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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
APRIL 20, 1999
REGISTRATION NO. 333-5529
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 5 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT ACT OF 1940 [ ]
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 5
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AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
(EXACT NAME OF REGISTRANT)
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AMERITAS LIFE INSURANCE CORP.
DEPOSITOR
5900 "O" STREET
LINCOLN, NEBRASKA 68510
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DONALD R. STADING
SENIOR VICE PRESIDENT, SECRETARY
AND CORPORATE GENERAL COUNSEL
AMERITAS LIFE INSURANCE CORP.
5900 "O" STREET
LINCOLN, NEBRASKA 68510
Approximate Date of Proposed Public Offering: As soon as practicable after
effective date.
It is proposed that this filing will become effective:
[ ] immediate upon filing pursuant to paragraph b
[ ] on pursuant to paragraph a of Rule 485
[X] on May 1, 1999 pursuant to paragraph b of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Securities of Unit Investment Trust
Omit from the facing sheet reference to the other Act if the Registration
Statement or amendment is filed under only one of the Acts. Include the
"Approximate Date of Proposed Public Offering" and "Title of Securities Being
Registered" only where securities are being registered under the Securities Act
of 1933.
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NLVA
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
PART A
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FORM N-4 ITEM HEADING IN PROSPECTUS
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Item 1. Cover Page................................ Cover Page
Item 2. Definitions............................... Definitions
Item 3. Synopsis or Highlights.................... Fee Table; Highlights
Item 4. Condensed Financial Information........... Condensed Financial Information; Performance
Data
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies
a) Depositor.............................. Ameritas Life Insurance Corp.
b) Registrant............................. The Separate Account
c) Portfolio Company...................... The Funds
d) Prospectus............................. The Funds
e) Voting................................. Voting Rights
f) Administrator.......................... N/A
Item 6. Deductions and Expenses
a) Deductions............................. Fee Table; Highlights; Charges and Deductions
b) Sales load............................. N/A
c) Special purchase plans................. N/A
d) Commissions............................ Distribution of the Policies
e) Portfolio company deductions and
expenses............................... The Funds; Fund Management Fees Expenses
f) Registrant's Operating Expenses........ N/A
Item 7. General Description of Variable Annuity
Contracts
a) Rights................................. Highlights; Policy Features, Annuity Period;
General Provisions; Voting Rights
b) Provisions and limitations............. Highlights; Allocation of Premium; Transfers
Among the Portfolios and the Fixed Account;
Systematic Programs
c) Changes in contracts or operations..... Addition, Deletion, or Substitution of
Investments; Policy Features; Voting Rights
d) Contractowner inquiries................ Cover Page
Item 8. Annuity Period
a) Level of benefits...................... Highlights; Allocation of Premium; Annuity
Income Options
b) Annuity commencement date.............. Annuity Date
c) Annuity payments....................... Highlights; Annuity Income Options
d) Assumed investment return.............. Annuity Income Options
e) Minimums............................... Annuity Income Options
f) Rights to change options or transfer
investment base........................ Annuity Income Options
Item 9. Death Benefit
a) Death benefit calculation.............. Highlights; Death of Annuitant; Death of
Owner; Annuity Income Options
b) Forms of benefits...................... Highlights; Death of Annuitant; Death of
Owner; Annuity Income Options
Item 10. Purchases and Contract Values
a) Procedures for purchases............... Cover Page; Highlights; Policy Purchase and
Premium Payment; Accumulation Value
b) Accumulation unit value................ Accumulation Value
c) Calculation of accumulation unit
value.................................. Accumulation Value; Policy Purchase and
Premium Payment
d) Principal underwriter.................. Distribution of the Policies
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<TABLE>
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FORM N-4 ITEM HEADING IN PROSPECTUS
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Item 11. Redemptions
a) Redemption procedures.................. Highlights; Withdrawals and Surrenders
b) Texas Optional Retirement Program...... N/A
c) Delay.................................. Withdrawals and Surrenders; Deferment of
Payment
d) Lapse.................................. N/A
e) Revocation rights...................... Highlights; Free Look Privilege
Item 12. Taxes
a) Tax consequences....................... Tax Charges; Federal Tax Matters
b) Qualified plans........................ Federal Tax Matters
c) Impact of taxes........................ Tax Charges
Item 13. Legal Proceedings......................... Legal Proceedings
Item 14. Table of Contents of Statement of Table of Contents of Statement of Additional
Additional Information.................... Information
PART B
FORM N-4 ITEM HEADING IN STATEMENT OF ADDITIONAL INFORMATION
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Item 15. Cover page................................ Cover page
Item 16. Table of Contents......................... Table of Contents
Item 17. General Information and History........... General Information and History
Item 18. Services
a) Fees, expenses and costs paid by other
than depositor or registrant........... N/A
b) Management-related services............ N/A
c) Custodian and independent public
accountant............................. Safekeeping of Separate Account Assets;
Experts
d) Other custodianship.................... N/A
e) Administrative servicing agent......... N/A
f) Depositor as principal underwriter..... N/A
Item Purchase of Securities Being Offered
19....
a) Manner of Offering..................... N/A
b) Sales load............................. N/A
Item 20. Underwriters
a) Depositor or affiliate as principal
underwriter............................ Distribution of the Policy
b) Continuous offering.................... Distribution of the Policy
c) Underwriting commissions............... Distribution of the Policy
d) Payments of underwriter................ N/A
Item 21. Calculation of Performance Data........... Calculation of Performance Data
Item 22. Annuity Payments.......................... N/A
Item 23. Financial Statements
a) Registrant............................. Financial Statements
b) Depositor.............................. Financial Statements
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PROSPECTUS
AMERITAS VARIABLE LIFE INSURANCE COMPANY LOGO
AMERITAS NO LOAD 5900 "O" Street
VARIABLE ANNUITY: A FLEXIBLE P.O. Box 81889/Lincoln, NE 68501
PREMIUM VARIABLE ANNUITY
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This Prospectus describes a no sales load/no surrender charge flexible premium
variable annuity policy contract ("Policy") offered by Ameritas Life Insurance
Corp. ("Ameritas"). The Policy is a deferred annuity; it provides a vehicle for
investing on a tax-deferred basis for retirement savings or other long-term
purposes.
You may purchase a Policy for $2,000 or more. Minimum additional subsequent
premiums may be $250 or more; smaller amounts may be accepted by automatic bank
draft or at the discretion of Ameritas.
