As filed with the Securities and Exchange Commission on April 29, 1998
File No. 33-59861
File No. 811-07299
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. ( )
Post-effective Amendment No. 3 ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Amendment No. 6 ( X )
(Check appropriate box or boxes)
-------------------------------
ANNUITY INVESTORS 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
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Mark F. Muething, Esq.
Senior Vice President, Secretary and General Counsel
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Name and Address of Agent for Service)
Copy to:
Catherine S. Bardsley, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036
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Approximate Date of Proposed Public Offering: Effective date of this
registration statement
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b).
/X/ On May 1, 1998 pursuant to paragraph (b) of Rule 485.
/ / Sixty days after filing 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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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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CROSS REFERENCE SHEET
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C (Other Information)
of Registration Statement Information Required by Form N-4
<TABLE>
<CAPTION>
PART A
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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 for the Company and the
Separate Account
5. General Description of Registrant, Depositor and
Portfolio Companies
(a) Depositor...................................... Annuity Investors Life Insurance Company
(b) Registrant..................................... The Separate Account
(c) Portfolio Company.............................. The Funds
(d) Fund Prospectus................................ The Funds
(e) Voting Rights.................................. Voting Rights
6. Deductions and Expenses
(a) General........................................ Charges and Deductions
(b) Sales Load %................................... Contingent Deferred Sales Charge
(c) Special Purchase Plan.......................... Contingent Deferred Sales Charge; Reduction or
Elimination of Contract and Certificate Charges
(d) Commissions.................................... Distribution of the Contract
(e) Fund Expenses.................................. The Funds
(f) Operating Expenses............................. Summary of Expenses
7. General Description of Variable Annuity Contracts
(a) Persons with Rights............................ The Contract; Surrenders; Contract Loans; Death
Benefit; Voting Rights
(b) (i) Allocation of Premium Payments......... Enrollment and Purchase Payments
(ii) Transfers.............................. Transfers
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(iii) Exchanges.............................. Additions, Deletions or Substitutions
(c) Changes........................................ Not Applicable
(d) Inquiries...................................... Contacting the Company
8. Annuity Period.......................................... Settlement Options
9. Death Benefit........................................... Death Benefit
10. Purchases and Contract Values
(a) Purchases...................................... Enrollment and Purchase Payments
(b) Valuation...................................... Fixed Account Value; Variable Account Value
(c) Daily Calculation.............................. Accumulation Unit Value; Net Investment Factor
(d) Underwriter.................................... Distribution of the Contract
11. Redemptions
(a) By Contract Owners............................. Surrender Value; Systematic Withdrawal
Option
By Annuitant................................... Not Applicable
(b) Texas ORP...................................... Texas Optional Retirement Program
(c) Check Delay.................................... Suspension or Delay in Payment of Surrender Value
(d) Free Look...................................... Not Applicable
12. Taxes................................................... Federal Tax Matters
13. Legal Proceedings....................................... Legal Proceedings
14. Table of Contents of the Statement of Additional Statement of Additional Information
Information.............................................
PART B
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Item of Form N-4 Statement of Additional
---------------- Information Caption
-----------------------
15. Cover Page.............................................. Cover Page
16. Table of Contents....................................... Table of Contents
17. General Information and General Information and History
History.................................................
18. Services
(a) Fees and Expenses of Registrant................ (Prospectus) Summary of Expenses
(b) Management Contracts........................... Not Applicable
(c) Custodian...................................... Not Applicable
Independent Auditors........................... Experts
(d) Assets of Registrant........................... Not Applicable
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(e) Affiliated Person.............................. Not Applicable
(f) Principal Underwriter.......................... Not Applicable
19. Purchase of Securities Being Offered.................... (Prospectus) Distribution of the Contract
Offering Sales Load..................................... (Prospectus) Contingent Deferred Sales Charge
20. Underwriters............................................ Distribution of the Contract
21. Calculation of Performance Data
(a) Money Market Funded Sub-Accounts............... Money Market Sub-Account Yield Calculation
(b) Other Sub-Accounts............................. Other Sub-Account Yield Calculation
22. Annuity Payments........................................ (Prospectus) Fixed Dollar Annuity Benefit;
Variable Dollar Annuity Benefit
23. Financial Statements.................................... Financial Statements
</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.
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT A
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
PROSPECTUS
FOR THE
COMMODORE NAUTICUS(REGISTERED)
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY
ISSUED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
This Prospectus describes The Commodore Nauticus(Registered) Group Flexible
Premium Deferred Annuity Contract (the "Contract") issued by Annuity Investors
Life Insurance Company (the "Company") and the Certificates of Participation
under the Contract ("Certificates").
A Certificate provides for the accumulation of an Account Value on a fixed or
variable basis, or a combination of both. The Certificate also provides for the
payment of periodic annuity payments on a fixed or variable basis, or a
combination of both. If the variable basis is chosen, Annuity Benefit values
will be held in Annuity Investors(Registered) 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 Contract 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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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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* * *
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES REGULATORY AUTHORITIES
NOR HAS THE 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.
This Prospectus Does Not Constitute An Offering In Any Jurisdiction In Which
Such Offering May Not Lawfully Be Made. No Dealer, Salesperson, Or Other Person
Is Authorized To Give Any Information Or Make Any Representations In Connection
With This Offering Other Than Those Contained In This Prospectus, And, If Given
Or Made, Such Other Information Or Representations Must Not Be Relied Upon.
Variable Annuity Contracts Are Not Deposits Or Obligations Of, Or Endorsed Or
Guaranteed By, Any Financial Institution, Nor Are They Federally Insured Or
Otherwise Protected By The Federal Deposit Insurance Corporation, The Federal
Reserve Board, Or Any Other Agency; They Are Subject To Investment Risks,
Including Possible Loss Of Principal Investment.
This Prospectus Is Valid Only When Accompanied By The Current Prospectus For
Each Underlying Fund. Both This Prospectus And The Underlying Fund Prospectuses
Should Be Read And Retained For Future Reference.
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TABLE OF CONTENTS
-----------------
Page
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DEFINITIONS....................................................................6
HIGHLIGHTS.....................................................................8
The Contract and Certificates.........................................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...............................................11
Standard Contracts...................................................11
Enhanced Contracts...................................................13
SUMMARY OF EXPENSES...........................................................15
Participant Transaction Expenses.....................................15
Annual Expenses......................................................16
Examples.............................................................18
FINANCIAL STATEMENTS..........................................................19
THE FUNDS.....................................................................19
Janus Aspen Series...................................................20
Aggressive Growth Portfolio.................................20
Worldwide Growth Portfolio..................................20
Balanced Portfolio..........................................20
Dreyfus Funds........................................................20
Capital Appreciation Portfolio (Dreyfus Variable Investment
Fund).......................................................20
Growth and Income Portfolio (Dreyfus Variable Investment
Fund).......................................................20
Small Cap Portfolio (Dreyfus Variable Investment Fund)......20
The Dreyfus Socially Responsible Growth Fund, Inc...........20
Dreyfus Stock Index Fund....................................20
Merrill Lynch Variable Series Funds, Inc.............................21
Basic Value Focus Fund......................................21
Global Strategy Focus Fund..................................21
High Current Income Fund....................................21
Domestic Money Market Fund..................................21
Strong Opportunity Fund II, Inc......................................21
Strong Opportunity Fund II..................................21
Morgan Stanley Universal Funds, Inc..................................21
U.S. Real Estate Portfolio..................................21
Fixed Income Portfolio......................................22
PBHG Insurance Series Fund, Inc......................................22
PBHG Growth II Portfolio....................................22
PBHG Technology & Communications Portfolio..................22
Additions, Deletions, or Substitutions...............................22
PERFORMANCE INFORMATION.......................................................23
Yield Data...........................................................23
Total Return Data....................................................23
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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ANNUITY INVESTORS LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT.............24
Annuity Investors Life Insurance Company.............................24
Published Ratings....................................................25
Year 2000............................................................25
The Separate Account.................................................25
THE FIXED ACCOUNT.............................................................25
Fixed Account Options................................................27
Renewal of Fixed Account Options.....................................27
THE CONTRACT..................................................................27
Right to Cancel......................................................27
ENROLLMENT AND PURCHASE PAYMENTS..............................................28
Purchase Payments....................................................28
Allocation of Purchase Payments......................................28
ACCOUNT VALUE.................................................................28
Fixed Account Value..................................................28
Variable Account Value...............................................28
Accumulation Unit Value..............................................30
Net Investment Factor................................................30
TRANSFERS.....................................................................30
Telephone Transfers..................................................31
Dollar Cost Averaging................................................31
Portfolio Rebalancing................................................31
Interest Sweep.......................................................32
Principal Guarantee Option...........................................32
Changes By the Company...............................................32
SURRENDERS....................................................................32
Surrender Value......................................................32
Suspension or Delay in Payment of Surrender Value....................33
Free Withdrawal Privilege............................................33
Systematic Withdrawal................................................33
CONTRACT LOANS................................................................35
DEATH BENEFIT.................................................................35
Death of Participant.................................................35
Death Benefit........................................................35
Beneficiary..........................................................37
CHARGES AND DEDUCTIONS........................................................37
Contingent Deferred Sales Charge.....................................37
Maintenance and Administrative Charges...............................38
Mortality and Expense Risk Charge....................................39
Premium Taxes........................................................39
Transfer Fee.........................................................39
Fund Expenses........................................................39
Reduction or Elimination of Contract and Certificate Charges.........40
SETTLEMENT OPTIONS............................................................40
Annuity Commencement Date............................................40
Election of Settlement Option........................................40
Annuity Benefit......................................................40
Fixed Dollar Annuity Benefit.........................................40
Variable Dollar Annuity Benefit......................................41
Transfers After the Annuity Commencement Date........................41
Annuity Transfer Formula.............................................41
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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Settlement Options...................................................42
Minimum Amounts......................................................42
Settlement Option Tables.............................................43
GENERAL PROVISIONS............................................................43
Non-participating....................................................43
Misstatement of Age..................................................43
Proof of Existence and Age...........................................43
Facility of Payment..................................................43
Transfer and Assignment..............................................43
Annuity Data.........................................................43
Annual Report........................................................43
Incontestability.....................................................43
Entire Contract......................................................43
Changes in the Contract..............................................44
Notices and Directions...............................................44
FEDERAL TAX MATTERS...........................................................45
Introduction.........................................................45
Taxation of Annuities In General.....................................45
Surrenders...........................................................45
Qualified Contracts.........................................45
Non-Qualified Contracts.....................................45
Annuity Benefit Payments.............................................45
Penalty Tax..........................................................46
Taxation of Death Benefit Proceeds...................................46
Transfers, Assignments, or Exchanges of Contracts....................46
Qualified Contracts - General........................................46
Individual Retirement Annuities.............................46
Tax-Sheltered Annuities.....................................46
Texas Optional Retirement Program...........................46
Pension and Profit Sharing Plans............................46
Certain Deferred Compensation Plans..................................48
Withholding..........................................................48
Possible Changes in Taxation.........................................48
Other Tax Consequences...............................................48
General..............................................................48
DISTRIBUTION OF THE CONTRACT..................................................48
LEGAL PROCEEDINGS.............................................................50
VOTING RIGHTS.................................................................50
AVAILABLE INFORMATION.........................................................50
STATEMENT OF ADDITIONAL INFORMATION...........................................53
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of the Participant's interest in the
Sub-Account(s) and the Fixed Account options as of the end of any Valuation
Period. The value of the Participant's interest in all Sub-Accounts is the
"Variable Account Value," and the value of the Participant's interest in all
Fixed Account options is the "Fixed Account Value."
ACCUMULATION PERIOD: The period prior to the Annuity Commencement Date during
which the Participant is eligible for benefits under the Contract.
ACCUMULATION UNIT: The unit of measurement used to calculate the value of the
Sub-Account(s) prior to the Annuity Commencement Date. 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 Annuitant is the Participant and is the person on whose life
Annuity Benefit payments are based.
ANNUITY BENEFIT: Periodic payments made by the Company under a Settlement
Option, which payments commence on or after the Annuity Commencement Date and
continue during the Annuity Payment Period, for the life of a person or for a
specific period. A Variable Dollar Annuity Benefit will provide payments that
vary in amount. Fixed Dollar Annuity Benefit payments remain constant.
ANNUITY COMMENCEMENT DATE: The date on which Annuity Benefits are to begin.
ANNUITY PAYMENT PERIOD: The period commencing with the Annuity Commencement
Date, during which Annuity Benefits are payable under the Contract with respect
to a Participant's participation interest.
ANNUITY UNIT: The unit of measurement used to determine the value of any
Variable Dollar Annuity Benefit payments after the first Annuity Benefit payment
is made by the Company. The value of an Annuity Unit is referred to as an
"Annuity Unit Value."
BENEFICIARY: The person or persons entitled to receive the Death Benefit if the
Participant dies prior to the Annuity Commencement Date.
CERTIFICATE ANNIVERSARY: An annual anniversary of the Certificate Effective
Date.
CERTIFICATE EFFECTIVE DATE: The date shown on the Certificate Specifications
page.
CERTIFICATE YEAR: Any period of twelve months commencing on the Certificate
Effective Date and on each Certificate Anniversary thereafter.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
CONTRACT OWNER: The person shown as such on the Application for the Contract,
the Participant Enrollment Form, the Contract Specifications page and the
Certificate Specifications page.
DEATH BENEFIT: The benefit described in the Death Benefit provision of this
Prospectus.
DUE PROOF OF DEATH: Any of (1) a certified copy of a death certificate; (2) a
certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or (4) any other proof satisfactory to the Company.
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FIXED ACCOUNT: An account which is part of the Company's general account, the
values of which are not dependent upon the investment performance of the
Sub-Accounts.
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.
PARTICIPANT: The person identified on the Certificate Specifications page, who
participates in the benefits of the Contract.
PURCHASE PAYMENT: A contribution after the deduction of premium tax, if any,
made to the Company in consideration for the Participant's participation under
the Contract.
SEPARATE ACCOUNT: Annuity Investors Variable Account A (also referred to as the
"Variable Account") which has been established by the Company pursuant to the
laws of the State of Ohio.
SETTLEMENT OPTION: The option elected by the Participant for the payment of
Annuity Benefits.
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which is
invested in the shares of a designated Fund.
SURRENDER VALUE: The amount payable under a Certificate if the Certificate is
surrendered.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date and ending at the close of trading
on the next succeeding Valuation Date. "Valuation Date" means each day on which
the New York Stock Exchange is open for business.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to the Company and in writing, that is sent to the Company on the
Company's form or in a form satisfactory to the Company, and that is received by
the Company at the Administrative Office. A Written Request is subject to any
payment made or any action the Company takes before the Written Request is
acknowledged by the Company. A Participant may be required to return his or her
Certificate to the Company in connection with a Written Request.
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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HIGHLIGHTS
THE CONTRACT AND CERTIFICATES. The Commodore Nauticus(Registered) Contract
described in this Prospectus is designed for use in connection with certain
retirement arrangements that qualify for favorable tax treatment under Sections
401, 403, or 457(g) of the Code, and for certain non-tax qualified annuity
purchases, including Code Section 457 (other than 457(g)) and non-qualified
deferred compensation arrangements.
