Annuity Investors(REGISTERED) Variable Account A
of
Annuity Investors Logo
for
The Commodore Logo
The Commodore The Commodore
Nauticus(REGISTERED) Americus(REGISTERED)
December 31, 1998
Annual Report to Contract Owners
<PAGE>
Table of Contents
Page
Letter from the President.................................................. 2
Tab
Annuity Investors Variable Account A -Financial Statements................. I
Dreyfus Portfolios--Annual Reports......................................... II
Dreyfus Variable Investment Fund
Small Cap Portfolio
Capital Appreciation Portfolio
Growth and Income Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Janus Aspen Series--Annual Report...........................................III
Aggressive Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
Merrill Lynch Variable Series Funds, Inc.--Annual Report.................... IV
Basic Value Focus Fund
Domestic Money Market Fund
Global Strategy Focus Fund
High Current Income Fund
PBHG Insurance Series Fund, Inc.--Annual Report............................. V
PBHG Technology & Communications Portfolio
PBHG Growth II Portfolio
Strong Opportunity Fund II, Inc.--Annual Report............................. VI
Morgan Stanley Dean Witter Universal Funds, Inc.--Annual Report.............VII
U.S. Real Estate Portfolio
Fixed Income Portfolio
-1-
<PAGE>
Dear Commodore Contract Owner:
I am pleased to present you with the December 31, 1998 Financial
Statements of Annuity Investors(R) Variable Account A, and the 1998 Annual
Reports for each of the seventeen Portfolios offered through the sub-accounts of
Annuity Investors Variable Account A. The Portfolios are managed by leading
investment advisors such as Janus Capital Corporation, The Dreyfus Corporation,
Merrill Lynch Asset Management, L.P., Morgan Stanley Dean Witter Investment
Management Inc., Pilgrim Baxter & Associates, Ltd. and Strong Capital
Management, Inc. The broad range of investment options offered under your
Contract allows you the flexibility to implement your own personal investment
strategy and to change your mix of investments as your objectives change over
time.
In 1998, the stock market, as measured by the Standard & Poor's 500
Index, showed a 26.67% increase and the NYSE Composite Index increased by
16.55%. The bond market, as measured by Lehman Brothers Aggregate Index,
increased by 8.63% over the same period. The performance of the sub-accounts
offered under your Contract compared favorably to the performance of these
indices, as shown by the average annual total return for the period January 1,
1998 to December 31, 1998, below.*
Janus A.S.-Aggressive Growth Portfolio 32.60%
Janus A.S.-Worldwide Growth Portfolio 27.33%
Janus A.S.-Balanced Portfolio 32.63%
Dreyfus V.I.F.-Capital Appreciation Portfolio 28.61%
Dreyfus V.I.F.-Growth and Income Portfolio 10.43%
Dreyfus V.I.F.-Small Cap Portfolio -4.63%
The Dreyfus Socially Responsible Growth Fund, Inc. 27.78%
Dreyfus Stock Index Fund 26.63%
Strong Opportunity Fund II, Inc. 12.14%
Merrill Lynch V.S.F.-Basic Value Focus Fund 8.09%
Merrill Lynch V.S.F.-Global Strategy Focus Fund 7.53%
Merrill Lynch V.S.F.-High Current Income Fund -4.28%
Merrill Lynch V.S.F.-Domestic Money Market Fund 3.04%
Morgan Stanley Universal Funds, Inc.-Fixed Income 6.57%
Portfolio
Morgan Stanley Universal Funds, Inc.-U.S. Real Estate -11.96%
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio 6.85%
PBHG Insurance Series Fund, Inc.-PBHG Tech. & Comm. 30.57%
Portfolio
*Performance figures are net of all sub-account charges, but do not
reflect contingent deferred sales charges and contract maintenance
fees.
I, and my colleagues at Annuity Investors Life Insurance Company(R),
look forward to serving you in the future.