You may direct that premiums accumulate on a variable basis in one or more of
the ten Subaccounts of the Ameritas Life Insurance Corp. Separate Account LLVA
("Separate Account LLVA") or on a fixed basis in the Fixed Account, or on a
combination variable and fixed basis. Separate Account LLVA uses its assets to
purchase shares in one or more of the following mutual fund portfolios:
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BERGER INSTITUTIONAL PRODUCTS TRUST NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
("BERGER IPT") ("NEUBERGER BERMAN AMT")
100 Fund Liquid Asset
Small Company Growth Limited Maturity Bond
Growth
Partners
Balanced
STRONG VARIABLE INSURANCE FUNDS, INC. RYDEX VARIABLE TRUST ("RYDEX")
("STRONG VIF"*) Nova Fund
International Stock Fund II Ursa Fund
Mid Cap Growth Fund II OTC Fund
Precious Metals Fund
STRONG OPPORTUNITY FUND II, INC.* U.S. Government Bond Fund
Juno Fund
</TABLE>
* Strong VIF and Strong Opportunity Fund II, Inc. are referred to collectively
as "Strong Funds(R)"
You bear all the investment risk for monies placed in Separate Account LLVA
before the Annuity Date. Results for the Portfolios are not guaranteed.
This prospectus contains information you should know before investing. A
Statement of Additional Information, which has the same date as this prospectus,
has been filed with the Securities and Exchange Commission; it is incorporated
herein by reference and is available free by writing Ameritas at the address
above or by calling Us at 1-800-255-9678. (Use this address and phone number for
any inquiry you have about the Policy.) The table of contents of the Statement
of Additional Information appears at the end of this prospectus.
Prospectuses for the mutual fund Portfolios identified above accompany this
prospectus.
Read the prospectuses carefully and keep them for future reference.
These securities are not deposits with, or obligations of, or guaranteed or
endorsed by, any financial institution; nor are they insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
These securities involve investment risk, including the possible loss of
principal.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Securities and Exchange Commission.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORY AUTHORITY HAS APPROVED THESE SECURITIES, OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
May 1, 1999
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TABLE OF CONTENTS
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PAGE
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DEFINITIONS................................................. 3
HIGHLIGHTS.................................................. 5
FEE TABLE................................................... 6
CONDENSED FINANCIAL INFORMATION............................. 10
PERFORMANCE DATA............................................ 11
YEAR 2000................................................... 11
AMERITAS, THE SEPARATE ACCOUNT AND THE FUNDS................ 11
Ameritas Life Insurance Corp......................... 11
The Separate Account................................. 12
The Funds............................................ 12
Addition, Deletion or Substitution of Investments.... 14
THE FIXED ACCOUNT........................................... 14
POLICY FEATURES............................................. 15
Control of the Policy................................ 15
Policy Purchase and Premium Payment.................. 15
Allocation of Premium................................ 15
Accumulation Value................................... 16
Transfers Among the Portfolios and the Fixed
Account.............................................. 16
Systematic Programs.................................. 17
Withdrawals and Surrenders........................... 17
Free Look Privilege.................................. 18
CHARGES AND DEDUCTIONS...................................... 18
Administrative Charges............................... 18
Mortality and Expense Risk Charge.................... 18
Tax Charges.......................................... 19
Fund Investment Advisory Fees and Expenses........... 19
ANNUITY PERIOD.............................................. 19
Annuity Date......................................... 19
Annuity Income Options............................... 20
FEDERAL TAX MATTERS......................................... 21
Taxation of Annuities in General..................... 21
Nonqualified Policies................................ 21
Qualified Policies................................... 22
GENERAL PROVISIONS.......................................... 23
Annuitant's Beneficiary.............................. 23
Death of Annuitant................................... 23
Death of Owner....................................... 24
Deferment of Payment................................. 24
Contestability....................................... 24
Misstatement of Age or Sex........................... 24
Reports and Records.................................. 24
DISTRIBUTION OF THE POLICIES................................ 25
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS................ 25
THIRD PARTY SERVICES........................................ 25
VOTING RIGHTS............................................... 25
LEGAL PROCEEDINGS........................................... 26
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 26
</TABLE>
The Policy, certain provisions, and certain Portfolios are not available in all
states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON, OR OTHER PERSON
MAY MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON.
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DEFINITIONS
ACCUMULATION UNIT - A unit used to measure the value of the Policy prior to the
Annuity Date. Analogous, though not identical, to a share owned in a mutual fund
account.
ACCUMULATION UNIT PRICE - The value of each Accumulation Unit is calculated each
Valuation Period. Analogous, though not identical, to the share price (net asset
value) of a mutual fund.
ACCUMULATION VALUE - The value of all amounts accumulated under the Policy prior
to the Annuity Date. On the Issue Date, the Accumulation Value is equal to the
initial premium, less any premium tax, plus any interest credited based on the
Liquid Asset Portfolio value as of the Policy Date.
AMERITAS - ("We, Us, Our") Ameritas Life Insurance Corp., a stock life insurance
company domiciled in Nebraska since 1887.
ANNUITANT - The person upon whose life expectancy the Policy is written. The
Annuitant may also be the Owner of the Policy.
ANNUITANT'S BENEFICIARY - The person who will receive any benefits paid upon the
Annuitant's death.
ANNUITY DATE - The date on which Annuity Payments begin.
ANNUITY INCOME OPTION - A method of receiving Annuity Payments.
ANNUITY PAYMENT - One of a series of payments paid to the Annuitant under an
Annuity Income Option.
EFFECTIVE DATE - The Valuation Date on which premiums are applied to purchase a
Policy.
FIXED ACCOUNT - A part of Ameritas' general account to which all or a portion of
premiums may be allocated for accumulation at fixed rates of interest.
FUNDS - Berger IPT, Neuberger Berman AMT, Strong Funds(R), and Rydex are the
Funds available for investment as of the date of this prospectus. The Funds have
one or more Portfolios; each Portfolio corresponds to one of the Subaccounts of
Separate Account LLVA.
ISSUE DATE - The date all financial, contractual and administrative requirements
have been met to issue the Policy. The free look period begins on this date.
NET PREMIUM - The Premium Payment less the premium tax (if imposed by the state
in which the Policy is delivered).
NONQUALIFIED POLICIES - Policies that do not qualify for special federal income
tax treatment.
OWNER - ("you, your") The person or entity in whose name the Policy is issued,
as stated in the application, or as subsequently changed. The Owner has the
privileges stated in the Policy, including the right to make allocations or
change beneficiaries. If a Policy has been absolutely assigned, the assignee is
the Owner. A collateral assignee is not the Owner.