The Contract Owner is the person shown as such on the Application for the
Contract, the Participant Enrollment Form, the Contract Specifications page and
the Certificate Specifications page. The Contract is held by the Contract Owner
for the benefit of Participants and Beneficiaries. Each participant for whom
Purchase Payment(s) are made will participate in the Contract as a Participant.
A Participant account will be established for each Participant. Subject to the
terms of a Certificate, the Account Value, after certain adjustments, will be
applied to the payment of an Annuity Benefit under the Settlement Option elected
by the Participant.
The Account Value will depend on the investment experience of the amounts
allocated to each Sub-Account of the Separate Account elected by the Participant
and/or interest credited on amounts allocated to the Fixed Account option(s)
elected. All Annuity Benefits and other values provided under a Certificate when
based on the investment experience of the Separate Account Sub-Accounts are
variable and are not guaranteed as to dollar amount. Therefore, prior to the
Annuity Commencement Date the Participant bears the entire investment risk with
respect to amounts allocated to the Separate Account Sub-Accounts under a
Certificate.
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE WITH RESPECT TO AMOUNTS
ALLOCATED TO THE SEPARATE ACCOUNT, SO THE PROCEEDS OF A SURRENDER COULD BE LESS
THAN THE TOTAL PURCHASE PAYMENTS.
THE SEPARATE ACCOUNT. Annuity Investors Variable Account A is a separate account
of the Company that is divided into Sub-Accounts (See "The Separate Account,"
page 23.) 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 Certificate and
the amount of any Annuity Benefits will vary to reflect the investment
performance of all the Sub-Accounts elected by the Participant and the deduction
of the charges described under "CHARGES AND DEDUCTIONS," page 31. For more
information about the Funds, see "THE FUNDS," page 18, 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 23.)
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TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE. Prior to the Annuity
Commencement Date, the Participant may transfer values between the Separate
Account and the Fixed Account, within the Fixed Account and among the
Sub-Accounts, by Written Request to the Company or by telephone in accordance
with the Company's telephone transfer rules. (See "TRANSFERS," page 26.)
The Company currently charges a fee of $25 for each transfer ("Transfer Fee") in
excess of twelve made during the same Certificate Year. (See "TRANSFERS," page
26.)
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SURRENDERS. All or part of the Surrender Value of a Certificate may be
surrendered by the Participant on or before the Annuity Commencement Date by
Written Request to the Company. Amounts surrendered may be subject to a
Contingent Deferred Sales Charge ("CDSC") depending upon how long the Purchase
Payments to be withdrawn have been held under the Certificate. Amounts withdrawn
also may be subject to a premium tax or similar tax, depending upon the
jurisdiction in which the Participant lives. Surrenders may be subject to a 10%
premature distribution penalty tax if made before the Participant reaches age 59
1/2. Surrenders may further be subject to federal, state or local income tax law
restrictions. (See "FEDERAL TAX MATTERS," page 38.)
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 31.)
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 the Fixed Account options. (See "CHARGES AND DEDUCTIONS," page
31.)
The Company deducts a Certificate maintenance charge each year ("Certificate
Maintenance Fee"). This Fee is currently $25 and is deducted from a
Participant's Variable Account Value on each Certificate Anniversary. The
Certificate Maintenance Fee may be waived under certain circumstances. The
Contract Maintenance Fee is not assessed against the Fixed Account options. (See
"CHARGES AND DEDUCTIONS," page 31.)
Charges for premium taxes may be imposed in some jurisdictions. Depending on the
applicability of such taxes, the charges may be deducted from Purchase Payments,
from surrenders, and from other payments made under the Certificate. (See
"CHARGES AND DEDUCTIONS," page 31.)
ANNUITY BENEFITS. Annuity Benefits are paid on a fixed or variable basis, or a
combination of both. (See "Annuity Benefit," page 34.)
DEATH BENEFIT. The Certificate provides for the payment of a Death Benefit if
the Participant dies prior to the Annuity Commencement Date. The Death Benefit
may be paid in one lump sum or pursuant to any available Settlement Option
offered under the Certificate. (See "DEATH BENEFIT," page 30.)
FEDERAL INCOME TAX CONSEQUENCES. A Participant generally should not be taxed on
increases in the Account Value until a distribution under the Certificate occurs
(e.g., a surrender or Annuity Benefit) or is deemed to occur (e.g., a loan in
default). Generally, a portion (up to 100%) of any distribution or deemed
distribution is taxable as ordinary income. The taxable portion of distributions
is generally subject to income tax withholding unless the recipient elects
otherwise. In addition, a 10% federal penalty tax may apply to certain
distributions. (See "FEDERAL TAX MATTERS," page 38.)
RIGHT TO CANCEL. Where required by state law, a Participant may cancel his or
her Certificate by giving the Company written notice of cancellation and
returning the Certificate before midnight of the twentieth day (or longer if
required by state law) after receipt. (See "Right to Cancel," page 24.)
CONTACTING THE COMPANY. All Written Requests and any questions or inquiries
should be directed to the Company's Administrative Office, P.O. Box 5423,
Cincinnati, Ohio 45201-5423, (800) 789-6771. All inquiries should include the
Certificate Number and the Participant's name.
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE ACCOMPANYING
PROSPECTUSES FOR THE FUNDS. PLEASE REFER TO THE FUND PROSPECTUSES FOR DETAILED
INFORMATION ABOUT THE FUNDS. THE REQUIREMENTS OF A PARTICULAR RETIREMENT PLAN,
AN ENDORSEMENT TO THE CONTRACT OR CERTIFICATE, OR LIMITATIONS OR PENALTIES
IMPOSED BY THE CODE OR THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, MAY IMPOSE ADDITIONAL LIMITS OR RESTRICTIONS ON PURCHASE PAYMENTS,
SURRENDERS, DISTRIBUTIONS, BENEFITS, OR ON OTHER PROVISIONS OF THE CONTRACT OR
THE CERTIFICATES THEREUNDER. THIS PROSPECTUS DOES NOT DESCRIBE SUCH LIMITATIONS
OR RESTRICTIONS. (SEE "FEDERAL TAX MATTERS," PAGE 38.)
- --------------------------------------------------------------------------------
Page 9
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
The following table gives per unit information about the financial history of
each Sub-Account of the Separate Account from inception to December 31, 1997.
This information should be read in conjunction with the Separate Account
financial statements (including the notes thereto) included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
STANDARD CONTRACTS
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
DREYFUS VARIABLE INVESTMENT FUND:
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 PORTFOLIO3
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
- --------------------
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>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
1997 1996 1995
---- ---- ----
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.:
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 10.000000(2) 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
- --------------------------------------------------------------------------------
Page 11
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
ENHANCED CONTRACTS(4)
1997 1996 1995
---- ---- ----
DREYFUS VARIABLE INVESTMENT FUND:
CAPITAL APPRECIATION PORTFOLIO
Accumulation UV - beginning 12.369954 9.946124 10.000000(1)
Accumulation UV - ending 15.690822 12.369954 9.946124
Accumulated units at year end 3,990.613 313.603 0.000
GROWTH AND INCOME PORTFOLIO
Accumulation UV - beginning 10.000000(2) N/A N/A
Accumulation UV - ending 11.498113 N/A N/A
Accumulated units at year end 5.708 N/A N/A
SMALL CAP PORTFOLIO
Accumulation UV - beginning 10.000000(2) N/A N/A
Accumulation UV - ending 12.169119 N/A N/A
Accumulated units at year end 1,993.698 N/A N/A
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
Accumulation UV - beginning 11.962818 9.962000 10.000000(1)
Accumulation UV - ending 15.220020 11.962818 9.962000
Accumulated units at year end 5,460.625 0.000 0.000
DREYFUS STOCK INDEX FUND
Accumulation UV - beginning 12.130821 9.994303 10.000000(1)
Accumulation UV - ending 15.977173 12.130821 9.994303
Accumulated units at year end 4,263.339 600.306 0.000
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO
Accumulation UV - beginning 11.015008 10.301075 10.000000(1)
Accumulation UV - ending 12.293313 11.015008 10.301075
Accumulated units at year end 1,754.459 1,910.271 0.000
WORLDWIDE GROWTH PORTFOLIO
Accumulation UV - beginning 13.090061 10.241132 10.000000(1)
Accumulation UV - ending 15.839608 13.090061 10.241132
Accumulated units at year end 3,070.952 272.267 0.000
BALANCED PORTFOLIO
Accumulation UV - beginning 11.707739 10.173040 10.000000(1)
Accumulation UV - ending 14.160835 11.707739 10.173040
Accumulated units at year end 8,896.063 1,024.467 0.000
SHORT-TERM BOND PORTFOLIO(3)
Accumulation UV - beginning 10.365199 10.063557 10.000000(1)
Accumulation UV - ending 10.958058 10.365199 10.063557
Accumulated units at year end 2,091.259 17.440 0.000
- ------------------
(4) Enchanced Contracts have an annual mortality and expense risk charge of 0.95%.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
1997 1996 1995
---- ---- ----
MERRILL LYNCH VARIABLE SERIES FUNDS INC.:
BASIC VALUE FOCUS FUND
Accumulation UV - beginning 12.133299 10.149258 10.000000(1)
Accumulation UV - ending 14.497904 12.133299 10.149258
Accumulated units at year end 2,123.159 96.296 0.000
GLOBAL STRATEGY FOCUS FUND
Accumulation UV - beginning 11.330202 10.107054 10.000000(1)
Accumulation UV - ending 12.563763 11.330202 10.107054
Accumulated units at year end 1,186.434 30.061 0.000
HIGH CURRENT INCOME FUND
Accumulation UV - beginning 11.148637 10.120248 10.000000(1)
Accumulation UV - ending 12.258690 11.148637 10.120248
Accumulated units at year end 1,036.359 255.389 0.000
DOMESTIC MONEY MARKET FUND
Accumulation UV - beginning 1.045819 1.002655 1.000000(1)
Accumulation UV - ending 1.087469 1.045819 1.002655
Accumulated units at year end 10,686.456 1,260.991 0.000
PBHG INSURANCE SERIES FUND, INC.:
PBHG GROWTH II PORTFOLIO
Accumulation UV - beginning 10.000000(2) N/A N/A
Accumulation UV - ending 10.682296 N/A N/A
Accumulated units at year end 496.211 N/A N/A
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
Accumulation UV - beginning 10.000000(2) N/A N/A
Accumulation UV - ending 10.344412 N/A N/A
Accumulated units at year end 156.518 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 12.315552 N/A N/A
Accumulated units at year end 0.000 N/A N/A
FIXED INCOME PORTFOLIO
Accumulation UV - beginning 10.000000(2) N/A N/A
Accumulation UV - ending 10.762308 N/A N/A
Accumulated units at year end 0.000 N/A N/A
STRONG OPPORTUNITY FUND II, INC.
Accumulation UV - beginning 10.000000(2) N/A N/A
Accumulation UV - ending 12.335975 N/A N/A
Accumulated units at year end 0.000 N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
Page 13
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES
PARTICIPANT TRANSACTION EXPENSES.
================================================================================
Sales Load Imposed on Purchase Payments NONE
- --------------------------------------------------------------------------------
Contingent Deferred Sales Charge (as a percentage of Purchase Payments
withdrawn)
Certificate Years since Purchase Payment Receipt
- --------------------------------------------------------------------------------
less than 1 year 7%
- --------------------------------------------------------------------------------
1 year but less than 2 years 6%
- --------------------------------------------------------------------------------
2 years but less than 3 years 5%
- --------------------------------------------------------------------------------
3 years but less than 4 years 4%
- --------------------------------------------------------------------------------
4 years but less than 5 years 3%
- --------------------------------------------------------------------------------
5 years but less than 6 years 2%
- --------------------------------------------------------------------------------
6 years but less than 7 years 1%
- --------------------------------------------------------------------------------
7 years or more 0%
- --------------------------------------------------------------------------------
Surrender Fees NONE
- --------------------------------------------------------------------------------
Transfer Fee(5) $25
- --------------------------------------------------------------------------------
Annual Certificate Maintenance Fee $25
================================================================================
- ----------------------
5 The first twelve transfers in a Certificate Year are free. Thereafter, a $25
fee will be charged on each subsequent transfer.
- --------------------------------------------------------------------------------
Page 14
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
ANNUAL EXPENSES. The purpose of these tables is to assist a Participant in
understanding the various costs and expenses that the Participant will bear
directly and indirectly with respect to investment in the Separate Account. The
tables reflect expenses of each Sub-Account as well as of the Funds in which the
Separate Account invests. See "CHARGES AND DEDUCTIONS," page 31 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>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT JANUS A.S. JANUS A.S. JANUS A.S. DREYFUS V.I.F. DREYFUS V.I.F. DREYFUS V.I.F.
ANNUAL EXPENSES(6) (as a AGGRESSIVE WORLDWIDE BALANCED GROWTH AND SMALL CAP CAPITAL
percentage of average GROWTH GROWTH PORTFOLIO(7) INCOME PORTFOLIO APPRECIATION
PORTFOLIO(7) PORTFOLIO(7) --------- PORTFOLIO --------- PORTFOLIO
Separate Account --------- --------- --------- ---------
assets)
- ---------------------------------------------------------------------------------------------------------------------------------
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%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------
(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
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 0.074%, 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.
</TABLE>
- --------------------------------------------------------------------------------
Page 15
<PAGE>
GROWTH FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT THE DREYFUS
ANNUAL EXPENSES(6) SOCIALLY MERRILL LYNCH MERRILL LYNCH MERRILL LYNCH MERRILL LYNCH
(as a percentage of RESPONSIBLE V.S.F. BASIC V.S.F. GLOBAL V.S.F. HIGH V.S.F.
average Separate GROWTH FUND, DREYFUS STOCK VALUE FOCUS STRATEGY CURRENT DOMESTIC MONEY
Account assets) INC. INDEX FUND FUND FOCUS FUND INCOME FUND MARKET FUND
----------- ---------- ------------- ------------- ------------ --------------
- ----------------------------------------------------------------------------------------------------------------------------------
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 STRONG MORGAN STANLEY MORGAN STANLEY - PBHG INSURANCE PBHG INSURANCE
ANNUAL EXPENSES(6) OPPORTUNITY U.S. REAL ESTATE FIXED INCOME SERIES FUND, INC. SERIES FUND, INC.-
(as a percentage of FUND II, INC. PORTFOLIO(9) PORTFOLIO(9) - PBHG GROWTH PBHG TECHNOLOGY &
average Separate ------------- --------- --------- II PORTFOLIO(10) COMMUNICATIONS
Account assets) --------------- 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>
- --------------------------------------------------------------------------------
Page 16
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
- -------------------
(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.
(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 16A
<PAGE>
GROUP 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 31 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 CERTIFICATE 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 tables
and examples do not include charges to the Participant 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 17
<PAGE>
GROUP 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 $21 $69 $123 $299
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund-Capital Appreciation
Portfolio $22 $72 $129 $312
- -------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. $22 $72 $130 $313
- -------------------------------------------------------------------------------------------------------------------------
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-PBHG Growth II Portfolio $26 $85 $152 $363
- -------------------------------------------------------------------------------------------------------------------------
PBHG Insurance Series Fund-PBHG 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.
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Page 18
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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THE FUNDS
The Separate Account currently has seventeen Funds that are available for
investment under a Certificate. Each Fund has separate investment objectives and
policies. As a result, each Fund operates as a separate investment portfolio and
the investment performance of one Fund has no effect on the investment
performance of any other Fund. There is no assurance that any of these Funds
will achieve their stated objectives. The Securities and Exchange Commission
does not supervise the management or the investment practices and/or policies of
any of the Funds.
