield on amounts held in a Sub-Account normally will fluctuate over time.
Therefore, the disclosed yield for any given period is not an indication or
representation of future yields or rates of return. The Sub-Account's actual
yield will be affected by the types and quality of portfolio securities held by
the Fund and its operating expenses.
5
<PAGE>
STANDARDIZED ANNUAL TOTAL RETURN CALCULATION
The Company may from time to time also disclose average annual total returns for
one or more of the Sub-Accounts for various periods of time. Average annual
total return quotations are computed by finding the average annual compounded
rates of return over one-, five- and ten-year periods that would equal the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)(SUPERSCRIPT)n = ERV
Where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = "ending redeemable value" of a hypothetical $1,000 payment
made at the beginning of the one-, five- or ten-year period
at the end of the one-, five- or ten-year period (or
fractional portion thereof).
All recurring fees, such as the Contract (or Certificate) Maintenance Fee and
the Mortality and Expense Risk Charge, that are charged to each type of Contract
are recognized in the ending redeemable value. The average annual total return
calculations will reflect the effect of any CDSCs that may be applicable to a
particular period for that type of Contract.
6
<PAGE>
<TABLE>
<CAPTION>
STANDARDIZED ANNUAL TOTAL RETURN
Standard Contract1/ Enhanced Contract2/
----------------------------- -----------------------------
1 Year Life of 1 Year Life of
(to 12/31/97) Separate (to 12/31/97) Separate
Account3/ Account3/
(to 12/31/97) (to 12/31/97)
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
THE DREYFUS CORPORATION:
Small Cap Portfolio (VIF) 6.82% 8.95% 7.16% 9.19%
Capital Appreciation Portfolio (VIF) 17.98% 43.45% 18.35% 44.41%
The Dreyfus Socially Responsible Growth Fund, Inc. 18.36% 38.76% 18.73% 39.70%
Dreyfus Stock Index Fund 22.82% 46.29% 23.21% 47.27%
Growth and Income Portfolio (VIF) 6.28% 2.25% 6.62% 2.48%
JANUS CAPITAL CORPORATION:
Janus Aspen Worldwide Growth Portfolio 12.15% 44.92% 12.51% 45.90%
Janus Aspen Aggressive Growth Portfolio 2.78% 9.68% 3.11% 10.43%
Janus Aspen Balanced Portfolio 12.10% 28.24% 12.46% 29.11%
MERRILL LYNCH ASSET MANAGEMENT, L.P.:
Basic Value Focus Fund (VSF) 10.64% 31.59% 10.99% 32.48%
Global Strategy Focus Fund (VSF) 2.07% 12.37% 2.39% 13.14%
High Current Income Fund (VSF) 1.13% 9.40% 1.46% 10.09%
Domestic Money Market Fund (VSF) -5.20% -4.51% -5.08% -3.75%
MORGAN STANLEY ASSET MANAGEMENT INC.:
Morgan Stanley Universal Funds U.S. Real Estate
Portfolio N/A4/ 10.41%5/ N/A4/ 10.66%5/
Morgan Stanley Universal Funds Fixed Income
Portfolio N/A4/ -5.09%6/ N/A4/ -4.88%6/
PILGRIM BAXTER & ASSOCIATES, LTD.:
PBHG Insurance Series Fund, Inc. - PBHG
Technology & Communications Portfolio N/A4/ -9.26%7/ N/A4/ -9.06%7/
PBHG Insurance Series Fund, Inc. - PBHG Growth
II Portfolio N/A4/ -5.89%7/ N/A4/ -5.68%7/
STRONG CAPITAL MANAGEMENT, INC.:
Strong Opportunity Fund II, Inc. 15.41% 10.62% 15.78% 10.86%
1/ Annual mortality and expense risk charge of 1.25% of daily net asset value.
2/ Annual mortality and expense risk charge of 0.95% of daily net asset value.
3/ From Separate Account commencement date (12/7/95) to 12/31/97.
4/ Annual Total Return not available because Fund not in existence for one full year.
5/ From inception date of Portfolio (3/3/97) to 12/31/97.
6/ From inception date of Portfolio (1/1/97) to 12/31/97.
7/ From inception date of Fund (5/1/97) to 12/31/97.
</TABLE>
7
<PAGE>
OTHER PERFORMANCE DATA
The Company may also disclose non-standardized performance data that depicts the
past performance of an underlying Fund of a Sub-Account, for periods BEFORE the
Sub-Account commenced operations with such historical Fund performance adjusted
for the fees and charges of the Contract. In other words, such performance
information will be calculated based on the performance of the underlying Fund
and the assumption that the Sub-Account had been in existence for the same
periods as those indicated for the Fund, with the level of Contract charges
currently in effect. The Fund used for these calculations will be the actual
Fund in which the Sub-Account invests.
This type of performance data may be disclosed on both an average annual total
return and a cumulative total return basis. Moreover, it may be disclosed
assuming that the Contract is not surrendered (i.e., with no deduction for a
CDSC) or assuming that the Contract is surrendered at the end of the applicable
period (i.e., reflecting a deduction for any applicable CDSC).
The Company also may from time to time disclose other non-standardized total
return in conjunction with the standardized performance data described above.
Non-standardized data may reflect no CDSC and no Contract (or Certificate)
Maintenance Fee and may present performance data for a period of time other than
that required by the standardized format. The Company may from time to time also
disclose cumulative total return calculated using the following formula assuming
that the CDSC percentage is 0%:
CTR = (ERV/P) - 1
Where:
CTR = the cumulative total return net of Sub-Account recurring
charges, other than the Contract Maintenance Fee, for the
period.
ERV = ending redeemable value of a hypothetical $1,000 payment
at the beginning of the one-, five- or ten-year period at
the end of the one-, five- or ten-year period (or
fractional portion thereof).
P = a hypothetical initial payment of $1,000.
All non-standardized performance data will be advertised only if the requisite
standardized performance data is also disclosed.
The Contracts may be compared in advertising materials to Certificates of
Deposit ("CDs") or other investments issued by banks or other depository
institutions. Variable annuities differ from bank investments in several
respects. For example, variable annuities may offer higher potential returns
than CDs. However, unless you have elected to invest in only the Fixed Account
options, the Company does not guarantee your return. Also, none of your
investments under a Contract, whether allocated to the Fixed Account or to a
Sub-Account, are FDIC-insured.
Advertising materials for the Contracts may, from time to time, address
retirement needs and investing for retirement, the usefulness of a tax-qualified
retirement plan, saving for college, or other investment goals. Advertising
materials for the Contracts may discuss, generally, the advantages of investing
in a variable annuity and the Contract's particular features and their
desirability and may compare Contract features with those of other variable
annuities and investment products of other issuers. Advertising materials may
also include a discussion of the balancing of risk and return in connection with
the selection of investment options under the Contracts and investment
alternatives generally, as well as a discussion of the risks and attributes
associated with the investment options under the Contracts. A description of the
8
<PAGE>
tax advantages associated with the Contracts, including the effects of
tax-deferral under a variable annuity or retirement plan generally, may be
included as well. Advertising materials for the Contracts may quote or reprint
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to current economic and political conditions,
management and composition of the underlying Funds, investment philosophy,
investment techniques, the desirability of owning a Contract and other products
and services offered by the Company or AAG Securities, Inc.
("AAG Securities").
The Company or AAG Securities may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. Such information may include: information about current economic,
market and political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance and goal
setting; questionnaires designed to help create a personal financial profile;
worksheets used to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and alternative investment strategies and plans.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the Consumer Price Index), and combinations of various
capital markets. The performance of these capital markets is based on the
returns of different indices.
Advertising materials for the Contracts may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risk associated with the security types in
any capital market may or may not correspond directly to those of the
Sub-Accounts and the Funds. Advertising materials may also compare performance
to that of other compilations or indices that may be developed and made
available in the future.
In addition, advertising materials may quote various measures of volatility and
benchmark correlations for the Sub-Accounts and the respective Funds and compare
these volatility measures and correlations with those of other separate accounts
and their underlying funds. Measures of volatility seek to compare a
sub-account's, or its underlying fund's, historical share price fluctuations or
total returns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of volatility
and correlation are calculated using averages of historical data.
9
<PAGE>
<TABLE>
<CAPTION>
NON-STANDARDIZED ANNUAL TOTAL RETURN
Standard Contract1/ Enhanced Contract2/
------------------- -------------------
1 Year 1 Year
(to 12/31/97) (to 12/31/97)
--------------------------- --------------------------
<S> <C> <C>
THE DREYFUS CORPORATION:
Small Cap Portfolio (VIF) 15.32% 15.66%
Capital Appreciation Portfolio (VIF) 26.48% 26.85%
The Dreyfus Socially Responsible Growth Fund, Inc. 26.86% 27.23%
Dreyfus Stock Index Fund 31.32% 31.71%
Growth and Income Portfolio (VIF) 14.78% 15.12%
JANUS CAPITAL CORPORATION:
Janus Aspen Worldwide Growth Portfolio 20.65% 21.01%
Janus Aspen Aggressive Growth Portfolio 11.28% 11.61%
Janus Aspen Balanced Portfolio 20.60% 20.96%
MERRILL LYNCH ASSET MANAGEMENT, L.P.:
Basic Value Focus Fund (VSF) 19.14% 19.49%
Global Strategy Focus Fund (VSF) 10.57% 10.89%
High Current Income Fund (VSF) 9.63% 9.96%
Domestic Money Market Fund (VSF) 3.30% 3.42%
MORGAN STANLEY ASSET MANAGEMENT INC.:
Morgan Stanley Universal Funds U.S. Real Estate N/A N/A
Portfolio3/
Morgan Stanley Universal Funds Fixed Income N/A N/A
Portfolio3/
PILGRIM BAXTER & ASSOCIATES, LTD.:
PBHG Insurance Series Fund, Inc. - PBHG N/A N/A
Technology & Communications Portfolio3/
PBHG Insurance Series Fund, Inc. - PBHG Growth II N/A N/A
Portfolio3/
STRONG CAPITAL MANAGEMENT, INC.:
Strong Opportunity Fund II, Inc. 23.91% 24.28%
1/ Annual mortality and expense risk charge of 1.25% of daily net asset value.
2/ Annual mortality and expense risk charge of 0.95% of daily net asset value.
3/ Annual Total Return not available because Fund not in existence for one full
year.
</TABLE>
10
<PAGE>
COMMODORE AMERICUS QUALIFIED CONTRACTS
OPTION A TABLE -- INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
-----------------------------------------------------------------
Terms of Annual Semi-Annual Quarterly Monthly
Payments
-----------------------------------------------------------------
Years
6 184.60 91.62 45.64 15.18
7 160.51 79.66 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 16.62 5.53
-----------------------------------------------------------------
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
--------- ----------- ----------- ----------- ----------
60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
--------- ----------- ----------- ----------- ----------
Age
--------- ----------- ----------- ----------- ----------
55 $4.42 $4.39 $4.32 $4.22
56 4.51 4.47 4.40 4.29
57 4.61 4.56 4.48 4.35
58 4.71 4.65 4.56 4.42
59 4.81 4.75 4.64 4.49
60 4.92 4.86 4.73 4.55
61 5.04 4.97 4.83 4.62
62 5.17 5.08 4.92 4.69
63 5.31 5.20 5.02 4.76
64 5.45 5.33 5.12 4.83
65 5.61 5.46 5.22 4.89
66 5.77 5.60 5.33 4.96
67 5.94 5.75 5.43 5.02
68 6.13 5.91 5.54 5.08
69 6.33 6.07 5.65 5.14
70 6.54 6.23 5.76 5.19
71 6.76 6.41 5.86 5.24
72 7.00 6.58 5.96 5.28
73 7.26 6.77 6.06 5.32
74 7.53 6.95 6.16 5.35
--------- ----------- ----------- ----------- ----------
11
<PAGE>
<TABLE>
<CAPTION>
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named.*
- ------------------------------------------------------------------------------------------------------
PRIMARY SECONDARY AGE
AGE
------------------------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.56 $4.58 $4.61 $4.63 $4.65 $4.67 $4.69 $4.71 $4.73 $4.75 $4.76
61 4.63 4.66 4.69 4.71 4.73 4.76 4.78 4.80 4.82 4.84 4.86
62 4.71 4.74 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96
63 4.79 4.82 4.85 4.88 4.91 4.94 4.97 5.00 5.02 5.05 5.07
64 4.88 4.91 4.94 4.98 5.01 5.04 5.07 5.10 5.13 5.15 5.18
65 4.96 5.00 5.03 5.07 5.11 5.14 5.17 5.20 5.24 5.27 5.30
66 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.32 5.35 5.38 5.42
67 5.14 5.18 5.23 5.27 5.31 5.35 5.39 5.43 5.47 5.51 5.54
68 5.23 5.28 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63 5.67
69 5.33 5.38 5.43 5.48 5.53 5.57 5.62 5.67 5.72 5.76 5.81
70 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.95
- ------------------------------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount shown.
</TABLE>
COMMODORE AMERICUS NON-QUALIFIED CONTRACTS
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
----------------------------------------------------------------
Terms of Annual Semi-Annual Quarterly Monthly
Payments
----------------------------------------------------------------
Years
6 184.60 91.62 45.64 15.18
7 160.51 79.66 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 16.62 5.53
--------------------------------------------------------------
12
<PAGE>
OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
--------- ----------- ----------- ----------- ------------
60 120 MONTHS 180 MONTHS 240
MALE MONTHS MONTHS
--------- ----------- ----------- ----------- ------------
Age
--------- ----------- ----------- ----------- ------------
55 $4.68 $4.62 $4.53 $4.39
56 4.78 4.72 4.61 4.45
57 4.89 4.82 4.69 4.51
58 5.00 4.92 4.78 4.58
59 5.12 5.03 4.87 4.64
60 5.25 5.14 4.96 4.71
61 5.39 5.26 5.06 4.78
62 5.53 5.39 5.16 4.84
63 5.69 5.52 5.26 4.90
64 5.85 5.66 5.36 4.96
65 6.03 5.81 5.46 5.02
66 6.21 5.96 5.56 5.08
67 6.41 6.11 5.66 5.13
68 6.62 6.28 5.76 5.18
69 6.84 6.44 5.86 5.23
70 7.07 6.61 5.96 5.27
71 7.32 6.78 6.05 5.31
72 7.58 6.96 6.14 5.34
73 7.85 7.14 6.23 5.37
74 8.14 7.32 6.31 5.40
--------- ----------- ----------- ----------- ------------
----------- ----------- ---------- ----------- ------------
60 120 180 MONTHS 240
FEMALE MONTHS MONTHS MONTHS
----------- ----------- ---------- ----------- ------------
Age
----------- ----------- ---------- ----------- ------------
55 $4.25 $4.22 $4.18 $4.10
56 4.33 4.30 4.25 4.17
57 4.41 4.38 4.32 4.23
58 4.50 4.47 4.40 4.30
59 4.60 4.56 4.48 4.37
60 4.70 4.66 4.57 4.44
61 4.81 4.76 4.66 4.51
62 4.93 4.86 4.75 4.58
63 5.05 4.98 4.85 4.65
64 5.18 5.10 4.95 4.72
65 5.32 5.22 5.05 4.79
66 5.47 5.36 5.16 4.86
67 5.63 5.50 5.26 4.93
68 5.80 5.65 5.37 5.00
69 5.98 5.80 5.49 5.06
70 6.18 5.96 5.60 5.12
71 6.39 6.14 5.71 5.18
72 6.62 6.31 5.83 5.23
73 6.86 6.50 5.94 5.28
74 7.12 6.69 6.04 5.32
----------- ----------- ---------- ----------- ------------
13
<PAGE>
<TABLE>
<CAPTION>
OPTION C TABLES - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named.*
- ------------------------------------------------------------------------------------------------------
MALE FEMALE SECONDARY AGE
PRIMARY
AGE
------------------------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.70 $4.73 $4.76 $4.79 $4.82 $4.85 $4.88 $4.91 $4.94 $4.96 $4.99
61 4.78 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.06 5.09
62 4.86 4.89 4.93 4.96 5.00 5.03 5.07 5.10 5.13 5.16 5.19
63 4.94 4.97 5.01 5.05 5.09 5.13 5.16 5.20 5.24 5.27 5.31
64 5.02 5.06 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.42
65 5.10 5.15 5.19 5.24 5.28 5.33 5.37 5.41 5.46 5.50 5.54
66 5.19 5.24 5.28 5.33 5.38 5.43 4.84 5.52 5.57 5.62 5.66
67 5.28 5.33 5.38 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.79
68 5.37 5.42 5.48 5.53 5.59 5.64 5.70 5.75 5.81 5.86 5.92
69 5.46 5.52 5.57 5.63 5.69 5.75 5.81 5.87 5.93 5.99 6.05
70 5.55 5.61 5.67 5.74 5.80 5.86 5.93 5.99 6.06 6.12 6.19
- ------------------------------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount shown.
</TABLE>
<TABLE>
<CAPTION>
Monthly payments for each $1,000 of proceeds by ages of persons named.*
- ------------------------------------------------------------------------------------------------------
MALE FEMALE PRIMARY AGE
SECONDARY
AGE
-----------------------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.46 $4.54 $4.62 $4.71 $4.79 $4.88 $4.98 $5.07 $5.17 $5.27 $5.38
61 4.48 4.56 4.65 4.73 4.82 4.91 5.01 5.11 5.21 5.31 5.42
62 4.50 4.58 4.67 4.75 4.85 4.94 5.04 5.14 5.25 5.36 5.47
63 4.52 4.60 4.69 4.78 4.87 4.97 5.07 5.17 5.28 5.40 5.51
64 4.53 4.62 4.71 4.80 4.90 5.00 5.10 5.21 5.32 5.44 5.56
65 4.55 4.63 4.72 4.82 4.92 5.02 5.13 5.24 5.35 5.48 5.60
66 4.56 4.65 4.74 4.84 4.94 5.05 5.16 5.27 5.39 5.51 5.64
67 4.57 4.66 4.76 4.86 4.96 5.07 5.18 5.30 5.42 5.55 5.68
68 4.59 4.68 4.78 4.88 4.98 5.09 5.21 5.33 5.45 5.59 5.72
69 4.60 4.69 4.79 4.89 5.00 5.11 5.23 5.36 5.48 5.62 5.76
70 4.61 4.70 4.80 4.91 5.02 5.13 5.25 5.38 5.51 5.65 5.80
- ------------------------------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount shown.
</TABLE>
14
<PAGE>
COMMODORE NAUTICUS GROUP CONTRACT AND CERTIFICATES
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 MONTHS 120 180 240
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
----------- ---------- --------- ---------- ----------
OPTION 2 TABLE - LIFE ANNUITY
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
15
<PAGE>
<TABLE>
<CAPTION>
OPTION 3 TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
MONTHLY PAYMENTS FOR EACH $1,000 OF PROCEEDS BY AGES OF PERSONS NAMED.*
- ---------------------------------------------------------------------------------------
Secondary Age
- ---------------------------------------------------------------------------------------
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
- ---------------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount shown.
</TABLE>
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 except
as a Death Benefit settlement option.
16
<PAGE>
FEDERAL TAX MATTERS
The Contracts and any Certificates thereunder are designed for use by
individuals as a non-tax-qualified annuity (including Contracts purchased by an
employer in connection with a Code Section 457 (other than 457(g)) or
non-qualified deferred compensation plan), and with arrangements which qualify
for special tax treatment under Sections 401, 403, 408 or 457(g) of the Code.
The ultimate effect of federal taxes on the Account Value, on Annuity Benefits
or on the Death Benefit, and on the economic benefit to the Owner, Participant,
Annuitant and/or Beneficiary may depend on the type of retirement plan for which
the Contract is purchased, on the tax and employment status of the individual
concerned and on the Company's tax status. THE FOLLOWING DISCUSSION IS GENERAL
AND IS NOT INTENDED AS TAX ADVICE. Any person concerned about tax implications
should consult a competent tax adviser. This discussion is based upon the
Company's understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service. No representation is made
as to the likelihood of continuation of present federal income tax laws or of
the current interpretations by the Internal Revenue Service. Moreover, no
attempt has been made to consider any applicable state or other tax laws.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Code. Since the Separate Account is not an entity separate from the Company,
and its operations form a part of the Company, it will not be taxed separately
as a "regulated investment company" under Subchapter M of the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that it will not be taxed on the Separate Account investment income and realized
net capital gains to the extent that such income and gains are applied to
increase the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACTS
Section 817(h) of the Code requires that with respect to Non-Qualified
Contracts, the investments of the Funds be "adequately diversified" in
accordance with Treasury regulations in order for the Contracts to qualify as
annuity contracts under federal tax law. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affect how the Funds' assets may be
invested.
In certain circumstances, Owners of individual variable annuity contracts and
Participants under group variable annuity contracts may be considered the
owners, for federal income tax purposes, of the assets of the separate accounts
used to support their contracts. In those circumstances, income and gains from
the separate account assets would be included in the variable contract owner's
gross income. The Internal Revenue Service has stated in published rulings that
a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
17
<PAGE>
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Owner or
Participant), rather than the insurance company, to be treated as the owner of
the assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular sub-accounts without being treated as
owners of the underlying assets." As of the date of this Statement of Additional
Information, no guidance has been issued.
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it was determined that contract owners were not owners of
separate account assets. For example, the Owner or Participant has additional
flexibility in allocating Purchase Payments and Account Value. These differences
could result in an Owner or Participant being treated as the owner of a PRO-RATA
portion of the assets of the Separate Account and/or Fixed Account. In addition,
the Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Contracts as
necessary to attempt to prevent an Owner or Participant from being considered
the owner of a PRO-RATA share of the assets of the Separate Account.
FINANCIAL STATEMENTS
The audited financial statements of the Separate Account for the year ended
December 31, 1997 and the Company's audited statutory-basis financial statements
for the years ended December 31, 1997 and 1996 are included herein.