OWNER'S DESIGNATED BENEFICIARY - The person designated by the Owner to whom
Policy ownership passes upon the Owner's death.
POLICY - The no sales load/no surrender charge variable annuity contract offered
by Ameritas and described in this prospectus.
POLICY DATE - The date used to determine Policy anniversary dates and Policy
Years. This date is determined on the Issue Date. It is the date within two days
after Ameritas received the application and initial premium. If the Policy Date
would fall on the 29th, 30th or 31st of a month, the Policy Date will be set at
the 28th day of that month.
POLICY YEAR - The period from one Policy anniversary date until the next Policy
anniversary date.
PORTFOLIO - One of the separate investment Portfolios of the Funds in which
Separate Account LLVA invests. Each Portfolio is a Subaccount of Separate
Account LLVA. In Separate Account LLVA, Berger IPT offers two Portfolios: Berger
IPT-100 Fund and Berger IPT-Small Company Growth Fund; Neuberger Berman AMT
offers five Portfolios: Liquid Asset, Limited Maturity Bond, Growth, Partners,
and
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Balanced; Strong VIF offers two Portfolios: Strong International Stock Fund II,
and Strong Mid Cap Growth Fund II; Strong Opportunity Fund II, Inc. is also
offered. Rydex offers six Portfolios: Nova Fund, Ursa Fund, OTC Fund, Precious
Metals Fund, U.S. Government Bond Fund, and Juno Fund. In this prospectus,
Portfolio will also be used to refer to the Subaccount that invests in the
corresponding Portfolio.
PREMIUM PAYMENT - An amount paid to purchase a Policy or to increase the
investment in the Policy.
QUALIFIED POLICIES - Policies owned inside certain qualified plans as defined
under applicable tax laws, such as IRAs and Pension Trusts.
SATISFACTORY PROOF OF DEATH - All of the following must be submitted: (1) A
certified copy of the death certificate; (2) A Claimant Statement; (3) The
Policy; and (4) Any other information that Ameritas may require to establish the
validity of the claim.
SEPARATE ACCOUNT LLVA - Ameritas Life Insurance Corp. Separate Account LLVA, an
account established by Ameritas to receive and invest premiums paid under the
Policy. Assets in Separate Account LLVA are segregated from the general assets
of Ameritas.
SUBACCOUNT - A subdivision of Separate Account LLVA which invests in shares of a
specified Portfolio of the Funds.
VALUATION DATE - Any day on which the New York Stock Exchange (NYSE) is open for
trading.
VALUATION PERIOD - The period between two successive Valuation Dates, commencing
at the close of trading on the NYSE on one Valuation Date and ending at the
close of trading on the next Valuation Date.
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HIGHLIGHTS
For an explanation of capitalized terms, refer to the "Definitions", section.
Unless stated otherwise, the captions in this highlights section correspond to
later sections in the prospectus which are only summarized here. Read the whole
prospectus.
THE POLICY
The purpose of the Policy is to allow you, the Owner, to accumulate funds on a
tax-deferred basis by investing in one or more investment Portfolios of the
Funds for retirement or other purposes. The tax-deferral feature is most
attractive to investors who have exhausted other avenues for tax-deferred
investing.
PURCHASING A POLICY
You may purchase a Policy with a complete application and a minimum initial
premium of $2,000 or more. Later premiums must be at least $250. Smaller
premiums may be accepted on automatic bank draft or at the discretion of
Ameritas. (See the section on Policy Purchase and Premium Payment.)
INVESTMENT CHOICES
In Separate Account LLVA, 16 Portfolios are offered. The assets of each
Portfolio are held separately from the other Portfolios; each has distinct
investment objectives and policies which are described in the accompanying
prospectuses for the Funds. The investment performance of the Portfolios is not
guaranteed. (See the section on The Funds.)
Premiums allocated to the Fixed Account are placed in the general account of
Ameritas and receive a guaranteed interest rate. (See the section on The Fixed
Account.)
ALLOCATION OF PREMIUM
Your Accumulation Value is initially allocated to the Liquid Asset Portfolio. At
the end of the free look period, the Accumulation Value is allocated among the
Portfolios or Fixed Account according to your instructions on the application.
Allocations may be changed at any time with no charge.
We will only allow allocations to Rydex according to administrative rules We
have set.
Where allowed, if the Owner has allocated 100% to the Fixed Account, the
Accumulation Value of the Policy is allocated to the Fixed Account on the
Effective Date, and no further allocation will occur.
CHARGES AND DEDUCTIONS
There are no sales loads or surrender charges. The costs in the Policy include
Our mortality and expense risk ("M&E") charges; an annual policy fee to cover
the cost for Us to administer the Policy; and investment advisory and other fees
imposed by the Funds. State premium taxes, if any, are deducted upon receipt of
premium, upon annuitization, or upon withdrawal, according to the laws of the
state of jurisdiction. A $10 transfer fee may be charged for each transfer over
the 15 free transfers allowed each Policy Year.
TRANSFERS AMONG PORTFOLIOS
You may transfer funds among the Portfolios up to 15 times per year free of
charge. Additional transfers may be subject to a transfer charge (maximum $10
per additional transfer). Minimum transfer amount is $250, or if less, the
entire value of the Portfolio from which the transfer is made. The minimum
amount which can remain in a Portfolio as a result of a transfer is $100.
Certain restrictions apply to transfers from the Fixed Account. We will only
allow transfers with regard to Rydex according to administrative rules We have
set. Systematic programs, which provide for the automatic transfer of funds,
such as Portfolio Rebalancing, Dollar Cost Averaging, and Earnings Sweep may be
offered. (See the section on Transfers Among Portfolios and the Fixed Account.)
WITHDRAWALS
You may withdraw all or part of the Accumulation Value before the earlier of the
Annuity Date or the Annuitant's death. Withdrawals must be at least $250.
Systematic withdrawals may be scheduled at 12 per
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year. Withdrawals made prior to age 59 1/2 may be subject to a 10% federal tax
penalty. There is no withdrawal charge imposed by us. (See the section on
Withdrawals and Surrenders.)
ANNUITY INCOME OPTIONS
Beginning on the Annuity Date, the Policy provides for lump sum payment, or for
periodic annuity payments to be paid to the Annuitant, based on the Accumulation
Value on that date. You may select from a number of Annuity Income Options. You
also have some flexibility in choosing an Annuity Date.