The Separate Account invests exclusively in shares of the Funds listed below
(followed by a brief overview of each Fund's investment objective(s) and
policies):
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Page 18A
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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 Portfolio.
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.
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Page 19
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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's manager, and Mellon Equity
Associates, an affiliate of Dreyfus, is the index manager.
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Page 19A
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GROUP 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 Certificate. See the attached Prospectus for the Fund.
DOMESTIC MONEY MARKET FUND. The investment objectives of the Fund are to
seek preservation of capital, maintain liquidity and achieve the highest
possible current income consistent with the foregoing objectives by
investing in short-term domestic money market securities.
Merrill Lynch Asset Management, L.P. serves as the investment adviser to
these Funds.
STRONG OPPORTUNITY FUND II, INC.:
STRONG OPPORTUNITY FUND II. The investment objective of the Strong
Opportunity Fund II is to seek capital growth. It currently emphasizes
medium-sized companies that the Fund's adviser believes are
under-researched and attractively valued.
Strong Capital Management, Inc. serves as the investment adviser to this
Fund.
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., Inc.) 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., Inc.) serves as the investment adviser
to the Fixed Income Portfolio.
- --------------------------------------------------------------------------------
Page 20
<PAGE>
GLOBAL 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 revenues 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 Participant's
interest in a Sub-Account will not be made without prior notice to the
Participant and the prior approval of the Securities and Exchange Commission.
Nothing contained herein shall prevent the Separate Account from purchasing
other securities for other series or classes of variable annuity policies, or
from effecting an exchange between series or classes of variable policies on the
basis of requests made by Participants.
- --------------------------------------------------------------------------------
Page 21
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
New Sub-Accounts may be established when, in the sole discretion of the Company,
marketing, tax, investment or other conditions so warrant. Any new Sub-Accounts
will be made available to existing Participants on a basis to be determined by
the Company. Each additional Sub-Account will purchase shares in a Fund or in
another mutual fund or investment vehicle. The Company may also eliminate one or
more Sub-Accounts, if in its sole discretion, marketing, tax, investment or
other conditions so warrant. In the event any Sub-Account is eliminated, the
Company will notify Participants and request a re-allocation of the amounts
invested in the eliminated Sub-Account.
In the event of any substitution or change, the Company may make such changes in
the Contract and Certificate as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the Certificates, the Separate Account may be
operated as a management company under the 1940 Act or any other form permitted
by law, may be de-registered under the 1940 Act in the event such registration
is no longer required, or may be combined with one or more separate accounts.
- --------------------------------------------------------------------------------
Page 21A
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
From time to time, the Company may advertise yields and/or total returns for the
Sub-Accounts. THESE FIGURES ARE BASED ON HISTORICAL INFORMATION AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. For a description of the methods used
to determine yield and total return, see the Statement of Additional
Information.
YIELD DATA. The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in that Sub-Account over a specified seven-day
period. The Company may also advertise the effective yield of the Money Market
Sub-Account which is calculated similarly but, when annualized, the income
earned by an investment in that Sub-Account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a Sub-Account other than the Money Market Sub-Account refers to the
annualized income generated by an investment in the Sub-Account over a specified
30-day period. The yield calculations do not reflect the effect of any CDSC or
premium taxes that may be applicable to a particular Certificate which would
reduce the yield with respect to that Certificate.
TOTAL RETURN DATA. The average annual total return of a Sub-Account refers to
return quotations assuming an investment has been held in the Sub-Account for
various periods of time including, but not limited to, a period measured from
the date the Sub-Account commenced operations. When a Sub-Account has been in
operation for one, five and ten years, respectively, the standardized average
annual total return presented will be presented for these periods, although
other periods may also be provided. The standardized average annual total return
quotations reflect the deduction of all applicable charges except for premium
taxes. In addition to standardized average annual total return for a
Sub-Account, the Company may provide cumulative total return and/or other
non-standardized total return for the Sub-Account. 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. Annuity Investors Life Insurance
Company(Registered) (the "Company") is a stock life insurance company
incorporated under the laws of the State of Ohio in 1981. The Company is
principally engaged in the sale of fixed and variable annuity policies.
The Company is a wholly-owned subsidiary of Great American Life Insurance
Company which is a wholly-owned subsidiary of American Annuity Group, 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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Page 22
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GROUP 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 Contract Owners and Participants, the ratings
and other information assigned to it by one or more independent rating
organizations such as A.M. Best Company, Standard & Poor's, and Duff & Phelps.
The purpose of the ratings is to reflect the financial strength and/or
claims-paying ability of the Company and should not be considered as reflecting
on the investment performance of assets held in the Separate Account. Each year
the A.M. Best Company reviews the financial status of thousands of insurers,
culminating in the assignment of Best's Ratings. These ratings reflect their
current opinion of the relative financial strength and operating performance of
an insurance company in comparison to the norms of the life/health insurance
industry. In addition, the claims-paying ability of the Company as measured by
Standard & Poor's or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to Contract Owners and Participants. These ratings are
opinions of those agencies as to an operating insurance company's financial
capacity to meet the obligations of its insurance and annuity policies in
accordance with their terms. Such ratings do not reflect the investment
performance of the Separate Account or the degree of risk associated with an
investment in the Separate Account.
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
Contract and Certificates.
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 Contract Owners and Participants under the Contracts
offered by this Prospectus and under all other contracts which provide for
accumulated values or dollar amount payments to reflect investment results of
the Separate Account. The obligations arising under the Contract and
Certificates are obligations of the Company.
The Separate Account has seventeen Sub-Accounts, each of which is invested
solely in a specific corresponding Fund. (See "THE FUNDS," page 18.) Changes to
the Sub-Accounts may be made at the discretion of the Company. (See "Additions,
Deletions, or Substitutions," page 21.)
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.
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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The Company has sole discretion to invest the assets of the Fixed Account,
subject to applicable law. The Company delegates the investment of the assets of
the Fixed Account to American Money Management Corporation. Allocation of any
amounts to the Fixed Account does not entitle Participants to share directly in
the investment experience of these assets. The Company assumes the risk of
investment gain or loss on the portion of the Account Value allocated to the
Fixed Account. All assets held in the general account are subject to the
Company's general liabilities from business operations.
- --------------------------------------------------------------------------------
Page 23A
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GROUP 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 Certificate 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 Participant may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be reallocated to any of the then-current options under the
Certificate (including the various Sub-Accounts within the Separate Account),
except that a Fixed Account option with a guarantee period that would extend
past the Annuity Commencement Date may not be selected. In particular, in the
case of renewals occurring within one year of the Annuity Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account Option.
If the Participant does not specify a new option in accordance with the
preceding paragraph, the Participant will be deemed to have elected the same
Fixed Account option 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 Participant
will be deemed to have selected the Fixed Account option with the longest
available guarantee period that expires prior to the Annuity Commencement Date,
or failing that, the Fixed Accumulation Account Option.
THE CONTRACT
The Contract is a group flexible premium deferred annuity. The rights and
benefits are described below and in each Certificate and the Contract. The
Company reserves the right to make any modification to conform the Contract and
Certificates thereunder to, or give the Participant the benefit of, any
applicable law. The obligations under the Contract and Certificates are
obligations of the Company.
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 of 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 Certificate. The various administrative rules
described below will apply separately to each Certificate, unless otherwise
noted. The Company reserves the right to terminate any Certificate for which the
Account Value is less than $500 and no Purchase Payment has been received for at
least two years.
RIGHT TO CANCEL (ONLY WHERE REQUIRED BY STATE LAW). A Participant may cancel his
or her Certificate by giving the Company written notice of cancellation and
returning the Certificate before midnight of the twentieth day following the
date the Participant receives the Certificate. The Certificate must be returned
to the Company, and the required notice must be given in person, or to the agent
who sold it to the Participant, or by mail. If by mail, the return of the
Certificate or notice is effective on the date it is postmarked, with the proper
address and with postage paid. If the Participant cancels the Certificate as set
forth above, the Certificate will be void and the Company will refund the
Purchase Payment(s) for that Participant, plus or minus any investment gains or
losses under the Certificate as of the end of the Valuation Period during which
the returned Certificate is received by the Company. Where required by state
law, the right to cancel provision of a Certificate may provide for refund of a
different amount, or a right to cancel for a different 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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<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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ENROLLMENT AND PURCHASE PAYMENTS
PURCHASE PAYMENTS. Currently, the minimum initial Purchase Payment for a
Certificate issued under a periodic payment program is $50; for other
Certificates, $2,000. Subsequent Purchase Payments (Purchase Payments other than
periodic payments or initial Purchase Payments) must be at least $50 per month
for any Certificate. 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 for a Certificate so long as the Certificate has not
been fully surrendered and the Participant 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 a
Participant's account. If the Participant Enrollment Form is in good order, the
Company will apply the initial Purchase Payment to an account for the
Participant within two business days of receipt of the Purchase Payment at the
Administrative Office. If the Enrollment Form is not in good order, the Company
will attempt to get the Enrollment Form in good order within five business days.
If the Enrollment Form is not in good order at the end of this period, the
Company will inform the Contract Owner of the reason for the delay and that the
Purchase Payment will be returned immediately unless he or she specifically
consents to the Company keeping the Purchase Payment until the Enrollment Form
is in good order. Once the Enrollment Form is in good order, the Purchase
Payment will be applied to the Participant's account within two business days.
Each additional Purchase Payment is credited to a Certificate as of the next
Valuation Date following the receipt of such additional Purchase Payment.
No Purchase Payment for any Certificate may exceed $500,000 without prior
approval of the Company.
ALLOCATION OF PURCHASE PAYMENTS. The Company will allocate Purchase Payments to
the Fixed Account options and/or to the Sub-Accounts according to the
instructions in the Participant Enrollment Form or subsequent Written Request.
Allocations must be made in whole percentages. The minimum amount that can 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 for a Certificate is equal to the aggregate value of the
Participant's interest in the Sub-Account(s) and the Fixed Account options as of
the end of any Valuation Period. The value of a Participant's interest in all
Sub-Accounts is the "Variable Account Value," and the value of a Participant's
interest in all Fixed Account options is the "Fixed Account Value."
FIXED ACCOUNT VALUE. The Fixed Account Value for a Certificate 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 Certificate at any time
is equal to the sum of the number of Accumulation Units attributable to that
Certificate for each Sub-Account multiplied by the Accumulation Unit Value for
the applicable Sub-Account at the end of the 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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<PAGE>
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of a Participant's Variable Account
Value;
3) payment of a Death Benefit;
4) application of a Participant's Variable Account Value to a
Settlement Option;
5) deduction of the Certificate Maintenance Fee; or
6) deduction of a Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or the Annuity Commencement Date or Death Benefit Valuation
Date, or the end of the Valuation Period on which the Certificate 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 current Valuation
Period; plus or minus
c. a per share charge or credit for any taxes reserved for,
which is determined by the Company to have resulted from the
investment operations of the Sub-Account;
(2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately
preceding Valuation Period; and
(3) is the factor representing the Mortality and Expense Risk
Charge and the Administration Charge deducted from the
Sub-Account for the number of days in the applicable
Valuation Period.
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Page 26
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
TRANSFERS
Prior to the Annuity Commencement Date, the Participant 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 $500 at the time of the transfer, the entire amount of the
Sub-Account balance must be transferred. The Participant may also transfer
amounts from any Fixed Account 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 "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 Certificate Year of
20% of the of the Fixed Account option's value as of the most recent Certificate
Anniversary. However, if the value of the Fixed Account option from which the
transfer is made is less than $500 at the time of the transfer, then the entire
balance will be transferred. Fixed Account option transfers are not permitted
during the first Certificate Year. 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 at
least six months from the date of transfer.
The Company charges a Transfer Fee of $25 for each transfer in excess of twelve
during the same Certificate Year.
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Page 26A
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
TELEPHONE TRANSFERS. A Participant also may place a request for all or part of
the Account Value to be transferred by telephone. All transfers must be in
accordance with the terms of the Certificate. Transfer instructions are
currently accepted on each Valuation Date between 9:30 a.m. and 4:00 p.m.
Eastern Time at (800) 789-6771. Once instructions have been accepted, they may
not be rescinded; however, new telephone instructions may be given the following
day.
The Company will not be liable for complying with telephone instructions the
Company reasonably believes to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The Participant will bear the
risk of such loss. The Company will employ reasonable procedures to determine
that telephone instructions are genuine. If the Company does not employ such
procedures, the Company may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, tape
recording telephone instructions.
DOLLAR COST AVERAGING. Prior to the Annuity Commencement Date, the Participant
may establish automatic transfers from the Money Market Sub-Account to any of
the other Sub-Account(s), on a monthly or quarterly basis, by submitting to the
Administrative Office a Dollar Cost Averaging Enrollment Form. No Dollar Cost
Averaging transfers may be made to any of the Fixed Account options. The 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-Accounts in the same percentage distribution
as directed in the Dollar Cost Averaging Enrollment 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 Certificate without a Transfer Fee charge.
Before electing Dollar Cost Averaging, a Participant should consider the risks
involved in switching between investments available under the Certificate.
Dollar Cost Averaging requires regular investments regardless of fluctuating
price levels and does not guarantee profits or prevent losses in a declining
market. A Participant should consider his or her financial ability to continue
Dollar Cost Averaging transfers through periods of changing price levels.
The Participant may terminate Dollar Cost Averaging services at any time, 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 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 Participant
may elect to have the Company perform Portfolio Rebalancing services. The
election of Portfolio Rebalancing instructs the Company to automatically
transfer amounts between the Sub-Accounts and the Fixed Accumulation Account
Option to maintain percentage allocations selected by the Participant.
Prior to the Annuity Commencement Date, the Participant 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 Participant 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 Certificate without a Transfer Fee charge.
The Participant 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 for Portfolio Rebalancing services.
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<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
INTEREST SWEEP. Prior to the Annuity Commencement Date, the Participant 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 option the value of each Fixed
Account option selected must be at least $5,000. The maximum amount that can 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 charge does not apply to Interest Sweep transfers,
and Interest Sweep transfers will not count toward the twelve transfers
permitted under the Certificate without a Transfer Fee charge.
The Participant 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 for Interest Sweep services.
PRINCIPAL GUARANTEE OPTION. The Participant 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
Participant's instructions. The minimum Purchase Payment eligible for the
Principal Guarantee program is $5,000.
CHANGES BY THE COMPANY. The Company reserves the right, at any time, to
terminate, suspend or modify the transfer privileges described above without
prior notice to Participants, as permitted by applicable law. The Company may
also impose an annual fee or increase the current annual fee for any of the
foregoing services in amount(s) as the Company may then determine to be
reasonable for participation for the service.
SURRENDERS
SURRENDER VALUE. The Participant may surrender the Certificate 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
Certificate, 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 31.)
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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Page 28
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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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. (See
"FEDERAL TAX MATTERS," page 38.)