The financial statements of the Company included in this Statement of Additional
Information should be considered only as bearing on the ability of the Company
to meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
18
<PAGE>
ANNUITY INVESTORS
VARIABLE ACCOUNT A
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
CONTENTS
Report of Independent Auditors...............................21
Audited Financial Statements
Statement of Assets and Liabilities - Current Year...........22
Statement of Assets and Liabilities - Prior Year ............24
Statements of Operations - Current Year......................25
Statements of Changes in Net Assets - Current Year ..........26
Statements of Operations and Statements of Changes in
Net Assets - Prior Year................................29
Notes to Financial Statements................................31
19
<PAGE>
ERNST & YOUNG LLP 1300 Chiquita Center Phone: 513-621-6454
250 East Fifth Street
Cincinnati, Ohio 45202
Report of Independent Auditors
Contractholders of Annuity Investors Variable Account A
and
Board of Directors of Annuity Investors Life Insurance Company
We have audited the accompanying statements of assets and liabilities of the
Annuity Investors Variable Account A (comprised of the Dreyfus Variable
Investment Fund Capital Appreciation Portfolio, Dreyfus Variable Investment Fund
Growth and Income Portfolio, Dreyfus Variable Investment Fund Small Cap
Portfolio, Dreyfus Socially Responsible Growth Fund, Inc., Dreyfus Stock Index
Fund, Janus Aspen Series Aggressive Growth Portfolio, Janus Aspen Series
Worldwide Growth Portfolio, Janus Aspen Series Balanced Portfolio, Janus Aspen
Series Short-Term Bond Portfolio, Merrill Lynch Variable Series Funds, Inc.
Basic Value Focus Fund, Merrill Lynch Variable Series Funds, Inc. Global
Strategy Focus Fund, Merrill Lynch Variable Series Funds, Inc. High Current
Income Fund, Merrill Lynch Variable Series Funds, Inc. Domestic Money Market
Fund, Morgan Stanley Universal Funds, Inc. Fixed Income Portfolio, Morgan
Stanley Universal Funds, Inc. U.S. Real Estate Portfolio, PBHG Insurance Series
Fund, Inc. Growth II Portfolio, PBHG Insurance Series Fund, Inc. Technology &
Communications Portfolio and Strong Funds Opportunity Fund II Sub-Accounts) as
of December 31, 1997 and 1996, and the related statements of operations and
changes in net assets for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 and 1996, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
sub-accounts constituting the Annuity Investors Variable Account A as of
December 31, 1997 and 1996, and the results of their operations and changes in
their net assets for the years then ended in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 3, 1998
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
Assets: Shares Cost
------ ----
<S> <C> <C> <C>
Investments in portfolio shares,
at net asset value (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio............ 140,369.889 $ 3,586,392 $ 3,916,320
Growth and Income Portfolio............... 26,988.061 585,651 560,812
Small Cap Portfolio....................... 18,735.866 1,118,725 1,070,567
Dreyfus Funds:
Socially Responsible Growth
Fund, Inc............................. 83,872.063 1,957,506 2,094,285
Stock Index Fund.......................... 202,885.198 4,860,174 5,224,294
Janus Aspen Series:
Aggressive Growth Portfolio............... 124,254.001 2,247,391 2,553,420
Worldwide Growth Portfolio................ 288,619.142 6,340,150 6,750,802
Balanced Portfolio........................ 337,438.946 5,473,066 5,895,058
Short-Term Bond Portfolio................. 7,446.572 74,035 66,126
Merrill Lynch Variable Series Funds, Inc.:
Basic Value focus Fund.................... 63,965.078 955,064 1,013,207
Global Strategy Focus Fund................ 15,966.291 234,211 234,864
High Current Income Fund.................. 70,683.985 812,648 814,279
Domestic Money Market Fund................ 764,922.240 764,922 764,922
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio.................... 7,372.126 79,156 76,744
U.S. Real Estate.......................... 20,939.568 231,982 238,921
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio....................... 16,267.143 180,184 174,872
Technology & Communications
Portfolio............................ 51,008.507 547,507 530,999
Strong Funds:
Opportunity Fund II....................... 20,165.037 430,658 437,581
------------
Total cost..................................... $ 30,479,422
- --------------------------------------------------------------------------------------------------
Total assets................................................................... 32,418,073
Liabilities:
Amounts due to Annuity Investors Life Insurance Company (Note 4)............. 0
- --------------------------------------------------------------------------------------------------
Net assets.................................................................... $32,418,073
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1997
Net assets attributable to variable annuity contract holders (Note 2): Units Unit Value
----------- ----------
<S> <C> <C> <C>
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio - Basic contract................... 247,118.575 $15.594553 3,853,704
Capital Appreciation Portfolio - Enhanced contract................ 3,990.613 15.690822 62,616
Growth and Income Portfolio - Basic contract...................... 48,865.286 11.475350 560,746
Growth and Income Portfolio - Enhanced contract................... 5.708 11.498113 66
Small Cap Portfolio - Basic contract.............................. 86,150.930 12.145032 1,046,306
Small Cap Portfolio - Enhanced contract........................... 1,993.698 12.169119 24,261
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. - Basic contract........... 132,957.488 15.126449 2,011,174
Socially Responsible Growth Fund, Inc. - Enhanced contract........ 5,460.625 15.220020 83,111
Stock Index Fund - Basic contract................................. 324,713.323 15.879169 5,156,178
Stock Index Fund - Enhanced contract.............................. 4,263.339 15.977173 68,116
Janus Aspen Series:
Aggressive Growth Portfolio - Basic contract...................... 207,227.419 12.217744 2,531,852
Aggressive Growth Portfolio - Enhanced contract................... 1,754.459 12.293313 21,568
Worldwide Growth Portfolio - Basic contract....................... 425,739.592 15.742391 6,702,159
Worldwide Growth Portfolio - Enhanced contract.................... 3,070.952 15.839608 48,643
Balanced Portfolio - Basic contract............................... 409,917.307 14.073772 5,769,083
Balanced Portfolio - Enhanced contract............................ 8,896.063 14.160835 125,975
Short-Term Bond Portfolio - Basic contract........................ 3,967.559 10.890671 43,210
Short-Term Bond Portfolio - Enhanced contract..................... 2,091.259 10.958058 22,916
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund - Basic contract........................... 68,181.594 14.408954 982,426
Basic Value Focus Fund - Enhanced contract........................ 2,123.159 14.497904 30,781
Global Strategy Focus Fund - Basic contract....................... 17,615.512 12.486612 219,958
Global Strategy Focus Fund - Enhanced contract.................... 1,186.434 12.563763 14,906
High Current Income Fund - Basic contract......................... 65,756.981 12.189961 801,575
High Current Income Fund - Enhanced contract...................... 1,036.359 12.258690 12,704
Domestic Money Market Fund - Basic contract....................... 697,535.841 1.079946 753,301
Domestic Money Market Fund - Enhanced contract.................... 10,686.456 1.087469 11,621
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio - Basic contract........................... 7,144.949 10.740991 76,744
Fixed Income Portfolio - Enhanced contract........................ 0.000 10.762308 0
U.S. Real Estate Portfolio - Basic contract....................... 19,438.406 12.291156 238,921
U.S. Real Estate Portfolio - Enhanced contract.................... 0.000 12.315552 0
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio - Basic contract.............................. 15,905.540 10.661135 169,571
Growth II Portfolio - Enhanced contract........................... 496.211 10.682296 5,301
Technology & Communications Portfolio - Basic contract............ 51,276.959 10.323925 529,380
Technology & Communications Portfolio - Enhanced contract......... 156.518 10.344412 1,619
Strong Funds:
Opportunity Fund II - Basic contract.............................. 35,542.297 12.311565 437,581
Opportunity Fund II - Enhanced contract........................... 0.000 12.335975 0
- -------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable annuity contract holders................................. 32,418,073
- -------------------------------------------------------------------------------------------------------------------------------
Net assets................................................................................... $ 32,418,073
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
Assets:
Investments in portfolio shares, at net asset value (Note 2): Shares Cost
-------------- --------------
<S> <C> <C> <C>
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio..................................... 18,967.$36 406,745 $ 416,902
Dreyfus Funds:
Socially Responsible Growth Fund, Inc.............................. 9,116.438 183,359 183,149
Stock Index Fund................................................... 17,818.125 353,102 361,352
Janus Aspen Series:
Aggressive Growth Portfolio........................................ 32,665.778 599,092 595,824
Worldwide Growth Portfolio........................................ 34,327.515 643,967 667,326
Balanced Portfolio................................................. 40,102.354 583,384 592,312
Short-Term Bond Portfolio.......................................... 4,399.742 44,349 43,865
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund............................................. 5,695.788 79,600 83,956
Global Strategy Focus Fund......................................... 1,754.771 22,862 24,339
High Current Income Fund........................................... 6,938.501 78,251 79,030
Domestic Money Market Fund......................................... 340,994.99 341,054 341,054
---------------
Total cost......................................................... $ 3,335,765
- --------------------------------------------------------------------------------------------------------------------------------
Total assets............................................................................. 3,389,109
Liabilities:
Amounts due to Annuity Investors Life Insurance Company (Note 4)................................................ 8,687
- -------------------------------------------------------------------------------------------------------------------------------
Net assets............................................................................................ $ 3,380,422
Net assets attributable to variable annuity contract holders (Note 2): Units Unit Value
----------------- ----------------
Dreyfus Variable Investment Funds:
Capital Appreciation Portfolio - Basic contract................... 33,424.286 $12.330543 $ 412,140
Capital Appreciation Portfolio - Enhanced contract................ 313.603 12.369954 3,879
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. - Basic contract........... 15,316.028 11.924561 182,637
Socially Responsible Growth Fund, Inc. - Enhanced contract........ 0.000 11.962818 0
Stock Index Fund - Basic contract................................. 29,203.177 12.092195 353,131
Stock Index Fund - Enhanced contract.............................. 600.306 12.130821 7,282
Janus Aspen Series:
Aggressive Growth Portfolio - Basic contract...................... 52,219.342 10.979832 573,359
Aggressive Growth Portfolio - Enhanced contract................... 1,910.271 11.015008 21,042
Worldwide Growth Portfolio - Basic contract....................... 50,730.352 13.048360 661,947
Worldwide Growth Portfolio - Enhanced contract.................... 272.267 13.090061 3,564
Balanced Portfolio - Basic contract............................... 49,603.384 11.670308 578,886
Balanced Portfolio - Enhanced contract............................ 1,024.467 11.707739 11,994
Short-Term Bond Portfolio - Basic contract........................ 4,216.270 10.332080 43,563
Short-Term Bond Portfolio - Enhanced contract..................... 17.440 10.365199 181
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund - Basic contrac............................ 6,820.503 12.094664 82,492
Basic Value Focus Fund - Enhanced contract........................ 96.296 12.133299 1,168
Global Strategy Focus Fund - Basic contract....................... 2,114.707 11.294096 23,884
Global Strategy Focus Fund - Enhanced contract.................... 30.061 11.330202 341
High Current Income Fund - Basic contract......................... 6,837.357 11.119068 76,025
High Current Income Fund - Enhanced contract...................... 255.389 11.148637 2,847
Domestic Money Market Fund - Basic contract....................... 325,331.820 1.041216 338,741
Domestic Money Market Fund - Enhanced contract.................... 1,260.991 1.045819 1,319
- --------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable annuity contract holders 3,380,422
- --------------------------------------------------------------------------------------------------------------------------------
Net assets............................................................................ $ 3,380,422
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
====================================================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
-------------------------------------------- -----------------------------
Growth Socially
Capital and Small Responsible Stock
Appreciation Income Cap Growth Index
Portfolio Portfolio Portfolio Fund, Inc. Fund
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares............$ 31,931 $ 35,214 $ 53,513 $ 65,284 $ 167,780
Expenses:
Mortality and expense risk fees (Note 4).................. 24,987 1,729 2,571 13,118 29,248
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)........................ 6,944 33,485 50,942 52,166 138,532
Net realized gain (loss) and unrealized appreciation
(depreciation) on investments:
Net realized gain on sale of investments in portfolio
portfolio shares...................................... 10,026 1,311 10 8,354 3,459
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares...... 319,771 (24,839) (48,158) 136,989 355,870
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares.. 329,797 (23,528) (48,148) 145,343 359,329
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations........................... $ 336,741 $ 9,957 $ 2,794 $ 197,509 $ 497,861
================================================================================================================================
Morgan
Stanley
Universal
Merrill Lynch Variable Series Funds, Inc. Funds
-------------------------------------------------------------- ----------
Basic Global High Domestic U.S.
Value Strategy Current Money Fixed
Focus Focus Income Market Income
Fund Fund Fund Fund Portfolio
===================================================================================================================================
Investment income:
Dividends from investments in portfolio shares............ $ 9,192 $ 1,268 $ 33,292 $ 41,589 $ 4,192
Expenses:
Mortality and expense risk fees (Note 4).................. 6,537 1,537 4,852 11,904 217
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)......................... 2,655 (269) 28,440 29,685 3,975
Net realized gain (loss) and unrealized appreciation
(depreciation) on investments:
Net realized gain on sale of investments in
portfolio shares....................................... 3,825 2,375 471 0 186
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares...... 53,787 (823) 853 0 (2,412)
- --------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares... 57,612 1,552 1,324 0 (2,226)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations............................. $ 60,267 $ 1,283 $ 29,764 $ 29,685 $ 1,749
================================================================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A (continued)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
Janus Aspen Series
-------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
Investment income:
Dividends from investments in portfolio shares............ $ 0 $ 60,959 $ 113,010 $ 11,320
Expenses:
Mortality and expense risk fees (Note 4).................. 20,223 44,109 36,816 746
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)........................ (20,223) 16,850 76,194 10,574
Net realized gain (loss) and unrealized appreciation
(depreciation) on investments:
Net realized gain on sale of investments in portfolio
portfolio shares...................................... 1,204 9,006 9,629 158
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares...... 309,297 387,292 413,065 (7,425)
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares.. 310,501 396,298 422,694 (7,267)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations........................... $ 290,278 $ 413,148 $ 498,888 $ 3,307
====================================================================================================================================
Morgan Stanley
Universal PBHG Insurance Strong
Funds Series Fund, Inc. Funds
--------------------- -------------------------- ------------------------
U.S. Technology
Real Growth and Opportunity
Estate II Communications Fund
Portfolio Portfolio Portfolio II Total
====================================================================================================================================
Investment income:
Dividends from investments in portfolio shares............ $ 7,455 $ 0 $ 0 $ 407 $ 636,406
Expenses:
Mortality and expense risk fees (Note 4).................. 727 767 2,092 948 203,128
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)......................... 6,728 (767) (2,092) (541) 433,278
Net realized gain (loss) and unrealized appreciation
(depreciation) on investments:
Net realized gain on sale of investments in
portfolio shares....................................... 448 109 898 483 51,952
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares...... 6,939 (5,312) (16,509) 6,923 1,885,308
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares... 7,387 (5,203) (15,611) 7,406 1,937,260
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations.............................. $ 14,115 $ (5,970) $ (17,703) $ 6,865 $2,370,538
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
==================================================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
-------------------------------------------------- --------------------
Growth Socially
Capital and Small Responsible
Appreciation Income Cap Growth
Portfolio Portfolio Portfolio Fund, Inc.
==================================================================================================================================
Changes from operations:
<S> <C> <C> <C> <C>
Net investment income (loss) ................... $ 6,944 $ 33,485 $ 50,942 $ 52,166
Net realized gain on sale of investments in
portfolio shares.............................. 10,026 1,311 10 8,354
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares............................. 319,771 (24,839) (48,158) 136,989
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations.............................. 336,741 9,957 2,794 197,509
Changes from principal transactions:
Contract purchase payments...................... 2,587,775 473,969 833,543 1,445,588
Contract redemptions............................ (114,166) (18,372) (3,025) (51,480)
Net transfers (to) from fixed account........... 689,951 95,258 237,255 320,031
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions............................ 3,163,560 550,855 1,067,773 1,714,139
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets............ 3,500,301 560,812 1,070,567 1,911,648
Net assets, beginning of period...................... 416,019 0 0 182,637
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period............................ $ 3,916,320 $ 560,812 $ 1,070,567 $ 2,094,285
================================================================================================================================
Merrill Lynch Variable Series Funds, Inc.
--------------------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
================================================================================================================================
Changes from operations:
Net investment income (loss)..................... $ 2,655 $ $ (269) $ 28,440 $ 29,685
Net realized gain on sale of investments in
portfolio shares.............................. 3,825 2,375 471 0
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares.............................. 53,787 (823) 853 0
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations............................... 60,267 1,283 29,764 29,685
Changes from principal transactions:
Contract purchase payments....................... 782,172 182,783 646,791 1,766,603
Contract redemptions ............................ (34,859) (11,021) (8,576) (28,653)
Net transfers (to) from fixed
account.................................... 121,967 37,593 67,428 (1,342,773)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions............................ 869,280 209,356 705,643 395,177
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets............ 929,547 210,639 735,407 424,862
Net assets, beginning of period...................... 83,660 24,225 78,872 340,060
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period............................ $ 1,013,207 $ 234,864 $ 814,279 $ 764,922
The accompanying notes are an integral part of these financial statements.
================================================================================================================================
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A (continued)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
================================================================================================================================
Dreyfus
Funds Janus Aspen Series
-------------- -----------------------------------------------------------
Short-
Stock Aggressive Worldwide Term
Index Growth Growth Balanced Bond
Fund Portfolio Portfolio Portfolio Portfolio
=================================================================================================================================
Changes from operations:
Net investment income (loss) ................... $ 138,532 $(20,223) $ 16,850 $ 76,194 $ 10,574
Net realized gain on sale of investments in
portfolio shares.............................. 3,459 1,204 9,006 9,629 158
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares............................. 355,870 309,297 387,292 413,065 (7,425)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations.............................. 497,861 290,278 413,148 498,888 3,307
Changes from principal transactions:
Contract purchase payments...................... 3,887,862 1,590,929 4,759,590 4,181,625 29,866
Contract redemptions............................ (82,415) (57,933) (153,014) (140,016) (283)
Net transfers (to) from fixed account........... 560,574 135,745 1,065,566 763,682 (10,508)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions............................ 4,366,020 1,668,741 5,672,143 4,805,290 19,075
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets............ 4,863,881 1,959,019 6,085,291 5,304,178 22,382
Net assets, beginning of period...................... 360,413 594,401 665,511 590,880 43,744
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period............................ $ 5,224,294 $2,553,420 $ 6,750,802 $ 5,895,058 $ 66,126 `
===================================================================================================================================
Morgan Stanley PBHG Insurance Strong
Universal Funds Series Fund, Inc. Funds
--------------------------- ---------------------------- ----------
U.S. Technology
Fixed Real Growth and Opportunity
Income Estate II Communications Fund
Portfolio Portfolio Portfolio Portfolio II Total
===================================================================================================================================
Changes from operations:
Net investment income (loss)..................... $ 3,975 $ 6,728 $ (767) $ (2,092) $ (541) $ 433,278
Net realized gain on sale of investments in
portfolio shares.............................. 186 448 109 898 483 51,952
Net change in unrealized appreciation
(depreciation) of investments in
portfolio shares.............................. (2,412) 6,939 (5,312) (16,509) 6,923 1,885,308
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations............................... 1,749 14,115 (5,970) (17,703) 6,865 2,370,538
Changes from principal transactions:
Contract purchase payments....................... 60,217 158,252 158,200 315,811 346,824 24,208,399
Contract redemptions ............................ (2,721) (3,572) 0 (10,266) 0 (720,373)
Net transfers (to) from fixed 17,500 70,126 22,642 243,157 83,892 3,179,086
account....................................
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal
transactions............................ 74,995 224,806 180,842 548,702 430,716 26,667,113
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets............ 76,744 238,921 174,872 530,999 437,581 29,037,651
Net assets, beginning of period...................... 0 0 0 0 0 3,380,422
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period............................ $ 76,744 $ 238,921 $174,872 $ 530,999 $ 437,581 $32,418,073
The accompanying notes are an integral part of these financial statements.
===================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Basic Contracts
================================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
------------------------------------- -------------------------
Growth Socially
Capital and Small Responsible Stock
Appreciation Income Cap Growth Index
Portfolio Portfolio Portfolio Fund, Inc. Fund
<S> <C> <C> <C> <C> <C>
================================================================================================================
Units outstanding, December 31, 1996 33,424.286 0.000 0.000 15,316.028 29,203.177
Units purchased 224,280.056 50,518.305 86,407.351 122,765.393 302,515.480
Units redeemed (10,585.767) (1,653.019) (256.421) (5,123.933) (7,005.334)
----------- ---------- ---------- ----------- -----------
Units outstanding December 31, 1997 247,118.575 48,865.286 86,150.930 132,957.488 324,713.323
=========== ========== ========== =========== ===========
================================================================================================================
================================================================================================
Janus Aspen Series
----------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
================================================================================================
Units outstanding, December 31, 1996 52,219.342 50,730.352 49,603.384 4,216.270
Units purchased 177,772.496 390,022.123 379,211.522 772.196
Units redeemed (22,764.419) (15,012.883) (18,897.599) (1,020.907)
----------- ----------- ----------- ----------
Units outstanding December 31, 1997 207,227.419 425,739.592 409,917.307 3,967.559
=========== ========== =========== =========
================================================================================================
<PAGE>
=======================================================================================================
Merrill Lynch Variable Series Funds, Inc.