DEATH BENEFIT
If the Annuitant dies before the Annuity Date, the death benefit becomes payable
to the Annuitant's Beneficiary upon Satisfactory Proof of Death. Ameritas
guarantees that the death benefit payable upon death of the Annuitant prior to
the Annuity Date will be the greater of the Accumulation Value or the premium
payments made less withdrawals. The death benefit may be paid in a lump sum or
under an Annuity Income Option. (See the section on Death of Annuitant.)
If the Owner dies prior to the Annuity Date, the Owner's entire interest in the
Policy must generally be distributed to the Owner's Designated Beneficiary
within five years after the date of death. Under special rules, if the Owner's
interest is payable to the surviving spouse of the Owner, the Policy may be
continued with the surviving spouse treated as the Owner. (See the section on
Death of Owner.)
FREE LOOK PERIOD
You may cancel the Policy within 10 days after you receive it (except in some
states which may require a longer period). To cancel, you must return the
Policy. When the Policy is received by Ameritas, you will be reimbursed all
premiums paid or the premiums adjusted by investment gains or losses, whichever
is more. (See the section on Free Look Privilege.)
FEE TABLE
The following illustrates the expenses you will bear as Owner, excluding
possible state premium taxes. For a complete discussion of expenses, see
"Charges and Deductions" and the Funds' prospectuses.
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OWNER TRANSACTION EXPENSES
Sales Load Imposed........................................ None
Surrender Charge.......................................... None
Withdrawal Charge......................................... None
Transfer Fee (after 15 free transfers per Policy year).... $10
ANNUAL POLICY FEE (maximum of $40, currently $25)........... $25
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
account value)
Mortality and Expense Risk Fees (M&E)..................... 0.75% current
0.95% guaranteed
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FUND MANAGEMENT FEES
Fee information about the Funds was provided to Ameritas by the Funds. Ameritas
has not independently verified such information. The amount of expenses borne by
each Portfolio for the fiscal year ended December 31, 1998, was as follows:
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PORTFOLIO INVESTMENT ADVISORY OTHER EXPENSES TOTAL TOTAL
AND MANAGEMENT
(Reflecting waivers
and/or
reimbursements,
if any)
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BERGER IPT
100 Fund .75% 2.13% 2.88% 1.00%(1)
Small Company Growth .90% 1.29% 2.19% 1.15%(1)
NEUBERGER BERMAN AMT
Liquid Asset .65% .49% 1.14% 1.00%(2)
Limited Maturity .65% .11% .76% .76%
Growth .83% .09% .92% .92%
Partners .78% .06% .84% .84%
Balanced .85% .18% 1.03% 1.03%
STRONG FUNDS
Mid Cap Growth Fund II 1.00% .20% 1.20% 1.20%
International Stock Fund
II 1.00% .62% 1.62% 1.62%
Opportunity Fund II 1.00% .16% 1.16% 1.16%
RYDEX
Nova Fund .74% 1.47% 2.21% 2.18%(3)
Ursa Fund .90% 1.57% 2.47% 2.30%(3)
OTC Fund .72% 1.24% 1.96% 1.96%
Precious Metals Fund .75% 1.61% 2.36% 2.20%(3)
U.S. Government Bond Fund .50% 1.30% 1.80% 1.80%
Juno Fund .90% 3.59% 4.49% 2.30%(3)
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</TABLE>
(1) Expenses reflect fee waiver and expense reimbursement.
(2) Expenses reflect expense reimbursement.
(3) Expenses reflect fee waiver and/or expense reimbursement.
Berger Associates provides investment advisory services to the Berger IPT Funds
available in Separate Account LLVA. Berger Associates has agreed to waive its
advisory fee and reimburse the Funds for additional expenses to the extent that
normal operating expenses in any fiscal year, including the management fee but
excluding brokerage commissions, interest, taxes and extraordinary expenses, of
Berger IPT-100 Fund exceed 1.00%, and the normal operating expenses in any
fiscal year of the Berger IPT-Small Company Growth Fund exceed 1.15%, of the
respective Fund's average daily net assets.
Neuberger Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust. The
figures reported under "Investment Advisory and Management" include the
aggregate of the administration fees paid by the Portfolio and the management
fees paid by its corresponding Series. Similarly, "Other Expenses' includes all
other expenses of the Portfolio and its corresponding Series.
Neuberger Berman Management Inc. ("NBMI") provides investment management
services to each Series that include, among other things, making and
implementing investment decisions and providing facilities and personnel
necessary to operate the Series. NBMI provides administrative services to each
Portfolio that include furnishing similar facilities and personnel to the
Portfolio. With the Portfolio's consent, NBMI is authorized to subcontract some
of its responsibilities under its administration agreement with the Portfolio to
third parties.
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Each Portfolio bears all expenses of its operations other than those borne by
NBMI as administrator of the Portfolio and as distributor of its shares. Each
Series bears all expenses of its operations other than those borne by NBMI as
investment manager of the Series. These expenses include, but are not limited
to, for the Portfolios and the Series, legal and accounting fees and
compensation for trustees who are not affiliated with NBMI; for the Portfolios,
transfer agent fees and the cost of printing and sending reports and proxy
materials to shareholders; and for the Series, custodial fees for securities.
Any expenses which are not directly attributable to a specific Series are
allocated on the basis of the net assets of the respective Series.
NBMI has voluntarily undertaken to limit the above listed Portfolio's expenses
by reimbursing each Portfolio for its operating expenses and its pro rata share
of its corresponding Series' operating expenses, excluding the compensation of
NBMI (with respect to all Portfolios but the Liquid Asset Portfolio), taxes,
interest, extraordinary expenses, brokerage commissions and transaction costs,
that exceed, in the aggregate, 1% per annum of the Portfolio's average daily net
asset value. This undertaking is subject to termination on 60 days' prior
written notice to the Portfolio.
The effect of any expense limitation by NBMI is to reduce operating expenses of
a Portfolio and its corresponding Series and thereby increase total return.
Strong Capital Management, Inc. is the investment advisor for the Strong
Funds(R). From time to time, Strong Capital Management, Inc., may voluntarily
waive all or a portion of its management fee and/or absorb certain expenses for
the Fund without further notification of the commencement or termination of any
such waiver or absorption. Any such waiver or absorption will have the effect of
lowering the overall expense ratio of the Fund and increasing the Fund's return
to investors at the time such amounts were waived and/or absorbed.
PADCO Advisors II, Inc., investment advisor of the Rydex Variable Trust, and
PADCO Service Company, Inc., servicer to the Rydex Variable Trust, have
voluntarily agreed to waive fees and/or reimburse expenses to ensure that
expenses do not exceed the following totals: Nova Fund -- 2.20%; Ursa
Fund -- 2.30%; OTC Fund -- 2.20%; Precious Metals Fund -- 2.20%; U.S. Government
Bond Fund -- 1.80%; Juno Fund -- 2.30%.