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE. The Company may suspend or
delay the date of payment of a partial or full surrender of the Variable Account
Value for any period if:
1) the New York Stock Exchange ("NYSE") is closed or trading on the
NYSE is restricted;
2) an emergency exists (as determined by the Securities and Exchange
Commission) as a result of which (a) the disposal of securities in
the Separate Account is not reasonably practicable; or (b) it is
not reasonably practicable to determine fairly the value of the
net assets in the Separate Account; or
3) the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of any partial or full
surrender of the Fixed Account Value for up to six months 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 PARTICIPANT ASSUMES THE INVESTMENT RISK AND BECAUSE CERTAIN SURRENDERS
ARE SUBJECT TO A CDSC, THE TOTAL AMOUNT PAID UPON SURRENDER OF THE CERTIFICATE
(TAKING INTO ACCOUNT ANY PRIOR SURRENDERS) MAY BE MORE OR LESS THAN THE TOTAL
PURCHASE PAYMENTS.
Since the qualified contracts offered by this Prospectus will be issued in
connection with retirement plans which meet the requirements of Sections 401,
403 or 457 of the Code, as applicable, reference should be made to the terms of
the particular plans for any additional limitations or restrictions on
surrenders.
FREE WITHDRAWAL PRIVILEGE. In accordance with the provisions of the Contract,
and subject to the terms of a Participant's plan, the Company will waive the
CDSC, to the extent applicable, on full or partial surrenders during the second
and succeeding Certificate Years, on an amount equal to not more than the
greater of: (1) accumulated earnings as of the last Certificate Anniversary
(Account Value in excess of Purchase Payments); or (2) 10% of the Account Value
as of the last Certificate Anniversary.
If the Free Withdrawal Privilege is not exercised during a Certificate Year, it
does not carry over to the next Certificate Year.
SYSTEMATIC WITHDRAWAL. Prior to the Annuity Commencement Date, the Participant,
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 31.) The Participant may begin or discontinue systematic withdrawals at any
time by Written Request to the Company, but at least 30 days notice must be
given to change any systematic withdrawal instructions that are currently in
place. 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 38.)
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Page 29
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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CONTRACT LOANS
If permitted under a Contract, a Participant under such Contract 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 and to applicable retirement
program rules. Tax advisers and retirement plan fiduciaries should be consulted
prior to exercising loan privileges. Loan provisions are described in the loan
endorsement.
The amount of any loan will be deducted from the 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
DEATH OF PARTICIPANT. If a Participant dies before the Annuity Commencement
Date, a Death Benefit will be paid to the primary Beneficiary(ies) then living
at the time of the Participant's death. If no primary Beneficiary is living at
the time of the Participant's death or if the primary Beneficiary dies within 30
days after the Participant's death and no Death Benefit has been paid, the Death
Benefit will be paid to the person(s) named as contingent Beneficiary(ies). If
no primary or contingent Beneficiary is living at the time of the Participant's
death, the Death Benefit will be paid to the Participant's estate. No Death
Benefit is payable on or after the Annuity Commencement Date. Only one Death
Benefit is payable with respect to a Participant's participation interest under
the Contract.
DEATH BENEFIT. The Death Benefit will be determined as of the Death Benefit
Valuation Date. The Death Benefit Valuation Date is the Valuation Period during
which the Company receives both Due Proof of Death of the Participant and a
Written Request regarding payment of the Death Benefit. If both documents are
not received at the same time, the Death Benefit Valuation Date is the Valuation
Period during which the Company receives the latter of Due Proof of Death or a
Written Request regarding payment of the Death Benefit.
If a Participant 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 not previously deducted, and less any
outstanding loans;
2) the total Purchase Payments, less any applicable premium tax not
previously deducted, less any partial surrenders, and less any
outstanding loans; or
3) the largest Death Benefit amount on any Certificate Anniversary prior
to death that is an exact multiple of five and occurs prior to the
Death Benefit Valuation Date, less any applicable premium tax not
previously deducted, less any partial surrenders after such Death
Benefit was determined and less any outstanding loans.
If the Participant dies 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 not previously deducted, and less any
outstanding loans;
2) the total Purchase Payments, less any applicable premium tax not
previously deducted, less any partial surrenders, and less any
outstanding loans; or
3) the largest Death Benefit amount on any Certificate Anniversary prior
to death that is both an exact multiple of five and occurs prior to the
date on which the Participant attained age 75, less any applicable
premium tax not previously deducted, less any partial surrenders after
such Death Benefit was determined and less any outstanding loans.
Payment of the Death Benefit is not subject to a CDSC.
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Page 30
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GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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BENEFICIARY. The primary Beneficiary(ies) and contingent Beneficiary(ies) are
named on the Participant Enrollment Form. The Beneficiaries may be changed at
any time prior to the Participant's death. The Company must receive a Written
Request to change a Beneficiary. Any such change will relate back to and take
effect on the date the Written Request was signed. The Company will not be
liable for any payment it makes before such Written Request has been received
and acknowledged at the Administrative Office.
In determining the identity or non-existence of any Beneficiary not identified
by name, the Company may rely on an affidavit by any person whom the Company
reasonably believes to be a reliable source for that information.
CHARGES AND DEDUCTIONS
There are two types of charges and deductions. First, there are charges assessed
under the Certificate. These charges include the CDSC, the Administration
Charge, the Mortality and Expense Risk Charge, Premium Taxes and Transfer Fees.
All of these charges are described below and some may not be applicable to every
Certificate. Second, there are Fund expenses for fund management fees and
administration expenses. These fees are described in the prospectus and
statement of additional information for each Fund.
CONTINGENT DEFERRED SALES CHARGE ("CDSC"). No deduction for front-end sales
charges is made from Purchase Payments. However, the Company may deduct a CDSC
of up to 7% of Purchase Payments on certain surrenders to partially cover
certain expenses incurred by the Company relating to the sale of the Contract,
including commissions paid, the costs of preparation of sales literature and
other promotional costs and acquisition expenses.
The CDSC applies to and is calculated separately for each Purchase Payment. The
CDSC percentage varies according to the number of full years elapsed between the
date of receipt of a Purchase Payment and the date a Written Request for
surrender is made. The amount of the CDSC is determined by multiplying the
amount withdrawn subject to the CDSC by the CDSC percentage in accordance with
the following table. Surrenders will be deemed to be withdrawn first from
accumulated earnings (which may be surrendered without charge) and then to
Purchase Payments on a first-in, first-out basis.
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NUMBER OF FULL YEARS ELAPSED BETWEEN DATE CONTINGENT DEFERRED SALES CHARGE
OF RECEIPT OF PURCHASE PAYMENT AND DATE AS A PERCENTAGE OF ASSOCIATED
WRITTEN REQUEST FOR SURRENDER RECEIVED PURCHASE PAYMENT SURRENDERED
- --------------------------------------------------------------------------------
0 7%
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1 6%
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2 5%
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3 4%
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4 3%
- --------------------------------------------------------------------------------
5 2%
- --------------------------------------------------------------------------------
6 1%
- --------------------------------------------------------------------------------
7 or more 0%
- --------------------------------------------------------------------------------
In no event shall the CDSC assessed against the Certificate exceed 7% of the
aggregate Purchase Payment(s).
Any Purchase Payments that have been held by the Company for at least seven
years may be surrendered free of any CDSC. The CDSC will not be imposed on
amounts surrendered under the Free Withdrawal Privilege. (See "Free Withdrawal
Privilege," page 29.)
No CDSC is assessed upon payment of the Death Benefit.
The CDSC also will be waived upon surrender if the Contract is modified by the
Long-Term Care Waiver Rider and the Participant 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 Certificate Anniversary.
This Rider may not be available in all jurisdictions. Also, the CDSC will be
waived if the Participant 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.
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Page 31
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
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The Company may reduce or waive the CDSC under the Contract and Certificates
when the Company incurs reduced sales and servicing expenses. The entitlement to
such a reduction in the CDSC will be based on: (i) the size and type of the
group to which sales are to be made; (ii) the anticipated total amount of
Purchase Payments to be received; and/or (iii) any prior or existing
relationship with the Company. The CDSC may be reduced or waived in connection
with a Contract offered to a group of employees of the Company, its subsidiaries
and/or affiliates. There may be other circumstances, of which the Company is not
presently aware, which could result in reduced sales expenses. In no event will
reduction or elimination of the CDSC be permitted where such reduction or
elimination will be unfairly discriminatory to any purchaser.
The CDSC arising from a surrender of the Certificate will be waived for
Certificates under a Contract issued with an Employer Plan Endorsement or a
Deferred Compensation Endorsement if the Participant incurs a separation from
service.
The CDSC arising from a surrender of the Certificate will be waived for
Certificates under a Contract issued with a Tax Sheltered Annuity Endorsement
(and without an Employer Plan Endorsement) if the Participant: (i) incurs a
separation from service, has attained age 55 and has held the Contract for at
least seven years; or (ii) 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 Participants, as permitted by applicable law.
MAINTENANCE AND ADMINISTRATIVE CHARGES. On each Certificate Anniversary, the
Company deducts an annual Certificate Maintenance Fee as partial compensation
for expenses relating to the issuance and maintenance of the Certificate, and
the Separate Account. The annual Certificate Maintenance Fee is $25. The
Certificate Maintenance Fee is deducted pro-rata from the Sub-Accounts for that
Certificate and is not assessed against Fixed Account options. If the
Certificate is surrendered on any day other than on the Certificate Anniversary,
the Certificate Maintenance Fee will be deducted in full at the time of such
surrender. If a Variable Dollar Annuity Benefit is elected, a portion of the $25
Certificate Maintenance Fee will be deducted from each annuity payment.
The Company will waive the Certificate Maintenance Fee if the Account Value for
the Certificate is equal to or greater than $30,000 on the date of the
assessment of the Charge. The Company will waive the Certificate Maintenance Fee
after the Annuity Commencement Date if the amount applied to a Variable Dollar
Annuity Benefit exceeds $30,000.
The Company may waive the Certificate Maintenance Fee in connection with sales
of Contracts to a trustee, employer or similar entity representing a group where
the Company determines that such sales result in savings of sales and/or
administrative expenses. The Certificate Maintenance Fee also may be waived with
respect to a Contract offered to a group of employees of the Company, its
subsidiaries and/or affiliates. The Company may waive the Certificate
Maintenance Fee in certain situations where the Company expects to realize
significant economies of scale with respect to sales of Contracts and
Certificates. This is possible because sales costs do not increase in proportion
to the Purchase Payments under the Contracts and Certificates sold; for example,
the per dollar transaction cost for a sale of a Contract and Certificates with
$500,000 of Purchase Payments is generally much higher than the per dollar cost
for a sale of a Contract and Certificates with $1,000,000 of Purchase Payments.
Thus, the applicable sales costs decline as a percentage of the Purchase
Payments as the amount of Purchase Payments increases. In such a situation, the
Company may be designated as a preferred variable annuity contract provider by
the employer or trustee or the employee benefit plan.
The Company has not imposed an Administration Charge and has set the Certificate
Maintenance Fee at a level such that the Company will recover no more than the
anticipated and estimated costs associated with administering the Certificate
and Separate Account. The Company does not expect to make a profit from the
actual administrative costs of a particular Certificate. The Company does not
expect to make a profit from the Certificate Maintenance Fee.
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Page 32
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE. The Company imposes a Mortality and Expense
Risk Charge as compensation for bearing certain mortality and expense risks
under the Certificate. For assuming these risks, the Company makes a daily
charge equal to .003403% corresponding to an effective annual rate of 1.25% of
the daily Net Asset Value of each Sub-Account in the Separate Account. The
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 Annuity Commencement Date and after the
Annuity Commencement Date if a Variable Dollar Annuity 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 the Fixed Account
options.
The mortality risks assumed by the Company arise from its contractual
obligations to make Annuity Benefit payments (determined in accordance with the
annuity tables and other provisions contained in the Certificate).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 Certificate.
The expense risk assumed by the Company is the risk that the Company's actual
expenses in administering the Certificates and the Separate Account will exceed
the amount recovered through the Certificate Maintenance Fees and Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to cover actual costs
and risks assumed, the loss will fall on the Company. Conversely, if this charge
is more than sufficient, any excess will be profit to the Company. Currently,
the Company expects a profit from this charge.
The Company recognizes that the CDSC may not generate sufficient funds to pay
the cost of distributing the Contracts and Certificates thereunder. To the
extent that the CDSC is insufficient to cover the actual cost of Contract and
Certificate distribution, the deficiency will be met from the Company's general
corporate assets which may include amounts, if any, derived from the Mortality
and Expense Risk Charge.
PREMIUM TAXES. Certain state and local governments impose premium taxes. These
taxes currently range up to 5.0% depending upon the jurisdiction. The Company,
in its sole discretion and in compliance with any applicable state law, will
determine the method used to recover premium tax expenses incurred. The Company
will deduct any applicable premium taxes from the Account Value either upon
death, surrender, annuitization, or at the time Purchase Payments are made to
the Certificate, but no earlier than when the Company has a tax liability under
state law.
TRANSFER FEE. The Company currently imposes a $25 fee for each transfer in
excess of twelve in a single Certificate Year. The Company will deduct the
charge from the amount transferred. 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 18.)
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REDUCTION OR ELIMINATION OF CONTRACT AND CERTIFICATE CHARGES. The CDSC and the
administrative charges under the Contract and Certificates may be reduced or
eliminated when certain sales of the Contract and Certificates result in savings
or reduction of sales expenses. The entitlement to such a reduction in the CDSC
or the administrative charges will be based on the following: (1) the size and
type of the group to which sales are to be made; (2) the total amount of
Purchase Payments to be received; and (3) any prior or existing relationship
with the Company. There may be other circumstances, of which the Company is not
presently aware, which could result in fewer sales expenses. In no event will
reduction or elimination of the CDSC or the administrative charge be permitted
where such reduction or elimination will be unfairly discriminatory to any
person.
SETTLEMENT OPTIONS
ANNUITY COMMENCEMENT DATE. Unless otherwise specified, the Annuity Commencement
Date will be the Participant's 85th birthday, or five years after the
Certificate Effective Date, whichever is later. The Annuity Commencement Date
may be changed by the Participant or by the Contract Owner by Written Request at
least 30 days prior to the then-current Annuity Commencement Date. The Annuity
Commencement Date may be changed to any date not later than such date as may be
required or permitted by law or by any applicable retirement plan.
ELECTION OF SETTLEMENT OPTION. If the Participant is alive on the Annuity
Commencement Date and unless otherwise directed, the Company will apply the
Account Value, less premium taxes, if any, according to the Settlement Option
elected.
If the payee of a Settlement Option is not a human being, the Company may reject
the election of a Settlement Option. If payment under a Settlement Option
depends on whether a payee is living, that payee must be a human being.
If no election has been made on the Annuity Commencement Date and if the
Participant is living and has a spouse, the Company will begin payments based on
the life of the Participant as primary payee and the spouse as secondary payee,
in accordance with Settlement Option 3 (Joint and One Half Survivor Annuity)
described below. If no election has been made on the Annuity Commencement Date
and if the Participant is living and does not have a spouse, the Company will
begin payments based on the life of the Participant in accordance with
Settlement Option 1 (Life Annuity with Payments for at Least a Fixed Period),
described below, with a fixed period of 120 monthly payments assured.
ANNUITY BENEFIT. The Annuity Benefit may be calculated and paid: (1) as a Fixed
Dollar Annuity Benefit; (2) as a Variable Dollar Annuity Benefit; or (3) as a
combination of both.