Sincerely,
/s/--------------
Robert A. Adams
President
-2-
<PAGE>
ANNUITY INVESTORS
VARIABLE ACCOUNT A
Financial Statements
Years ended December 31, 1998 and 1997
With Report of Independent Auditors
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
Financial Statements
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors.............................................1
Audited Financial Statements
Statement of Assets and Liabilities - Current Year.........................2
Statement of Assets and Liabilities - Prior Year...........................4
Statements of Operations - Current Year....................................6
Statements of Operations - Prior Year......................................7
Statements of Changes in Net Assets - Current Year.........................8
Statements of Changes in Net Assets - Prior Year..........................11
Notes to Financial Statements.............................................14
<PAGE>
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, 1998 and 1997, 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, 1998 and 1997, 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, 1998 and 1997, 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 4, 1999
-1-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Market
Shares Cost Value
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments in portfolio shares, at net asset value (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio .............................. 258,671.915 $ 7,472,994 $ 9,340,643
Growth and Income Portfolio ................................. 92,571.106 1,995,497 2,094,884
Small Cap Portfolio ......................................... 58,023.275 3,253,489 3,128,035
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. ...................... 146,605.458 3,755,062 4,556,498
Stock Index Fund ............................................ 431,475.411 11,687,152 14,031,580
Janus Aspen Series:
Aggressive Growth Portfolio ................................. 164,049.255 3,156,609 4,526,119
Worldwide Growth Portfolio .................................. 484,769.907 11,693,725 14,101,957
Balanced Portfolio .......................................... 644,903.995 11,536,564 14,510,340
Short-Term Bond Portfolio ................................... 0.000 0 0
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund ...................................... 171,800.005 2,508,822 2,520,306
Global Strategy Focus Fund .................................. 26,435.460 365,698 354,500
High Current Income Fund .................................... 142,758.018 1,603,907 1,443,283
Domestic Money Market Fund .................................. 997,945.322 997,945 997,945
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio ...................................... 73,075.791 797,468 781,911
U.S. Real Estate Portfolio .................................. 67,863.625 722,850 665,064
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio ......................................... 27,498.480 302,292 319,807
Technology & Communications Portfolio ....................... 112,563.486 1,228,252 1,548,873
Strong Funds:
Opportunity Fund II ......................................... 78,825.745 1,676,372 1,712,095
-----------
Total cost................................................................. $64,754,695
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets.............................................................................. 76,633,840
Liabilities:
Amounts due to Annuity Investors Life Insurance Company (Note 4)........................................... 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets................................................................................ $76,633,840
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1998
<TABLE>
<CAPTION>
Market
Units Unit Value Value
----------- ------------ -------------
<S> <C> <C> <C>
Net assets attributable to variable annuity contract holders (Note 2):
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio - Basic contract ......................... 445,340.210 $ 20.056205 $ 8,931,835
Capital Appreciation Portfolio - Enhanced contract ...................... 20,198.098 20.239919 408,808
Growth and Income Portfolio - Basic contract ............................ 153,859.242 12.672693 1,949,811
Growth and Income Portfolio - Enhanced contract ......................... 11,391.202 12.735544 145,073
Small Cap Portfolio - Basic contract .................................... 256,140.224 11.582209 2,966,670
Small Cap Portfolio - Enhanced contract ................................. 13,863.364 11.639676 161,365
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. - Basic contract ................. 229,710.625 19.329493 4,440,190
Socially Responsible Growth Fund, Inc. - Enhanced contract .............. 5,962.423 19.506808 116,308
Stock Index Fund - Basic contract ....................................... 665,996.241 20.107787 13,391,711
Stock Index Fund - Enhanced contract .................................... 31,533.165 20.291951 639,869
Janus Aspen Series:
Aggressive Growth Portfolio - Basic contract ............................ 276,028.214 16.201176 4,471,982
Aggressive Growth Portfolio - Enhanced contract ......................... 3,311.189 16.349773 54,137
Worldwide Growth Portfolio - Basic contract ............................. 689,148.869 20.045287 13,814,187
Worldwide Growth Portfolio - Enhanced contract .......................... 14,225.653 20.228946 287,770
Balanced Portfolio - Basic contract ..................................... 765,170.784 18.665828 14,282,546
Balanced Portfolio - Enhanced contract .................................. 12,092.854 18.837059 227,794
Short-Term Bond Portfolio - Basic contract .............................. 0.000 0.000000 0
Short-Term Bond Portfolio - Enhanced contract ........................... 0.000 0.000000 0
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund - Basic contract ................................. 154,675.988 15.575121 2,409,097
Basic Value Focus Fund - Enhanced contract .............................. 7,075.336 15.717824 111,209
Global Strategy Focus Fund - Basic contract ............................. 25,160.717 13.426667 337,825
Global Strategy Focus Fund - Enhanced contract .......................... 1,230.646 13.549756 16,675
High Current Income Fund - Basic contract ............................... 119,716.657 11.667978 1,396,851
High Current Income Fund - Enhanced contract ............................ 3,945.423 11.768629 46,432
Domestic Money Market Fund - Basic contract ............................. 876,845.270 1.118170 980,462
Domestic Money Market Fund - Enhanced contract .......................... 15,490.877 1.128613 17,483
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio - Basic contract ................................. 67,599.236 11.446708 773,789
Fixed Income Portfolio - Enhanced contract .............................. 706.067 11.503500 8,122
U.S. Real Estate Portfolio - Basic contract ............................. 61,094.222 10.820841 661,091
U.S. Real Estate Portfolio - Enhanced contract .......................... 365.320 10.874562 3,973
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio - Basic contract .................................... 27,306.830 11.391453 311,064
Growth II Portfolio - Enhanced contract ................................. 763.702 11.447984 8,743
Technology & Communications Portfolio - Basic contract .................. 112,549.063 13.480010 1,517,162
Technology & Communications Portfolio - Enhanced contract ............... 2,340.838 13.546872 31,711
Strong Funds:
Opportunity Fund II - Basic contract .................................... 120,817.718 13.806405 1,668,058
Opportunity Fund II - Enhanced contract ................................. 3,173.858 13.874874 44,037
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable annuity contract holders......................................... 76,633,840
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets........................................................................................... $ 76,633,840
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