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EXAMPLE: The following example illustrates expenses you would incur at the end
of a one, three, five or ten-year period on a hypothetical $1,000 allocation to
each Portfolio assuming a 5% annual return. The example reflects expenses of
Separate Account LLVA and the Portfolio, but does not reflect premium taxes
which may apply. The information presented applies whether or not the Policy is
(1) surrendered; (2) annuitized; or (3) not surrendered or annuitized.
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--- --- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BERGER IPT
100 Fund $18 $57 $ 97 $211
Small Company Growth $20 $61 $105 $226
NEUBERGER BERMAN AMT
Liquid Asset $18 $57 $ 97 $211
Limited Maturity $16 $49 $ 85 $185
Growth $18 $54 $ 93 $202
Partners $17 $52 $ 89 $193
Balanced $19 $58 $ 99 $214
STRONG FUNDS(R)
Mid Cap Growth Fund II $20 $63 $108 $232
International Stock Fund II $25 $75 $129 $274
Opportunity II $20 $62 $106 $227
RYDEX
Nova Fund $30 $92 $157 $329
Ursa Fund $31 $96 $162 $340
OTC Fund $28 $86 $146 $308
Precious Metals Fund $30 $93 $158 $331
U.S. Government Bond Fund $26 $81 $138 $292
Juno Fund $31 $96 $162 $340
The example assumes an average $30,000 annuity investment. This example should not be considered
a representation of past or future expenses, performance or return. Actual expenses and/or returns may
be greater or less than those shown.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 13
CONDENSED FINANCIAL INFORMATION
The financial statements for Ameritas and Separate Account LLVA (as well as
auditors' reports thereon) are in the Statement of Additional Information.
ACCUMULATION UNIT VALUES
Following are the accumulation unit values for the Subaccounts as of January 22,
1997, when contracts offered by this prospectus were first sold, December 31,
1998 and 1997. The number of outstanding accumulation units in each Subaccount
as of December 31, 1998 and 1997 is also shown.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AS OF AS OF UNITS AS OF
FUND JANUARY 22, 1997 DECEMBER 31 DECEMBER 31 YEAR
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BERGER IPT
- -----------------------------------------------------------------------------------------------------------------
100 Fund -- 13.558 14,689 1998
10.97 11.748 12,757 1997
- -----------------------------------------------------------------------------------------------------------------
Small Company Growth -- 12.111 7,506 1998
10.38 11.979 5,387 1997
- -----------------------------------------------------------------------------------------------------------------
NEUBERGER BERMAN AMT
- -----------------------------------------------------------------------------------------------------------------
Liquid Asset -- 1.078 465,363 1998
1.00 1.037 289,768 1997
- -----------------------------------------------------------------------------------------------------------------
Limited Maturity -- 15.437 76,589 1998
14.08 14.899 33,642 1997
- -----------------------------------------------------------------------------------------------------------------
Growth -- 34.807 4,829 1998
27.51 30.355 2,405 1997
- -----------------------------------------------------------------------------------------------------------------
Partners -- 21.182 52,142 1998
17.31 20.480 28,567 1997
- -----------------------------------------------------------------------------------------------------------------
Balanced -- 21.036 15,849 1998
16.57 18.892 11,464 1997
- -----------------------------------------------------------------------------------------------------------------
STRONG FUNDS(R)
- -----------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund II -- 16.461 13,361 1998
10.69 12.888 1,460 1997
- -----------------------------------------------------------------------------------------------------------------
International Stock Fund II -- 9.117 13,841 1998
11.52 9.646 6,593 1997
- -----------------------------------------------------------------------------------------------------------------
Opportunity Fund II -- 27.024 20,379 1998
19.62 23.979 1,876 1997
- -----------------------------------------------------------------------------------------------------------------
RYDEX
- -----------------------------------------------------------------------------------------------------------------
Nova Fund(1) -- -- -- 1998
- -----------------------------------------------------------------------------------------------------------------
Ursa Fund(1) -- -- -- 1998
- -----------------------------------------------------------------------------------------------------------------
OTC Fund(1) -- -- -- 1998
- -----------------------------------------------------------------------------------------------------------------
Precious Metals Fund(1) -- -- -- 1998
- -----------------------------------------------------------------------------------------------------------------
U. S. Government Bond
Fund(1) -- -- -- 1998
- -----------------------------------------------------------------------------------------------------------------
Juno Fund(1) -- -- -- 1998
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No Activity prior to 12/31/98
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<PAGE> 14
PERFORMANCE DATA
Separate Account LLVA may advertise certain information regarding the
performance of the Subaccounts. Performance data may be advertised as average
annual total return and/or cumulative total return. The Liquid Asset
Subaccount may advertise yield and/or effective yield. The yield figures are
based on historical earnings and are not intended to indicate future
performance. Other Subaccounts may advertise current yield. Details on how
performance measures are calculated for the Subaccounts are found in the
Statement of Additional Information. Performance advertising will reflect the
mortality and expense risk charge and the annual policy fee.
YEAR 2000
Like other insurance companies and their separate accounts, Ameritas and the
Separate Account could be adversely affected if the computer systems they rely
upon do not properly process date-related information and data involving the
years 2000 and after. This issue arose because both mainframe and PC-based
computer hardware and software have traditionally used two digits to identify
the year. For example, the year 1998 is input, stored and calculated as "98."
Similarly, the year 2000 would be input, stored and calculated as "00." If
computers assume this means 1900, it could cause errors in calculations,
comparisons, and other computing functions.
Like all insurance companies, Ameritas makes extensive use of dates and date
calculations. We began a corporate-wide Year 2000 (Y2K) project in mid-1996. Our
goal is to ensure that Our computer systems continue to operate smoothly with no
service disruptions before, during or after the year 2000.
As of December 31, 1998, all of Our computer application and operating systems
had been updated for the year 2000. Continuous testing and monitoring throughout
1999 will help Ameritas continue to meet Our contractual and service obligations
to Our customers. In addition to Our internal efforts, Ameritas is working
closely with vendors and other business partners to confirm that they too are
addressing Y2K issues on a timely basis. We believe that We are Y2K - compliant;
however, in the event We or Our service providers, vendors, financial
institutions or others with which We conduct business, fail to be Y2K -
compliant, there would be a materially adverse effect on Us.
AMERITAS, THE SEPARATE ACCOUNT AND THE FUNDS
AMERITAS LIFE INSURANCE CORP.