---------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
=======================================================================================================
Units outstanding, December 31, 1996 6,820.503 2,114.707 6,837.357 325,331.820
Units purchased 63,713.297 16,649.421 60,146.745 1,834,941.088
Units redeemed (2,352.206) (1,148.616) (1,227.121) (1,462,737.067)
---------- ---------- ---------- --------------
Units outstanding December 31, 1997 68,181.594 17,615.512 65,756.981 697,535.841
========== ========== ========== ==============
=======================================================================================================
===================================================================================================================
Morgan Stanley PBHG Insurance Strong
Universal Funds Series Fund, Inc. Funds
------------------------ --------------------------- ------------
U.S. Technology
Fixed Real Growth and Opportunity
Income Estate II Communications Fund
Portfolio Portfolio Portfolio Portfolio II
===================================================================================================================
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000 0.000
Units purchased 7,618.399 19,733.721 15,908.128 53,379.692 36,045.579
Units redeemed (473.450) (295.315) (2.588) (2,102.733) (503.282)
--------- ---------- ---------- ---------- ----------
Units outstanding December 31, 1997 7,144.949 19,438.406 15,905.540 51,276.959 35,542.297
========= ========== ========== ========== ==========
===================================================================================================================
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Enhanced Contracts
<TABLE>
<CAPTION>
==============================================================================================================
Dreyfus Variable Investment Fund Dreyfus Funds
---------------------------------------- ----------------------
Growth Socially
Capital and Small Responsible Stock
Appreciation Income Cap Growth Index
Portfolio Portfolio Portfolio Fund, Inc. Fund
<S> <C> <C> <C> <C> <C>
==============================================================================================================
Units outstanding, December 31, 1996 313.603 0.000 0.000 0.000 600.306
Units purchased 3,924.489 5.708 1,993.698 5,841.203 3,940.642
Units redeemed (247.479) 0.000 0.000 (380.578) (277.609)
----------- ------- ---------- ----------- ----------
Units outstanding December 31, 1997 3,990.613 5.708 1,993.698 5,460.625 4,263.339
=========== ======= ========== =========== ==========
==============================================================================================================
================================================================================================
Janus Aspen Series
-------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
===============================================================================================
Units outstanding, December 31, 1996 1,910.271 272.267 1,024.467 17.440
Units purchased 1,568.503 2,943.182 8,513.034 2,073.819
Units redeemed (1,724.315) (144.497) (641.438) 0.000
---------- -------------- ------------- ----------
Units outstanding December 31, 1997 1,754.459 3,070.952 8,896.063 2,091.259
============ ============== ============= ==========
================================================================================================
<PAGE>
==========================================================================================
Merrill Lynch Variable Series Funds, Inc.
-------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
==========================================================================================
Units outstanding, December 31, 1996 96.296 30.061 255.389 1,260.991
Units purchased 2,026.863 1,253.336 1,020.714 10,698.722
Units redeemed 0.000 (96.963) (239.744) (1,273.257)
--------- --------- --------- ----------
Units outstanding December 31, 1997 2,123.159 1,186.434 1,036.359 10,686.456
========= ========= ========= ==========
==========================================================================================
==========================================================================================================
Morgan Stanley PBHG Insurance Strong
Universal Funds Series Fund, Inc. Funds
----------------------- --------------------------- ------------
U.S. Technology
Fixed Real Growth and Opportunity
Income Estate II Communications Fund
Portfolio Portfolio Portfolio Portfolio II
==========================================================================================================
Units outstanding, December 31, 1996 0.000 0.000 0.000 0.000 0.000
Units purchased 0.000 0.000 496.211 469.962 0.000
Units redeemed 0.000 0.000 0.000 (313.444) 0.000
----- ----- ------- -------- -----
Units outstanding December 31, 1997 0.000 0.000 496.211 156.518 0.000
===== ===== ======= ======= =====
==========================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Dreyfus VIF* Dreyfus Funds
------------ ---------------------
Socially
Capital Responsible Stock
Appreciation Growth Index
Portfolio Fund, Inc. Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividends from Investments in portfolio shares.............................................. $ 3,207 $ 6,574 $5,938
Expenses:
Mortality and expense risk fees (Note 4)... ................................................ 883 512 939
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income................................................................. 2,324 6,062 4,999
Net realized gain (loss) and unrealized appreciation (depreciation) on Investments:
Net realized gain (loss) on sale of Investments In portfolio shares........................ 90 289 512
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... 10,157 (209) 8,250
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on Investments in portfolio shares.................................... $10,247 80 8,762
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations............................ $12,571 $ 6,142 $13,761
==================================================================================================================================
*Variable Investment Fund
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Dreyfus VIF* Dreyfus Funds
------------ ---------------------
Socially
Capital Responsible Stock
Appreciation Growth Index
Portfolio Fund, Inc. Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Changes from operation:
Net Investment Income...................................................................... $ 2,324 $ 6,062 $ 4,999
Net realized gain (loss) on sale of Investments in portfolio shares........................ 90 289 512
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... 10,157 (209) 8,250
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations...................................... 12,571 6,142 13,761
Changes from principal transactions:
Contract purchase payments................................................................. 412,062 171,247 339,471
Contract redemptions....................................................................... (457) (1,164) (1,044)
Net transfers (to) from fixed account...................................................... (8,157) 6,412 8,225
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions................................ 403,448 176,495 346,652
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase in net assets....................................................... 416,019 182,637 360,413
Net assets, beginning of period................................................................. 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period....................................................................... $416,019 $182,637 360,413
==================================================================================================================================
*Variable Investment Fund
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Janus Aspen Series
-----------------------------------
Aggressive Worldwide
Growth Growth Balanced
Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividends from Investments in portfolio shares.............................................. $ 638 $ 4,200 $6,684
Expenses:
Mortality and expense risk fees (Note 4)..................................................... 1,423 1,815 1,431
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income................................................................. (785) 2,385 5,253
Net realized gain (loss) and unrealized appreciation (depreciation) on Investments:
Net realized gain (loss) on sale of Investments In portfolio shares........................ 173 2,393 711
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... (3,268) 23,360 8,927
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on Investments in portfolio shares.................................... $(3,095) 25,753 9,638
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations............................ $(3,880) $28,138 $14,891
==================================================================================================================================
*Variable Investment Fund
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Janus Aspen Series
-----------------------------------
Aggressive Worldwide
Growth Growth Balanced
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Changes from operation:
Net Investment Income...................................................................... $ (785) $ 2,385 $ 5,253
Net realized gain (loss) on sale of Investments in portfolio shares........................ 173 2,393 711
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... (3,268) 23,360) 8,927
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations...................................... (3,880) 28,138 14,891
Changes from principal transactions:
Contract purchase payments................................................................. 586,354 631,446 571,341
Contract redemptions....................................................................... (2,136) (1,623) (476)
Net transfers (to) from fixed account...................................................... 14,063 7,550 5,124
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions................................ 598,281 637,373 575,989
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase in net assets....................................................... 594,401 665,511 590,880
Net assets, beginning of period................................................................. 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period....................................................................... $594,401 $665,511 590,880
==================================================================================================================================
*Variable Investment Fund
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Merrill Lynch Variable
-------- -----------------------
Short- Basic Global High
Term Value Strategy Current
Bond Focus Focus Income
Portfolio Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends from Investments in portfolio shares.............................................. $ 980 $ 93 $ 0 $ 862
Expenses:
Mortality and expense risk fees (Note 4)..................................................... 122 296 114 157
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income................................................................. 858 203) (114) 705
Net realized gain (loss) and unrealized appreciation (depreciation) on Investments:
Net realized gain (loss) on sale of Investments In portfolio shares........................ (0) 496 0 (10)
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... (484) 4,356 1,476 778
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on Investments in portfolio shares.................................... (484) 4,852 1,476 768
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations............................ $ 374 $4,649 $ 1,362 $ 1,473
==================================================================================================================================
*Variable Investment Fund
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Merrill Lynch Variable
-------- -----------------------
Short- Basic Global High
Term Value Strategy Current
Bond Focus Focus Income
Portfolio Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes from operation:
Net Investment Income...................................................................... $ 858 $ (203) $ (114) $ 705
Net realized gain (loss) on sale of Investments In portfolio shares........................ (0) 496 0 (10)
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... (484) 4,356 1,476 778
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations...................................... 374 4,649 1,362 1,473
Changes from principal transactions:
Contract purchase payments................................................................. 43,280 80,350 22,977 76,120
Contract redemptions....................................................................... 0 (166) (52) (252)
Net transfers (to) from fixed account...................................................... 90 (1,173) (62) 1,531
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions................................ 43,370 79,011 22,863 77,399
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in net assets....................................................... 43,744 83,660 24,225 78,872
Net assets, beginning of period................................................................. 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period....................................................................... $43,744 $ 83,660 $ 24,225 $78,872
===================================================================================================================================
*Variable Investment Fund
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Series Funds, Inc.
----------------------
Domestic
Money
Market
Fund Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividends from Investments in portfolio shares.............................................. $ 4,007 $33,183
Expenses:
Mortality and expense risk fees (Note 4)..................................................... 995 8,687
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income................................................................. 3,012 24,496
Net realized gain (loss) and unrealized appreciation (depreciation) on Investments:
Net realized gain (loss) on sale of Investments In portfolio shares........................ 0 4,654
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... 0 53,343
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on Investments in portfolio shares.................................... 0 57,997
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations............................ $ 3,012 $82,493
==================================================================================================================================
*Variable Investment Fund
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================================================================
Series Funds, Inc.
----------------------
Domestic
Money
Market
Fund Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Changes from operation:
Net Investment Income...................................................................... $ 3,012 $ 24,496
Net realized gain (loss) on sale of Investments in portfolio shares........................ 0 4,654
Net change in unrealized appreciation (depreciation) of Investments in portfolio shares.... 0 53,343
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in net assets from operations...................................... 3,012 82,493
Changes from principal transactions:
Contract purchase payments................................................................. 403,339 3,337,987
Contract redemptions....................................................................... 0 (7,370)
Net transfers (to) from fixed account...................................................... (66,291) (32,688)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions................................ 337,048 3,297,929
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in net assets....................................................... 340,060 3,380,422
Net assets, beginning of period................................................................. 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period....................................................................... $340,060 $3,380,422
===================================================================================================================================
*Variable Investment Fund
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
Basic Contracts
===================================================================================================================================
Dreyfus VIF* Dreyfus Funds Janus Aspen Series
------------ ------------------- ---------------------------------------------------
Socially Short-
Capital Responsible Stock Aggressive Worldwide Term
Appreciation Growth Index Growth Growth Balanced Bond
Portfolio Fund, Inc. Fund Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
Units outstanding, December 31, 1995 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 34,422.778 15,640.606 29,479.189 52,474.764 51,619.416 50,768.075 4,216.270
Units redeemed (998.492) (324.578) (276.012) (255.422) (889.064) (1,164.691) 0.000
---------- ---------- ---------- ----------- ---------- ---------- ---------
Units outstanding December 31, 1996 33,424.286 15,316.028 29,203.177 52,219.342 50,730.352 49,603.384 4,216.270
========== ========== ========== ========== ========== ========== =========
===================================================================================================================================
=========================================================================================
Merrill Lynch Variable Series Funds, Inc.
------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
=========================================================================================
Units outstanding, December 31, 1995 0.000 0.000 0.000 0.000
Units purchased 6,930.204 2,124.185 6,860.213 391,560.413
Units redeemed (109.701) (9.478) (22.856) (66,228.593)
--------- --------- --------- -----------
Units outstanding December 31, 1996 6,820.503 2,114.707 6,837.357 325,331.820
========= ========= ========= ===========
=========================================================================================
* Variable Investment Fund
<PAGE>
Enhanced Contracts
===================================================================================================================================
Dreyfus VIF* Dreyfus Funds Janus Aspen Series
------------ ------------------- ---------------------------------------------------
Socially Short-
Capital Responsible Stock Aggressive Worldwide Term
Appreciation Growth Index Growth Growth Balanced Bond
Portfolio Fund, Inc. Fund Portfolio Portfolio Portfolio Portfolio
===================================================================================================================================
Units outstanding, December 31, 1995 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Units purchased 313.603 0.000 600.306 1,910.271 272.267 1,024.467 17.440
Units redeemed 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- ---------- ---------- ----------- ---------- --------- ---------
Units outstanding December 31, 1996 313.603 0.000 600.306 1,910.271 272.267 1,024.467 17.440
========== ========== ========== ========== ========== ========== =========
===================================================================================================================================
Enhanced Contracts
=========================================================================================
Merrill Lynch Variable Series Funds, Inc.
------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
=========================================================================================
Units outstanding, December 31, 1995 0.000 0.000 0.000 0.000
Units purchased 96.296 30.061 255.389 1,260.991
Units redeemed 0.000 0.000 0.000 0.000
--------- --------- --------- -----------
Units outstanding December 31, 1996 96.296 30.061 255.389 1,260.991
========= ========= ========= ===========
=========================================================================================
* Variable Investment Fund
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) GENERAL
-------
Annuity Investors Variable Account A (the "Account") is registered under
the Investment Company Act of 1940, as amended, as a unit investment
trust. The Account was established on May 26, 1995 and commenced
operations on December 7, 1995 as a segregated investment account for
individual and group variable annuity contracts which are registered under
the Securities Act of 1933. The operations of the Account are included in
the operations of Annuity Investors Life Insurance Company (the "Company")
pursuant to the provisions of the Ohio Insurance Code. The Company is an
indirect wholly-owned subsidiary of American Annuity Group, Inc., ("AAG"),
a publicly traded insurance holding company listed on the New York Stock
Exchange. The Company is licensed in 47 states.
At December 31, 1997, the following investment options were available:
THE DREYFUS VARIABLE INVESTMENT FUND:
. Capital Appreciation Portfolio
. Growth and Income Portfolio
. Small Cap Portfolio
DREYFUS FUNDS:
. Socially Responsible Growth Fund, Inc.
. Stock Index Fund
JANUS ASPEN SERIES:
. Aggressive Growth Portfolio
. Worldwide Growth Portfolio
. Balanced Portfolio
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.:
. Domestic Money Market Fund
. Basic Value Focus Fund
. Global Strategy Focus Fund
. High Current Income Fund
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
. Fixed Income Portfolio
. U.S. Real Estate Portfolio
PBHG INSURANCE SERIES FUND, INC.:
. Growth II Portfolio
. Technology & Communications Portfolio
STRONG FUNDS:
. Opportunity Fund II
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis Of Presentation
---------------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements
and accompanying notes. Changes in circumstances could cause actual
results to differ materially from those estimates.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
Investments
-----------
Investments are valued using the net asset value of the respective
portfolios at the end of each business day of the New York Stock Exchange,
with the exception of business holidays. Investment transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). The cost of investments sold is determined on a first-in,
first-out basis. The Account does not hold any investments which are
restricted as to resale.
Net investment income (loss), net realized gain (loss) and unrealized
appreciation (depreciation) on investments are allocated to the contracts
on each valuation date based on each contract's pro rata share of the
assets of the Account as of the beginning of the valuation date.
Federal Income Taxes
--------------------
No provision for federal income taxes has been made in the accompanying
financial statements because the operations of the Account are included in
the total operations of the Company, which is treated as a life insurance
company for federal income tax purposes under Subchapter L of the Internal
Revenue Code. Net investment income and realized gains (losses) will be
retained in the Account and will not be taxable until received by the
contract owner or beneficiary in the form of annuity payments or other
distributions.
Net Assets Attributable To Variable Annuity Contract Holders
------------------------------------------------------------
The variable annuity contract reserves are comprised of net contract
purchase payments less redemptions and benefits. These reserves are
adjusted daily for the net investment income (loss), net realized gain
(loss) and unrealized appreciation (depreciation) on investments.
(3) Purchases And Sales Of Investments In Portfolio Shares
------------------------------------------------------
The aggregate cost of purchases and proceeds from sales of investments in
all portfolio shares for the years ended December 31, 1997 and 1996 are as
follows:
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
1997
------------------------------
Cost of Proceeds from
Purchases Sales
--------- -------------
The Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio $ 3,205,485 35,865
Growth and Income Portfolio 606,028 21,688
Small Cap Portfolio 1,118,851 136
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. 1,799,223 33,431
Stock Index Fund 4,519,615 15,987
Janus Aspen Series:
Aggressive Growth Portfolio 1,811,011 163,917
Worldwide Growth Portfolio 5,714,442 27,266
Balanced Portfolio 4,962,560 82,509
Short-Term Bond Portfolio 51,886 22,434
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund 909,483 37,844
Global Strategy Focus Fund 224,738 15,765
High Current Income Fund 752,313 18,387
Domestic Money Market Fund 1,914,332 1,490,464
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio 84,163 5,193
U.S. Real Estate Portfolio 234,705 3,171
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio 181,137 1,063
Technology & Communications Portfolio 562,830 16,221
Strong Funds:
Opportunity Fund II 436,177 6,002
----------- ----------
Total $29,088,979 $1,997,343
=========== ==========
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
1996
------------------------------
Cost of Proceeds from
Purchases Sales
--------- -------------
Dreyfus Funds:
Capital Appreciation Portfolio $ 416,285 $ 9,630
Socially Responsible Growth Fund, Inc. 187,037 3,968
Stock Index Fund 359,968 7,377
Janus Aspen Series:
Aggressive Growth Portfolio 600,450 1,531
Worldwide Growth Portfolio 658,159 16,587
Balanced Portfolio 600,469 17,796
Short-Term Bond Portfolio 44,403 53
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund 86,446 7,342
Global Strategy Focus Fund 22,875 13
High Current Income Fund 79,869 1,608
Domestic Money Market Fund 420,222 79,168
---------- --------
Total $3,476,183 $145,073
========== ========
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
(4) Deductions And Expenses
-----------------------
Although periodic annuitization payments to contract owners vary according
to the investment performance of the sub-accounts, such payments are not
affected by mortality or expense experience because the Company assumes
the mortality risk and expense risk under the contracts.
The mortality risk assumed by the Company results from the life annuity
payment option in the contracts, in which the Company agrees to make
annuity payments regardless of how long a particular annuitant or other
payee lives. The annuity payments are determined in accordance with
annuity purchase rate provisions established at the time the contracts are
issued. Based on the actuarial determination of expected mortality, the
Company is required to fund any deficiency in the annuity payment reserves
from its general account assets.
The expense risk assumed by the Company is the risk that the deductions
for sales and administrative expenses may prove insufficient to cover the
actual sales and administrative expenses. Under the Basic Contract, the
Company deducts a fee from the Account each day for assuming the mortality
and expense risks. This fee is equal on an annual basis to 1.25% of the
daily value of the total investments of the Account. These fees aggregated
$199,272 and $8,622 for the years ended December 31, 1997 and 1996,
respectively.
In connection with certain contracts in which the Company incurs reduced
sales and servicing expenses, such as contracts offered to active
employees of the Company or any of its subsidiaries and/or affiliates, the
Company may offer an Enhanced Contract. Under the Enhanced Contract, the
Company deducts a fee from the Account each day for assuming the mortality
and expense risks. This fee is equal on an annual basis to 0.95% of the
daily value of the total investments of the Account. These fees aggregated
$3,856 and $65 for the years ended December 31, 1997 and 1996,
respectively.
Pursuant to an administrative agreement between AAG and the Company, AAG
subsidiaries provide sales and administrative services to the Company and
the Account. The Company may deduct a percentage of purchase payments
surrendered to cover sales expenses. The percentage decreases to 0% from a
maximum of 7.0% based upon the number of years the purchase payment has
been held.
In addition, the Company may deduct units from contracts annually and upon
full surrender to cover an administrative fee of $25. These expenses
totaled $7,275 and $175 for the years ended December 31, 1997 and 1996,
respectively.
(5) Other Transactions With Affiliates
----------------------------------
AAG Securities, Inc., an affiliate of the Company, is the principal
underwriter and performs all variable annuity sales functions on behalf of
the Company.
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
(6) Net Assets
----------
Net assets consisted of the following at December 31, 1997 and 1996:
1997 1996
----------- ----------
Proceeds from the sales of units since
organization, less cost of units
redeemed $29,965,042 $3,297,929
Undistributed net investment income 457,774 24,496
Undistributed net realized gains on
sale of investments 56,606 4,654
Net unrealized depreciation of investments 1,938,651 53,343
----------- ----------
Net assets $32,418,073 $3,380,422
=========== ==========
<PAGE>
ANNUITY INVESTORS LIFE
INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 1997 AND 1996
CONTENTS
Report of Independent Auditors................................................39
Audited Statutory-Basis Financial Statements
Balance Sheets - Statutory-Basis..............................................40
Statements of Operations - Statutory-Basis....................................41
Statements of Changes in Capital and Surplus - Statutory-Basis................42
Statements of Cash Flows - Statutory-Basis....................................43
Notes to Statutory-Basis Financial Statements.................................44
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Annuity Investors Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Annuity
Investors Life Insurance Company ("the Company") as of December 31, 1997 and
1996, and the related statutory-basis statements of operations, changes in
capital and surplus, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Notes B and I to the financial statements, the Company presents
its financial statements in conformity with the accounting practices prescribed
or permitted by the Ohio Insurance Department, which practices differ from
generally accepted accounting principles. The variances between such practices
and generally accepted accounting principles and the effects on the accompanying
financial statements are described in Notes B and I.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Annuity Investors Life Insurance Company at December 31, 1997 and 1996, or
the results of its operations or its cash flows for the years then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Annuity Investors
Life Insurance Company at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Ohio Insurance Department.