=================================================================================================================================
Market
Shares Cost Value
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
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 Portfolio ........................................... 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
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
==================================================================================================================================
Market
Units Unit Value Value
----------- ----------- -----------
<S> <C> <C> <C>
Net assets attributable to variable annuity contract holders (Note 2):
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
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Dreyfus Variable Investment Fund
----------------------------------------------------
Growth
Capital and Small
Appreciation Income Cap
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 52,299 $ 35,426 $ 48,600
Expenses:
Mortality and expense risk fees (Note 4) .......................... 79,803 17,591 25,657
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (27,504) 17,835 22,943
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 80,800 (7,622) (18,401)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,537,721 124,226 (77,296)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 1,618,521 116,604 (95,697)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 1,591,017 $ 134,439 $ (72,754)
====================================================================================================================================
<CAPTION>
================================================================================================================
Dreyfus Funds
--------------------------------
Socially
Responsible Stock
Growth Index
Fund, Inc. Fund
================================================================================================================
<S> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 171,025 $ 157,506
Expenses:
Mortality and expense risk fees (Note 4) .......................... 39,072 115,315
- ----------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 131,953 42,191
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 33,516 179,958
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 664,657 1,980,383
- ----------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 698,173 2,160,341
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 830,126 $ 2,202,532
================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
----------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 0 $ 403,005 $ 454,882 $ 591
Expenses:
Mortality and expense risk fees (Note 4) .......................... 40,580 130,289 119,952 308
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (40,580) 272,716 334,930 283
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 29,417 94,500 54,985 (7,029)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,063,481 1,997,580 2,551,784 7,834
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 1,092,898 2,092,080 2,606,769 805
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 1,052,318 $ 2,364,796 $ 2,941,699 $ 1,088
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Merrill Lynch Variable Series Funds, Inc.
---------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 157,272 $ 38,481 $ 120,440 $ 42,570
Expenses:
Mortality and expense risk fees (Note 4) .......................... 23,055 3,765 15,221 13,362
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 134,217 34,716 105,219 29,208
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (837) (2,908) (15,007) 0
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (46,659) (11,851) (162,254) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (47,496) (14,759) (177,261) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 86,721 $ 19,957 $ (72,042) $ 29,208
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Morgan Stanley PBHG Insurance
Universal Funds, Inc. Series Fund, Inc.
---------------------------------------------------------
U.S. Technology
Fixed Real Growth and
Income Estate II Communications
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 35,969 $ 22,092 $ 0 $ 157
Expenses:
Mortality and expense risk fees (Note 4) .......................... 4,817 5,856 2,974 12,134
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 31,152 16,236 (2,974) (11,977)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 5,008 (4,878) 596 4,399
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (13,145) (64,725) 22,827 337,130
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (8,137) (69,603) 23,423 341,529
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 23,015 $ (53,367) $ 20,449 $ 329,552
====================================================================================================================================
<CAPTION>
===================================================================================================================
Strong
Funds
------------
Opportunity
Fund
II Total
===================================================================================================================
<S> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 93,328 $ 1,833,643
Expenses:
Mortality and expense risk fees (Note 4) .......................... 13,265 663,016
- -------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 80,063 1,170,627
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares (3,881) 422,616
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 28,800 9,940,493
- -------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 24,919 10,363,109
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 104,982 $11,533,736
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
Dreyfus Variable Investment Fund
----------------------------------------------------
Growth
Capital and Small
Appreciation Income Cap
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares ......................... $ 31,931 $ 35,214 $ 53,513
Expenses:
Mortality and expense risk fees (Note 4) ............................... 24,987 1,729 2,571
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)....................................... 6,944 33,485 50,942
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares .... 10,026 1,311 10
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares ................................... 319,771 (24,839) (48,158)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ................ 329,797 (23,528) (48,148)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ $ 336,741 $ 9,957 $ 2,794
====================================================================================================================================
<CAPTION>
================================================================================================================
Dreyfus Funds
--------------------------------
Socially
Responsible Stock
Growth Index
Fund, Inc. Fund
================================================================================================================
<S> <C> <C>
Investment income:
Dividends from investments in portfolio shares .......................... $ 65,284 $ 167,780
Expenses:
Mortality and expense risk fees (Note 4) ................................ 13,118 29,248
- ----------------------------------------------------------------------------------------------------------------
Net investment income (loss)........................................ 52,166 138,532
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares ..... 8,354 3,459
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .................................... 136,989 355,870
- ----------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ................. 145,343 359,329
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ......... $ 197,509 $ 497,861
================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
--------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
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 (loss) on sale of investments in 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
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Merrill Lynch Variable Series Funds, Inc.