Ameritas Life Insurance Corp. ("Ameritas") is a stock life insurance company
domiciled in Nebraska since 1887. Ameritas and its subsidiaries are currently
licensed to sell life insurance and annuities in 50 states and the District of
Columbia. The Home Office of Ameritas is at 5900 "O" Street, P.O. Box 81889,
Lincoln, Nebraska 68501.
Effective January 1, 1998, Ameritas converted from a mutual insurance company
structure to a mutual insurance holding company structure pursuant to the
Nebraska Mutual Insurance Holding Company Act. The conversion was approved by
the Nebraska State Department of Insurance and the policyowners of the mutual
company.
Ameritas and subsidiaries had total assets at December 31, 1998 of over $4.1
billion. Ameritas enjoys a long standing A+ (Superior) rating for financial
strength and operating performance from A.M. Best, an independent firm that
analyzes insurance carriers. This is the second highest of Best's 15 categories.
Ameritas has been rated A- (Excellent) by Weiss Research, Inc., for fiscal
strength. This is the third highest of Weiss' 16 categories. Ameritas also has
an AA (Very Strong) rating from Standard & Poor's for insurer financial
strength. This is the third highest of Standard & Poor's 21 ratings.
Ameritas Investment Corp., the principal underwriter of the Policies, may
publish in advertisements and reports to Policyowners, the ratings and other
information assigned to Ameritas by one or more independent rating services. The
purpose of the ratings is to reflect the financial strength of Ameritas. The
ratings do not relate to the performance of Separate Account LLVA. Published
material may also include charts and other information concerning dollar cost
averaging, portfolio rebalancing, earnings sweep,
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<PAGE> 15
tax-deference, diversification, asset allocation, long-term market trends, index
performance, and other investment programs and methods. Ameritas may also
advertise the no load nature of this Policy.
THE SEPARATE ACCOUNT
Ameritas Life Insurance Corp. Separate Account LLVA ("Separate Account LLVA")
was established under Nebraska law on October 26, 1995 to receive and invest
premiums paid under the Policy. Assets of Separate Account LLVA are held
separately from all other assets of Ameritas and are not chargeable with
liabilities from any other business Ameritas may conduct. Income, gains, or
losses of Separate Account LLVA are credited without regard to other income,
gains, or losses of Ameritas.
Separate Account LLVA purchases and redeems shares from the Portfolios at the
net asset value. Shares are redeemed for Ameritas to pay withdrawals and
surrenders, collect charges, and transfer assets from one Portfolio to another,
or to the Fixed Account, as requested by the Owner. Any dividend or capital gain
distribution is automatically reinvested in the corresponding Subaccount.
All obligations arising under the Policies are liabilities of Ameritas. Ameritas
will always keep assets in Separate Account LLVA of a total market value at
least equal to the reserve and other contract liabilities of Separate Account
LLVA. To the extent that assets in Separate Account LLVA exceed Ameritas'
liabilities in Separate Account LLVA, Ameritas may withdraw excess assets to
cover general account obligations.
Separate Account LLVA is a unit investment trust registered with the Securities
and Exchange Commission ("SEC") under the Investment Company Act of 1940 ("1940
Act"). This does not signify that the SEC supervises the management, investment
practices or policies of Separate Account LLVA.
THE FUNDS
The Funds currently available are: Berger IPT, Neuberger Berman AMT, Strong
Funds(R), and Rydex. Each Fund is registered with the SEC under the 1940 Act as
an open-ended diversified management investment company or a series thereof.
There are currently 16 Subaccounts within Separate Account LLVA, each investing
only in a corresponding Portfolio of the Funds.
The assets of each Portfolio of the Funds are held separate from the assets of
the other Portfolios. Thus, each Portfolio operates as a separate investment,
and the income or losses of one Portfolio generally do not affect the investment
of any other Portfolio.
Rydex involves strategic or tactical asset allocation, and may involve
aggressive investing strategies. For that reason, We have established
administrative rules under which We will allow allocations and/or transfers to
be made to Rydex. (See Rydex Administrative Rules, below.)
There is no assurance that any Portfolio will achieve stated objectives. More
detailed information, including a description of investment risks, investment
advisory services, total expenses and charges is in the prospectuses of the
Funds, which accompany this Prospectus. These prospectuses should be read in
conjunction with this Prospectus and retained. All underlying Fund information,
including Fund prospectuses, has been provided to Ameritas by the Funds.
Ameritas has not independently verified this information.
The investments in the Portfolios may be managed by Portfolio managers which
manage one or more other mutual funds that have similar names, investment
objectives, and investment styles as the Portfolios. You should be aware that
the Portfolios are likely to differ from the other mutual funds in size, cash
flow pattern, and tax matters. Thus, the holdings and performance of the
Portfolios can be expected to vary from those of the other mutual funds.
You should periodically reconsider your allocation among the Portfolios in light
of current market conditions and the investment risks attendant to investing in
the Portfolios.
The Funds may be made available for variable annuity or variable life insurance
contracts of various insurance companies. Though unlikely, there is a
possibility that a material conflict could arise between the interests of
Separate Account LLVA and one or more of the separate accounts of another
participating insurance company. In the event of a material conflict, the
affected insurance companies agree to take any
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<PAGE> 16
necessary steps, including removing separate accounts from the Funds, to resolve
the matter. See the prospectuses of the Funds for more information.
RYDEX ADMINISTRATIVE RULES
You may access the Rydex Subaccounts through your Policy only if you qualify as
an accredited investor, as defined in Rule 501 of Regulation D under the
Securities Act of 1933, or, in the alternative, you meet all of the following
criteria:
1. You have designated to Us in writing that you have an agreement retaining a
registered investment advisor ("RIA") to provide strategic or tactical asset
allocation services relating to your Policy. A RIA is a person or entity
regulated by the SEC or state authorities, as applicable.
2. You agree that you are solely responsible for selecting, supervising, and
paying any compensation for services to your RIA. We do not have any
responsibility for your RIA or the recommendations or advice provided;
3. You have executed a Rydex Third Party Authorization, which is a power of
attorney authorizing your RIA to give allocation and transfer directions to
Us;
4. Unless you have specified otherwise in the power of attorney you provided Us,
you may make withdrawals from or surrender your Policy at any time, and may
give Us your directions to allocate and/or transfer among all Investment
Options other than Rydex. Only your RIA may give Us directions to allocate to
or transfer Accumulation Value to or from Rydex Subaccounts;
5. You agree to provide Us with:
A. Written notification of any change in your RIA; and
B. A power of attorney authorizing your new RIA to give allocation and
transfer directions to Us;
6. You agree that the transaction cutoff time for receipt by Us of purchase
payments for allocation and transfer and/or withdrawal instructions relating
to Rydex Subaccounts is 1:30 p.m. Central time, or one hour before market
close, for days on which the market closes early.