/s/ ERNST & YOUNG LLP
Cincinnati, Ohio
March 2, 1998
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
STATUTORY-BASIS
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1997 1996
---------- ---------
<S> <C> <C>
ADMITTED ASSETS
Cash and investments
Fixed maturities - at amortized cost
(market value - $33,661,758 and $22,445,536) 33,176,305 $22,996,685
Policy loans 281,758 41,190
Short-term investments 7,612,000 841,000
Cash 1,021,733 475,770
Other invested assets - 75,000
---------- -------------
Total cash and investments 42,091,796 24,429,645
Investment income due and accrued 523,546 437,051
Federal income tax recoverable 148,476 392,995
Other admitted assets 22,691 -
---------- -----------------
Total General Account admitted assets 42,786,509 25,259,691
Separate Account assets 37,248,224 3,389,109
---------- ------------
TOTAL ADMITTED ASSETS 80,034,733 $28,648,800
========== ===========
LIABILITIES, CAPITAL AND SURPLUS
Annuity reserves 23,186,988 $ 3,676,377
Commissions due and accrued 109,180 53,746
General expenses due and accrued 201,989 26,759
Transfers to Separate Accounts due and accrued (net)
(contingent deferred sales charges -
($2,170,871) and ($198,353)) (2,170,871) (206,980)
Taxes, licenses and fees due and accrued 15,368 1,900
Asset valuation reserve 126,076 58,437
Payable to parent and affiliates 446,637 303,718
Other liabilities 976,052 9,402
---------- --------------
Total General Account liabilities 22,891,419 3,923,359
Separate Account liabilities 37,248,224 3,389,109
---------- ------------
TOTAL LIABILITIES 60,139,643 7,312,468
---------- ------------
Common stock, par value- $125:
- 25,000 shares authorized
- 20,000 shares issued and outstanding 2,500,000 2,500,000
Gross paid-in and contributed surplus 17,550,000 17,550,000
Unassigned surplus (deficit) (154,910) 1,286,332
---------- ------------
TOTAL CAPITAL AND SURPLUS 19,895,090 21,336,332
---------- -----------
TOTAL LIABILITIES, CAPITAL AND SURPLUS 80,034,733 $28,648,800
========== ===========
See notes to statutory-basis financial statements
2
</TABLE>
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
STATUTORY-BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------ --------
<S> <C> <C>
REVENUES
Premiums and annuity considerations $12,878,897 $ 38,838
Deposit-type funds 43,367,003 4,355,900
Net investment income 1,789,590 1,500,424
Amortization of interest maintenance reserve (2,195) (814)
Other income 31,884 175
------------- -------------
Total revenue 58,065,179 5,894,523
BENEFITS AND EXPENSES
Increase in aggregate reserves 19,510,611 834,364
Policyholders' benefits 1,207,596 408,089
Commissions 3,722,847 257,666
Commissions and expense allowances on reinsurance assumed - 48,353
General insurance expenses 2,928,646 1,138,281
Taxes, licenses and fees 213,167 103,174
Net transfers to Separate Accounts 29,300,569 3,090,948
Reserve adjustment on termination of reinsurance assumed 2,654,548 -
------------ ---------------
Total benefits and expenses 59,537,984 5,880,875
----------- ----------
Gain (loss) from operations before federal income taxes (1,472,805) 13,648
Provision (benefit) for federal income taxes (37,876) 2,280
------------- ------------
Gain (loss) from operations after federal income
taxes before net realized capital losses (1,434,929) 11,368
Net realized capital losses
Net realized capital losses before federal
income taxes and transfer to IMR (9,212) (26,813)
Capital loss tax benefit - -
Interest maintenance reserve transfer
(net of tax) 5,988 17,428
-------------- ------------
Net realized capital losses after transfer
to IMR (3,224) (9,385)
-------------- ------------
NET INCOME (LOSS) $(1,438,153) $ 1,983
=========== ============
</TABLE>
See notes to statutory-basis financial statements
3
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
STATUTORY-BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------ ----------
<S> <C> <C>
COMMON STOCK
Balance at beginning of year $ 2,500,000 $ 2,000,000
Transfer from gross paid in and contributed surplus - 500,000
------------ ------------
Balance at end of year $ 2,500,000 $ 2,500,000
============ ============
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Balance at beginning of year $17,550,000 $18,050,000
Transfer to common stock - (500,000)
------------ ------------
Balance at end of year $17,550,000 $17,550,000
============ ============
UNASSIGNED FUNDS
Balance at beginning of year $ 1,286,332 $ 1,064,981
Net income (loss) (1,438,153) 1,983
Increase in non-admitted assets (31,801) (85,271)
Increase in asset valuation reserve (67,639) (55,589)
Adjustment for prior year taxes 96,351 360,228
------------ ------------
Balance at end of year $ (154,910) $ 1,286,332
============ ============
TOTAL CAPITAL AND SURPLUS $ 19,895,090 $21,336,332
============ ============
</TABLE>
See notes to statutory-basis financial statements
4
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
STATUTORY-BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------- ----------
<S> <C> <C>
OPERATIONS:
Premiums and annuity considerations $ 12,878,897 $ 38,838
Deposit-type funds 43,367,003 4,355,900
Net investment income 1,788,231 1,365,858
Net increase in policy loans (240,568) (41,190)
Policyholder benefits paid (1,207,596) (408,089)
Commissions, expenses and premium and other taxes paid (6,614,922) (1,479,640)
Net transfers to Separate Accounts (31,264,460) (3,297,928)
Federal income taxes recovered (paid) 378,746 (44,000)
Other cash provided (used) (1,563,792) 186,214
----------- ------------
Net cash provided by operations 17,521,539 675,963
INVESTING ACTIVITIES:
Sale, maturity or repayment of bonds 2,491,585 2,383,321
Purchase of bonds (12,771,161) (16,931,028)
Cash provided (applied) from receivable for securities 75,000 (75,000)
------------ ------------
Net cash used in investment activities (10,204,576) (14,622,707)
------------ -----------
Net increase (decrease) in cash and short-term investments 7,316,963 (13,946,744)
Cash and short-term investments at beginning of year 1,316,770 15,263,514
------------ -----------
Cash and short-term investments at end of year $ 8,633,733 $ 1,316,770
============ ===========
</TABLE>
See notes to statutory-basis financial statements
5
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
A. GENERAL
Annuity Investors Life Insurance Company ("AILIC"), a stock life insurance
company domiciled in the State of Ohio, is an indirectly owned subsidiary of
American Annuity Group, Inc. ("AAG"), a publicly traded financial services
holding company of which American Financial Group, Inc. ("AFG") owns
approximately 81%. On November 29, 1994, AILIC was purchased from Great American
Insurance Company, a wholly-owned subsidiary of AFG.
AILIC's primary product is variable annuities. These are reported as
deposit-type funds. The product is marketed to hospitals, educational
institutions and other qualified and non-qualified markets. During 1997, AILIC
also began writing individual fixed annuity products produced by one large
agency.
B. ACCOUNTING POLICIES
BASIS OF PRESENTATION The accompanying financial statements have been prepared
in conformity with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and the Ohio Insurance
Department, which vary in some respects from generally accepted accounting
principles ("GAAP"). The more significant of these differences are as follows:
(a) annuity receipts and deposit-type funds are accounted for as revenues
versus liabilities;
(b) costs incurred in the acquisition of new business such as commissions,
underwriting and policy issuance costs are expensed at the time incurred
versus being capitalized;
(c) reserves established for future policy benefits are calculated using more
conservative assumptions for mortality and interest rates than would be
used under GAAP;
(d) an Interest Maintenance Reserve ("IMR") is provided whereby portions of
realized gains and losses from fixed income investments are deferred and
amortized into investment income as prescribed by the NAIC;
(e) investments in fixed maturity securities considered "available for sale"
(as defined by GAAP) are generally recorded at amortized cost versus
market;
(f) an Asset Valuation Reserve ("AVR") is provided which reclassifies a portion
of surplus to liabilities; and
(g) the cost of certain assets designated as "non-admitted assets" (principally
advance commissions paid to agents) is charged against surplus.
Preparation of the financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known which could impact the amounts reported and
disclosed herein.
Certain reclassifications have been made to the prior year financial statements
to conform with current year presentation.
INVESTMENTS Asset values are generally stated as follows: Bonds not backed by
other loans, where permitted, are carried at amortized cost using the interest
method; loan-backed bonds and structured securities, where permitted, are
carried at amortized cost using the interest method; short-term investments are
carried at cost; and policy loans are carried at the aggregate unpaid balance.
The Company uses dealer modeled prepayment assumptions to determine effective
yields for loan-backed bonds and structured securities. These assumptions are
consistent with the current interest rate and economic environment. Significant
changes in estimated cash flows from the original purchase assumptions are
accounted for on a prospective basis.
As prescribed by the NAIC, the market value for investments in bonds is
determined by the values included in the Valuations of Securities manual
published by the NAIC's Securities Valuation Office. Those values generally
represent quoted market value prices for securities traded in the public
marketplace or analytically determined values by the Securities Valuation
Office.
6
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
INVESTMENTS (CONTINUED)
Short-term investments having original maturities of three months or less when
purchased are considered to be cash equivalents for purposes of the
statutory-basis financial statements.
The carrying values of cash and short-term investments approximate their fair
values.
Gains or losses on sales of securities are recognized at the time of disposition
with the amount of gain or loss determined on the specific identification basis.
The IMR applies to interest-related realized capital gains and losses (net of
tax) and is intended to defer realized gains and losses resulting from changes
in the general level of interest rates. The IMR is amortized into investment
income over the approximate remaining life of the investments sold.
The AVR provides for possible credit-related losses on securities and is
calculated according to a specified formula as prescribed by the NAIC for the
purpose of stabilizing surplus against fluctuations in the market value of
investment securities. Changes in the required reserve balances are made by
direct credits or charges to surplus.
PREMIUMS Annuity premiums and deposit-type funds are recognized as revenue when
received.
SEPARATE ACCOUNTS Separate account assets and liabilities reported in the
accompanying statutory-basis balance sheets represent funds that are separately
administered, principally for annuity contracts, and for which the
contractholder, rather than AILIC, bears the investment risk. Assets of the
Separate Accounts are not chargeable with liabilities incurred in any other
business operation of AILIC. Separate account assets are reported at market
value. The operations of the separate accounts are not included in the
accompanying statutory-basis financial statements. Fees charged on separate
account policyholder deposits are included in other income.
ANNUITY RESERVES Annuity reserves are developed by actuarial methods and are
determined based on published tables using statutory specified interest rates
and valuation methods that will provide, in the aggregate, reserves that are
greater than or equal to the minimum amounts required by law. The fair market
value of the reserves approximates the statement value.
The fair value of the liability for annuities in the payout phase is assumed to
be the present value of the anticipated cash flows, discounted at current
interest rates. Fair value of annuities in the accumulation phase is assumed to
be no more than the policyholders' cash surrender amount.
REINSURANCE Reinsurance premiums, benefits and expenses are accounted for on a
basis consistent with those used in accounting for the original policies issued
and the terms of the reinsurance contracts. The reinsurance agreement with Great
American Life Insurance Company ("GALIC"), an affiliated Ohio domiciled
insurance company, was terminated on January 1, 1997 and reserves of
approximately $2.7 million were transferred back to GALIC along with assets
equal to the reserves transferred.
FEDERAL INCOME TAXES AILIC files a separate company federal income tax return.
BENEFIT PLAN All employees meeting minimum requirements are eligible to
participate in an Employee Stock Ownership Retirement Plan ("ESORP") established
by AAG. The ESORP is a noncontributory, trusteed plan which invests primarily in
securities of AAG for the benefit of the employees of AAG and its subsidiaries.
Contributions are discretionary by the Board of Directors of AAG and are charged
against earnings in the year for which they are declared. Qualified employees
having vested rights are entitled to benefit payments at age 60.
7
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
C. INVESTMENTS
Fixed maturity investments at December 31 consisted of the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------
1997
Carrying Market Gross Unrealized
Value Value Gains Losses
----- ----- ----- ------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities $ 9,326,347 $ 9,345,879 $ 61,757 $ 42,225
All other corporate 23,849,958 24,315,879 546,439 80,518
----------- ----------- -------- ---------
Total fixed maturity investments $33,176,305 $33,661,758 $608,196 $122,743
=========== =========== ======== ========
1996
--------------------------------------------------------------
Carrying Market Gross Unrealized
Value Value Gains Losses
----- ----- ----- ------
U.S. Government and government
agencies and authorities $ 9,049,167 $ 8,730,379 $ 42,370 $361,158
All other corporate 13,947,518 13,715,157 111,747 344,108
----------- ----------- -------- --------
Total fixed maturity investments $22,996,685 $22,445,536 $154,117 $705,266
=========== =========== ======== ========
The table below sets forth the scheduled maturities of AILIC's fixed maturity investments as of December 31, 1997:
Carrying Market
Value Value
----- -----
Bonds by maturity:
Due within 1 year or less $ 2,005,027 $ 2,003,285
Over 1 year through 5 years 8,306,878 8,315,621
Over 5 years through 10 years 13,142,738 13,353,424
Over 10 years through 20 years 6,195,035 6,429,645
Over 20 years 3,526,627 3,559,783
------------ ------------
Total bonds by maturity $33,176,305 $33,661,758
=========== ===========
</TABLE>
The expected maturities in the foregoing table may differ from the contractual
maturities because certain borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
Proceeds from sales of fixed maturity investments were $2.5 million in 1997 and
$2.4 million in 1996. Gross realized gains of $17,374 and $3,525 and gross
realized losses of $26,586 and $30,338 were realized on those sales during 1997
and 1996, respectively.
U.S. Treasury Notes with a carrying value of $6.6 million and $6.1 million at
December 31, 1997 and 1996, respectively, were on deposit as required by the
insurance departments of various states.
8
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
Net investment income consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- --------
<S> <C> <C>
Bonds $1,642,923 $1,369,442
Short-term investments 182,085 159,533
Cash on hand and on deposit 837 1,250
Policy loans 7,605 1,153
Miscellaneous 6,648 54
------------ --------------
Gross investment income 1,840,098 1,531,432
Investment expenses (50,508) (31,008)
------------ ------------
Net investment income $1,789,590 $1,500,424
========== ==========
</TABLE>
D. FEDERAL INCOME TAXES
--------------------
AILIC has no federal income taxes available for recoupement in the event of
future losses. AILIC has approximately $1.1 million in loss carryforwards
derived from year ended December 31, 1997 to offset future year's taxable
income. These loss carryforwards will expire in the year 2012.
E. RELATED PARTY TRANSACTIONS
--------------------------
On December 30, 1993, AILIC entered into a reinsurance agreement with GALIC,
which became AILIC's immediate parent in 1995. As a result of the transaction,
AILIC assumed $2.6 million in deferred annuity reserves and received an
equivalent amount of assets. Premiums of $38,838 in 1996 consisted of assumed
reinsurance from GALIC in accordance with the agreement. The reinsurance
agreement was terminated January 1, 1997 and reserves of $2.7 million were
transferred back to GALIC along with assets equal to the reserves transferred.
AILIC has an agreement with AAG, subject to the direction of the Finance
Committee of AILIC, whereby AAG, along with services provided by American Money
Management, Inc. (an affiliate), provides for management and accounting services
related to the investment portfolio. In 1997 and 1996, AILIC paid $41,743 and
$15,095, respectively, in management fees.
AILIC has an agreement with AAG Securities, Inc., a wholly-owned subsidiary of
AAG, whereby AAG Securities is the principal underwriter and distributor of
AILIC's variable contracts. AILIC pays AAG Securities for acting as underwriter
under a distribution agreement. In 1997 and 1996, AILIC paid $2.2 million and
$0.3 million, respectively, in commission to AAG Securities.
Certain administrative, management, accounting, actuarial, data processing,
collection and investment services are provided under agreements between AILIC
and affiliates at charges not unfavorable to AILIC or insurance affiliates. In
1997 and 1996, AILIC paid $678,717 and $277,505, respectively, in fees to
affiliates.
F. DIVIDEND RESTRICTIONS
---------------------
The amount of dividends which can be paid by AILIC without prior approval of
regulatory authorities is subject to restrictions relating to capital and
surplus and net income. AILIC cannot pay dividends in 1998 based on capital and
surplus, without prior approval.
9
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
G. ANNUITY RESERVES, EXCLUDING SEPARATE ACCOUNTS
---------------------------------------------
At December 31, 1997, $0.6 million or 2.7% of AILIC's annuity reserves,
excluding Separate Accounts, were subject to discretionary withdrawal without
adjustment, and $22.6 million or 97.3% were subject to discretionary withdrawal
at book value less surrender charges of 5% or more. At December 31, 1996, $2.7
million or 72.2% of AILIC's annuity reserves, excluding Separate Accounts, were
subject to discretionary withdrawal without adjustment, and $1.0 million or
27.8% were subject to discretionary withdrawal at book value less surrender
charges of 5% or more.
H. SEPARATE ACCOUNT
----------------
The Company writes individual and group non-guaranteed variable annuities. In
1997, the General Account had net transfers to the Separate Accounts of
$29,300,569, consisting of transfers to the Separate Accounts of $32,220,256 and
transfers from the Separate Accounts of $2,919,687, including contingent
deferred sales charges of $1,972,518. In 1996, the General Account had net
transfers to the Separate Account of $3,090,948 consisting of transfers to the
Separate Account of $3,337,987 and transfers from the Separate Account of
$247,039, including contingent deferred sales charges of $198,353.
All Separate Account reserves are non-guaranteed and subject to discretionary
withdrawal at market value. In 1996, funds in the Separate Account had a total
market value of $3,389,109 and amortized cost of $3,335,765, resulting in net
unrealized gains of $53,344, consisting of gross unrealized gains of $57,307 and
gross unrealized losses of $3,963. In 1997, funds in the Separate Accounts had a
total market value of $37,248,224 and amortized cost of $35,412,702, resulting
in net unrealized gains of $1,835,522, consisting of gross unrealized gains of
$2,047,508 and gross unrealized losses of $211,986.
10
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997 AND 1996
I. VARIANCES FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
-------------------------------------------------------
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the National Association of
Insurance Commissioners ("NAIC") and the Ohio Insurance Department, which vary
in some respects from generally accepted accounting principles ("GAAP"). The
following table summarizes the differences between net income and surplus as
determined in accordance with statutory accounting practices and GAAP for the
years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
NET INCOME CAPITAL AND SURPLUS
----------------------------- -----------------------------
1997 1996 1997 1996
------------ -------- ------------ -----------
<S> <C> <C> <C> <C>
As reported on a statutory basis $(1,438,153) $ 1,983 $19,895,090 $21,336,332
Commissions capitalized to DAC 3,722,847 257,666 3,722,847 257,666
General expenses capitalized to DAC 2,046,618 569,139 2,046,618 569,139
Taxes, licenses and fees capitalized to DAC 127,900 51,587 127,900 51,587
Amortization of DAC (169,695) (51,969) (169,695) (51,969)
Capital gains transferred to IMR, net of tax (5,988) (17,428) (5,988) (17,428)
Amortization of IMR, net of tax 2,195 814 2,195 814
Contingent deferred sales charge (3,693,287) (262,297) (3,693,287) (262,297)
Federal income taxes (226,161) (190,841) (226,161) (190,841)
Deferred gain on intercompany sales (17,011) - (17,011) -
Unrealized gain (loss) adjustment - - 578,256 (352,697)
AVR adjustment - - 67,639 55,589
Non-admitted assets adjustment - - 31,801 85,271
Prior year tax adjustment - - (96,351) (360,228)
Prior year stat to GAAP cumulative adjustments - - (176,526) 38,868
----------------- ------------- ------------- --------------
Total GAAP adjustments 1,787,418 356,671 2,192,237 (176,526)
------------ -------- ------------ -------------
GAAP basis $ 349,265 $358,654 $22,087,327 $21,159,806
============ ======== =========== ===========
</TABLE>
11
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Parts A or B of
this Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance Company authorizing establishment of Annuity
Investors Variable Account A.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company and AAG Securities, INC.2/
(b) Form of Selling Agreement between Annuity Investors
Life Insurance Company, AAG Securities, Inc. and
another Broker-Dealer.2/
(4) (a) Individual Contract Forms.
(i) Form of Qualified Individual Flexible Premium
Deferred Annuity Contract.2/
(ii) Form of Non-Qualified Individual Contract.2/
(b) Endorsements to Individual Contracts.
(i) Form of Loan Endorsement to Qualified
Individual Contract.2/
(ii) Form of Tax Sheltered Annuity Endorsement to
Qualified Individual Contract.2/
(iii) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Qualified
Individual Contract.2/
(iv) Form of Employer Plan Endorsement to
Qualified Individual Contract.2/
(v) Form of Individual Retirement Annuity
Endorsement to Qualified Individual
Contract.2/
(vi) Form of Texas Optional Retirement Program
Endorsement to Qualified Individual
Contract.2/
<PAGE>
(vii) Form of Long-Tevm Care Waiver Rider to
Individual Contract.3/
(viii) Form of SIMPLE IRA Endorsement to Qualified
Individual Contract.3/
(ix) Revised form of IRA Endorsement to Qualified
Individual Contract (filed herewith).
(x) Form of Roth IRA Endorsement to Qualified
Individual Contract (filed herewith).
(xi) Revised form of SIMPLE IRA Endorsement to
Qualified Individual Contract (filed
herewith).
(xii) Revised form of Tax Sheltered Annuity
Endorsement to Qualified Individual Contract
(filed herewith).
(xiii) Revised form of Qualified Pension, Profit
Sharing and Annuity Plan Endorsement to
Qualified Individual Contract (filed
herewith).
(xiv) Revised form of Employer Plan Endorsement to
Qualified Individual Contract (filed
herewith).
(xv) Form of Governmental Section 457 Plan
Endorsement to Qualified Individual Contract
(filed herewith).
(5) (a) Form of Application for Individual Flexible Premium
Deferred Annuity Contract.3/
(6) (a) Articles of Incorporation of Annuity Investors Life
Insurance Company.1/
(i) Amendment to Articles of Incorporation,
adopted April 9, 1996 and approved by
Secretary of State of State of Ohio on July
11, 1996.3/
(ii) Amendment to Articles of Incorporation,
adopted August 9, 1996 and approved by
Secretary of State of State of Ohio on
December 23, 1996.3/
(b) Code of Regulations of Annuity Investors Life Insurance
Company.1/
(7) Not applicable.