---------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 9,192 $ 1,268 $ 33,292 $ 41,589
Expenses:
Mortality and expense risk fees (Note 4) .......................... 6,537 1,537 4,852 11,904
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 2,655 (269) 28,440 29,685
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) 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 gain (loss) on investments in portfolio shares ........... 57,612 1,552 1,324 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 60,267 $ 1,283 $ 29,764 $ 29,685
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Morgan Stanley PBHG Insurance
Universal Funds, Inc. Series Fund, Inc.
---------------------------------------------------------
U.S. Technology
Fixed Real Growth and
Income Estate II Communications
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 4,192 $ 7,455 $ 0 $ 0
Expenses:
Mortality and expense risk fees (Note 4) .......................... 217 727 767 2,092
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. 3,975 6,728 (767) (2,092)
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 186 448 109 898
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (2,412) 6,939 (5,312) (16,509)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... (2,226) 7,387 (5,203) (15,611)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 1,749 $ 14,115 $ (5,970) $ (17,703)
====================================================================================================================================
<CAPTION>
=======================================================================================================================
Strong
Funds
------------
Opportunity
Fund
II Total
=======================================================================================================================
<S> <C> <C>
Investment income:
Dividends from investments in portfolio shares .................... $ 407 $ 636,406
Expenses:
Mortality and expense risk fees (Note 4) .......................... 948 203,128
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................. (541) 433,278
Net realized gain (loss) and unrealized appreciation (depreciation)
on investments:
Net realized gain (loss) on sale of investments in portfolio shares 483 51,952
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 6,923 1,885,308
- -----------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments in portfolio shares ........... 7,406 1,937,260
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... $ 6,865 $2,370,538
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
Dreyfus Variable Investment Fund
----------------------------------------------------
Growth
Capital and Small
Appreciation Income Cap
Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ (27,504) $ 17,835 $ 22,943
Net realized gain (loss) on sale of investments in portfolio shares 80,800 (7,622) (18,401)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 1,537,721 124,226 (77,296)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 1,591,017 134,439 (72,754)
Changes from principal transactions:
Contract purchase payments ........................................ 3,493,049 1,319,418 1,968,291
Contract redemptions .............................................. (283,084) (37,005) (62,726)
Net transfers (to) from fixed account ............................. 623,341 117,220 224,657
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 3,833,306 1,399,633 2,130,222
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 5,424,323 1,534,072 2,057,468
Net assets, beginning of period ........................................ 3,916,320 560,812 1,070,567
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 9,340,643 $ 2,094,884 $ 3,128,035
====================================================================================================================================
<CAPTION>
================================================================================================================
Dreyfus Funds
--------------------------------
Socially
Responsible Stock
Growth Index
Fund, Inc. Fund
================================================================================================================
<S> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 131,953 $ 42,191
Net realized gain (loss) on sale of investments in portfolio shares 33,516 179,958
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 664,657 1,980,383
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 830,126 2,202,532
Changes from principal transactions:
Contract purchase payments ........................................ 1,499,937 6,196,975
Contract redemptions .............................................. (122,782) (315,162)
Net transfers (to) from fixed account ............................. 254,932 722,941
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 1,632,087 6,604,754
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 2,462,213 8,807,286
Net assets, beginning of period ........................................ 2,094,285 5,224,294
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 4,556,498 $ 14,031,580
================================================================================================================
<CAPTION>
====================================================================================================================================
Janus Aspen Series
----------------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ................................. $ (40,580) $ 272,716 $ 334,930 $ 283
Net realized gain (loss) on sale of investments in
portfolio shares ........................................ 29,417 94,500 54,985 (7,029)
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares ......................... 1,063,481 1,997,580 2,551,784 7,834
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ... 1,052,318 2,364,796 2,941,699 1,088
Changes from principal transactions:
Contract purchase payments ................................... 1,211,114 4,957,213 5,335,110 3,730
Contract redemptions ......................................... (200,425) (384,734) (361,309) (5)
Net transfers (to) from fixed account ........................ (90,308) 413,880 699,782 (70,939)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions .. 920,381 4,986,359 5,673,583 (67,214)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ......................... 1,972,699 7,351,155 8,615,282 (66,126)
Net assets, beginning of period ................................... 2,553,420 6,750,802 5,895,058 66,126
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ......................................... $ 4,526,119 $ 14,101,957 $ 14,510,340 $ 0
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Merrill Lynch Variable Series Funds, Inc.
---------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 134,217 $ 34,716 $ 105,219 $ 29,208
Net realized gain (loss) on sale of investments in portfolio shares (837) (2,908) (15,007) 0
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (46,659) (11,851) (162,254) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 86,721 19,957 (72,042) 29,208
Changes from principal transactions:
Contract purchase payments ........................................ 1,501,132 113,474 720,476 1,401,235
Contract redemptions .............................................. (65,000) (9,043) (60,276) (24,217)
Net transfers (to) from fixed account ............................. (15,754) (4,752) 40,846 (1,173,203)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 1,420,378 99,679 701,046 203,815
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 1,507,099 119,636 629,004 233,023
Net assets, beginning of period ........................................ 1,013,207 234,864 814,279 764,922
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 2,520,306 $ 354,500 $ 1,443,283 $ 997,945
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Morgan Stanley PBHG Insurance
Universal Funds, Inc. Series Fund, Inc.