If a Fixed Dollar Annuity Benefit only is elected, the Company will transfer all
of the Separate Account Value to the Fixed Account prior to the Annuity
Commencement Date. Similarly, if a Variable Dollar Annuity Benefit only is
elected, the Company will transfer all of the Fixed Account Value to the
Sub-Accounts as of the end of the Valuation Period immediately prior to the
Annuity Commencement Date. The Company will allocate the amount applied to a
Variable Dollar Annuity Benefit among the Sub-Accounts in accordance with a
Written Request. No transfers between the Fixed Dollar Annuity Benefit and the
Variable Dollar Annuity Benefit will be allowed after the Annuity Commencement
Date. However, after the Variable Dollar Annuity Benefit has been paid for at
least twelve months, the Participant may, no more than once each twelve months,
transfer all or part of the Annuity Units upon which the Variable Dollar Annuity
Benefit is based from the Sub-Account(s) held to Annuity Units in different
Sub-Accounts.
If a Variable Dollar Annuity Benefit is elected, the amount applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the Annuity Commencement Date. If a Fixed Dollar Annuity
Benefit is elected, the amount applied under that benefit is the Fixed Account
Value as of the Annuity Commencement Date.
FIXED DOLLAR ANNUITY BENEFIT. Fixed Dollar Annuity Benefits are determined by
multiplying the Fixed Account Value (expressed in thousands of dollars and after
deduction of any fees and charges, loans or applicable premium taxes not
previously deducted) by the amount of the monthly payment per $1,000 of value
obtained from the Settlement Option Table for the Annuity Benefit elected. The
Fixed Dollar Annuity Benefit will remain level for the duration of the Annuity
Payment Period.
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VARIABLE DOLLAR ANNUITY BENEFIT. The first monthly Variable Dollar Annuity
Benefit payment is equal to a Participant's Variable Account Value (expressed in
thousands of dollars and after deduction of any fees and charges, loans, or
applicable premium tax or other taxes not previously deducted) as of the end of
the Valuation Period immediately preceding the Annuity Commencement Date
multiplied by the amount of the monthly payment per $1,000 of value obtained
from the Settlement Option Table for the Settlement Option elected less the
pro-rata portion of the Certificate Maintenance Fee.
The number of Annuity Units in each Sub-Account held by a Participant is
determined by dividing the dollar amount of the first monthly Variable Dollar
Annuity Benefit payment from each Sub-Account by the Annuity Unit Value for that
Sub-Account as of the Annuity Commencement Date. The number of Annuity Units
remains fixed during the Annuity Payment Period, except as a result of any
transfers among Sub-Accounts after the Annuity Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Annuity
Benefit payment will reflect the investment performance of the Sub-Account(s)
selected and may vary from month to month. The total amount of the second and
any subsequent Variable Dollar Annuity Benefit payment will be equal to the sum
of the payments from each Sub-Account less a pro-rata portion of the Certificate
Maintenance Fee. Where a Participant elects a Variable Dollar Annuity Benefit,
there is a risk that only one Annuity Benefit payment will be made under any
Settlement Option, if: (i) at the end of the applicable Valuation Period, the
Participant's Variable Account Value has declined to zero; or (ii) the person on
whose life Annuity Benefit payments are based dies prior to the second Annuity
Benefit payment.
The payment from each Sub-Account is found by multiplying the number of Annuity
Units held in each Sub-Account by the Annuity Unit Value for that Sub-Account as
of the end of the fifth Valuation Period preceding the due date of the payment.
The Annuity Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit values. Thereafter, the value of a Annuity Unit
for a Sub-Account is determined by multiplying the Annuity Unit Value as of the
end of the preceding Valuation Period by the Net Investment Factor, determined
as set forth above under "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 three percent (3%) per year,
compounded annually, that is reflected in the Settlement Option Tables.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE. After the Annuity Commencement
Date, no transfers between the Fixed Account and the Separate Account are
permitted. However, after a Variable Dollar Annuity Benefit has been paid for at
least twelve months, the Participant may, by Written Request to the
Administrative Office, transfer Annuity Units between Sub-Accounts no more than
once during a twelve-month period.
ANNUITY TRANSFER FORMULA. Transfers after the Annuity Commencement Date are
implemented according to the following formulas:
1) Determine the number of units to be transferred from the
Sub-Account as follows:
= AT/AUV1
2) Determine the number of Annuity Units remaining in such
Sub-Account (after the transfer):
= UNIT1 - AT/AUV1
3) Determine the number of Annuity Units in the transferee
Sub-Account (after the transfer):
= UNIT2 + AT/AUV2
4) Subsequent Variable Dollar Annuity Benefit payments will reflect
the changes in Annuity Units in each Sub-Account as of the next
Variable Dollar Annuity Benefit payment's due date.
Where:
(AUV1) is the Annuity Unit Value of the Sub-Account that the transfer
is being made from as of the end of the Valuation Period in which the
transfer request was received.
(AUV2) is the Annuity Unit Value of the Sub-Account that the transfer
is being made to as of the end of the Valuation Period in which the
transfer request was received.
(UNIT1) is the number of Annuity Units in the Sub-Account that the
transfer is being made from, before the transfer.
(UNIT2) is the number of Annuity Units in the Sub-Account that the
transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the Sub-Account.
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SETTLEMENT OPTIONS
OPTION 1: LIFE ANNUITY WITH PAYMENTS FOR AT LEAST A FIXED
PERIOD. The Company will make a monthly payment for
at least a fixed period. If the Annuitant lives
longer than the fixed period, then the Company will
make payments until the Annuitant's death. The fixed
periods available are reflected in Annuity Table 1
set forth in the Statement of Additional Information
(and in the Contract and Certificates).
If, at the death of the Annuitant, payments have been
made for less than the fixed period elected, the
Company will continue to make payments: (i) to the
contingent payee designated on the Settlement Option
election form; and (ii) during the remainder of the
fixed period.
OPTION 2: LIFE ANNUITY. The Company will make annuity
payments until the Annuitant's death. Annuity Table 2
set forth in the Statement of Additional Information
(and in the Contract and Certificates) applies to
this Option.
OPTION 3: JOINT AND ONE-HALF SURVIVOR ANNUITY. The Company
will provide a monthly payment to an Annuitant during
his/her lifetime; thereafter, upon the death of the
Annuitant and receipt by the Company of Due Proof of
Death, one-half of the monthly payments will continue
to a designated survivor, if living, and until
his/her death. Annuity Table 3 set forth in the
Statement of Additional Information (and in the
Contract and Certificates) applies to this Option.
OPTION 4: INCOME FOR A FIXED PERIOD. The Company will make
payments for a fixed period. Payment intervals and
amounts are shown in Annuity Table 4 set forth in the
Statement of Additional Information (and in the
Contract and Certificates) and are based on a 3%
guaranteed interest rate.
If, at the death of the Annuitant, payments have been
made for less than the fixed period elected, the
Company will continue to make payments: (i) to the
contingent payee designated on the Settlement Option
election form; and (ii) during the remainder of the
fixed period.
OPTION 5: ANY OTHER FORM. The Company will make payments in
the form of any other annuity which is acceptable to
the Company.
MINIMUM AMOUNTS. If the Participant's Account Value is less than $5,000 on the
Annuity Commencement Date, the Company reserves the right to pay that amount in
one lump sum. If monthly payments under a Settlement Option would be less than
$100, the Company may make payments quarterly, semi-annually or annually at its
discretion.
All elected Settlement Options must comply with current applicable laws,
regulations and rulings issued by any governmental agency. If at the time a
Fixed Dollar Annuity Benefit is elected, the Company has available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and guaranteed for as long as that election remains in force.
To the extent applicable, all factors, values, benefits and reserves will not be
less than those required by the law of the state in which the Contract is
delivered.
SETTLEMENT OPTION TABLES. The Settlement Option Tables set forth in the
Statement of Additional Information, and in the Contract and Certificates
reflect the dollar amount of the guaranteed monthly payments that the Company
will make at sample payment intervals for each $1,000 applied at the guaranteed
interest rate of 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.
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GENERAL PROVISIONS
NON-PARTICIPATING. The Contract and the Certificates thereunder are
non-participating. Neither the Contract nor the Certificates thereunder are
eligible to share in the profits or surplus earnings of the Company's general
account and will not receive dividends from the general account.
MISSTATEMENT OF AGE. If the age of the Participant has been misstated in the
Certificate Application, Annuity Benefit payments under the Certificate will be
whatever the Account Value on the Annuity Commencement Date would purchase on
the basis of the correct age of the Participant. If the Company has made
underpayments based on any misstatement, the Company shall promptly pay the
amount of any underpayment, with interest, in one lump sum. Any overpayments
made shall be charged, with interest, against the next Annuity Benefit payment
or succeeding Annuity Benefit payments due under the Certificate. The interest
rate used will not be less than 3% per year.
PROOF OF EXISTENCE AND AGE. The Company may require proof of age of the
Annuitant and, if applicable, any joint payee, before any Annuity Benefit
involving lifetime payments will be made. The Company may also require proof
that such person(s) are still living.
FACILITY OF PAYMENT. If any person receiving payments under a Certificate is
incapable of giving valid receipt of payment, the Company may make such payment
to the person who has legally assumed responsibility for his or her care and
principal support.
Any such payment shall fully discharge the Company to the extent of that
payment.
TRANSFER AND ASSIGNMENT. Neither any one Participant nor the Contract Owner may
transfer, sell, assign, pledge, charge, encumber or in any way alienate his or
her interest under a Certificate or the Contract, respectively. To the extent
permitted by law, no benefits payable under the Contract or a Certificate will
be subject to the claims of creditors.
ANNUITY DATA. The Company will not be liable for obligations which depend on the
Company receiving information from a Participant until such information is
received by the Company in a satisfactory form.
ANNUAL REPORT. At least once each Certificate Year prior to the Annuity
Commencement Date, the Participant will be given a report of the current Account
Value allocated to each Sub-Account, and each Fixed Account option. This report
will also include any other information required by law or regulation, including
all transactions which have occurred during the accounting period shown in the
report.
INCONTESTABILITY. A Certificate shall not be contestable by the Company.
ENTIRE CONTRACT. The Company issues a Certificate in consideration and
acceptance of the payment of the initial Purchase Payment and, where state law
requires, the Participant Enrollment Form. In those states that require a
written application, a copy of the Enrollment Form will be attached to and
become part of the Certificate and along with the Certificate constitutes the
entire Certificate. All statements made by the Participant will be considered
representations and not warranties. The Company will not use any statement in
defense of a claim unless it is made in the Participant Enrollment Form (or
other application form) and a copy of the Participant Enrollment Form (or other
application form) is attached to the Certificate when issued.
CHANGES IN THE CONTRACT. Only the Company's President, Vice President and
Secretary have the authority to bind the Company or to make any change in the
Contract or the Certificates thereunder and then only in writing. The Company
will not be bound by any promise or representation made by any other persons.
The Company may not change or amend the Contract or Certificates thereunder,
except as expressly provided therein, without the Participant's consent.
However, the Company may change or amend the Contract or Certificates thereunder
if such change or amendment is necessary for the Contract or Certificates
thereunder to comply with any state or federal law, rule or regulation.
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 Participant will be satisfied by the mailing
of any such required written notice, by first-class mail, to the Participant's
last known address as shown on the Company's records.
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FEDERAL TAX MATTERS
INTRODUCTION. The following discussion is a general description of federal tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under 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 Annuity 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 and Participants 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 Participant who is a natural
person generally is not taxed on increases in the value of an Account until
distribution occurs by withdrawing all or part of the Account Value (e.g.,
surrenders or annuity payments under the Settlement Option elected.) The taxable
portion of a distribution (in the form of a single sum payment or an annuity) is
generally taxable as ordinary income. The following discussion generally applies
to a Certificate owned by a natural person.
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.
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ANNUITY BENEFIT PAYMENTS. Although the tax consequences may vary depending on
the Settlement Option elected under the Contract, in general, only the portion
of an Annuity 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 Annuity Benefit
payments is taxable. For Variable Dollar Annuity 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 Annuity 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
Annuity Benefit payments for the term of the payments; however, the remainder of
each Annuity Benefit payment is taxable. Special allocation rules apply if
Annuity 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
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recovered, the full amount of any additional Annuity Benefit payments is
taxable. If Annuity 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.
PENALTY TAX. In general, a 10% premature distribution penalty tax applies to the
taxable portion of a distribution from a Contract prior to the Participant's 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 a Participant. Generally such amounts are includable in
the income of the recipient as follows: (1) if distributed in a lump sum, they
are taxed in the same manner as a full surrender as described above, or (2) if
distributed under a Settlement Option, they are taxed in the same manner as
Annuity 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 Participant, or the exchange of a Contract may result in certain
tax consequences to the Participant 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 Participants 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 Contract 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 Contract 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 Participant or recipient of the distribution. A competent
tax adviser should be consulted for further information.
GENERAL. At the time the initial Purchase Payment is paid, a prospective
purchaser must specify whether the purchase is a Qualified Contract 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") is the principal underwriter and
distributor of the Contracts. AAG Securities may also serve as an underwriter
and distributor of other contracts issued through the Separate Account and
certain other Separate Accounts of the Company and any affiliates of the
Company. AAG Securities is a wholly owned subsidiary of American Annuity Group,
Inc., a publicly-traded company which is an indirect subsidiary of American
Financial Group, Inc. AAG Securities is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). Its principal offices are
located at 250 East Fifth Street, Cincinnati, Ohio 45202. The Company pays AAG
Securities for acting as underwriter under a distribution agreement.
AAG Securities will sell Contracts through its registered representatives. In
addition, AAG Securities has entered into sales agreements with other
broker-dealers to solicit applications for the Contracts through registered
representatives who are licensed to sell securities and variable insurance
products. These agreements provide that applications for the Contracts may be
solicited by registered representatives of the broker-dealers appointed by the
Company to sell its variable life insurance and variable annuities. These
broker-dealers are registered with the Securities and Exchange Commission and
are members of the NASD. The registered representatives are authorized under
applicable state regulations to sell variable annuities.
- --------------------------------------------------------------------------------
Page 40
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
The Company or AAG Securities may pay commissions to registered representatives
of AAG Securities and other broker-dealers of up to 8.5% of Purchase Payments
made under the Contracts ("Commissions"). These Commissions are reduced by
one-half for Contracts issued to Owners over age 75. When permitted by state law
and in exchange for lower initial Commissions, AAG Securities and/or the Company
may pay trail commissions to registered representatives of AAG Securities and to
other broker-dealers. Trail commissions are not expected to exceed 1% of the
Account Value of a Contract on an annual basis. To the extent permissible under
current law, the Company and/or AAG Securities may pay production, persistency
and managerial bonuses as well as other promotional incentives, in cash or other
compensation, to registered representatives of AAG Securities and/or other
broker-dealers.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account or AAG
Securities. The Company is involved in various kinds of routine litigation
which, in management's judgment, are not of material importance to the Company's
assets or the Separate Account.
VOTING RIGHTS
To the extent required by applicable law, all Fund shares held in the Separate
Account will be voted by the Company at regular and special shareholder meetings
of the respective Funds in accordance with instructions received from persons
having voting interests in the corresponding Sub-Account. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or if the Company determines that it is
allowed to vote all shares in its own right, the Company may elect to do so.