(8) (a) Participation Agreement between Annuity Investors Life
Insurance Company and Dreyfus Variable Investment
Fund.1/
(b) Participation Agreement between Annuity Investors Life
Insurance Company and Dreyfus Stock Index Fund.1/
-2-
<PAGE>
(c) Participation Agreement between Annuity Investors Life
Insurance Company and The Dreyfus Socially Responsible
Fund, Inc.1/
(d) Participation Agreement between Annuity Investors Life
Insurance Company and Janus Aspen Series.2/
(e) Amended and Restated Participation Agreement between
Annuity Investors Life Insurance Company and Merrill
Lynch Variable Series Funds, Inc.2/
(f) Agreement between Annuity Investors Life Insurance
Company and Merrill Lynch Asset Management, L.P.2/
(g) Service Agreement between Annuity Investors Life
Insurance Company and American Annuity Group, Inc.1/
(h) Agreement between AAG Securities, Inc. and AAG
Insurance Agency, Inc.1/
(i) Investment Service Agreement between Annuity Investors
Life Insurance Company and American Annuity Group,
Inc.1/
(j) Participation Agreement between Annuity Investors Life
Insurance Company and Morgan Stanley Universal Funds,
Inc.3/
(k) Participation Agreement between Annuity Investors Life
Insurance Company and Strong Special Fund II, Inc.3/
(l) Participation Agreement between Annuity Investors Life
Insurance Company and PBHG Insurance Series Fund,
Inc.3/
(m) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
Company.3/
(n) Service Agreement between Annuity Investors Life
Insurance Company and Janus Capital Corporation.3/
(o) Service Agreement between Annuity Investors Life
Insurance Company and Strong Capital Management, Inc.
(filed herewith).
(p) Service Agreement between Annuity Investors Life
Insurance Company and Pilgrim Baxter & Associates, Ltd.
(filed herewith).
(q) Service Agreement between Annuity Investors Life
Insurance Company and Morgan Stanley Asset Management,
Inc. (filed herewith).
(9) Opinion and Consent of Counsel.1/
(10) Consent of Independent Auditors (filed herewith).
(11) No financial statements are omitted from Item 23.
-3-
<PAGE>
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations.3/
(14) Financial Data Schedule (filed herewith).
===============================================================================
1/ Filed with Form N-4 on December 27, 1995.
2/ Filed with Pre-Effective Amendment No. 1 on July 26, 1996.
3/ Filed with Post-Effective Amendment No. 1 on April 29, 1997.
-4-
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF ANNUITY INVESTORS LIFE INSURANCE COMPANY
PRINCIPAL POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH THE COMPANY
---- ---------------- --------------------
Robert Allen Adams (1) President, Director
Stephen Craig Lindner (1) Director
William Jack Maney, II (1) Assistant Treasurer and
Director
James Michael Mortensen (1) Executive Vice President,
Assistant Secretary and
Director
Mark Francis Muething (1) Senior Vice President, Secretary,
General Counsel and Director
Jeffrey Scott Tate (1) Director
Thomas Kevin Liguzinski (1) Senior Vice President
Charles Kent McManus (1) Senior Vice President
Robert Eugene Allen (1) Vice President and Treasurer
Arthur Ronald Greene, III (1) Vice President
Betty Marie Kasprowicz (1) Vice President and Assistant
Secretary
Michael Joseph O'Connor (1) Senior Vice President
Lynn Edward Laswell (1) Vice President and Controller
Vincent J. Graneri (1) Vice President and Chief Actuary
David Shipley (1) Vice President
Thomas E. Mischell (1) Assistant Treasurer
(1) P.O. Box 5423, Cincinnati, Ohio 45201-5423.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The Depositor, Annuity Investors Life Insurance Company(R), is a wholly
owned subsidiary of Great American(R) Life Insurance Company, which is a
wholly owned subsidiary of American Annuity GroupSM, Inc. The Registrant,
Annuity Investors(R) Separate Account A, is a segregated asset account of
Annuity Investors Life Insurance Company. The following chart shows the
affiliations among Annuity Investors Life Insurance Company(R) and its
parent, subsidiary and affiliated entities.
-5-
<PAGE>
<TABLE>
<CAPTION>
% OF STOCK
OWNED(1) BY
AMERICAN FINANCIAL GROUP, INC. DATE IMMEDIATE NATURE
| STATE OF OF INCOR- PARENT OF
DOMICILE PORATION COMPANY BUSINESS
-------- -------- ------- --------
|
<S> <C> <C> <C> <C>
|_AFC Holding Company Ohio 12/09/94 100 Holding Company
|_AHH Holdings, Inc. Florida 12/27/95 49 Holding Company
| |_Columbia Financial Company Florida 10/26/93 100 Real Estate Holding Company
| |_American Heritage Holding Corporation Delaware 11/02/94 100 Home Builder
| | |_Heritage Homes Realty, Inc. Florida 07/20/93 100 Home Sales
| | |_Southeast Title, Inc. Florida 05/16/95 100 Title Company
| |_Heritage Home Finance Corporation Florida 02/10/94 100 Finance Company
|_American Financial Capital Trust I Delaware 09/14/96 100 Statutory Business Trust
|_American Financial Corporation Ohio 11/15/55 100 Holding Company
| |_AFC Acquisition Corp. Ohio 06/26/97 100 Transitory Holding Company
| |_AFC Coal Properties, Inc. Ohio 12/18/96 100 Real Estate Holding Company
| |_American Barge & Towing Company Ohio 03/25/82 100 Inactive
| | |_Spartan Transportation Corporation Ohio 7/19/1983 100 Mgmt-River Transportation
Equipment
| |_American Financial Corporation Ohio 08/27/63 100 Inactive
| |_American Money Management Corporation Ohio 03/01/73 100 Investment Management
| |_American Money Management International, N.V Netherland 05/10/85 100 Securities Management
| | Antilles
| |_American Premier Underwriters, Inc. Pennsylvania 1846 100(2) Diversified
| | |_The Ann Arbor Railroad Company Michigan 09/21/1895 99 Inactive
| | |_The Associates of the Jersey Company New Jersey 11/10/1804 100 Inactive
| | |_Cal Coal, Inc. Illinois 05/30/79 100 Inactive
| | |_Canadian Lease Insurance Services, Ltd. Washington 02/28/91 100 Insurance Agency
| | |_The Indianapolis Union Railway Company Indiana 11/19/1872 100 Inactive
| | |_Leased Equipment Reinsurance Company, Ltd. Bermuda 09/18/89 100 Reinsurance Company
| | |_Lease Insurance Agency Services Corporation Washington 12/27/83 100 Insurance Agency
| | |_Lease Insurance Services, Ltd. Washington 05/14/90 100 Insurance Agency
| | |_Lehigh Valley Railroad Company Pennsylvania 04/21/1846 100 Inactive
| | |_The New York and Harlem Railroad Company New York 04/25/1831 97 Inactive
| | |_The Owasco River Railway, Inc. New York 06/02/1881 100 Inactive
| | |_PCC Real Estate, Inc. New York 12/15/86 100 Holding Company
| | | |_PCC Chicago Realty Corp. New York 12/23/86 100 Real Estate Developer
| | | |_PCC Gun Hill Realty Corp. New York 12/18/85 100 Real Estate Developer
| | | |_PCC Michigan Realty, Inc. Michigan 11/09/87 100 Real Estate Developer
| | | |_PCC Scarsdale Realty Corp. New York 06/01/86 100 Real Estate Developer
| | | | |_Scarsdale Depot Associates, L.P. Delaware 05/05/89 80 Real Estate Developer
| | |_Penn Central Energy Management Company Delaware 05/11/87 100 Energy Operations Manager
-6-
<PAGE>
| | |_Pennsylvania Company Delaware 12/05/58 100 Holding Company
| | | |_Atlanta Casualty Company Illinois 06/13/72 100(2) Property/Casualty Insurance
| | | | |_American Premier Insurance Company Indiana 11/30/89 100 Property/Casualty Insurance
| | | | |_Atlanta Specialty Insurance Company Ohio 02/06/74 100 Property/Casualty Insurance
| | | | |_Atlanta Casualty Group, Inc. Georgia 04/01/77 100 Insurance Agency
| | | | | |_Atlanta Casualty General Agency, Inc. Texas 03/15/61 100 Managing General Agency
| | | | | |_Atlanta Insurance Brokers, Inc. Georgia 02/06/71 100 Insurance Agency
| | | | | |_Treaty House, Ltd. (d/b/a Mr. Budget) Nevada 11/02/71 100 Insurance Premium Finance
-7-
<PAGE>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK
|_AFC Holding Company OWNED(1) BY
|_American Financial Corporation DATE IMMEDIATE NATURE
| |_American Premier Underwriters, Inc. STATE OF OF INCOR- PARENT OF
| | |_Pennsylvania Company DOMICILE PORATION COMPANY BUSINESS
-------- -------- ------- ---------
|
| | | | |_Penn Central U.K. Limited United Kingdom 10/28/92 100 Insurance Holding Company
| | | | | |_Insurance (GB) Limited United Kingdom 05/13/92 100 Property/Casualty Insurance
| | | |_Delbay Corporation Delaware 12/27/62 100 Inactive
| | | |_Great Southwest Corporation Delaware 10/25/78 100 Real Estate Developer
| | | | |_World Houston, Inc. Delaware 05/30/74 100 Real Estate Developer
| | | |_Hangar Acquisition Corp. Ohio 10/06/95 100 Aircraft Investment
| | | |_Infinity Insurance Company Indiana 07/09/55 100 Property/Casualty Insurance
| | | | |_Infinity Agency of Texas, Inc. Texas 07/15/92 100 Managing General Agency
| | | | |_The Infinity Group, Inc. Indiana 07/22/92 100 Services Provider
| | | | |_Infinity National Insurance Company Indiana 08/05/92 100 Property/Casualty Insurance
| | | | |_Infinity Select Insurance Company Indiana 06/11/91 100 Property/Casualty Insurance
| | | | |_Leader National Insurance Company Ohio 03/20/63 100 Property/Casualty Insurance
| | | | | |_Budget Insurance Premiums, Inc. Ohio 02/14/64 100 Premium Finance Company
| | | | | |_Leader National Agency, Inc. Ohio 04/05-63 100 Brokering Agent
| | | | | |_Leader National Agency of Texas, Inc. Texas 01/25/94 100 Managing General Agency
| | | | | |_Leader National Insurance Agency Arizona 12/05/73 100 Brokering Agent
| | | | | | | _of Arizona
| | | | | |_Leader Preferred Insurance Company Ohio 11/07/94 100 Property/Casualty Insurance
| | | | | |_Leader Specialty Insurance Company Indiana 03/10/94 100 Property/Casualty Insurance
| | | | | |_TALON Group, Inc. Ohio 12/12/97 100 Services Provider
| | | |_PCC Technical Industries, Inc. California 03/07/55 100 Holding Company
| | | | |_ESC, Inc. California 11/02/62 100 Connector Accessories
| | | | |_Marathon Manufacturing Companies, Inc. Delaware 11/18/83 100 Holding Company
| | | | | |_Marathon Manufacturing Company Delaware 12/07/79 100 Inactive
| | | | |_PCC Maryland Realty Corp. Maryland 08/18/93 100 Real Estate Holding Company
| | | | |_Penn Camarillo Realty Corp. California 11/24/92 100 Real Estate Holding Company
| | | |_Penn Towers, Inc. Pennsylvania 08/01/58 100 Inactive
| | | |_Republic Indemnity Company of America California 12/05/72 100 Workers' Compensation Insurance
| | | | |_Republic Indemnity Company of California California 10/13/82 100 Workers' Compensation Insurance
| | | | |_Republic Indemnity Medical Management, Inc. California 03/25/96 100 Medical Bill Review
| | | | |_Timberglen Limited United Kingdom 10/28/92 100 Investments
| | | |_Risico Management Corporation Delaware 01/10/89 100 Risk Management
| | | |_Windsor Insurance Company Indiana 11/05/87 100(2) Property/Casualty Insurance
| | | | |_American Deposit Insurance Company Oklahoma 12/28/66 100 Property/Casualty Insurance
-8-
<PAGE>
| | | | | |_Granite Finance Co., Inc. Texas 11/09/65 100 Premium Financing
| | | | |_Coventry Insurance Company Ohio 09/05/89 100 Property/Casualty Insurance
| | | | |_El Aguila Compania de Seguros, S.A. de C.V. Mexico 11/24/94 100(2) Property/Casualty Insurance
| | | | |_Moore Group Inc. Georgia 12/19/62 100 Insurance Holding Company/Agency
| | | | | |_Casualty Underwriters, Inc. Georgia 10/01/54 51 Insurance Agency
| | | | | |_Dudley L. Moore Insurance, Inc. Louisiana 03/30/78 beneficial Insurance Agency
interest
| | | | | |_Hallmark General Insurance Agency, Inc. Oklahoma 06/16/72 beneficial Insurance Agency
interest
| | | | | |_Windsor Group, Inc. Georgia 05/23/91 100 Insurance Holding Company
| | | | |_Regal Insurance Company Indiana 11/05/87 100 Property/Casualty Insurance
| | | | |_Texas Windsor Group, Inc. Texas 06/23/88 100 Insurance Agency
-9-
<PAGE>
% OF STOCK
AMERICAN FINANCIAL GROUP, INC. OWNED(1) BY
| |_AFC Holding Company DATE IMMEDIATE NATURE
| |_American Financial Corporation STATE OF OF INCOR- PARENT OF
| | |_American Premier Underwriters, Inc. DOMICILE PORATION COMPANY BUSINESS
| -------- -------- ------- --------
|
|-
| | |_Pennsylvania-Reading Seashore Lines New Jersey 06/14/01 66.67 Inactive
| | |_Pittsburgh and Cross Creek Railroad Company Pennsylvania 08/14/70 83 Inactive
| | |_Terminal Realty Penn Co. District of 09/23/68 100 Inactive
| | |_United Railroad Corp. Delaware 11/25/81 100 Inactive
| | | |_Detroit Manufacturers Railroad Company Michigan 01/30/02 82 Inactive
| | |_Waynesburg Southern Railroad Company Pennsylvania 09/01/66 100 Inactive
| |_Chiquita Brands International, Inc. New Jersey 03/30/99 40.41(2) Production/Processing/
| | | | | |_(and subsidiaries) Distribution of
Food Products
| |_Dixie Terminal Corporation Ohio 04/23/70 100 Commercial Leasing
| |_Fairmont Holdings, Inc. Ohio 12/15/83 100 Holding Company
| |_FWC Corporation Ohio 03/16/83 100 Financial Services
| |_Great American Holding Corporation Ohio 11/30/77 100 Holding Company
| | |_Great American Insurance Company Ohio 3/7/1872 100 Property/Casualty Insurance
| | | |_Agricultural Excess and Surplus Delaware 02/28/79 100 Excess & Surplus Lines Insurance
| | | | | |_Insurance Company
| | | |_Agricultural Insurance Company Ohio 03/23/05 100 Property/Casualty Insurance
| | | |_American Alliance Insurance Company Arizona 09/11/45 100 Property/Casualty Insurance
| | | |_American Annuity Group, Inc. Delaware 05/15/87 81.13(2) Holding Company
| | | | |_AAG Holding Company, Inc. Ohio 09/11/96 100 Holding Company
| | | | | |_American Annuity Group Capital Trust I Delaware 09/13/96 100 Financing Vehicle
| | | | | |_American Annuity Group Capital Trust II Delaware 03/11/97 100 Financing Vehicle
| | | | | |_American Annuity Group Capital Trust III Delaware 05/27/97 100 Financing Vehicle
| | | | | |_Great American Life Insurance Company Ohio 12/15/59 100 Life Insurance Company
| | | | | | |_Annuity Investors Life Insurance Company Ohio 11/31/81 100 Life Insurance Company
| | | | | | |_Assured Security Life Insurance South Dakota 05/12/78 100 Life Insurance Company
| | | | | | || |_Company, Inc.
| | | | | | |_CHATBAR, Inc. Massachusetts 11/02/93 100 Hotel Operator
| | | | | | |_Driskill Holding, Inc. Texas 06/07/95 beneficial Hotel Management
interest
| | | | | | |_First Benefit Insurance Company Arizona 01/03/95 100 Life Insurance Company
| | | | | | |_GALIC Brothers, Inc. Ohio 11/12/93 80 Real Estate Management
| | | | | | |_Great American Life Assurance Company Ohio 08/10/67 100 Life Insurance Company
| | | | | | |_Loyal American Life Insurance Company Alabama 05/18/55 100 Life Insurance Company
| | | | | | | |_ADL Financial Services, Inc. North Carolina 09/10/70 100 Marketing Services
| | | | | | | |_Purity Financial Corporation Florida 12/21/91 100 Marketing Services
-10-
<PAGE>
| | | | | | |_Prairie National Life Insurance Company South Dakota 02/11/76 100 Life Insurance Company
| | | | | | | |_American Memorial Life Insurance Company South Dakota 03/18/59 100 Life Insurance Company
| | | | | | | | |_Great Western Life Insurance Company Montana 05/01/80 100 Life Insurance Company
| | | | | | | | |_Rushmore National Life Insurance Company South Dakota 04/16/37 100 Life Insurance Company
| | | | |_AAG Insurance Agency, Inc. Kentucky 12/06/94 100 Life Insurance Agency
| | | | | |_AAG Insurance Agency of Massachusetts, Inc. Massachusetts 05/25/95 100 Insurance Agency
| | | | |_AAG Securities, Inc. Ohio 12/10/93 100 Broker-Dealer
| | | | |_American DataSource, Inc. Delaware 06/15/90 100 Pre-need Trust Services
| | | | |_American Memorial Marketing Services, Inc. Washington 06/19/80 100 Marketing Services
-11-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company % OF STOCK
| |_American Financial Corporation OWNED(1) BY
| | |_Great American Holding Corporation DATE IMMEDIATE NATURE
| | | |_Great American Insurance Company STATE OF OF INCOR- PARENT OF
| | | | |_American Annuity Group, Inc. DOMICILE PORATION COMPANY BUSINESS
-------- -------- ------- ---------
|-
| | | | |_CSW Management Services, Inc. Texas 06/27/85 100 Pre-need Trust Admin. Services
| | | | |_GALIC Disbursing Company Ohio 05/31/94 100 Payroll Servicer
| | | | |_General Accident Life Assurance Company Puerto Rico 07/01/64 99 Life Insurance Company
| | | | | |_of Puerto Rico, Inc.
| | | | |_Keyes-Graham Insurance Agency, Inc. Massachusetts 12/23/87 100 Insurance Agency
| | | | |_International Funeral Associates, Inc. Delaware 05/07/86 100 Coop. Buying Funeral Dirs.
| | | | |_Laurentian Credit Services Corporation Delaware 10/07/94 100 Inactive
| | | | |_Laurentian Marketing Services, Inc. Delaware 12/23/87 100 Marketing Services
| | | | |_Laurentian Securities Corporation Delaware 01/30/90 100 Inactive
| | | | |_Lifestyle Financial Investments, Inc. Ohio 12/29/93 100 Marketing Services
| | | | | |_Lifestyle Financial Investments Agency Ohio 03/07/94 beneficial Life Insurance Agency
| | | | | | |_of Ohio, Inc. interest
| | | | | |_Lifestyle Financial Investments of Indiana 02/24/94 100 Life Insurance Agency
| | | | | | |_Indiana, Inc.
| | | | | |_Lifestyle Financial Investments of Kentucky 10/03/94 100 Insurance Agency
| | | | | | |_Kentucky, Inc.
| | | | | |_Lifestyle Financial Investments of Minnesota 06/10/85 100 Insurance Agency
| | | | | | |_the Northwest, Inc.
| | | | | |_Lifestyle Financial Investments of North Carolina 07/13/94 100 Insurance Agency
| | | | | | |_the Southeast, Inc.
| | | | |_Loyal Marketing Services, Inc. Alabama 07/20/90 100 Marketing Services
| | | | |_New Energy Corporation Indiana 01/08/97 49 Holding Company
| | | | |_Purple Cross Insurance Agency, Inc. Delaware 11/07/89 100 Insurance Agency
| | | | |_Retirement Resource Group, Inc. Indiana 02/07/95 100 Insurance Agency
| | | | | |_RRG of Alabama, Inc. Alabama 09/22/95 100 Life Insurance Agency
| | | | | |_RRG of Ohio, Inc. Ohio 02/20/96 beneficial Insurance Agency
interest
| | | | | |_AAG Insurance Agency of Texas, Inc. Texas 06/02/95 100 Life Insurance Agency
| | | | |_SPELCO (UK) Ltd. United Kingdom 00/00/00 99 Inactive
| | | | |_SWTC, Inc. Delaware 00/00/00 100 Inactive
| | | | |_SWTC Hong Kong Ltd. Hong Kong 00/00/00 100 Inactive
| | | | |_Technomil Ltd. Delaware 00/00/00 100 Inactive
| | | |_American Custom Insurance Services, Ohio 07/27/83 100 Management Holding Company
| | | | |_Inc.
| | | | |_American Custom Insurance Services California 05/18/92 100 Insurance Agency & Brokerage
| | | | | |_California, Inc.