---------------------------------------------------------
U.S. Technology
Fixed Real Growth and
Income Estate II Communications
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 31,152 $ 16,236 $ (2,974) $ (11,977)
Net realized gain (loss) on sale of investments in portfolio shares 5,008 (4,878) 596 4,399
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. (13,145) (64,725) 22,827 337,130
Net increase (decrease) in net assets from operations ........ 23,015 (53,367) 20,449 329,552
Changes from principal transactions:
Contract purchase payments ........................................ 354,893 455,030 121,131 644,581
Contract redemptions .............................................. (6,605) (11,846) (2,291) (38,053)
Net transfers (to) from fixed account ............................. 333,864 36,326 5,646 81,794
Net increase in net assets from principal transactions ....... 682,152 479,510 124,486 688,322
Net increase in net assets .............................. 705,167 426,143 144,935 1,017,874
Net assets, beginning of period ........................................ 76,744 238,921 174,872 530,999
Net assets, end of period .............................................. $ 781,911 $ 665,064 $ 319,807 $ 1,548,873
====================================================================================================================================
<CAPTION>
=======================================================================================================================
Strong
Funds
------------
Opportunity
Fund
II Total
=======================================================================================================================
<S> <C> <C>
Changes from operations:
Net investment income (loss) ...................................... $ 80,063 $ 1,170,627
Net realized gain (loss) on sale of investments in portfolio shares (3,881) 422,616
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares .............................. 28,800 9,940,493
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ........ 104,982 11,533,736
Changes from principal transactions:
Contract purchase payments ........................................ 1,062,529 32,359,318
Contract redemptions .............................................. (24,103) (2,008,666)
Net transfers (to) from fixed account ............................. 131,106 2,331,379
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ....... 1,169,532 32,682,031
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets .............................. 1,274,514 44,215,767
Net assets, beginning of period ........................................ 437,581 32,418,073
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period .............................................. $ 1,712,095 $ 76,633,840
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1998
Basic 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, 1997 247,118.575 48,865.286 86,150.930 132,957.488 324,713.323
Units purchased 213,653.289 109,141.805 173,379.161 104,886.187 367,351.643
Units redeemed (15,431.654) (4,147.849) (3,389.867) (8,133.050) (26,068.725)
----------- ----------- ----------- ----------- -----------
Units outstanding December 31, 1998 445,340.210 153,859.242 256,140.224 229,710.625 665,996.241
=========== =========== =========== =========== ===========
==================================================================================================================================
<CAPTION>
===============================================================================================================
Janus Aspen Series
-------------------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
===============================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1997 207,227.419 425,739.592 409,917.307 3,967.559
Units purchased 94,553.109 284,041.016 382,195.992 343.698
Units redeemed (25,752.314) (20,631.739) (26,942.515) (4,311.257)
----------- ----------- ----------- -----------
Units outstanding December 31, 1998 276,028.214 689,148.869 765,170.784 0.000
=========== =========== =========== ===========
===============================================================================================================
<CAPTION>
===============================================================================================================
Merrill Lynch Variable Series Funds, Inc.
--------------------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
===============================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1997 68,181.594 17,615.512 65,756.981 697,535.841
Units purchased 92,801.588 10,410.160 65,161.945 1,617,996.547
Units redeemed (6,307.194) (2,864.955) (11,202.269) (1,438,687.11)
------------- ------------- ------------- ------------
Units outstanding December 31, 1998 154,675.988 25,160.717 119,716.657 876,845.270
============= ============= ============= ============
===============================================================================================================
<CAPTION>
Morgan Stanley PBHG Insurance Strong
Universal Funds, Inc. Series Fund, Inc. Funds
------------------------------ ------------------------------------------------
U.S. Technology
Fixed Real Growth and Opportunity
Income Estate II Communications Fund
Portfolio Portfolio Portfolio Portfolio II
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 7,144.949 19,438.406 15,905.540 51,276.959 35,542.297
Units purchased 61,069.161 42,714.635 11,981.263 64,689.186 87,196.634
Units redeemed (614.874) (1,058.819) (579.973) (3,417.082) (1,921.213)
------------- ------------ ------------- ------------- -------------
Units outstanding December 31, 1998 67,599.236 61,094.222 27,306.830 112,549.063 120,817.718
============= ============ ============= ============= =============
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-9-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1998
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, 1997 3,990.613 5.708 1,993.698 5,460.625 4,263.339
Units purchased 16,725.218 11,512.717 11,955.075 2,403.284 27,564.885
Units redeemed (517.733) (127.223) (85.409) (1,901.486) (295.059)
---------- ---------- ---------- ---------- ----------
Units outstanding December 31, 1998 20,198.098 11,391.202 13,863.364 5,962.423 31,533.165
========== ========== ========== ========== ==========
============================================================================================================================
<CAPTION>
===========================================================================================================
Janus Aspen Series
----------------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
===========================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1997 1,754.459 3,070.952 8,896.063 2,091.259
Units purchased 1,793.596 12,038.103 4,583.881 8.386
Units redeemed (236.866) (883.402) (1,387.090) (2,099.645)
---------- ---------- ---------- ----------
Units outstanding December 31, 1998 3,311.189 14,225.653 12,092.854 0.000
========== ========== ========== ==========
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================================
Merrill Lynch Variable Series Funds, Inc.