The person with the voting interest is the Participant. The number of votes
which are available to a Participant will be calculated separately for each
Sub-Account. Before the Annuity Commencement Date, that number will be
determined by applying his or her percentage interest, if any, in a particular
Sub-Account to the total number of votes attributable to that Sub-Account. The
Participant holds a voting interest in each Sub-Account to which the Account
Value is allocated. After the Annuity Commencement Date, the number of votes
decreases as Annuity Payments are made and as the number of Accumulation Units
for a Certificate decreases.
The number of votes of a Fund will be determined as of the date coincident with
the date established by that Fund for shareholders eligible to vote at the
meeting of the Fund. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established by
the respective Funds.
Shares as to which no timely instructions are received and shares held by the
Company as to which Participants have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Certificates participating in the Sub-Account. Voting instructions to abstain on
any item will be applied on a pro-rata basis to reduce the votes eligible to be
cast.
Each person or entity having a voting interest in a Sub-Account will receive
proxy material, reports and other material relating to the appropriate Fund. It
should be noted that the Funds are not required to hold annual or other regular
meetings of shareholders.
AVAILABLE INFORMATION
The Company has filed a registration statement (the Registration Statement) with
the Securities and Exchange Commission under the Securities Act of 1933 relating
to the Contract and Certificates thereunder offered by this Prospectus. This
Prospectus has been filed as a part of the Registration Statement and does not
contain all of the information set forth in the Registration Statement and
exhibits thereto, and reference is hereby made to such Registration Statement
and exhibits for further information relating to the Company, the Contract and
the Certificates. Statements contained in this Prospectus, as to the content of
the Contract, the Certificates and other legal instruments, are summaries. For a
complete statement of the terms thereof, reference is made to the instruments
filed as exhibits to the Registration Statement. The Registration Statement and
the exhibits thereto may be inspected and copied at the office of the
Commission, located at 450 Fifth Street, N.W., Washington, D.C., and may also be
accessed at the Securities and Exchange Commission's Web site
http://www.sec.gov.
- --------------------------------------------------------------------------------
Page 41
<PAGE>
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY PROSPECTUS
- --------------------------------------------------------------------------------
THIS PAGE INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
Page 42
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the Table
of Contents for that Statement:
Page
ANNUITY INVESTORS LIFE INSURANCE COMPANY................................... 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 Yield Calculation........................ 4
Other Sub-Account 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
Commodore Americus Qualfied 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 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 Code:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 43
<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 for the Sub-Account 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
<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(R) 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) Group Contract Form, Certificate Form, and Endorsements.
(a) Group Contract Forms and Endorsements.
(i) Form of Group Flexible Premium Deferred Annuity Contract.1/
(ii) Form of Enhanced Group Flexible Premium Deferred Annuity
Contract. 1/
(iii) Form of Loan Endorsement to Group Contract. 1/
(iv) Form of Employer Plan Endorsement to Group Contract. 1/
(v) Form of Tax Sheltered Annuity Endorsement to Group Contract.1/
(vi) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract. 1/
(vii) Form of Long-Term Care Waiver Rider to Group Contract. 1/
(viii)Form of Section 457 Plan/Deferred Compensation Endorsement to
Group Contract (filed herewith).
(ix) Revised form of Employer Plan Endorsement to Group Contract
(filed herewith).
<PAGE>
(x) Revised form of Tax Sheltered Annuity Endorsement to Group
Contract (filed herewith).
(xi) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Group Contract (filed herewith).
(xii) Form of Governmental Section 457 Plan Endorsement to Group
Contract (filed herewith).
(b) Certificate of Participation Form and Endorsements.
(i) Form of Certificate of Participation. 1/
(ii) Form of Certificate of Participation under Enhanced
Contract. 1/
(iii) Form of Loan Endorsement to Certificate. 1/
(iv) Form of Employer Plan Endorsement to Certificate. 1/
(v) Form of Tax Sheltered Annuity Endorsement to Certificate. 1/
(vi) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate. 1/
(vii) Form of Long-Term Care Waiver Rider to Certificate. 1/
(viii)Form of Deferred Compensation Endorsement to Certificate. 3/
(ix) Revised form of Employer Plan Endorsement to Certificate
(filed herewith).
(x) Revised form of Tax Sheltered Annuity Endorsement to
Certificate (filed herewith).
(xi) Revised form of Qualified Pension, Profit Sharing and Annuity
Plan Endorsement to Certificate (filed herewith).
(xii) Form of Governmental Section 457 Plan Endorsement to
Certificate (filed herewith).
(c) Group Contract Form and Certificate of Participation Form for use in
South Dakota.1/
(i) Form of Group Flexible Premium Deferred Annuity Contract for
use in South Dakota. 4/
(ii) Form of Certificate of Participation for use in South
Dakota.4/
2
<PAGE>
(d) Group Contract Form and Certificate of Participation Form for use in
Wisconsin.
(i) Form of Group Flexible Premium Deferred Annuity Contract for
use in Wisconsin.4/
(ii) Form of Certificate of Participation for use in Wisconsin.4/
(e) Certificate of Participation Form for use in North Dakota.
(i) Form of Certificate of Participation for use in North
Dakota.4/
(f) Form of Endorsements for use in Virginia.
(i) Form of Employer Plan Endorsement to Group Contract for use in
Virginia.4/
(ii) Form of Employer Plan Endorsement to Certificate of
Participation for use in Virginia.4/
(iii) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract for use in Virginia.4/
(iv) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation for use in
Virginia.4/
(v) Form of Tax Sheltered Annuity Endorsement to Group Contract
for use in Virginia.4/
(5) (a) Form of Application for Group Flexible Premium Deferred Annuity
Contract.1/
(i) Alternative Form of Application.5/
(ii) Alternative Form of Application (filed herewith).
(b) Form of Participant Enrollment Form under Group Flexible Premium
Deferred Annuity Contract (ERISA).1/
(c) Form of Participant Enrollment Form under Group Flexible Premium
Deferred Annuity Contract (Non-ERISA).5/
(6) (a) Articles of Incorporation of Annuity Investors Life Insurance
Company.4/
(i) Amendment to Articles of Incorporation, adopted April 9, 1996
and approved by Secretary of State of Ohio on July 11,
1996.5/
(ii) Amendment to Articles of Incorporation adopted August 9, 1996
and approved by Secretary of State of Ohio on December 3,
1996.5/
3
<PAGE>
(b) Code of Regulations of Annuity Investors Life Insurance Company.4/
(7) Not Applicable.
(8) (a) Participation Agreement between Annuity Investors Life Insurance
Company and Dreyfus Variable Investment Fund.2/
(b) Participation Agreement between Annuity Investors Life Insurance
Company and Dreyfus Stock Index Fund. 2/
(c) Participation Agreement between Annuity Investors Life Insurance
Company and The Dreyfus Socially Responsible Growth Fund, Inc. 2/
(d) Participation Agreement between Annuity Investors Life Insurance
Company and Janus Aspen Series. 2/
(e) Participation Agreement with Merrill Lynch Variable Series Funds,
Inc.
(i) Participation Agreement between Annuity Investors Life
Insurance Company and Merrill Lynch Variable Series Funds,
Inc. 2/
(ii) Amended and Restated Participation Agreement between Annuity
Investors Life Insurance Company and Merrill Lynch Variable
Series Funds, Inc. 4/
(f) Service Agreement between Annuity Investors Life Insurance Company
and American Annuity Group, Inc. 2/
(g) Agreement between AAG Securities, Inc. and AAG Insurance Agency,
Inc. 2/
(h) Investment Service Agreement between Annuity Investors Life
Insurance Company and American Annuity Group, Inc. 2/
(i) Agreement between Annuity Investors Life Insurance Company and
Merrill Lynch Asset Management, L.P.4/
(j) Participation Agreement between Annuity Investors Life Insurance
Company and Morgan Stanley Universal Funds, Inc. 5/.
(k) Participation agreement between Annuity Investors Life Insurance
Company and Strong Special Fund II, Inc. 5/.
(l) Participation Agreement between Annuity Investors Life Insurance
Company and PBHG Insurance Series Fund, Inc. 5/.
(m) Amended and Restated Agreement between The Dreyfus Corporation and
Annuity Investors Life Insurance Company5/.
4
<PAGE>
(n) Service Agreement between Annuity Investors Life Insurance Company
and Janus Capital Corporation5/.
(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.
(12) Not Applicable.
(13) Schedule for Computation of Performance Quotations.5/
(14) Financial Data Schedule (filed herewith).
- ----------------
1/ Filed with Pre-Effective Amendment No. 2 to Form N-4 on November 8, 1995.
2/ Filed with Pre-Effective Amendment No. 3 to Form N-4 on December 4, 1995.
3/ Filed with Form N-4 on June 2, 1995.
4/ Filed with Post-Effective Amendment No. 1 to Form N-4 on April 26, 1996.
5/ Filed with Post-Effective Amendment No. 2 to Form N-4 on April 29, 1997.
-5-
<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 Group,SM Inc. The Registrant, Annuity
Investors(R) Variable Account A, is a segregated asset account of Annuity
Investors Life Insurance Company.
The following chart indicates the persons controlled by or under common
control with the Company.
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK OWNED (1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- -------------- ------------------- ------------------
|
|_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
| | |_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.
|_AFC Holding Company
|_American Financial Corporation % OF STOCK OWNED (1)
| |_American Premier Underwriters, Inc. STATE OF DATE OF BY IMMEDIATE
| | |_Pennsylvania Company DOMICILE INCORPORATION PARENT COMPANY NATURE OF 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 of
| | | | | | |_ Arizona Arizona 12/05/73 100 Brokering Agent
| | | | | |_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
| | | | | |_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 interest Insurance Agency
| | | | | |_Hallmark General Insurance Agency, Inc. Oklahoma 06/16/72 beneficial interest Insurance Agency
| | | | | |_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
-8-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation
| | |_American Premier Underwriters, Inc. % OF STOCK OWNED (1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORPORATION PARENT COMPANY NATURE OF 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.
| | | | | |_(and subsidia) New Jersey 03/30/99 40.41 (2) Production/
Processing/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 Insurance Com Delaware 02/28/79 100 Excess & Surplus Lines
Insurance
| | | |_Agricultural Insurance Company Ohio 03/23/05 100 Property/Casualty
Insurance
| | | |_American Alliance Insurance Company Arizona 09/11/45 100 Property/Casualty
Insurance
| | | |_American Annuity Group, Inc. Delaware 05/15/87 81.13 (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 Company South Dakota 05/12/78 100 Life Insurance Company
Inc.
| | | | | | |_CHATBAR, Inc. Massachusetts 11/02/93 100 Hotel Operator
| | | | | | |_Driskill Holding, Inc. Texas 06/07/95 beneficial interest Hotel Management
| | | | | | |_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 09/10/70 100 Marketing Services
Carolina
| | | | | | | |_Purity Financial Corporation Florida 12/21/91 100 Marketing Services
| | | | | | |_Prairie National Life Insurance Company South Dakota 02/11/76 100 Life Insurance Company
| | | | | | | |_American Memorial Life Insurance Co 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 Coy 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, In 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
-9-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation
| | |_Great American Holding Corporation % OF STOCK OWNED (1)
| | | |_Great American Insurance Company STATE OF DATE OF BY IMMEDIATE
| | | | |_American Annuity Group, Inc. DOMICILE INCORPORATION PARENT COMPANY NATURE OF 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 of Puerto Rico 07/01/64 99 Life Insurance Company
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 of Ohio 03/07/94 beneficial interest Life Insurance Agency
Ohio, Inc.
| | | | | |_Lifestyle Financial Investments of Indiana Indiana 02/24/94 100 Life Insurance Agency
Inc.
| | | | | |_Lifestyle Financial Investments of Kentucky Kentucky 10/03/94 100 Insurance Agency
Inc.
| | | | | |_Lifestyle Financial Investments of the Minnesota 06/10/85 100 Insurance Agency
Northwest, Inc.
| | | | | |_Lifestyle Financial Investments of the North 07/13/94 100 Insurance Agency
Southeast, Inc. Carolina
| | | | |_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 interest Insurance Agency
| | | | | |_AAG Insurance Agency of Texas, Inc. Texas 06/02/95 100 Life Insurance Agency
| | | | |_SPELCO (UK) Ltd. United 00/00/00 99 Inactive
Kingdom
| | | | |_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, Inc. Ohio 07/27/83 100 Management Holding
Company
| | | | |_American Custom Insurance Services California 05/18/92 100 Insurance Agency &
| | | | |_California Inc. Brokerage
| | | | |_Eden Park Insurance Brokers, Inc. California 02/13/90 100 Wholesale Brokerage
for Surplus Lines
| | | | |_Professional Risk Brokers, Inc. Illinois 03/01/90 100 Insurance Agency
| | | | |_Professional Risk Brokers Insurance, Inc. Massachusetts 04/19/94 100 Surplus Lines
Brokerage
| | | | |_Professional Risk Brokers of Connecticut, In Connecticut 07/09/92 100 Insurance Agency &
Brokerage
| | | | |_Professional Risk Brokers of Ohio, Inc. Ohio 12/17/86 100 Insurance Agency and
Brokerage
| | | |_American Custom Insurance Services Illinois, I 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
-10-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation
| | |_Great American Holding Corporation % OF STOCK OWNED (1)
| | | |_Great American Insurance Company STATE OF DATE OF BY IMMEDIATE
|_ DOMICILE INCORPORATION PARENT COMPANY NATURE OF 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 interest Lloyd's Plan Insurer
| | | |_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 interest Property/Casualty Insurance
| | | |_Grizzly Golf Center, Inc. Ohio 11/08/93 100 Operate Golf Courses
| | | |_Homestead Snacks Inc. California 03/02/79 100 (2) Meat Snack Distribution
| | | | |_Giant Snacks, Inc. Delaware 07/06/89 100 Meat Snack Distribution
| | | |_Key Largo Group, Inc. Florida 07/28/81 100 Land Developer & Resort
Operator
| | | | |_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
-11-
<PAGE>
AMERICAN FINANCIAL GROUP, INC.
| |_AFC Holding Company
| |_American Financial Corporation % OF STOCK OWNED (1)
| | |_Great American Holding Corporation STATE OF DATE OF BY IMMEDIATE
| | | |_Great American Insurance Company DOMICILE INCORPORATION PARENT COMPANY NATURE OF BUSINESS
-------- -------------- ------------------ ------------------
|_
| | | | |_American Highways Insurance Agency California 05/05/94 100 Insurance Agency
| | | | |_Explorer Insurance Agency, Inc. Ohio 07/17/97 beneficial interest Insurance Agency
| | | | |_National Interstate Insurance Agency of
| | | | | |_Texas Inc. Texas 06/07/89 beneficial interest Insurance Agency
| | | | |_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
| | | | | |_Agency Inc. Georgia 08/07/95 100 Insurance Agency
| | | |_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 interest Insurance Agency
| | | |_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
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other affiliated company(ies).
(3) Convertible Preferred Stock.
</TABLE>
-12-
<PAGE>
ITEM 27. NUMBER OF CERTIFICATE OWNERS
As of March 31, 1998 there were 4,953 Participants (Certificate Owners) in
168 Standard Contracts, and 271 Participants in 5 Enhanced Contracts.
ITEM 28. INDEMNIFICATION
(a) The Code of Regulations of Annuity Investors Life Insurance Company
provides in Article V as follows:
The Corporations shall, to the full extent permitted by the General
Corporation Law of Ohio, indemnify any person who is or was a director
or officer of the Corporation and whom it may indemnify pursuant
thereto. The Corporation may, within the sole discretion of the Board
of Directors, indemnify in whole or in part any other persons whom it
may indemnify pursuant thereto.