7. If We receive notification that your RIA is either no longer authorized by
you or no longer able to give allocation and transfer directions to Us, You
will be unable to transfer funds among the Rydex Subaccounts, but you may
transfer out of a Rydex Subaccount to other Subaccount choices. Any further
premium allocation to a Rydex Subaccount will be changed to the Neuberger
Berman AMT Liquid Asset Subaccount.
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<PAGE> 17
The eligible Portfolios of the Funds, along with their investment advisers, are
listed in the following table:
<TABLE>
<CAPTION>
INVESTMENT ADVISERS
FUND OR MANAGERS ELIGIBLE PORTFOLIOS
---- ------------------- -------------------
<S> <C> <C>
Berger IPT Berger Associates, Inc. 100 Fund
Small Company Growth Fund
Neuberger Berman Neuberger Berman Liquid Asset
AMT Management Incorporated Limited Maturity Bond
Growth
Partners
Balanced
Strong VIF Strong Capital Mid Cap Growth Fund II
Management, Inc International Stock Fund II
Strong Opportunity Strong Capital Opportunity Fund II
Fund II, Inc. Management, Inc.
Rydex PADCO Advisors II, Inc. Nova Fund
Ursa Fund
OTC Fund
Precious Metals Fund
U.S. Government Bond Fund
Juno Fund
</TABLE>
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Ameritas reserves the right, subject to applicable law, to add, delete, combine,
or substitute investments in Separate Account LLVA if, in our judgment,
marketing needs, tax considerations, or investment conditions warrant. This may
happen due to a change in law or a change in a Portfolio's objectives or
restrictions, or for some other reason. Ameritas may operate Separate Account
LLVA as a management company under the 1940 Act, it may be deregistered under
that Act if registration is no longer required, or it may be combined with other
Ameritas separate accounts. Ameritas may also transfer the assets of Separate
Account LLVA to another separate account. If necessary, We will notify the SEC
and/or state insurance authorities and will obtain any required approvals before
making these changes.
If any changes are made, Ameritas may, by appropriate endorsement, change the
Policy to reflect the changes. In addition, Ameritas may, when permitted by law,
restrict or eliminate any voting rights of Owners or other persons who have
voting rights as to Separate Account LLVA. AVLIC will determine the basis for
making any new Subaccounts available to existing Owners.
You will be notified of any material change in the investment policy of any
Portfolio in which you have an interest.
THE FIXED ACCOUNT
You may allocate all or a portion of your Premium Payments and make transfers to
the Fixed Account. Amounts in the Fixed Account earn a fixed rate of interest
guaranteed by Ameritas never to be less than 3.0%. Ameritas may, at its
discretion, set a higher interest rate.
Each month Ameritas will establish the declared rate for the Policies with a
Policy Date or Policy anniversary date in that month. Interest will be credited
on the amounts transferred or allocated to the Fixed Account at the declared
rate effective for the month of issue. The declared interest rate is guaranteed
for the remainder of the Policy Year. During later Policy Years, all amounts in
the Fixed Account will earn interest at the declared rate in effect in the month
of the last Policy anniversary. Declared interest rates may increase or decrease
from previous periods.
Amounts allocated to the Fixed Account or transferred from Separate Account LLVA
to the Fixed Account are placed in the general account of Ameritas, which
supports insurance and annuity obligations. The general account includes all of
Ameritas' assets, except those assets segregated in the separate
NLVA
14
<PAGE> 18
accounts. Ameritas has the sole discretion to invest the assets of the general
account, subject to applicable law. Ameritas bears an investment risk for all
amounts allocated or transferred to the Fixed Account and interest credited
thereto, less any deduction for charges and expenses, whereas the Owner bears
the investment risk that the declared interest rate described above may fall to
a lower rate after the expiration of a declared rate period.
Because of exemptive and exclusionary provisions, interests in the general
account have not been registered under the Securities Act of 1933 nor is the
general account registered as an investment company under the Investment Company
Act of 1940. Accordingly neither the general account nor any interest therein is
generally subject to the provisions of the 1933 or 1940 Act. We understand that
the SEC has not reviewed the disclosures in this Prospectus relating to the
Fixed Account portion of the contract; however, disclosures regarding the Fixed
Account portion of the contract may be subject to generally applicable
provisions of the federal securities laws regarding the accuracy and
completeness of statements made.
POLICY FEATURES
The Policy is a variable annuity contract issued by Ameritas. The rights and
benefits of the Policy are described below and in the Policy. The Policy
controls the rights and benefits you have. Ameritas reserves the right to make
any modification to conform the Policy to, or to give you the benefit of, any
changes in the law. If necessary, We will provide notice of such modifications
to, and receive approval from, the SEC and/or state insurance authorities. You
will be notified of any material modifications to the Policy.
CONTROL OF THE POLICY
The Owner is the person or entity named as such in the application or subsequent
written changes shown in Our records. While living, the Owner has the sole right
to receive all benefits and exercise all rights granted by the Policy or
Ameritas. The Owner may name both primary and contingent beneficiaries. Subject
to the rights of any irrevocable beneficiary and any assignee of record, all
rights, options, and privileges belong to the Owner, if living; otherwise to the
Owner's Designated Beneficiary, if living; otherwise to the estate of the last
Owner to die.
POLICY PURCHASE AND PREMIUM PAYMENT
Individuals wishing to purchase a Policy should send a complete application and
an initial premium to Ameritas' Home Office (5900 "O" Street, P.O. Box 81889,
Lincoln, NE 68501). Your initial premium must be at least $2,000. The named
Annuitant must be 85 years of age or less. Acceptance is subject to Ameritas'
underwriting rules, and Ameritas reserves the right to reject any application.
If the application and initial Premium Payment can be accepted in the form
received, the initial premium will be applied to purchase the Policy within two
business days from the date the premium was received. The date the initial
premium is applied to purchase the Policy is the Effective Date.
If an incomplete application is received, We will request the necessary
information to complete the application. If after five business days from
receipt of the initial premium, the application remains incomplete, We will
return the initial premium unless We obtain your permission to retain the
premium pending completion of the application. Once the application is complete
and We have received the initial premium, the premium will be applied within two
business days.