----------------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
===========================================================================================================
<S> <C> <C> <C> <C>
Units outstanding, December 31, 1997 2,123.159 1,186.434 1,036.359 10,686.456
Units purchased 6,275.039 127.248 2,949.347 55,490.063
Units redeemed (1,322.862) (83.036) (40.283) (50,685.642)
---------- ---------- ---------- ----------
Units outstanding December 31, 1998 7,075.336 1,230.646 3,945.423 15,490.877
========== ========== ========== ==========
===========================================================================================================
<CAPTION>
============================================================================================================================
Morgan Stanley PBHG Insurance Strong
Universal Funds, Inc. Series Fund, Inc. Funds
---------------------------- ------------------------------ -----------
U.S. Technology
Fixed Real Growth and Opportunity
Income Estate II Communications Fund
Portfolio Portfolio Portfolio Portfolio II
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Units outstanding, December 31, 1997 0.000 0.000 496.211 156.518 0.000
Units purchased 706.067 401.140 371.465 2,184.320 3,455.369
Units redeemed 0.000 (35.820) (103.974) 0.000 (281.511)
---------- ---------- ---------- ---------- ---------
Units outstanding December 31, 1998 706.067 365.320 763.702 2,340.838 3,173.858
========== ========== ========== ========== =========
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-10-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
=================================================================================================================================
Dreyfus Variable Investment Fund
-------------------------------------------------
Growth
Capital and Small
Appreciation Income Cap
Portfolio Portfolio Portfolio
=================================================================================================================================
<S> <C> <C> <C>
Changes from operations:
Net investment income (loss) ....................................... $ 6,944 $ 33,485 $ 50,942
Net realized gain (loss) on sale of
investments in portfolio shares .................................. 10,026 1,311 10
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares ................. 319,771 (24,839) (48,158)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ......... 336,741 9,957 2,794
Changes from principal transactions:
Contract purchase payments ......................................... 2,587,775 473,969 833,543
Contract redemptions ............................................... (114,166) (18,372) (3,025)
Net transfers (to) from fixed account .............................. 689,951 95,258 237,255
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
principal transactions ...................................... 3,163,560 550,855 1,067,773
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ............................... 3,500,301 560,812 1,070,567
Net assets, beginning of period ......................................... 416,019 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ............................................... $ 3,916,320 $ 560,812 $ 1,070,567
=================================================================================================================================
<CAPTION>
===============================================================================================================
Dreyfus Funds
-------------------------------
Socially
Responsible Stock
Growth Index
Fund, Inc. Fund
===============================================================================================================
<S> <C> <C>
Changes from operations:
Net investment income (loss) ....................................... $ 52,166 $ 138,532
Net realized gain (loss) on sale of
investments in portfolio shares .................................. 8,354 3,459
Net change in unrealized appreciation
(depreciation) of investments in portfolio shares ................. 136,989 355,870
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ......... 197,509 497,861
Changes from principal transactions:
Contract purchase payments ......................................... 1,445,588 3,887,862
Contract redemptions ............................................... (51,480) (82,415)
Net transfers (to) from fixed account .............................. 320,031 560,574
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets from
principal transactions ...................................... 1,714,139 4,366,020
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets ............................... 1,911,648 4,863,881
Net assets, beginning of period ......................................... 182,637 360,413
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period ............................................... $ 2,094,285 $ 5,224,294
===============================================================================================================
<CAPTION>
==================================================================================================================================
Janus Aspen Series
--------------------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
==================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss) ...........................$ (20,223) $ 16,850 $ 76,194 $ 10,574
Net realized gain (loss) on sale of
investments in 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 increase (decrease) in net assets
from operations ................................. 290,278 413,148 498,888 3,307
Changes from principal transactions:
Contract purchase payments ............................. 1,590,929 4,759,590 4,181,625 29,866
Contract redemptions ................................... (57,933) (153,014) (140,016) (283)
Net transfers (to) from fixed account .................. 135,745 1,065,566 763,682 (10,508)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
principal transactions .......................... 1,668,741 5,672,143 4,805,290 19,075
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ................... 1,959,019 6,085,291 5,304,178 22,382
Net assets, beginning of period ............................. 594,401 665,511 590,880 43,744
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ...................................$ 2,553,420 $ 6,750,802 $ 5,895,058 $ 66,126
==================================================================================================================================
<CAPTION>
====================================================================================================================================
Merrill Lynch Variable Series Funds, Inc.