| | | | |_Eden Park Insurance Brokers, Inc. California 02/13/90 100 Wholesale Brokerage for Surplus
Lines
| | | | |_Professional Risk Brokers, Inc. Illinois 03/01/90 100 Insurance Agency
| | | | |_Professional Risk Brokers Insurance, Inc. Massachusetts 04/19/94 100 Surplus Lines Brokerage
| | | | |_Professional Risk Brokers of Connecticut, Inc. Connecticut 07/09/92 100 Insurance Agency & Brokerage
| | | | |_Professional Risk Brokers of Ohio, Inc. Ohio 12/17/86 100 Insurance Agency and Brokerage
-12-
<PAGE>
| | | |_American Custom Insurance Services Illinois, Inc. Illinois 07/08/92 100 Underwriting Office
| | | |_American Dynasty Surplus Lines Insurance Company Delaware 01/12/82 100 Excess & Surplus Lines Insurance
| | | |_American Empire Surplus Lines Insurance Company Delaware 07/15/77 100 Excess & Surplus Lines Insurance
| | | | |_American Empire Insurance Company Ohio 11/26/79 100 Property/Casualty Insurance
| | | | | |_American Signature Underwriters, Inc. Ohio 04/08/96 100 Insurance Agency
| | | | | |_Specialty Underwriters, Inc. Texas 05/19/76 100 Insurance Agency
| | | | |_Fidelity Excess and Surplus Insurance Company Ohio 06/30/87 100 Property/Casualty Insurance
-13-
<PAGE>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK
| |_AFC Holding Company OWNED(1) BY
| |_American Financial Corporation DATE IMMEDIATE NATURE
| | |_Great American Holding Corporation STATE OF OF INCOR- PARENT OF
| | | |_Great American Insurance Company DOMICILE PORATION COMPANY BUSINESS
|_ -------- -------- ------- ---------
| | | |_American Financial Enterprises, Inc. Connecticut 1871 100(2) Closed End Investment Company
| | | |_American Insurance Agency, Inc. Kentucky 07/27/67 100 Insurance Agency
| | | |_American National Fire Insurance Company New York 08/22/47 100 Property/Casualty Insurance
| | | |_American Special Risk, Inc. Illinois 12/29/81 100 Insurance Broker/Managing General
Agency
| | | | |_American Special Risk I of Arizona, Inc. Arizona 02/06/90 100 Inactive
| | | |_American Spirit Insurance Company Indiana 04/05/88 100 Property/Casualty Insurance
| | | |_Brothers Property Corporation Ohio 09/08/87 80 Real Estate Investment
| | | | |_Brothers Barrington Corporation Oklahoma 03/18/94 100 Real Estate Holding Corporation
| | | | |_Brothers Cincinnatian Corporation Ohio 01/25/94 100 Hotel Manager
| | | | |_Brothers Columbine Corporation Oklahoma 03/18/94 100 Real Estate Holding Corporation
| | | | |_Brothers Landing Corporation Louisiana 02/24/94 100 Real Estate Holding Corporation
| | | | |_Brothers Pennsylvanian Corporation Pennsylvania 12/23/94 100 Real Estate Holding Corporation
| | | | |_Brothers Port Richey Corporation Florida 12/06/93 100 Apartment Manager
| | | | |_Brothers Property Management Corporation Ohio 09/25/87 100 Real Estate Management
| | | | |_Brothers Railyard Corporation Texas 12/14/93 100 Apartment Manager
| | | |_Consolidated Underwriters, Inc. Texas 10/14/80 100 Inactive
| | | |_Contemporary American Insurance Company Illinois 04/16/96 100 Property/Casualty Insurance
| | | |_Crop Managers Insurance Agency, Inc. Kansas 08/09/89 100 Insurance Agency
| | | |_Dempsey & Siders Agency, Inc. Ohio 05/09/56 100 Insurance Agency
| | | |_Eagle American Insurance Company Ohio 07/01/87 100 Property/Casualty Insurance
| | | |_Eden Park Insurance Company Indiana 01/08/90 100 Special Risk Surplus Lines
| | | |_FCIA Management Company, Inc. New York 09/17/91 79 Servicing Agent
| | | |_The Gains Group, Inc. Ohio 01/26/82 100 Marketing of Advertising
| | | |_Great American Lloyd's, Inc. Texas 08/02/83 100 Attorney-in-Fact - Texas Lloyd's
Company
| | | |_Great American Lloyd's Insurance Company Texas 10/09/79 beneficial Lloyd's Plan Insurer
interest
| | | |_Great American Management Services, Inc. Ohio 12/05/74 100 Data Processing and Equipment
Leasing
| | | | |_American Payroll Services, Inc. Ohio 02/20/87 100 Payroll Services
| | | |_Great American Re Inc. Delaware 05/14/71 100 Reinsurance Intermediary
| | | |_Great American Risk Management, Inc. Ohio 04/21/80 100 Insurance Risk Management
| | | |_Great Texas County Mutual Insurance Company Texas 04/29/54 beneficial Property/Casualty Insurance
interest
| | | |_Grizzly Golf Center, Inc. Ohio 11/08/93 100 Operate Golf Courses
| | | |_Homestead Snacks Inc. California 03/02/79 100(2) Meat Snack Distribution
-14-
<PAGE>
| | | | |_Giant Snacks, Inc. Delaware 07/06/89 100 Meat Snack Distribution
| | | |_Key Largo Group, Inc. Florida 07/28/81 100 Land Developer & Resort Operator
| | | | |_Key Largo Group Utility Company Florida 11/26/84 100 Water & Sewer Utility
| | | |_Mid-Continent Casualty Company Oklahoma 02/26/47 100 Property/Casualty Insurance
| | | | |_Mid-Continent Insurance Company Oklahoma 08/13/92 100 Property/Casualty Insurance
| | | | |_Oklahoma Surety Company Oklahoma 08/05/68 100 Property/Casualty Insurance
| | | |_National Interstate Corporation Ohio 01/26/89 52.15 Holding Company
-15-
<PAGE>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK
| |_AFC Holding Company OWNED(1) BY
| |_American Financial Corporation DATE IMMEDIATE NATURE
| | |_Great American Holding Corporation STATE OF OF INCOR- PARENT OF
| | | |_Great American Insurance Company DOMICILE PORATION COMPANY BUSINESS
-------- -------- ------- --------
|_
| | | | |_American Highways Insurance Agency California 05/05/94 100 Insurance Agency
| | | | |_Explorer Insurance Agency, Inc. Ohio 07/17/97 beneficial Insurance Agency
interest
| | | | |_National Interstate Insurance Agency Texas 06/07/89 beneficial Insurance Agency
interest
| | | | | |_of Texas, Inc.
| | | | |_National Interstate Insurance Agency, Inc. Ohio 02/13/89 100 Insurance Agency
| | | | |_National Interstate Insurance Company Ohio 02/10/89 100 Property/Casualty Insurance
| | | | |_Safety, Claims & Litigation Services, Inc. Pennsylvania 06/23/95 100 Claims Third Party Administrator
| | | |_OBGC Corporation Florida 11/23/77 80 Real Estate Development
| | | |_Pointe Apartments, Inc. Minnesota 06/24/93 100 Real Estate Holding Corporation
| | | |_Seven Hills Insurance Agency, Inc. Ohio 12/22/97 100 Insurance Agency
| | | |_Seven Hills Insurance Company New York 06/30/32 100 Property/Casualty Reinsurance
| | | |_Stonewall Insurance Company Alabama 02/1866 100 Property/Casualty Insurance
| | | |_Stone Mountain Professional Liability Georgia 08/07/95 100 Insurance Agency
| | | | | |_Agency, Inc.
| | | |_Tamarack American, Inc. Delaware 06/10/86 100 Management Holding Company
| | | |_Transport Insurance Company Ohio 05/25/76 100 Property/Casualty Insurance
| | | | |_American Commonwealth Development Company Texas 07/23/63 100 Real Estate Development
| | | | | |_ACDC Holdings Corporation Texas 05/04/81 100 Real Estate Development
| | | | |_Instech Corporation Texas 09/02/75 100 Claim & Claim Adjustment Services
| | | | |_TICO Insurance Company Ohio 06/03/80 100 Property/Casualty Insurance
| | | | |_Transport Managing General Agency, Inc. Texas 05/19/89 100 Managing General Agency
| | | | |_Transport Insurance Agency, Inc. Texas 08/21/89 beneficial Insurance Agency
interest
| | | |_Transport Underwriters Association California 05/11/45 100 Holding Company/Agency
| | | |_Utility Insurance Services, Inc. Texas 04/06/95 100(2) Texas Local Recording Agency
| | | |_Utility Management Services, Inc. Texas 09/07/65 100 Texas Managing General Agency
|_One East Fourth, Inc. Ohio 02/03/64 100 Commercial Leasing
|_PCC 38 Corp. Illinois 12/23/96 100 Real Estate Holding Company
|_Pioneer Carpet Mills, Inc. Ohio 04/29/76 100 Carpet Manufacturing
|_TEJ Holdings, Inc. Ohio 12/04/84 100 Real Estate Holdings
|_Three East Fourth, Inc. Ohio 08/10/66 100 Commercial Leasing
</TABLE>
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other affiliated company(ies).
(3) Convertible Preferred Stock.
-16-
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1998, there were 2,781 Contract Owners, of which 2,657
were qualified and 124 were non-qualified.
ITEM 28. INDEMNIFICATION
(a) The Code of Regulations of Annuity Investors Life Insurance Company(R)
provides in Article V as follows:
The Corporations shall, to the full extent permitted by the
General Corporation Law of Ohio, indemnify any person who is
or was a director or officer of the Corporation and whom it
may indemnify pursuant thereto. The Corporation may, within
the sole discretion of the Board of Directors, indemnify in
whole or in part any other persons whom it may indemnify
pursuant thereto.
Insofar as indemnification for liability arising under the Securities
Act of 1933 ("1933 Act") may be permitted to directors, officers and
controlling persons of the Depositor pursuant to the foregoing
provisions, or otherwise, the Depositor has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Depositor of
expenses incurred or paid by the director, officer or controlling
person of the Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Depositor will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
(b) The directors and officers of Annuity Investors Life Insurance
Company are covered under a Directors and Officers Reimbursement
Policy. Under the Reimbursement Policy, directors and officers are
indemnified for loss arising from any covered claim by reason of any
Wrongful Act in their capacities as directors or officers, except to
the extent the Company has indemnified them. In general, the term
"loss" means any amount which the directors or officers are legally
obligated to pay for a claim for Wrongful Acts. In general, the term
"Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement, omission or act by a director or officer while
acting individually or collectively in their capacity as such claimed
against them solely by reason of their being directors and officers.
The limit of liability under the program is $20,000,000 for the policy
year ending September 1, 1999. The primary policy under the program is
with National Union Fire Insurance Company of Pittsburgh, PA. in the
name of American Premier Underwriters, Inc.
-17-
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
AAG Securities, Inc. is the underwriter and distributor of the Contracts as
defined in the Investment Company Act of 1940 ("1940 Act"). It is also the
underwriter and distributor of Annuity Investors(R) Variable Account B.
(a) AAG Securities, Inc. does not act as a principal underwriter, depositor,
sponsor or investment adviser for any investment company other than Annuity
Investors Variable Account A and Annuity Investors Variable Account B.
(b) Directors and Officers of AAG Securities, Inc.
NAME AND PRINCIPAL POSITION WITH
BUSINESS ADDRESS AAG SECURITIES, INC.
Thomas Kevin Liguzinski (1) Chief Executive Officer and Director
Charles Kent McManus (1) Senior Vice President
Mark Francis Muething (1) Vice President, Secretary and
Director
William Jack Maney, II (1) Director
Jeffrey Scott Tate (1) Director
James Lee Henderson (1) President
Andrew Conrad Bambeck, III (1) Vice President
William Claire Bair, Jr. (1) Treasurer
Thomas E. Mischell (1) Assistant Treasurer
Fred J. Runk (1) Assistant Treasurer
(1) 250 East Fifth Street, Cincinnati, Ohio 45202
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by Lynn E. Laswell,
Vice President and Controller of the Company, at the Administrative
Office.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as necessary to ensure
that the audited financial statements in the registration statement are
-18-
<PAGE>
never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of
any application to purchase a Contract offered by the Prospectus, a
space that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Prospectus and Statement of
Additional Information and any financial statements required to be made
available under this Form promptly upon written or oral request to the
Company at the address or phone number listed in the Prospectus.
(d) The Company represents that the fees and charges deducted under the
Contracts, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by
the Company.
-19-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has caused this
Post-Effective Amendment No. 2 to its Registration Statement to be
signed on its behalf by the undersigned in the City of Cincinnati,
State of Ohio on the 6th day of April, 1998.
ANNUITY INVESTORS VARIABLE ACCOUNT A
(REGISTRANT)
/s/ Robert Allen Adams
By:__________________________________
Robert Allen Adams
Chairman of the Board, President
and Director, Annuity Investors
Life Insurance Company
ANNUITY INVESTORS LIFE INSURANCE COMPANY
(DEPOSITOR)
/s/ Robert Allen Adams
By:__________________________________
Robert Allen Adams
Chairman of the Board, President
and Director
As required by the Securities Act of 1933, this Post-Effective
Amendment No. 2 has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Robert Allen Adams
___________________________ April 6, 1998
Robert Allen Adams Principal Executive
Officer, Director
/s/ Robert Eugene Allen
___________________________ April 6, 1998
Robert Eugene Allen Principal Financial
Officer
/s/ Lynn E. Laswell
___________________________ April 6, 1998
Lynn Edward Laswell Principal Accounting
Officer
-20-
<PAGE>
/s/ Stephen Craig Lindner
___________________________ April 6, 1998
Stephen Craig Lindner Director
/s/ William J. Maney, II
___________________________ April 6, 1998
William Jack Maney, II Director
/s/ James M. Mortensen
___________________________ April 6, 1998
James Michael Mortensen Director
/s/ Mark F. Muething
___________________________ April 6, 1998
Mark Francis Muething Director
/s/ Jeffrey Scott Tate
___________________________ April 6, 1998
Jeffrey Scott Tate Director
-21-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C> <C>
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance Company authorizing establishment of Annuity Investors
Variable Account A.1/
(3)(a) Distribution Agreement between Annuity Investors Life Insurance
Company and AAG Securities, Inc.1/
(3)(b) Form of Selling Agreement between Annuity Investors Life Insurance
Company, AAG Securities, Inc. and another Broker-Dealer.2/
(4)(a)(i) Form of Qualified Individual Flexible Premium Deferred Annuity
Contract.2/
(4)(a)(ii) Form of Non-Qualified Individual Contract.2/
(4)(b)(i) Form of Loan Endorsement to Individual Contract.2/
(4)(b)(ii) Form of Tax Sheltered Annuity Endorsement to Individual Contract.2/
(4)(b)(iii) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Qualified Individual Contract.2/
(4)(b)(iv) Form of Employer Plan Endorsement to Individual Contract.2/
(4)(b)(v) Form of Individual Retirement Annuity Endorsement to Individual
Contract.2/
(4)(b)(vi) Form of Texas Optional Retirement Program Endorsement to Individual
Contract.2/
(4)(b)(vii) Form of Long-Term Care Waiver Rider to Individual Contract.3/
(4)(b)(viii) Form of SIMPLE IRA Endorsement.3/
(4)(b)(ix) Revised form of IRA Endorsement to Qualified Individual Contract
(filed herewith).
(4)(b)(x) Form of Roth IRA Endorsement to Qualified
Individual Contract (filed herewith).
(4)(b)(xi) Revised form of SIMPLE IRA Endorsement to Qualified Individual
Contract (filed herewith).
(4)(b)(xii) Revised form of Tax Sheltered Annuity Endorsement to Qualified
Individual Contract (filed herewith).
(4)(b)(xiii) Revised form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Qualified Individual Contract (filed herewith).
(4)(b)(xiv) Revised form of Employer Plan Endorsement to Qualified Individual
Contract (filed herewith).
(4)(b)(xv) Form of Governmental Section 457 Plan Endorsement to Qualified
Individual Contract (filed herewith).
(5)(a) Form of Application for Individual Flexible Premium Deferred
Annuity Contract.3/
-22-
<PAGE>
(6)(a) Articles of Incorporation of Annuity Investors Life Insurance
Company.1/
(6)(a)(i) Amendment to Articles of Incorporation, adopted April 9, 1996 and
approved by Secretary of State of State of Ohio on July 11, 19963.
(6)(a)(ii) Amendment to Articles of Incorporation, adopted August 9, 1996 and
approved by Secretary of State of State of Ohio on December 3,
1996.3/
(6)(b) Code of Regulations of Annuity Investors Life Insurance Company.1/
(8)(a) Participation Agreement between Annuity Investors Life Insurance
Company and Dreyfus Variable Investment Fund.1/
(8)(b) Participation Agreement between Annuity Investors Life Insurance
Company and Dreyfus Stock Index Fund.1/
(8)(c) Participation Agreement between Annuity Investors Life Insurance
Company and The Dreyfus Socially Responsible Fund.1/
(8)(d) Participation Agreement between Annuity Investors Life Insurance
Company and Janus Aspen Series.2/
(8)(e) Amended and Restated Participation Agreement between Annuity
Investors Life Insurance Company and Merrill Lynch Variable Series
Funds, Inc.2/
(8)(f) Agreement between Annuity Investors Life Insurance Company and
Merrill Lynch Asset Management, L.P.2/
(8)(g) Service Agreement between Annuity Investors Life Insurance Company
and American Annuity Group, Inc.1/
(8)(h) Agreement between AAG Securities, Inc. and AAG Insurance Agency,
Inc.1/
(8)(i) Investment Service Agreement between Annuity Investors Life
Insurance Company and American Annuity Group, Inc.1/
(8)(j) Participation Agreement between Annuity Investors Life Insurance
Company and Morgan Stanley Universal Funds, Inc.3/
(8)(k) Participation agreement between Annuity Investors Life Insurance
Company and Strong Special Fund II, Inc.3/
(8)(l) Participation Agreement between Annuity Investors Life Insurance
Company and PBHG Insurance Series Fund, Inc.3/
(8)(m) Amended and Restated Agreement between The Dreyfus Corporation and
Annuity Investors Life Insurance Company.3/
(8)(n) Service Agreement between Annuity Investors Life Insurance Company
and Janus Capital Corporation.3/
-23-
<PAGE>
(8)(o) Service Agreement between Annuity Investors Life Insurance Company
and Strong Capital Management, Inc. (filed herewith).
(8)(p) Service Agreement between Annuity Investors Life Insurance Company
and Pilgrim Baxter & Associates, Ltd. (filed herewith)
(8)(q) Service Agreement between Annuity Investors Life Insurance Company
and Morgan Stanley Asset Management, Inc. (filed herewith).
(9) Opinion and Consent of Counsel.1/
(10) Consent of Independent Auditors (filed herewith).
(11) No financial statements are omitted from Item 23.
(12) Not applicable.
(13) Schedule for Computation of Performance Quotations3/.
(14) Financial Data Schedule (filed herewith).
</TABLE>
-----------------------
1/ Filed with Form N-4 on December 27, 1995.
2/ Filed with Pre-Effective Amendment No. 1 on July 26, 1996.
3/ Filed with Post-Effective Amendment No. 1 on April 29, 1997.
-24-
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 30,479,422
<INVESTMENTS-AT-VALUE> 32,418,073
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,418,073
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,912,267,411
<SHARES-COMMON-PRIOR> 581,598,317
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 636,406
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 203,128
<NET-INVESTMENT-INCOME> 433,278
<REALIZED-GAINS-CURRENT> 51,952
<APPREC-INCREASE-CURRENT> 1,885,308
<NET-CHANGE-FROM-OPS> 2,370,538
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,889,171,078
<NUMBER-OF-SHARES-REDEEMED> 1,558,501,984
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,330,669,094
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT 4(b)(ix)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to make it an Individual
Retirement Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to
receive contributions that qualify for deferred tax treatment under Internal
Revenue Code ("IRC") Section 408(b). It is restricted as required by federal
tax law. We may change the terms of this annuity contract or administer this
annuity contract at any time as needed to comply with that law. Any such
change may be applied retroactively.
EXCLUSIVE BENEFIT. This annuity contract is established for the
exclusive benefit of you and your beneficiaries. Your interest in this
annuity contract is nonforfeitable.
NON-PARTICIPATING. This annuity contract does not pay dividends or share in
our surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your
interest in this annuity contract. You cannot pledge it to secure a loan or
the performance of an obligation, or for any other purpose. The only
exceptions to these rules are:
1) an interest in this annuity contract may be transferred to a spouse
or former spouse under a divorce or separation instrument described
in IRC Section 71(b)(2)(A); and
2) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the annuity
contract during your lifetime.
CONTRIBUTIONS. This annuity contract does not require fixed premiums,
purchase payments, or other contributions, but we may decline to accept any
contribution of less than $50. This annuity contract will not lapse if you
do not make contributions. This annuity contract will remain subject to
cancellation under any involuntary surrender or termination provision of
this annuity contract; provided, however, that in no event shall any such
cancellation occur unless, at a minimum, contributions have not been made
for at least two full years and the value of this annuity contract
(increased by any guaranteed interest) would provide a benefit at age 70-1/2
of less than $20 a month under the regular settlement option.
<PAGE>
All contributions to us must be made in cash BY CHECK OR MONEY ORDER MADE
PAYABLE TO US. Total contributions made to this policy with respect to any
one tax year may not exceed $2,000, excluding any payment which is:
1) allowed as a rollover under IRC Section 402(c), 403(a)(4), 403(b)(8),
or 408(d)(3); or
2) made through a Simplified Employee Pension (SEP) program under IRC
Section 408(k).
This annuity contract will not accept contributions made by an employer
through a SIMPLE plan under IRC Section 408(p). This annuity contract will
not accept a transfer or rollover of any funds attributable to contributions
made by an employer through a SIMPLE plan until at least 2-years after the
date you first participated in that employer's SIMPLE plan.