Insofar as indemnification for liability arising under the Securities Act
of 1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Depositor of expenses incurred or paid by the director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
(b) The directors and officers of Annuity Investors Life Insurance Company
are covered under a Directors and Officers Reimbursement Policy. Under the
Reimbursement Policy, directors and officers are indemnified for loss arising
from any covered claim by reason of any Wrongful Act in their capacities as
directors or officers, except to the extent the Company has indemnified them. In
general, the term "loss" means any amount which the directors or officers are
legally obligated to pay for a claim for Wrongful Acts. In general, the term
"Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement, omission or act by a director or officer while acting
individually or collectively in their capacity as such claimed against them
solely by reason of their being directors and officers. The limit of liability
under the program is $20,000,000 for the policy year ending September 1, 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.
-13-
<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.
ITEMS 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that
the audited financial statements in the registration statement are
never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
-14-
<PAGE>
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a Certificate offered by the Prospectus, a
space that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Prospectus and Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral request
to the Company at the address or phone number listed in the
Prospectus.
(d) The Company represents that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed
by the Company.
-15-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this amendment to its Registration Statement
and has caused this Post-Effective Amendment No. 3 to its Registration Statement
to be signed on its behalf by the undersigned in the City of Cincinnati, State
of Ohio on the 6th day of April, 1998.
ANNUITY INVESTORS VARIABLE
ACCOUNT A
(REGISTRANT)
By: /s/ Robert Allen Adams
-----------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director, Annuity Investors
Life Insurance Company
ANNUITY INVESTORS LIFE
INSURANCE COMPANY
(DEPOSITOR)
By: /s/ Robert Allen Adams
-------------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director
As required by the Securities Act of 1933, as amended, this Post-Effective
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
/s/ Robert Allen Adams Principal Executive April 6, 1998
- ----------------------------- Officer, Director
Robert Allen Adams
/s/ Robert Eugene Allen Principal Financial April 6, 1998
- ----------------------------- Officer
Robert Eugene Allen
-16-
<PAGE>
/s/ Lynn Edward Laswell Principal Accounting April 6, 1998
- ----------------------------- Officer
Lynn Edward Laswell
/s/ Stephen Craig Lindner Director April 6, 1998
- -----------------------------
Stephen Craig Lindner
/s/ William Jack Maney, II Director April 6, 1998
- -----------------------------
William Jack Maney, II
/s/ James Michael Mortensen Director April 6, 1998
- -----------------------------
James Michael Mortensen
/s/ Mark Francis Muething Director April 6, 1998
- -----------------------------
Mark Francis Muething
/s/ Jeffrey Scott Tate Director April 6, 1998
- -----------------------------
Jeffrey Scott Tate
-17-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(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.2/
(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 Group Flexible Premium Deferred
Annuity Contract.1/
(4)(a)(ii) Form of Enhanced Group Flexible Premium
Deferred Annuity Contract.1/
(4)(a)(iii) Form of Loan Endorsement to Group Contract 1/
(4)(a)(iv) Form of Employer Plan Endorsement to Group
Contract 1/
(4)(a)(v) Form of Tax Sheltered Annuity Endorsement to
Group Contract 1/
(4)(a)(vi) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract 1/
(4)(a)(vii) Form of Long-Term Care Waiver Rider to Group
Contract 1/
(4)(a)(viii) Form of Section 457 Plan/Deferred
Compensation Endorsement to Group Contract
(filed herewith).
(4)(a)(ix) Revised form of Employer Plan Endorsement to Group
Contract (filed herewith).
(4)(a)(x) Revised form of Tax Sheltered Annuity
Endorsement to Group Contract (filed
herewith).
(4)(a)(xi) Revised form of Qualified Pension, Profit
Sharing and Annuity Plan Endorsement to Group
Contract (filed herewith).
(4)(a)(xii) Form of Governmental Section 457 Plan
Endorsement to Group Contract (filed
herewith).
(4)(b)(i) Form of Certificate of Participation 1/
(4)(b)(ii) Form of Certificate of Participation under
Enhanced Contract 1/
(4)(b)(iii) Form of Loan Endorsement to Certificate 1/
(4)(b)(iv) Form of Employer Plan Endorsement to
Certificate 1/
(4)(b)(v) Form of Tax Sheltered Annuity Endorsement to
Certificate 1/
(4)(b)(vi) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Certificate 1/
(4)(b)(vii) Form of Long-Term Care Waiver Rider to
Certificate1/
(4)(b)(viii) Form of Deferred Compensation Endorsement to
Certificate. 3/
-18-
<PAGE>
(4)(b)(ix) Revised form of Employer Plan Endorsement to
Certificate (filed herewith).
(4)(b)(x) Revised form of Tax Sheltered Annuity Endorsement to
Certificate (filed herewith).
(4)(b)(xi) Revised form of Qualified Pension, Profit
Sharing and Annuity Plan Endorsement to
Certificate (filed herewith).
(4)(b)(xii) Form of Governmental Section 457 Plan
Endorsement to Certificate (filed herewith).
(4)(c)(i) Form of Group Flexible Premium Deferred
Annuity Contract for use in South Dakota. 4/
(4)(c)(ii) Form of Certificate of Participation for use
in South Dakota. 4/
(4)(d)(i) Form of Group Flexible Premium Deferred
Annuity Contract for use in Wisconsin. 4/
(4)(d)(ii) Form of Certificate of Participation for use
in Wisconsin. 4/
(4)(e)(i) Form of Certificate of Participation for use
in North Dakota. 4/
(4)(f)(i) Form of Employer Plan Endorsement to Group
Contract for use in Virginia. 4/
(4)(f)(ii) Form of Employer Plan Endorsement to
Certificate of Participation for use in
Virginia. 4/
(4)(f)(iii) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Group Contract
for use in Virginia. 4/
(4)(f)(iv) Form of Qualified Pension, Profit Sharing and
Annuity Plan Endorsement to Certificate of
Participation for use in Virginia. 4/
(4)(f)(v) Form of Tax Sheltered Annuity Endorsement to
Group Contract for use in Virginia. 4/
(5)(a) Form of Application for Group Flexible
Premium Deferred Annuity Contract 1/
(5)(a)(i) Alternative Form of Application5/
(5)(a)(ii) Alternative Form of Application (filed
herewith).
(5)(b) Form of Participant Enrollment Form under
Group Flexible Premium Deferred Annuity
Contract
(ERISA) 1/
(5)(c) Form of Participant Enrollment Form under
Group Flexible Premium Deferred Annuity
Contract (Non-ERISA) 5/
(6)(a) Articles of Incorporation of Annuity
Investors Life Insurance Company 4/
(6)(a)(i) Amendment to Articles of Incorporation, adopted April
9, 1996 and approved by Secretary of State of Ohio on
July 11, 1996 5/.
(6)(a)(ii) Amendment to Articles of Incorporation adopted August
9, 1996 and approved by Secretary of State of Ohio on
December 3, 1996 5/.
-19-
<PAGE>
(6)(b) Code of Regulations of Annuity Investors Life
Insurance Company 4/
(8)(a) Participation Agreement between Annuity
Investors Life Insurance Company and Dreyfus
Variable Investment Fund 2/
-
(8)(b) Participation Agreement between Annuity
Investors Life Insurance Company and Dreyfus
Stock Index Fund 2/
(8)(c) Participation Agreement between Annuity
Investors Life Insurance Company and The
Dreyfus Socially Responsible Growth Fund,
INC. 2/
(8)(d) Participation Agreement between Annuity
Investors Life Insurance Company and Janus
Aspen Series 2/
8(e)(i) Participation Agreement between Annuity
Investors Life Insurance Company and Merrill
Lynch Variable Series Funds, Inc. 2/
8(e)(ii) Amended and Restated Participation Agreement
between Annuity Investors Life Insurance
Company and Merrill Lynch Variable Series
Funds, Inc. 4/
(8)(f) Service Agreement between Annuity Investors
Life Insurance Company and American Annuity
Group, Inc. 2/
(8)(g) Agreement between AAG Securities Inc. and AAG
Insurance Agency, Inc. 2/
--
(8)(h) Investment Service Agreement between Annuity
Investors Life Insurance Company and American
Annuity Group, Inc. 2/
(8)(i) Agreement between Annuity Investors Life
Insurance Company and Merrill Lynch Asset
Management, L.P.4/
(8)(j) Participation Agreement between Annuity
Investors Life Insurance Company and Morgan
Stanley Universal Funds, Inc. 5/.
8(k) Participation agreement between Annuity
Investors Life Insurance Company and Strong
Special Fund II, Inc. 5/.
8(l) Participation Agreement between Annuity
Investors Life Insurance Company and PBHG
Insurance Series Fund, Inc. 5/.
(8)(m) Amended and Restated Agreement between The
Dreyfus Corporation and Annuity Investors
Life Insurance Company5/.
--
(8)(n) Service Agreement between Annuity Investors
Life Insurance Company and Janus Capital
Corporation5/ 5/.
(8)(o) Service Agreement between Annuity Investors
Life Insurance Company and Strong Capital
Management, Inc. (filed herewith).
-20-
<PAGE>
(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
Quotations. 5/
(14) Financial Data Schedule (filed herewith).
1/ Filed with Pre-Effective Amendment No. 2 to Form N-4 on November 8,
1995.
2/ Filed with Pre-Effective Amendment No. 3 to Form N-A on December 4, 1995
3/ Filed with Form N-4 on June 2, 1995.
4/ Filed with Post-Effective Amendment No. 1 to Form N-4 on April 26, 1996.
5/ Filed with Post-Effective Amendment No. 2 to Form N-4 on April 29, 1997.
-21-
<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)(a)(viii)
DEFERRED COMPENSATION
ENDORSEMENT
The Contract is changed as set out below for use with a non-qualified deferred
compensation plan or Internal Revenue Code Section 457 plan:
RIGHTS IN CONTRACT AND PARTICIPATION INTEREST.
The Contract Owner as employer shall possess all rights under this
Contract and in any participation interest under this Contract. Any
request, designation, election, power, or right otherwise permitted or
given to a Participant, Annuitant, Beneficiary, or other payee under
this Contract shall be owned, controlled, and exercised only by the
Contract Owner. No Participant, Annuitant, Beneficiary, or payee (other
than the Contract Owner) shall have any legal or equitable rights under
this Contract or in any participation interest under this Contract.
The entire rights of the Contract Owner under this Contract shall at
all times be subject to the claims of the Contract Owner's general
creditors and to legal process.
BENEFICIARY DESIGNATIONS.
The Beneficiary for each participation interest may be designated by
the Contract Owner at any time before a Death Benefit payment is made
by us, and regardless of any designation of Beneficiary previously
received or acknowledged by us.
PAYEE DESIGNATIONS.
Any Annuity Benefit shall be paid to the Contract Owner or to the
applicable Annuitant and/or any joint or survivor or contingent payee.
Any Death Benefit shall be paid to the Contract Owner or to the
applicable Beneficiary and/or any joint or survivor or contingent
payee. Any other payment or proceeds shall be paid to the Contract
Owner or the applicable Annuitant. Subject to these limits, the
Contract Owner shall designate the person to whom payments shall be
made, and may make or change any such designation at any time subject
to any prior action taken by us.
This is a part of the Contract. It is not a separate contract. In all cases of
conflict with the other terms of the Contract, the restrictions of this
endorsement shall control. It changes the Contract only as and to the extent
stated.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
EXHIBIT (4)(a)(ix)
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 the group annuity
contract application or any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named on
the group annuity contract 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 of a participant's interest
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 of a participant's interest in the annuity contract may be made
without the participant's 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 an 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
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.
<PAGE>
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any portion
of a participant's interest in this annuity contract remaining payable after
the participant's death shall be determined under the Plan. No distribution
of any such amount shall be made without the written direction of the Plan
Administrator.
INVESTMENT ALLOCATIONS AND TRANSFERS. If this 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 with respect
to a participant's interest in the annuity contract may be made without the
participant's 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 a participant 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 that portion of a participant's 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 the annuity contract, payments of a
participant's interest may be made in the form of a Qualified Joint and 50%
Survivor Annuity. Under this payment option, we will make equal payments to
the participant for life at least once per year. If the person who is the
participant's spouse at the time payments commence survives the participant,
then after the participant's 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
the participant and his or her spouse. We will require proof of the ages of
the participant and spouse. Monthly payments that we will make under this
payment option for each $1,000 of proceeds applied will be furnished upon
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 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
EXHIBIT 4(a)(x)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
TAX SHELTERED ANNUITY ENDORSEMENT
The annuity contract is changed as set out below to add provisions for a Tax
Sheltered 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 403(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.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or transfer his
or her interest in this annuity contract. A participant 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 secure a loan made under any
loan provisions of this annuity contract;
2) an interest in this annuity contract may be transferred under a
Qualified Domestic Relations Order as defined in IRC Section 414(p);
and
3) a participant may designate another person to receive payments with
the participant 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 the participant's lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to this
annuity contract that does not qualify for deferred tax treatment under IRC
Section 403(b) and Section 415. Contributions made for a participant to this
annuity contract and any other plan, contract, or arrangement under salary
reduction agreement(s) with his or her 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 this 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 from this annuity contract unless the
participant has:
1) reached age 59-1/2; or
2) separated from service with his or her 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), a
participant or his or her 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 the participant 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.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions of a participant's interest in this annuity contract is April 1
following the later of the calendar year in which the participant reaches age
70-1/2 or the calendar year in which the participant retires.
No later than the Required Beginning Date:
1) the participant's interest in this annuity contract must be paid in
full; or
2) distributions of the participant's interest in this annuity contract
must begin in the form of periodic payments made at least annually
(i) for the participant's life or as joint and survivor payments to
the participant and one other individual, or (ii) over a period
certain not to exceed the participant's life expectancy or the joint
and last survivor life expectancy of the participant and one other
individual named to receive any remaining payments after the
participant'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
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 a participant 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 participant 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 participant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of the participant's interest in this
annuity contract must continue to be distributed at least as rapidly as under
the method of distribution being used prior to the participant's death.
-2-
<PAGE>
If the participant dies before the Required Beginning Date and before
payments begin irrevocably, the participant's entire interest in this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
participant's 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 the participant's death with payments
beginning by December 31 of the first calendar year after the
participant's death.
However, if the participant's surviving spouse is the individual designated
to receive his or her entire interest in 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 participant would
have reached age 70-1/2. If the participant's surviving spouse dies before
payments begin under this provision, then this provision shall apply upon the
death of the participant's spouse as if the participant's spouse were 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 the participant's death, the life expectancy of the
participant's 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
SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT 4(a)(xi)
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.
EXCLUSIVE BENEFIT. This annuity contract is established for the exclusive
benefit of the participants and their 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 a participant's interest in the annuity contract
except as provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or transfer his
or her interest in this annuity contract. A participant 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) a participant's interest in this annuity contract may secure a loan
made to the participant under any loan provisions of this annuity
contract;
2) all or part of a participant's interest in this annuity contract may
be transferred under a Qualified Domestic Relations Order as defined
in IRC Section 414(p); and
3) payments from a participant's interest in this annuity contract may
be made based on joint lives or joint life expectancies of the
participant and another person, but such other person shall have no
present rights under this annuity contract during the participant's
lifetime.