---------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
====================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)......................................... $ 2,655 $ (269) $ 28,440 $ 29,685
Net realized gain (loss) 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
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Morgan Stanley PBHG Insurance
Universal Funds, Inc. Series Fund, Inc.
--------------------------------------------------------
U.S. Technology
Fixed Real Growth and
Income Estate II Communications
Portfolio Portfolio Portfolio Portfolio
===================================================================================================================================
<S> <C> <C> <C> <C>
Changes from operations:
Net investment income (loss)......................................... $ 3,975 $ 6,728 $ (767) $ (2,092)
Net realized gain (loss) on sale of investments in portfolio shares . 186 448 109 898
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares ................................ (2,412) 6,939 (5,312) (16,509)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations .......... 1,749 14,115 (5,970) (17,703)
Changes from principal transactions:
Contract purchase payments .......................................... 60,217 158,252 158,200 315,811
Contract redemptions ................................................ (2,721) (3,572) 0 (10,266)
Net transfers (to) from fixed account ............................... 17,500 70,126 22,642 243,157
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ......... 74,995 224,806 180,842 548,702
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets ................................ 76,744 238,921 174,872 530,999
Net assets, beginning of period .......................................... 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period................................................. $ 76,744 $ 238,921 $ 174,872 $ 530,999
===================================================================================================================================
<CAPTION>
=======================================================================================================================
Strong
Funds
------------
Opportunity
Fund
II Total
=======================================================================================================================
<S> <C> <C>
Changes from operations:
Net investment income (loss)................................................. $ (541) $ 433,278
Net realized gain (loss) on sale of investments in portfolio shares ......... 483 51,952
Net change in unrealized appreciation (depreciation) of
investments in portfolio shares ........................................ 6,923 1,885,308
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations .................. 6,865 2,370,538
Changes from principal transactions:
Contract purchase payments .................................................. 346,824 24,208,399
Contract redemptions ........................................................ 0 (720,373)
Net transfers (to) from fixed account ....................................... 83,892 3,179,086
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from principal transactions ................. 430,716 26,667,113
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets ........................................ 437,581 29,037,651
Net assets, beginning of period .................................................. 0 3,380,422
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period......................................................... $ 437,581 $ 32,418,073
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-11-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
Basic 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 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
=========== =========== =========== =========== ===========
================================================================================================================================
<CAPTION>
=============================================================================================================
Janus Aspen Series
------------------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
=============================================================================================================
<S> <C> <C> <C> <C>
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
=========== =========== =========== ===========
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================
Merrill Lynch Variable Series Funds, Inc.
------------------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
=============================================================================================================
<S> <C> <C> <C> <C>
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
=========== ============= ============= =============
=============================================================================================================
<CAPTION>
================================================================================================================================
Morgan Stanley PBHG Insurance Strong
Universal Funds, Inc. Series Fund, Inc. Funds
------------------------------ ------------------------------- -------------
U.S. Technology
Fixed Real Growth and Opportunity
Income Estate II Communications Fund
Portfolio Portfolio Portfolio Portfolio II
================================================================================================================================
<S> <C> <C> <C> <C> <C>
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
=========== ============= ============= ============= =============
================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-12-
<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
========= ========= ========= ========= =========
========================================================================================================================
<CAPTION>
=======================================================================================================
Janus Aspen Series
------------------------------------------------------------
Short-
Aggressive Worldwide Term
Growth Growth Balanced Bond
Portfolio Portfolio Portfolio Portfolio
=======================================================================================================
<S> <C> <C> <C> <C>
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
========= ========= ========= =========
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================================
Merrill Lynch Variable Series Funds, Inc.
------------------------------------------------------------
Basic Global High Domestic
Value Strategy Current Money
Focus Focus Income Market
Fund Fund Fund Fund
=======================================================================================================
<S> <C> <C> <C> <C>
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
========== ========= ========= ==========
=======================================================================================================
<CAPTION>
=========================================================================================================================
Morgan Stanley PBHG Insurance Strong
Universal Funds, Inc. Series Fund, Inc. Funds
-------------------------- --------------------------- ----------
U.S. Technology
Fixed Real Growth and Opportunity
Income Estate II Communications Fund
Portfolio Portfolio Portfolio Portfolio II
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
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
========== ========== ========== ========== ==========
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-13-
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(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, 1998, the following investment options were available:
The Dreyfus Variable Investment Fund:
o Capital Appreciation Portfolio
o Growth and Income Portfolio
o Small Cap Portfolio
Dreyfus Funds:
o Socially Responsible Growth Fund, Inc.
o Stock Index Fund
Janus Aspen Series:
o Aggressive Growth Portfolio
o Worldwide Growth Portfolio
o Balanced Portfolio
Merrill Lynch Variable Series Funds, Inc.:
o Domestic Money Market Fund
o Basic Value Focus Fund
o Global Strategy Focus Fund
o High Current Income Fund
Morgan Stanley Universal Funds, Inc.:
o Fixed Income Portfolio
o U.S. Real Estate Portfolio
PBHG Insurance Series Fund, Inc.:
o Growth II Portfolio
o Technology & Communications Portfolio
Strong Funds:
o Opportunity Fund II
Effective September 29, 1998, the Janus Aspen Series Short-Term Bond
Portfolio was closed and all remaining shares were transferred to the
Merrill Lynch Variable Series Funds, Inc. Domestic Money Market Funds.