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your annuity contract. This report will
include (i) the amount of all regular contributions received during or after
the calendar year which relate to such calendar year, (ii) the amount of all
rollover contributions received during such calendar year, (iii) the
contract value(s) determined as of the end of such calendar year, and (iv)
such other information as may be required under federal tax law.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the calendar
year in which you reach age 70-1/2. No later than the Required Beginning
Date:
1) your entire interest in this annuity contract must be paid in full;
or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for your life or as
joint and survivor payments to you and one other individual, or (ii)
over a period certain not to exceed your life expectancy or the joint
and last survivor expectancy of you and one other individual
designated to receive any remaining payments after your death, with
payments which do not increase or increase only as provided in Q&A
F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death
benefit requirements of IRC Section 401(a)(9)(G), and the regulations
thereunder, including the minimum distribution incidental benefit
requirements of Section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of you and your spouse shall be recalculated annually unless
periodic payments for a fixed period begin irrevocably (subject to
acceleration) by the Required Beginning Date. The life expectancy of any
other individual may not be recalculated. Any life expectancy which is not
being recalculated shall be determined using the attained age of the
individual in the calendar year in which you reach age 70-1/2 or in any
earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
-2-
<PAGE>
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of your interest in this annuity
contract must continue to be distributed at least as rapidly as under the
method of distribution being used prior to your death.
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in this annuity contract must be paid
either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract
to receive payments after your death with payments beginning by
December 31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive
your entire interest in this annuity contract, the starting date for
payments under clause (2) above may be delayed to a date not later than
December 31 of the calendar year in which you would have reached age 70-1/2.
Alternatively, this annuity contract will be treated as the IRA of such
spouse if he or she becomes Successor Owner of this contract, makes a
rollover from this contract, or fails to receive distributions from this
contract otherwise required by this provision. No contributions or rollover
to this annuity contract may be made after your death unless your spouse
becomes Successor Owner In any case, if a surviving spouse dies before
payments begin under this provision, then this provision shall apply upon
the death of your spouse as if your spouse was the owner of this annuity
contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after your death, the life expectancy of your surviving spouse
shall be recalculated annually unless periodic payments for a fixed period
begin irrevocably (subject to acceleration) by the date payments are
required to begin. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of such individual in the calendar year in
which payments are required to begin or in any earlier year in which
payments begin irrevocably, and any payment calculations for subsequent
years shall be based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy was
first determined.
This is part of your annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (4)(b)(x)
ROTH
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to make it a Roth Individual
Retirement Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions that qualify for special tax treatment under Internal Revenue
Code ("IRC") Section 408A. It is restricted as required by federal tax law.
We may change the terms of this annuity contract or administer this annuity
contract at any time as needed to comply with that law. Any such change may
be applied retroactively.
EXCLUSIVE BENEFIT. This annuity contract is established for the exclusive
benefit of you and your beneficiaries. Your interest in this annuity
contract is nonforfeitable.
NON-PARTICIPATING. This annuity contract does not pay dividends or share in
our surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest
in this annuity contract. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only exceptions
to these rules are:
1) an interest in this annuity contract may be transferred to a spouse or
former spouse under a divorce or separation instrument described in IRC
Section 71(b)(2)(A); and
2) you may designate another person to receive payments with you based on
joint lives or joint life expectancies, but any such designation shall
not give that other person any present rights under the annuity
contract during your lifetime.
CONTRIBUTIONS. This annuity contract does not require fixed premiums,
purchase payments, or other contributions, but we may decline to accept any
contribution of less than $50. This annuity contract will not lapse if you do
not make contributions. This annuity contract will remain subject to
cancellation under any involuntary surrender or termination provision of this
annuity contract; provided, however, that in no event shall any such
cancellation occur unless, at a minimum, contributions have not been made for
at least two full years and the value of this annuity contract (increased by
any guaranteed interest) would provide a benefit at its stated maturity date
of less than $20 a month under the regular settlement option.
All contributions to us must be made in cash BY CHECK OR MONEY ORDER MADE
PAYABLE TO US.
Total contributions made to this annuity contract with respect to any one tax
year may not exceed $2,000, excluding any payment which is a qualified
rollover contribution under IRC Section 408A(e).
This annuity contract will not accept contributions made by an employer
through Simplified Employee Pension (SEP) program under IRC Section 408(k) or
a SIMPLE plan under IRC Section 408(p). No rollover contributions will be
accepted other than a qualified rollover contribution from an IRA or Roth IRA
under IRC Section 408A(e). This annuity contract will not accept a transfer
or rollover of any funds attributable to contributions made by an employer
through a SEP program or SIMPLE plan except to the extent provided by the
Secretary of the Treasury.
<PAGE>
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your annuity contract. This report will
include (i) the amount of all regular contributions received during or after
the calendar year which relate to such calendar year, (ii) the amount of all
rollover contributions received during such calendar year, (iii) the contract
value(s) determined as of the end of such calendar year, and (iv) such other
information as may be required under federal tax law.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. During your lifetime,
distributions from your annuity contract need not meet the requirements of
IRC Section 401(a)(9) or the incidental death benefit requirements of IRC
Section 401(a)(9)(G).
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. Your entire interest in this
annuity contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract to
receive payments after your death with payments beginning by December
31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive
your entire interest in this annuity contract, this annuity contract will be
treated as the Roth IRA of such spouse if he or she becomes Successor Owner
of this contract, makes a rollover from this contract, or fails to receive
distributions from this contract otherwise required by this provision. No
contributions or rollover to this annuity contract may be made after your
death unless your spouse becomes Successor Owner. In any case, if a surviving
spouse dies before payments begin under this provision, then this provision
shall apply upon the death of your spouse as if your spouse was the owner of
this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. The life expectancy
of your surviving spouse shall be recalculated annually unless periodic
payments for a fixed period begin irrevocably (subject to acceleration) by
the date payments are required to begin. The life expectancy of any other
individual may not be recalculated. Any life expectancy which is not being
recalculated shall be determined using the attained age of such individual in
the calendar year in which payments are required to begin or in any earlier
year in which payments begin irrevocably, and any payment calculations for
subsequent years shall be based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life expectancy
was first determined.
This is part of your annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control. This Endorsement shall supersede any other Individual Retirement
Annuity endorsement(s) which may have previously been a part of the contract.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-2-
EXHIBIT (4)(b)(xi)
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The annuity contract is changed as set out below to make it a SIMPLE Individual
Retirement Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions under a Savings Incentive Match Plan for Employees of Small
Employers ("SIMPLE IRA plan") that qualifies under Internal Revenue Code ("IRC")
Section 408(p). It is restricted as required by federal tax law. We may change
the terms of this annuity contract or administer this annuity contract at any
time as needed to comply with that law. Any such change may be applied
retroactively.
EXCLUSIVE BENEFIT. This annuity contract is established for the exclusive
benefit of you and your beneficiaries. Your interest in this annuity
contract is nonforfeitable.
NON-PARTICIPATING. This annuity contract does not pay dividends or share in our
surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest in
this annuity contract. You cannot pledge it to secure a loan or the performance
of an obligation, or for any other purpose. The only exceptions to these rules
are:
1) an interest in this annuity contract may be transferred to a spouse
or former spouse under a divorce or separation instrument described
in IRC Section 71(b)(2)(A); and
2) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the annuity
contract during your lifetime.
CONTRIBUTIONS. This annuity contract does not require fixed premiums, purchase
payments, or other contributions, but we may decline to accept any contribution
of less than $50. This annuity contract will not lapse if you do not make
contributions. This annuity contract will remain subject to cancellation under
any involuntary surrender or termination provision of this annuity contract;
provided, however, that in no event shall any such cancellation occur unless, at
a minimum, contributions have not been made for at least two full years and the
value of this annuity contract (increased by any guaranteed interest) would
provide a benefit at age 70-1/2 of less than $20 a month under the regular
settlement option.
All contributions to us must be made in cash BY CHECK OR MONEY ORDER MADE
PAYABLE TO US.
This annuity contract will only accept contributions made by an employer under a
SIMPLE IRA plan that meets the requirements of IRC Section 408(p), and rollover
contributions or transfers from another SIMPLE IRA owned by you. No other
contributions to this annuity contract will be accepted.
<PAGE>
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your annuity contract. This report will include
(i) the amount of all regular contributions received during or after the
calendar year which relate to such calendar year, (ii) the amount of all
rollover contributions received during such calendar year, (iii) the contract
value(s) determined as of the end of such calendar year, and (iv) such other
information as may be required under federal tax law.
If contributions to this annuity contract are paid directly by your employer
under a SIMPLE IRA plan, we will provide your employer with the summary
description required by IRC Section 408(l)(2)(B).
DESIGNATED FINANCIAL INSTITUTION. If we are the designated financial institution
for your employer's SIMPLE IRA plan, as defined in IRC Section 408(p)(7), then
you may direct that contributions paid on your behalf be transferred to another
qualified SIMPLE IRA without cost or penalty, provided that you elect such a
transfer either before the beginning of the calendar year to which such
contribution relates or within the 60-day election period which includes the
date you first become eligible to participate in the SIMPLE IRA plan.
LIMITS ON ROLLOVERS AND TRANSFERS; ADDITIONAL TAXES. During the first two years
that you participate in the SIMPLE IRA plan of your employer, any rollover or
transfer otherwise permitted under this annuity contract must be made to another
SIMPLE IRA owned by you. In some cases, any distribution to you during this
two-year period may be subject to a twenty-five percent additional penalty tax
if you do not roll over the amount distributed into a SIMPLE IRA. After the end
of this two-year period, a rollover or transfer otherwise permitted under this
annuity contract may be made to any IRA owned by you that is qualified under IRC
Section 408(a), (b), or (p).
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the calendar year
in which you reach age 70-1/2. No later than the Required Beginning Date:
1) your entire interest in this annuity contract must be paid in full;
or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for your life or as
joint and survivor payments to you and one other individual, or (ii)
over a period certain not to exceed your life expectancy or the joint
and last survivor expectancy of you and one other individual
designated to receive any remaining payments after your death, with
payments which do not increase or increase only as provided in Q&A
F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirements of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. The life expectancies of
you and your spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the Required
Beginning Date. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of the individual in the calendar year in
which you reach age 70-1/2 or in any earlier year in which payments begin
irrevocably, and any payment calculations for subsequent years shall be based on
such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year such life expectancy was first determined.
-2-
<PAGE>
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to acceleration),
the remaining portion of your interest in this annuity contract must continue to
be distributed at least as rapidly as under the method of distribution being
used prior to your death.
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in this annuity contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under this annuity contract
to receive payments after your death with payments beginning by
December 31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive your
entire interest in this annuity contract, the starting date for payments under
clause (2) above may be delayed to a date not later than December 31 of the
calendar year in which you would have reached age 70-1/2. Alternatively, this
annuity contract will be treated as the IRA of such spouse if he or she becomes
Successor Owner of this contract, makes a rollover from this contract, or fails
to receive distributions from this contract otherwise required by this
provision. No contributions or rollover to this annuity contract may be made
after your death unless your spouse becomes Successor Owner In any case, if a
surviving spouse dies before payments begin under this provision, then this
provision shall apply upon the death of your spouse as if your spouse was the
owner of this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V and
VI of Section 1.72-9 of the Income Tax Regulations. For distributions beginning
after your death, the life expectancy of your surviving spouse shall be
recalculated annually unless periodic payments for a fixed period begin
irrevocably (subject to acceleration) by the date payments are required to
begin. The life expectancy of any other individual may not be recalculated. Any
life expectancy which is not being recalculated shall be determined using the
attained age of such individual in the calendar year in which payments are
required to begin or in any earlier year in which payments begin irrevocably,
and any payment calculations for subsequent years shall be based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first determined.
This is part of your annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (4)(b)(xii)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
TAX SHELTERED ANNUITY ENDORSEMENT
The Certificate of Participation under the annuity contract (your "Certificate")
is changed as set out below to add provisions for a Tax Sheltered Annuity.
APPLICABLE TAX LAW RESTRICTIONS. The annuity contract is intended to receive
contributions that qualify for deferred tax treatment under Internal Revenue
Code ("IRC") Section 403(b). It is restricted as required by federal tax law.
We may change the terms of the annuity contract and your Certificate, or
administer the annuity contract and your interest in it, at any time as
needed to comply with that law. Any such change may be applied retroactively.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest
in the annuity contract. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only exceptions
to these rules are:
1) you may use your interest in the annuity contract to secure a loan
made under any loan provisions of the annuity contract;
2) all or part of your interest in the annuity contract may be
transferred under a Qualified Domestic Relations Order as defined in
IRC Section 414(p); and
3) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the annuity
contract during your lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to the
annuity contract that does not qualify for deferred tax treatment under IRC
Section 403(b) and Section 415. Contributions made for you to the annuity
contract and any other plan, contract, or arrangement under salary reduction
agreement(s) with your employer(s) cannot exceed the limits of IRC Section
402(g).
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND CUSTODIAL
ACCOUNTS TRANSFERS. To comply with federal tax law, distribution restrictions
apply to amounts under the annuity contract that represent:
1) contributions made after December 31, 1988 under any salary reduction
agreement with an employer;
2) income earned after December 31, 1988 on salary reduction
contributions whenever made; or
3) transfers from a custodial account described in IRC Section 403(b)(7)
and all income attributable to the amount transferred.
Any such amount cannot be distributed with respect to your interest in the
annuity contract unless you have:
1) reached age 59-1/2; or
2) separated from service with your employer; or
3) become disabled (as defined in IRC Section 72(m)(7)); or
4) in the case of salary reduction contributions (including salary
reduction contributions to a custodial account), incurred a hardship
as defined under the IRC.
<PAGE>
A withdrawal made by reason of a hardship cannot include any income earned
after December 31, 1988 attributable to salary reduction contributions.
IRC Section 72(m)(7) states that: "An individual shall be considered to be
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or to be of long-continued and indefinite
duration. An individual shall not be considered to be disabled unless he
furnishes proof of the existence thereof in such form and manner as the
Secretary [of the Treasury] may require."
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), you or
your surviving spouse may elect to have any portion of an eligible rollover
distribution (as defined in IRC Section 403(b)(8)) paid directly to an
Individual Retirement Annuity or Individual Retirement Account (as defined in
IRC Section 408) or, if allowed, to another Tax Sheltered Annuity (as defined
in IRC Section 403(b)), specified by your or your surviving spouse and which
accepts such distribution. Any direct rollover election must be made on our
form, and must be received at our office before the date of payment.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions with respect to your interest in the annuity contract is April
1 following the later of the calendar year in which you reach age 70-1/2 or
the calendar year in which you retire. No later than the Required Beginning
Date:
1) your interest in the annuity contract must be paid in full; or
2) distributions of your interest in the annuity contract must begin in
the form of periodic payments made at least annually (i) for your
life or as joint and survivor payments to you and one other
individual, or (ii) over a period certain not to exceed the your life
expectancy or the joint and last survivor life expectancy of you and
one other individual named to receive any remaining payments after
your death, with payments which do not increase or increase only as
provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed Income
Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirements of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of you and your spouse shall be recalculated annually unless
periodic payments for a fixed period begin irrevocably (subject to
acceleration) by the Required Beginning Date. The life expectancy of any
other individual may not be recalculated. Any life expectancy which is not
being recalculated shall be determined using the attained age of the
individual in the calendar year in which you reach age 70-1/2 or in any
earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If you die after the Required
Beginning Date or after payments begin irrevocably (subject to acceleration),
the remaining portion of your interest in the annuity contract must continue
to be distributed at least as rapidly as under the method of distribution
being used prior to your death.
-2-
<PAGE>
If you die before the Required Beginning Date and before payments begin
irrevocably, your entire interest in the annuity contract must be paid
either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated under the annuity contract to
receive payments after your death with payments beginning by December
31 of the first calendar year after your death.
However, if your surviving spouse is the individual designated to receive
your entire interest in the annuity contract, then the starting date for
payments under clause 2) above may be delayed to a date not later than
December 31 of the calendar year in which you would have reached age 70-1/2.
If your surviving spouse dies before payments begin under this provision,
then this provision shall apply upon the death of your spouse as if your
spouse were the owner of your interest in the annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after your death, the life expectancy of your surviving spouse
shall be recalculated annually unless periodic payments for a fixed period
begin irrevocably (subject to acceleration) by the date payments are required
to begin. The life expectancy of any other individual may not be
recalculated. Any life expectancy which is not being recalculated shall be
determined using the attained age of such individual in the calendar year in
which payments are required to begin or in any earlier year in which payments
begin irrevocably, and any payment calculations for subsequent years shall be
based on such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first determined.
This is part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz James M. Mortensen
Secretary Executive Vice President
-3-
EXHIBIT (4)(b)(xiii)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a
qualified pension, profit sharing, or annuity plan. This endorsement and the
annuity contract to which it is attached are not valid without additional
endorsement(s) defining the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions pursuant to a pension, profit sharing, or annuity plan
qualified under Internal Revenue Code ("IRC") Section 401(a) or 403(a). It is
restricted as required by federal tax law. We may change the terms of this
annuity contract or administer this annuity contract at any time as needed to
comply with that law. Any such change may be applied retroactively.
ANNUITANT. "Annuitant" means the designated person covered under the Plan for
whose benefit this annuity contract was purchased. If the owner of this
annuity contract is the Employer or Plan trustee, then any reference in this
annuity contract to the owner's life, age, death, or spouse shall be treated
as a reference to the Annuitant's life, age, death, or spouse.
EXCLUSIVE BENEFIT. This annuity contract is for the exclusive benefit of the
Annuitant and his or her beneficiaries. No amounts held under this annuity
contract may be used for or diverted to any purpose other than the provision
of Plan benefits except as permitted by the Plan after the complete
satisfaction of all liabilities to persons covered by the Plan and their
beneficiaries. Until distributed, the Plan retains all legal ownership rights
and control over the Annuitant's interest in the annuity contract except as
provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. No interest in this annuity contract may be
assigned, sold, or transferred. No interest in this annuity contract may be
pledged to secure a loan or the performance of an obligation, or for any
other purpose. The only exceptions to these rules are:
1) if this annuity contract is owned by the Employer or Plan trustee, it
may be transferred to a successor Employer or Plan trustee or to the
Annuitant or another person entitled to Plan benefits through the
Annuitant;
2) this annuity contract may secure a loan to the Annuitant made under
any loan provisions of this annuity contract;
3) the Annuitant's interest in this annuity contract may be transferred
under a Qualified Domestic Relations Order as defined in IRC Section
414(p); and
4) payments may be made based on joint lives or joint life expectancies
of the Annuitant and another person, but such other person shall have
no present rights under this annuity contract during the lifetime of
the Annuitant.
Except as elected under the DIRECT ROLLOVER provision, any distributions
under this annuity contract shall be paid to the owner or to the Annuitant or
other person entitled to Plan benefits through the Annuitant, as may be
directed by the owner of the annuity contract.
<PAGE>
LIMITS ON CONTRIBUTIONS. Contributions to this annuity contract which
represent contributions to the Plan must not exceed the limits set forth in
IRC Section 415. Contributions to this annuity contract which represent
elective deferrals cannot exceed the limits of IRC Section 402(g). Additional
limits may apply under the terms of the Plan. The Plan Administrator shall
ensure compliance with these IRC limits and any Plan limits.
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS. Any
amounts under this annuity contract which represent employee elective
contributions made pursuant to salary reduction agreement(s) under IRC
Section 401(k) and any income earned on such amounts, cannot be distributed
any earlier than allowed under IRC Section 401(k)(2)(B). Additional limits
may apply under the terms of the Plan. The Plan Administrator shall determine
when a distribution is allowed under this IRC section and the Plan.
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts under this
annuity contract which represent contributions to a money purchase pension
plan or a defined benefit pension plan, and any income earned on such
amounts, cannot be distributed any earlier than allowed under Section
1.401-1(b)(1)(i) of the Income Tax Regulations. Additional limits may apply
under the terms of the Plan. The Plan Administrator shall determine when a
distribution is allowed under this regulation and the Plan.
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), the
Annuitant or his or her surviving spouse may elect to have any portion of an
eligible rollover distribution (as defined in IRC Section 402(c)(4)) paid
directly to an Individual Retirement Annuity or Individual Retirement Account
(as defined in IRC Section 408) or, if allowed, to another qualified pension,
profit sharing, or annuity plan (as defined in IRC Section 401(a) or 403(a)),
specified by the Annuitant or surviving spouse and which accepts such
distribution. Any direct rollover election must be made on our form, and must
be received at our office before the date of payment.
DATE BENEFITS TO BEGIN. Unless the Annuitant elects to delay the payment of
his or her benefits, a distribution of the Annuitant's interest in this
annuity contract shall begin no later than 60 days after the end of the Plan
year in which the last of the following occurs:
1) the Annuitant has reached the earlier of age 65 or the normal
retirement age stated in the Plan;
2) the 10th anniversary of the date the Annuitant joined the Plan; or
3) the Annuitant's separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of benefits be delayed beyond the Required
Beginning Date stated in the REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE
provision, below.
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<PAGE>
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the later of
the calendar year in which the Annuitant reaches age 70-1/2 or the calendar
year in which the Annuitant separates from service with the Employer. For any
5% owner of the Employer, the Required Beginning Date is April 1 following
the calendar year in which the Annuitant reaches age 70-1/2. No later than
the Required Beginning Date:
1) the entire amount payable under this annuity contract must be paid in
full; or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for the Annuitant's life
or as joint and survivor payments for the lives of the Annuitant and
one other individual, or (ii) over a period certain not to exceed the
Annuitant's life expectancy or the joint and last survivor life
expectancy of the Annuitant and one other individual entitled to
receive any amount payable after the Annuitant's death, with payments
which do not increase or increase only as provided in Q&A F-3 of
Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of the Annuitant and his or her spouse shall be recalculated
annually unless periodic payments for a fixed period begin irrevocably
(subject to acceleration) by the Required Beginning Date. The life expectancy
of any other individual may not be recalculated. Any life expectancy which is
not being recalculated shall be determined using the attained age of the
individual in the calendar year in which the Annuitant reaches age 70-1/2 or
in any earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If the Annuitant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), any amount remaining payable under this annuity contract must
continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Annuitant's death.
If the Annuitant dies before the Required Beginning Date and before payments
begin irrevocably, then any amount remaining payable under this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
Annuitant's death; or
2) over the life or over a period certain not greater than the life
expectancy of the individual entitled to payments after the
Annuitant's death with payments beginning by December 31 of the first
calendar year after the Annuitant's death.