Except as elected under the DIRECT ROLLOVER provision, any distributions from
a participant's interest in this annuity contract shall be paid to the
annuity contract owner or to the participant or another person entitled to
Plan benefits through the participant, as may be directed by the annuity
contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to a participant's interest in this
annuity contract which represent contributions to the Plan for the
participant's benefit must not exceed the limits set forth in IRC Section
415. Contributions to a participant's interest in this annuity contract which
represent the participant's 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.
<PAGE>
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS. Any
amounts under a participant's interest in 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 a
participant's interest in this annuity contract which represent contributions
for the participant 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), a
participant 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 participant 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 a participant elects to delay the payment of
his or her benefits, distributions of the participant'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 participant has reached the earlier of age 65 or the normal
retirement age stated in the Plan;
2) the 10th anniversary of the date the participant joined the Plan; or
3) the participant'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.
REQUIRED MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for
distributions with respect to a participant's interest in this annuity
contract is April 1 following the later of the calendar year in which the
participant reaches age 70-1/2 or the calendar year in which the participant
separates from service with the Employer. If the participant is a 5% owner of
the Employer, the Required Beginning Date is April 1 following the calendar
year in which the participant reaches age 70-1/2.
No later than the Required Beginning Date:
1) the participant's interest in this annuity contract must be paid in
full; or
2) distributions of the participant's interest in this annuity contract
must begin in the form of periodic payments made at least annually
(i) for the participant's life or as joint and survivor payments for
the lives of the participant and one other individual, or (ii) over a
period certain not to exceed the participant's life expectancy or the
joint and last survivor life expectancy of the participant and one
other individual entitled to receive any remaining payments after the
participant'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.
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 participant 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 immediately preceding the Required Beginning
Date 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 a participant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of the participant's interest in this
annuity contract must continue to be distributed at least as rapidly as under
the method of distribution being used prior to the participant's death.
If a participant dies before the Required Beginning Date and before payments
begin irrevocably, the participant's entire interest in this annuity contract
must be paid either:
1) in full by December 31 of the fifth calendar year after the
participant's death; or
2) over the life or over a period certain not greater than the life
expectancy of the individual designated to receive payments after the
participant's death with payments beginning by December 31 of the
first calendar year after the participant's death.
However, if the participant's surviving spouse is the individual designated
to receive the participant's entire interest in 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 participant
would have reached age 70-1/2. If the participant's surviving spouse dies
before payments begin under this provision, then this provision shall apply
upon the death of the participant's spouse as if the spouse were the owner of
the participant's interest in 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 a participant's death, the life expectancy of the
participant's 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 James M. Mortensen
Secretary Executive Vice President
-4-
EXHIBIT 4(a)(xii)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
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.
EXCLUSIVE BENEFIT. This annuity contract is for the exclusive benefit of the
participants and their 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 a participant's interest in the annuity contract except as
provided by the Plan Administrator.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or transfer his
or her interest in this annuity contract. A participant 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) a participant's interest in this annuity contract may secure a loan
to the participant made under any loan provisions of this annuity
contract;
2) all or part of a participant's interest in this annuity contract may
be transferred under a Qualified Domestic Relations Order as defined
in IRC Section 414(p); and
3) payments from a participant's interest in this annuity contract may
be made based on joint lives or joint life expectancies of the
participant and another person, but such other person shall have no
present rights under this annuity contract during the participant's
lifetime.
Any distributions from a participant's interest in this annuity contract
shall be paid to the annuity contract owner or to the participant or other
person entitled to Plan benefits through the participant, as may be directed
by the annuity contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to a participant's interest in this
annuity contract which represent contributions to the Plan for the
participant's benefit must not exceed the limits set forth in IRC Section
457(b) and (c). No elective contributions may be made by the participant with
respect to any month unless the participant 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 participant
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.
<PAGE>
DISTRIBUTION RESTRICTIONS. As required under IRC Section 457(d), no
distributions from a participant's interest in this annuity contract can
be made until:
1) the calendar year in which the participant reaches age 70-1/2; or
2) the participant's separation from service with the Employer; or
3) the participant is faced with an unforeseeable emergency as defined
under the IRC; or
4) the conditions are met for an in-service distribution to the
participant 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 a participant'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 participant reaches normal retirement age as determined under the
Plan; or
2) the participant 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
a participant's payments actually begin the Plan may allow the participant to
elect irrevocably to delay payment to a later fixed and determinable date
within the limits of this provision. The participant 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 to a participant 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 with respect to a participant's interest in this annuity
contract is April 1 following the later of the calendar year in which the
participant reaches age 70-1/2 or the calendar year in which the participant
separates from service with the Employer. No later than the Required
Beginning Date:
1) the participant's interest in this annuity contract must be paid in
full; or
2) distributions of the participant's interest in this annuity contract
must begin in the form of periodic payments made at least annually
(i) for the participant's life or as joint and survivor payments for
the lives of the participant and one other individual, or (ii) over a
period certain not to exceed the participant's life expectancy or the
joint and last survivor life expectancy of the participant and one
other individual entitled to receive any amount payable after the
participant'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 and any guidance which
may be issued by the Secretary of the Treasury under IRC Section 457.
-2-
<PAGE>
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 participant 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 participant 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 a participant dies after the
Required Beginning Date or after payments begin irrevocably (subject to
acceleration), the remaining portion of the participant's interest in annuity
contract must continue to be distributed at least as rapidly as under the
method of distribution being used prior to the participant's death.
If a participant dies before the Required Beginning Date and before payments
begin irrevocably, then the participant's entire interest in this annuity
contract must be paid either:
1) in full by December 31 of the fifth calendar year after the
participant's death;
2) if someone other than the participant's surviving spouse is entitled
to receive part or all of the participant's interest after the
participant'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 participant's death; or
3) if the participant's spouse is the sole person entitled to receive
the participant's interest after the participant'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 participant's death or the
calendar year in which the participant would have attained age
70-1/2.
If the participant's surviving spouse is the sole person entitled to receive
the participant's interest in this annuity contract after the participant's
death and the surviving spouse dies before payments begin under this
provision, then this provision shall apply upon the death of the
participant's spouse as if the spouse were the owner of the participant's
interest in 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 participant'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)(ix)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
EMPLOYER PLAN
ENDORSEMENT
Your Certificate of Participation under the annuity contract (your
"Certificate") 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 the 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. The annuity contract may be restricted by federal
and/or state laws related to employee benefit plans. 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 such
laws.
PLAN DISTRIBUTION PROVISIONS. Distributions of your interest allowed under
the annuity contract and your Certificate may be made only at a time allowed
by the Plan or required by the annuity contract. The form of any distribution
of shall be determined under the Plan from among those forms of distribution
available under the annuity contract. No distribution of your interest may be
made without the written direction of the Plan Administrator unless required
by the annuity contract. Distributions of your interest may be made without
your consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any portion of your interest in the 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 the 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 portion
of your interest in the annuity contract remaining payable 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 the 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 the 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
the annuity contract to secure a loan. Allocations or transfers with respect
to your interest in the annuity contract may be made without your consent
when required by the Plan or the annuity contract.
PLAN LOAN PROVISIONS. If loans are allowed under the 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 that portion of your interest in the annuity contract used as
security for the loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the other
payment options available under the annuity contract, payments of your
interest 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 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 /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-2-
EXHIBIT 4(b)(x)
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)(xi)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
Your Certificate of Participation under the annuity contract (your
"Certificate") is changed as set out below to add provisions for a qualified
pension, profit sharing, or annuity plan. This endorsement and the Certificate
to which it is attached are not valid without additional endorsement(s) defining
the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. The 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 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.
EXCLUSIVE BENEFIT. Your interest in the annuity contract is established for the
exclusive benefit of you and your beneficiaries. No amounts held under your
interest in the 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 your interest in the annuity contract except as provided
by the Plan Administrator.
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) your interest in the annuity contract may secure a loan made to you
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) payments from your interest in the annuity contract may be made based
on joint lives or joint life expectancies of you and another person,
but such other person shall have no present rights under the annuity
contract during your lifetime.
Except as elected under the DIRECT ROLLOVER provision, any distributions from
your interest in the annuity contract shall be paid to the annuity contract
owner or to you or another person entitled to Plan benefits through you, as may
be directed by the annuity contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to your interest in the annuity contract
which represent contributions to the Plan for your benefit must not exceed the
limits set forth in IRC Section 415. Contributions to your interest in the
annuity contract which represent your 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.
<PAGE>
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS. Any amounts
under your interest in the 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 your
interest in the annuity contract which represent contributions for you 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), you or
your surviving spouse may elect to have any portion of an eligible rollover
distribution (as defined in IRC Section 402(c)(4)) paid directly to 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 you
or your surviving spouse and which accepts such distribution. Any direct
rollover election must be made on our form, and must be received at our office
before the date of payment.
DATE BENEFITS TO BEGIN. Unless you elect to delay the payment of your benefits,
distributions of your interest in the 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) you have reached the earlier of age 65 or the normal retirement age
stated in the Plan;
2) the 10th anniversary of the date you joined the Plan; or
3) your separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
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 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 separate from service with the Employer. If you are a
5% owner of the Employer, the Required Beginning Date is April 1 following the
calendar year in which you reach age 70-1/2. 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 for the lives of you and one
other individual, or (ii) over a period certain not to exceed your
life expectancy or the joint and last survivor life expectancy of you
and one other individual entitled 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.
-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.
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
immediately preceding the Required Beginning Date 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.
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 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 /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT 4(b)(xii)
ANNUITY INVESTORS[SERVICEMARK]
LIFE INSURANCE COMPANY
GOVERNMENTAL SECTION 457 PLAN
ENDORSEMENT
Your Certificate of Participation under the annuity contract (your
"Certificate") is changed as set out below to add provisions for a governmental
Section 457 plan. This endorsement and the Certificate to which it is attached
are not valid without additional endorsement(s) defining the Plan and Plan
Administrator.
APPLICABLE TAX LAW RESTRICTIONS. The 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 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.
EXCLUSIVE BENEFIT. Your interest in the annuity contract is for the exclusive
benefit of you and your beneficiaries. No amounts held under your interest in
the 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 your interest in the annuity contract except as
provided by the Plan Administrator.
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) your interest in the annuity contract may secure a loan to you 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) payments from your interest in the annuity contract may be made based
on joint lives or joint life expectancies of you and another person,
but such other person shall have no present rights under the annuity
contract during your lifetime.
Any distributions from your interest in the annuity contract shall be paid to
the annuity contract owner or to you or other person entitled to Plan
benefits through you, as may be directed by the annuity contract owner.
LIMITS ON CONTRIBUTIONS. Contributions to your interest in the annuity
contract which represent contributions to the Plan for your benefit must not
exceed the limits set forth in IRC Section 457(b) and (c). No elective
contributions may be made by you with respect to any month unless you have
entered an agreement for deferral before the first day of that month.
However, an elective contribution may be made for your first month of
employment if the agreement for deferral is made on or before the date your
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.
<PAGE>
DISTRIBUTION RESTRICTIONS. As required under IRC Section 457(d), no
distributions from your interest in the annuity contract can be made until:
1) the calendar year in which you reach age 70-1/2; or
2) your separation from service with the Employer; or
3) you are faced with an unforeseeable emergency as defined under the
IRC; or
4) the conditions are met for an in-service distribution you 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 your interest in the 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) you reach normal retirement age as determined under the Plan; or
2) you separate 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
your payments actually begin the Plan may allow you to elect irrevocably to
delay payment to a later fixed and determinable date within the limits of
this provision. You 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 your 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 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 separate from service with the Employer. 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 for the lives of you and one
other individual, or (ii) over a period certain not to exceed your
life expectancy or the joint and last survivor life expectancy of you
and one other individual entitled to receive any amount payable 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
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.
-2-
<PAGE>
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 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, then 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;
2) if someone other than your surviving spouse is entitled to receive
part or all of your interest after your 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 your death;
or
3) if your spouse is the sole person entitled to receive your interest
after your 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
your death or the calendar year in which you would have attained age
70-1/2.
If your surviving spouse is the sole person entitled to receive your interest
in the annuity contract after your death and the surviving spouse dies before
payments begin under this provision, then this provision shall apply upon the
death of your spouse as if the 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 /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
-3-
EXHIBIT (5)(a)(ii)
================================================================================
[GRAPHIC OMITTED]
PO Box 5423, Cincinnati, Ohio 45201-4523 (800) 789-6771
APPLICATION FOR GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACT
================================================================================
- --------------------------------------------------------------------------------
1) OWNER INFORMATION
PROPOSED CONTRACT OWNER:
------------------------------------------------------
MAILING ADDRESS:
--------------------------------------------------------------
--------------------------------------------------------------
BILLING CONTACT:
--------------------------------------------------------------
Telephone Number ( ) Fax Number ( )
------------------------ ------------------------------------
MAIL BILLING STATEMENT TO (IF OTHER THAN THIRD PARTY ADMINISTRATOR (IF
ABOVE): APPLICABLE):
Name: Firm:
-------------------------------- ----------------------------
Address: Address:
-------------------------------- ----------------------------
City, State Zip: City, State Zip:
-------------------------- --------------------
Contact:
----------------------------
Telephone Number: ( )
-------------------
- --------------------------------------------------------------------------------
2) PRODUCT INFORMATION
The Application is for investment in the AILIC Contract:
------------------------
- --------------------------------------------------------------------------------
3) PLAN INFORMATION
PLAN NAME: PLAN NUMBER: / / / / / /
--------------------------------
TAX ID NUMBER: PLAN YEAR END: Month Day
---------------------------- --- ---
PLAN TYPE: / / 401(a) / / 401(k) / / ERISA 403(b)
/ / NonERISA 403(b) / / 457 / / Other (Specify)
-------------
PLAN ADMINISTRATOR/TRUSTEE TELEPHONE NUMBER: ( )
--------------- -----------------
- --------------------------------------------------------------------------------
4) AGREEMENT
Application is hereby made for a Group Flexible Premium Deferred Annuity
Contract. The Owner acknowledges that Annuity Investors Life Insurance Company
(REGISTERED) will provide the investment vehicle for, but will not be
responsible for the administration of the plan. The Owner hereby agrees that the
Contract shall not take effect and be in force unless and until the first
premium is received by the COMPANY. The Owner has read and understands this
entire application. The Owner has also received current copies of the
prospectuses for the Annuity Investors Variable Account and Funds which
correspond to the product selected in section 2 of this application.
IT IS FURTHER UNDERSTOOD THAT PAYMENTS AND VALUES PROVIDED UNDER EACH
CERTIFICATE, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT,
ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
The information provided herein is true, correct, and complete to the best of my
knowledge and belief.
Signed at: this day of , in the year .
------------------------, --- ------- ------
City, State Day Month Year
Signature for Owner: Title:
---------------------- ------------------------------
Signature of COMPANY Representative:
--------------------------------------------
- --------------------------------------------------------------------------------
FOR HOME OFFICE USE ONLY:
- --------------------------------------------------------------------------------
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. 3 of the Registration
Statement (Form N-4 File Nos. 33-59861 and 811-07299) and related Statement of
Additional Information of Annuity Investors Variable Account A.
/s/ Ernst & Young LLP
Cincinnati, Ohio
April 29, 1998