No other sub-accounts were added to or deleted from the Account in 1998.
(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.
14
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
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 (loss) 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.
15
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(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, 1998 and 1997 are as follows:
1998
Proceeds
Cost of from
Purchases Sales
The Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio $ 4,034,231 $ 228,430
Growth and Income Portfolio 1,524,741 107,273
Small Cap Portfolio 2,260,574 107,409
Dreyfus Funds:
Socially Responsible Growth Fund, Inc. 1,871,366 107,326
Stock Index Fund 7,277,529 630,583
Janus Aspen Series:
Aggressive Growth Portfolio 1,072,550 192,749
Worldwide Growth Portfolio 5,552,839 293,764
Balanced Portfolio 6,229,950 221,437
Short-Term Bond Portfolio 4,336 71,267
Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Fund 1,665,199 110,605
Global Strategy Focus Fund 175,584 41,189
High Current Income Fund 1,094,117 287,852
Domestic Money Market Fund 2,329,571 2,096,548
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio 852,047 138,743
U.S. Real Estate Portfolio 559,465 63,719
PBHG Insurance Series Fund, Inc.:
Growth II Portfolio 147,611 26,098
Technology & Communications Portfolio 709,264 32,918
Strong Funds:
Opportunity Fund II 1,340,045 90,450
------------ ------------
Total $38,701,019 $4,848,360
=========== ==========
16
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(3) PURCHASES AND SALES OF INVESTMENTS IN PORTFOLIO SHARES (Continued)
1997
Proceeds
Cost of 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
=========== ==========
17
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(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 $648,745 and $199,272 for the years ended December 31,
1998 and 1997, 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 $14,271 and $3,856 for the years ended December 31, 1998
and 1997, 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 $62,799 and $7,275 for the years ended December 31,
1998 and 1997, 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.
18
<PAGE>
ANNUITY INVESTORS VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
(6) NET ASSETS
The following is a reconciliation of net assets at December 31, 1998:
1998
Proceeds from the sales of units since organization,
less cost of units redeemed $62,647,073
Undistributed net investment income 1,628,401
Undistributed net realized gains on sale of investments 479,222
Net unrealized appreciation of investments 11,879,144
------------
Net assets, end of period $76,633,840
(7) YEAR 2000 (Unaudited)
To date, the Company has completed its assessment and remediation of all
systems that could be significantly affected by the Year 2000. The
Company is currently testing its software and hardware for Year 2000
readiness. It is anticipated that this process will be completed in a
timely manner. However, if testing is not completed timely, the Year
2000 Issue could have an impact on the operations of the Company.
The Company's operations could also be affected by the inability of
third parties to become Year 2000 compliant. Various investment advisors
who are not affiliated with the Company manage the investment
sub-accounts included in Separate Account A. Like most financial
organizations, investment advisors have been working diligently to
address Year 2000 issues. The Company does not expect any of the
investment advisors to provide Year 2000 assurance on the various
sub-accounts before the second quarter of 1999. The inability of third
parties to complete the Year 2000 resolution process in a timely fashion
could materially impact the Company. The effect of non-compliance by
significant third parties is not determinable.
19
<PAGE>
The Financial Statements of the following investment companies ("Registrant")
are made a part hereof and incorporated herein:
Registrant 1940 Act Number
Janus Aspen Series 811-07736
- --Janus Aspen Aggressive Growth Portfolio
- --Janus Aspen Worldwide Growth Portfolio
- --Janus Aspen Balanced Portfolio
Dreyfus Variable Investment Fund 811-05125
- --Capital Appreciation Portfolio
- --Growth & Income Portfolio
- --Small Cap Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc. 811-07044
Dreyfus Stock Index Fund 811-05179
Merrill Lynch Variable Series Fund, Inc. 811-03290
- --Basic Value Focus Fund
- --Global Strategy Focus Fund
- --High Current Income Fund
- --Domestic Money Market fund
Morgan Stanley Universal Funds, Inc. 811-07607
- --U.S. Real Estate Portfolio
- --Fixed Income Portfolio
PBHG Insurance Series Fund, Inc. 811-08009
- --PBHG Growth II Portfolio
- --PBHG Technology & Communications Portfolio
Strong Special Fund II, Inc. 811-06552
The Timothy Plan Variable Series 811-8228
-20-
<PAGE>
3244 (2/99)
Annuity Investors Life Insurance Company(R)
P. O. Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
This report is for the information of the contract owners and participants of
the Annuity Investors Life Insurance Company and the Annuity Investors Variable
Account A. It is authorized for distribution to other persons only when preceded
or accompanied by a current prospectus which contains complete information,
including charges and expenses.