However, if the Annuitant's spouse is the individual entitled to receive the
entire amount remaining payable under this annuity contract, then the
starting date for payments under clause 2) above may be delayed to a date not
later than December 31 of the calendar year in which the Annuitant would have
reached age 70-1/2. If the Annuitant's surviving spouse dies before payments
begin under this provision, then this provision shall apply upon the death of
the Annuitant's spouse as if the spouse were the Annuitant under this annuity
contract.
-3-
<PAGE>
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after the Annuitant's death, the life expectancy of his or her
surviving spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the date
payments are required to begin. The life expectancy of any other individual
may not be recalculated. Any life expectancy which is not being recalculated
shall be determined using the attained age of such individual in the calendar
year in which payments are required to begin or in any earlier year in which
payments begin irrevocably, and any payment calculations for subsequent years
shall be based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first
determined.
This is part of the annuity contract. It is not a separate contract. It changes
the annuity contract only as and to the extent stated. In all cases of conflict
with the other terms of the annuity contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-4-
Exhibit 4(b)(xiv)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
EMPLOYER PLAN
ENDORSEMENT
The annuity contract is changed as set out below to adapt it for use with an
employee benefit plan:
PLAN. "Plan" means the employee benefit plan named on your application or
any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named on
your application, or any other employer which succeeds to its rights under
the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person designated as
such to us in writing by the Employer. If no person has been designated,
"Plan Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of this annuity contract, the Plan
Administrator shall interpret the Plan and decide all questions about what is
allowed or required by the Plan. We have no duty to review or interpret the
Plan, or to review or approve any decision of the Plan Administrator. We are
entitled to rely on the written directions of the Plan Administrator on such
matters.
APPLICABLE RESTRICTIONS. This annuity contract may be restricted by federal
and/or state laws related to employee benefit plans. We may change the terms
of this annuity contract or administer this annuity contract at any time as
needed to comply with such laws.
PLAN DISTRIBUTION PROVISIONS. Distributions allowed under this annuity
contract may be made only at a time allowed by the Plan or required by this
annuity contract. The form of any distribution shall be determined under the
Plan from among those forms of distribution available under this annuity
contract. No distribution may be made without the written direction of the
Plan Administrator unless required by this annuity contract. Distributions
may be made without your consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any amount under this annuity contract
attributable to contributions by the Employer (excluding any contributions
made under a salary reduction agreement with your employer) is subject to the
vesting provisions of the Plan. If at any time the Plan provides for a
forfeiture of an amount that is not vested, then such amount may be withdrawn
and paid as directed by the Plan Administrator.
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to this annuity contract
for you are subject to any limits on contributions and nondiscrimination
provisions of the Plan. If the Plan Administrator determines that excess or
discriminatory contributions were made, then amounts attributable to such
contributions may be withdrawn and paid as directed by the Plan
Administrator.
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any amount
remaining payable under this annuity contract after your death shall be
determined under the Plan. No distribution of any such amount shall be made
without the written direction of the Plan Administrator.
<PAGE>
INVESTMENT ALLOCATIONS AND TRANSFERS. If this annuity contract provides that
amounts held under it are allocated among separate investment funds or fixed
accounts, then any such allocations and/or subsequent transfers shall be made
only as required or allowed by the Plan, or as required by this annuity
contract to secure a loan. No such allocation or transfer shall be made
without the written direction of the Plan Administrator unless required by
this annuity contract to secure a loan. Allocations or transfers may be made
without your consent when required by the Plan or the annuity contract.
PLAN LOAN PROVISIONS. If loans are allowed under this annuity contract, no
such loan may be made unless also allowed by the Plan. Any such loan will be
subject to any additional limits and conditions which apply under the Plan.
No loan may be made without the written direction of the Plan Administrator.
The rate of interest to be paid by you on any such loan will be fixed by the
Plan Administrator, but we may require that it be at least three percentage
points higher than the minimum guaranteed rate of interest, if any, that
applies to your interest in this annuity contract used as security for the
loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the other
payment options available under this annuity contract, payments may be made
in the form of a Qualified Joint and 50% Survivor Annuity. Under this payment
option, we will make equal payments to you for life at least once per year.
If the person who is your spouse at the time payments commence survives you,
then after your death we will make payments to such spouse at the same
intervals equal to one-half of the amount of the prior payments, with such
payments continuing to such spouse until his or her death. The first payment
under this payment option will be made on the effective date of the payment
option. The amount of the payments we will make under this payment option is
based on the intervals for payments, which are subject to our approval.
Amounts vary with the ages, as of the first payment date, of you and your
spouse. We will require proof of the ages of you and your spouse. Monthly
payments that we will make under this payment option for each $1,000 of
proceeds applied will be furnished at your request. Once payments begin under
this payment option, the value of future payments may not be withdrawn as a
commutation of benefits.
This is a part of your annuity contract. It is not a separate contract. It
changes the annuity contract only as and to the extent stated. In all cases of
conflict with the other terms of the annuity contract, the provisions of this
endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kaspowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-2-
EXHIBIT (4)(b)(xv)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
Box 5423, Cincinnati, Ohio 45201-5423 o (800) 789-6771
GOVERNMENTAL SECTION 457 PLAN
ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a
governmental Section 457 plan. This endorsement and the annuity contract to
which it is attached are not valid without additional endorsement(s) defining
the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This annuity contract is intended to receive
contributions pursuant to a plan qualified under Internal Revenue Code
("IRC") Section 457 maintained by a state, a political subdivision of a
state, or any agency or instrumentality of a state or political subdivision
of a state. It is restricted as required by federal tax law. We may change
the terms of this annuity contract or administer this annuity contract at any
time as needed to comply with that law. Any such change may be applied
retroactively.
ANNUITANT. "Annuitant" means the designated person covered under the Plan for
whose benefit this annuity contract was purchased. If the owner of this
annuity contract is the Employer or Plan trustee, then any reference in this
annuity contract to the owner's life, age, death, or spouse shall be treated
as a reference to the Annuitant's life, age, death, or spouse.
EXCLUSIVE BENEFIT. This annuity contract is for the exclusive benefit of the
Annuitant and his or her beneficiaries. No amounts held under this annuity
contract may be used for or diverted to any purpose other than the provision
of Plan benefits except as permitted by the Plan after the complete
satisfaction of all liabilities to persons covered by the Plan and their
beneficiaries. Until distributed, the Plan retains all legal ownership rights
and control over the Annuitant's interest in the annuity contract except as
provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. No interest in this annuity contract may be
assigned, sold, or transferred. No interest in this annuity contract may be
pledged to secure a loan or the performance of an obligation, or for any
other purpose. The only exceptions to these rules are:
1) if this annuity contract is owned by the Employer or Plan trustee, it
may be transferred to a successor Employer or Plan trustee or to the
Annuitant or another person entitled to Plan benefits through the
Annuitant;
2) this annuity contract may secure a loan to the Annuitant made under
any loan provisions of this annuity contract;
3) the Annuitant's interest in this annuity contract may be transferred
under a Qualified Domestic Relations Order as defined in IRC Section
414(p); and
4) payments may be made based on joint lives or joint life expectancies
of the Annuitant and another person, but such other person shall have
no present rights under this annuity contract during the lifetime of
the Annuitant.
Any distributions under this annuity contract shall be paid to the owner or
to the Annuitant or other person entitled to Plan benefits through the
Annuitant, as may be directed by the owner of the annuity contract.
<PAGE>
LIMITS ON CONTRIBUTIONS. Contributions to this annuity contract which
represent contributions to the Plan must not exceed the limits set forth in
IRC Section 457(b) and (c). No elective contributions may be made by the
Annuitant with respect to any month unless the Annuitant has entered an
agreement for deferral before the first day of that month. However, an
elective contribution may be made for the first month of employment of the
Annuitant if the agreement for deferral is made on or before the date service
with the Employer begins. Additional limits may apply under the terms of the
Plan. The Plan Administrator shall ensure compliance with these IRC limits
and any Plan limits.
DISTRIBUTION RESTRICTIONS. As required under IRC Section 457(d), no
distributions from this annuity contract can be made until:
1) the calendar year in which the Annuitant reaches age 70-1/2; or
2) the Annuitant's separation from service with the Employer; or
3) the Annuitant is faced with an unforeseeable emergency as defined
under the IRC; or
4) the conditions are met for an in-service distribution under IRC
Section 457(e)(9).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall determine when a distribution is allowed under this IRC
section and the Plan.
DATE BENEFITS TO BEGIN. A distribution of the Annuitant's interest in this
annuity contract shall begin no later than 60 days after the end of the Plan
year in which the later of the following occurs:
1) the Annuitant reaches normal retirement age as determined under the
Plan; or
2) the Annuitant separates from service with the Employer.
If the Plan permits benefit payments upon separation from service to begin
before the latest date required under this provision, then prior to the date
payments actually begin the Plan may allow the Annuitant to elect irrevocably
to delay payment to a later fixed and determinable date within the limits of
this provision. The Annuitant may make only one such election after the
earliest date on which the Plan permits benefit payments upon separation from
service.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of benefits be delayed beyond the Required
Beginning Date stated in the REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE
provision, below.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions under this annuity contract is April 1 following the later of
the calendar year in which the Annuitant reaches age 70-1/2 or the calendar
year in which the Annuitant separates from service with the Employer. No
later than the Required Beginning Date:
1) the entire amount payable under this annuity contract must be paid in
full; or
2) distributions from this annuity contract must begin in the form of
periodic payments made at least annually (i) for the Annuitant's life
or as joint and survivor payments for the lives of the Annuitant and
one other individual, or (ii) over a period certain not to exceed the
Annuitant's life expectancy or the joint and last survivor life
expectancy of the Annuitant and one other individual entitled to
receive any amount payable after the Annuitant's death, with payments
which do not increase or increase only as provided in Q&A F-3 of
Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
-2-
<PAGE>
All distributions made hereunder shall be made in accordance with the
requirements of IRC Section 401(a)(9), including the incidental death benefit
requirement of IRC Section 401(a)(9)(G), and the regulations thereunder,
including the minimum distribution incidental benefit requirements of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations and any guidance which
may be issued by the Secretary of the Treasury under IRC Section 457.
Life expectancies are computed using the expected return multiples in Tables
V and VI of Section 1.72-9 of the Income Tax Regulations. The life
expectancies of the Annuitant and his or her spouse shall be recalculated
annually unless periodic payments for a fixed period begin irrevocably
(subject to acceleration) by the Required Beginning Date. The life expectancy
of any other individual may not be recalculated. Any life expectancy which is
not being recalculated shall be determined using the attained age of the
individual in the calendar year in which the Annuitant reaches age 70-1/2 or
in any earlier year in which payments begin irrevocably, and any payment
calculations for subsequent years shall be based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar
year such life expectancy was first determined.
REQUIRED MINIMUM DISTRIBUTIONS AFTER DEATH. If the Annuitant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), any amount remaining payable under this annuity contract must
continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Annuitant's death.
If the Annuitant dies before the Required Beginning Date and before payments
begin irrevocably, then any amount remaining payable under this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
Annuitant's death;
2) if someone other than the Annuitant's surviving spouse is entitled to
receive part or all of the amount remaining payable after the
Annuitant's death, over a period certain not greater than fifteen
years and not greater than the life expectancy of the eldest person
entitled to benefits, with payments beginning by December 31 of the
first calendar year after the Annuitant's death; or
3) if the Annuitant's spouse is the sole person entitled to receive the
amount remaining payable after the Annuitant's death, over the life
or over a period certain not greater than the life expectancy of the
surviving spouse, with payments beginning by December 31 of the later
of first calendar year after the Annuitant's death or the calendar
year in which the Annuitant would have attained age 70-1/2.
If the Annuitant's surviving spouse is the sole person entitled to receive
the amount remaining payable after the Annuitant's death and the surviving
spouse dies before payments begin under this provision, then this provision
shall apply upon the death of the Annuitant's spouse as if the spouse were
the Annuitant under this annuity contract.
Life expectancy is computed using the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. For distributions
beginning after the Annuitant's death, the life expectancy of his or her
surviving spouse shall be recalculated annually unless periodic payments for
a fixed period begin irrevocably (subject to acceleration) by the date
payments are required to begin. The life expectancy of any other individual
may not be recalculated. Any life expectancy which is not being recalculated
shall be determined using the attained age of such individual in the calendar
year in which payments are required to begin or in any earlier year in which
payments begin irrevocably, and any payment calculations for subsequent years
shall be based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first
determined.
-3-
<PAGE>
This is part of the annuity contract. It is not a separate contract. It
changes the annuity contract only as and to the extent stated. In all cases
of conflict with the other terms of the annuity contract, the provisions of
this Endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-4-
Exhibit (8)(o)
April 25, 1997
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething
Dear Mark:
Re: Fee Letter Relating to the Annuity Investors
Life Insurance Company Participation Agreement.
Pursuant to the Participation Agreement by and among Strong Capital
Management, Inc. ("Strong"), Annuity Investors Life Insurance Company (the
"Company"), Strong Variable Insurance Funds, Inc., Strong Special Fund II, Inc.
and Strong Funds Distributors, Inc. ("Distributors") dated as April 25, 1997
(the "Participation Agreement"), the Company will provide certain administrative
services on behalf of the registered investment companies or series thereof
specified in Exhibit A (each a "Fund" and collectively the "Funds").
In recognition of the reduction in administrative expenses that derives
from the performance of said administrative services, Strong agrees to pay the
Company the fee specified below for each Fund specified in Exhibit A hereto.
(a) For average aggregate amounts (as calculated in paragraph
(b), below) invested through variable insurance products issued by the
Company with the Funds, the monthly fee shall equal the percentage
(calculated in paragraph (b), below) of the applicable annual fee for
each Fund specified in Exhibit A.
(b) For purposes of computing the fee contemplated in paragraph
(a) above, Strong shall calculate and pay to the Company an amount with
respect to each Fund equal to the product of: (a) the product of (i) the
number of calendar days in the applicable month divided by the number of
calendar days in that year (365 or 366 as applicable) and (ii) the
applicable percentage specified in Exhibit A, hereto, multiplied by (b)
the average daily market value of the investments held in such Fund
pursuant to the Participation Agreement computed by totaling the
aggregate investment (share net asset value multiplied by the total
number of shares held) on each day during the calendar month and
dividing by the total number of days during such month.
<PAGE>
(c) Strong shall calculate the amount of the payment to be made
pursuant to this Letter Agreement at the end of each calendar month and
will make such payment to the Company within 30 days after receiving the
report referenced in paragraph (e), below. Fees will be paid, at
Strong's election, by wire transfer or by check. All payments hereunder
shall be considered final unless disputed by the Company in writing
within 60 days of receipt.
(d) The parties agree that the fees contemplated herein are
solely for shareholder servicing and other administrative services
provided by the Company and do not constitute payment in any manner for
investment advisory, distribution, trustee, or custodial services.
(e) The Company agrees to provide Strong by the 15th day of each
month with a report which indicates the number of Owners that hold
through a Contract interests in each Account as of the last day of the
prior month.
(f) If requested in writing by Strong, and at Strong's expense,
the Company shall provide to Strong, by February 14th of each year, a
"Special Report" from a nationally recognized accounting firm reasonably
acceptable to Strong which substantiates for each month of the prior
calendar year: (a) the number of owners that hold, through an Account,
interests in each Account maintained by the Company on the last day of
each month which held shares for which the fee provided for in this
Letter Agreement was received by the Company, (b) that any fees billed
to Strong for such month were accurately determined in accordance with
this Letter Agreement, and (c) such other information in connection with
this Agreement and the Participation Agreement as may be reasonably
requested by Strong.
(g) The parties hereto agree that Strong may unilaterally amend
Schedule A hereto to add additional investment companies or series
thereof ("New Funds") as Funds subject to the provisions of this Letter
Agreement by sending to the Company a written notice of the New Funds
and indicating therein the fees to be paid to the Company with respect
to the administrative services provided pursuant to the Participation
Agreement in connection with such New Funds.
(h) This Letter Agreement shall terminate upon termination of the
Participation Agreement. Accordingly, all payments pursuant to this
Letter Agreement shall cease upon termination of the Participation
Agreement.
(i) Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Participation Agreement.
2
<PAGE>
If you are in agreement with the foregoing, please sign and date below
where indicated and return one copy of this signed letter agreement to me.
Very truly yours,
/s/ Stephen J. Shenkenberg
Stephen J. Shenkenberg
Vice President
Accepted and agreed as of April 25, 1997 by
Annuity Investors Life Insurance Company
/s/ Mark F. Muething
By: Mark F. Muething
Name and Title: Senior Vice President
<PAGE>
EXHIBIT A TO LETTER DATED APRIL 25, 1997
The Funds subject to this Agreement and applicable annual fees are as follows:
Fund Annual Fee
Strong Special Fund II, Inc. .20%
Strong Variable Insurance Funds, Inc.
Strong Growth Fund II .20%
Exhibit (8)(p)
PILGRIM BAXTER & ASSOCIATES
Investment Counsel
May 1, 1997
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 452O2
Ladies and Gentlemen:
The purpose of this letter is to confirm certain financial arrangements
between Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), the investment
adviser to the PBHG Insurance Series Fund, Inc. (the "Fund") and Annuity
Investors Life Insurance Company ("Annuity Investors") in connection with
Annuity Investors' purchase of shares of certain series of the Fund (the
"Series") on behalf of certain of its separate accounts (the "Separate
Accounts") to fund variable life and annuity contracts issued by Annuity
Investors.
In recognition of Annuity Investors providing to the Fund the services
described in that certain Fund Participation Agreement among Annuity Investors,
the Fund and Pilgrim Baxter, dated May 1, 1997 (the "Agreement"), Pilgrim Baxter
shall pay to Annuity Investors an administrative service fee equal to, on an
annualized basis, 0.15% on the first $25,000,000 of the average daily net assets
of the Separate Accounts invested in shares of the Series of the Fund specified
in Appendix B to the Agreement; 0.20% on the next $25,000,000 of average daily
net assets of the Separate Accounts invested in shares of the Series of the
Fund; and 0.25% on average daily net assets of the Separate Accounts invested in
shares of the Series of the Fund in excess of $50,000,000. Such fee shall be
paid quarterly (on a calendar year basis) in arrears.
In the event that the fees payable to Annuity Investors hereunder, based
upon an opinion of counsel reasonably acceptable to the Fund, Pilgrim Baxter and
Annuity Investors, are or may be in contravention or violation of any law, rule,
regulation, court decision or order, or out-of-court settlement of actual or
threatened litigation or enforcement position of any regulatory body having
jurisdiction over the Fund or Pilgrim Baxter (taken together, "Change in Law"),
the fees shall be adjusted to conform to such Change in Law on terms and
conditions deemed fair and equitable by Pilgrim Baxter and the Fund.
<PAGE>
Either party may terminate this agreement, without penalty, on six
months written notice to the other party, and this agreement shall terminate
automatically upon termination of the Agreement; except that the fees payable
hereunder shall continue as long as any Separate Account is invested in a
Series.
1255 Drummers Lane, Suite 300, Wayne, Pennsylvania 19087-1590
Phone (610) 341-9000 . Facsimile (610) 687-1890
Please confirm your understanding of this arrangement by having the
enclosed duplicate copy of this letter executed by an appropriate authorized
officer of Annuity Investors and returned to Pilgrim Baxter, at 1255 Drummers
Lane, Suite 300, Wayne, PA 19087, Attention:
John M. Zerr, Esquire.
Very truly yours,
PILGRIM BAXTER & ASSOCIATES, LTD.
By: /s/ Eric C. Schneider
Name: Eric C. Schneider
Title: Chief Financial Officer
Accepted and Agreed To:
ANNUITY INVESTORS LIFE
INSURANCE COMPANY
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
Exhibit (8)(q)
MORGAN STANLEY
MORGAN STANLEY
ASSET MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 703-4000
May 1, 1997
Mark F. Muething, Esq.
Senior Vice President
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Gentlemen:
We are please to have entered into an agreement with Annuity Investors Life
Insurance Company (the "Company") dated May 1, 1997 providing for the purchase
by the Company of shares of Morgan Stanley Universal Funds, Inc. (the "Fund")
for its separate accounts to fund variable annuity contract and variable life
policy benefits ("Participation Agreement").
In recognition of the fact that the Company will provide various administrative
services in connection with the issuance of variable annuity contracts and
variable life insurance policies and the fact that we (or our affiliates), as
investments advisers and administrators to the Fund will not incur
administrative expenses that we would otherwise incur in servicing large numbers
of investors in the Fund (such as shareholder communication, record keeping and
postage expenses), we will pay to the Company 0.15% of the Company's separate
account investments in the portfolios of the Fund.
Payment will be made on a quarterly basis during the month following the end of
each quarter.
If you agree to the foregoing, please sign the enclosed copy of this letter and
return it to George Koshy at Morgan Stanley Asset Management Inc., 1221 Avenue
of the Americas, New York, New York 10010.
Sincerely,
Morgan Stanley Asset Management Inc.
By: /s/ Jeffrey R. Margolis
Name: Jeffrey R. Margolis
Title: Principal
Miller Anderson & Sherrerd, LLP
By: /s/ Marna C. Whittington
Name: Marna C. Whittington
Title: Managing Director
AGREED
Annuity Investors Life Insurance Company
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
Exhibit 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 3, 1998, with respect to the financial
statements of Annuity Investors Variable Account A, and March 2, 1998, with
respect to the statutory-basis financial statements of Annuity Investors Life
Insurance Company, in the Post-effective Amendment No. 2 of the Registration
Statement (Form N-4 File Nos. 33-65409 and 811-07299) and related Statement of
Additional Information of Annuity Investors Variable Account A.
/s/ Ernst & Young LLP
--------------------------
Cincinnati, Ohio
April 29, 1998