Additional Premium Payments may be made at any time prior to the Annuity Date,
as long as the Annuitant is living. Additional payments must be made for at
least $250, however, smaller amounts may be accepted if made by automatic bank
draft or at Ameritas' discretion. Any additional premium is credited to the
Accumulation Value as of the end of the Valuation Period during which it is
received.
Total premiums may not exceed $1,000,000 for either a single Policy or for
multiple Ameritas annuity Policies having the same Annuitant without prior
approval from Ameritas.
ALLOCATION OF PREMIUM
You may allocate Net Premium to one or more of the Portfolios and to the Fixed
Account. Allocated portions must be a whole number percentage. The allocations
must total 100%.
NLVA
15
<PAGE> 19
On the Issue Date, the Policy's Accumulation Value will be based on the Liquid
Asset Portfolio value as if the Policy had been issued and the initial Net
Premium invested within two Valuation Dates of Our receipt of the application
and initial premium ("the two day date"). On the Effective Date, the
Accumulation Value is allocated to the Liquid Asset Portfolio, unless, where
available, the Owner has allocated 100% to the Fixed Account. Thirteen days
after the Issue Date, the Accumulation Value of the Policy will be allocated
among the Portfolios, or to the Fixed Account as selected by the Owner in the
application.
Where allowed, if the Owner has allocated 100% to the Fixed Account, the
Accumulation Value of the Policy is allocated to the Fixed Account on the
Effective Date. In this instance, no further allocation will occur.
The Owner bears the entire investment risk for the portion of the Accumulation
Value allocated to the Portfolios. This will affect the Policy's Accumulation
Value, which on the Annuity Date affects the level of annuity payments payable.
You should periodically review your allocation in light of market conditions and
your financial objectives.
ACCUMULATION VALUE
On the Effective Date, the Accumulation Value of the Policy is equal to the
initial premium received, less any applicable premium taxes, plus any interest
credited based on the Liquid Asset Portfolio value as of the Policy Date.
Thereafter, the Accumulation Value is determined on each Valuation Date by
multiplying the number of Accumulation Units of each Subaccount by the current
Accumulation Unit Price for that Subaccount and by adding each together with the
amount in the Fixed Account. The number of Accumulation Units credited to the
Policy is decreased by any annual Policy fee, any withdrawals, and, upon
annuitization, any applicable premium taxes.
When a portion of the Accumulation Value is allocated to a Portfolio, a certain
number of Accumulation Units are credited to your Policy. The number of
Accumulation Units is determined by dividing the dollar amount allocated to the
Portfolio by the Accumulation Unit Price for that Portfolio as of the end of the
Valuation Period in which the allocation is made.
The Accumulation Units of each Portfolio are valued separately. The Accumulation
Unit Price may vary each Valuation Period according to the net investment
performance of the Portfolio, the daily charges under the Policy, and, any
applicable tax charges.
Therefore, the Accumulation Value of your Policy will vary from Valuation Period
to Valuation Period, reflecting the investment experience of the selected
Portfolios of the Funds, the interest earned in the Fixed Account, additional
Premium Payments, withdrawals and the deduction of any charges.
VALUATION DATE AND VALUATION PERIOD
A Valuation Date is each day on which the New York Stock Exchange ("NYSE") is
open for trading. The net asset value for each Fund Portfolio is determined as
of the close of regular trading on the NYSE. The net investment return for each
Subaccount and all transactions and calculations with respect to the Policies as
of any Valuation Date are determined as of that time. The transaction cut-off
time for receipt by Us of Premium Payments and all transactions with respect to
Rydex is 1:30 p.m. Central time. A Valuation Period is the period between two
successive Valuation Dates, commencing at the close of the NYSE on each
Valuation Date and ending at the close of the NYSE on the next succeeding
Valuation Date.
TRANSFERS AMONG PORTFOLIOS AND THE FIXED ACCOUNT
You may make transfers among the Portfolios and/or the Fixed Account 15 times
each Policy Year without charge. A transfer charge of $10 may be imposed for
each additional transfer. This charge will be deducted pro rata from each
Subaccount (and, if applicable, the Fixed Account) in which you are invested.
Each transfer must be at least $250, or the balance of the Portfolio, if less.
You may make unlimited transfers from the Portfolios to the Fixed Account.
During the 30 day period following the Policy anniversary date, you may also
transfer from the Fixed Account to the various Portfolios amounts up to the
greater of: 25% of the Accumulation Value of the Fixed Account; the amount of
any transfer
NLVA
16
<PAGE> 20
from the Fixed Account during the prior thirteen months; or $1,000. This
provision is not available while dollar cost averaging from the Fixed Account.
The minimum amount that may remain in a Portfolio or the Fixed Account after a
transfer is $100. We will only allow transfers with regard to Rydex according to
administrative rules We have set.
You may initiate transactions by telephone. Ameritas will employ reasonable
procedures to confirm that telephone instructions are genuine. Our procedures
for transactions initiated by telephone include, but are not limited to,
requiring the Owner to provide the Policy number at the time of giving transfer
instructions; tape recording of all telephone transfer instructions; and the
provision, by Ameritas, of written confirmation of telephone transactions.
Ameritas will effect transfers and determine all values in connection with
transfers at the end of the Valuation Period during which the transfer request
is received at the Home Office.
Transfers may be subject to additional limitations by the Funds.
SYSTEMATIC PROGRAMS
Ameritas may offer systematic programs as discussed below. Transfers of
Accumulation Value made within programs will be counted in determining whether
the transfer fee applies. Lower minimum amounts may be allowed to transfer as
part of a systematic program. All other normal transfer restrictions, as
described above, may apply. There is no separate charge for participation in
these programs at this time.
PORTFOLIO REBALANCING. Portfolio rebalancing is a method to maintain your
original allocation proportions among Portfolios. Under this program, the Owner
can instruct Ameritas to reallocate Accumulation Value among the Portfolios, on
a systematic basis, in accordance with allocation instructions specified by the
Owner. The Fixed Account can not be used in this program.
DOLLAR COST AVERAGING. Under the Dollar Cost Averaging program, the Owner can
instruct Ameritas to automatically transfer, on a systematic basis, a
predetermined amount or percentage specified by the Owner from the Fixed Account
or the Liquid Asset Subaccount to any other Subaccount(s). Dollar cost averaging
is permitted from the Fixed Account, if no more than 1/36th of the value of the
Fixed Account at the time dollar cost averaging is established is transferred
each month.
EARNINGS SWEEP. Permits systematic redistribution of earnings among Portfolios.
The Owner can request participation in the available systematic programs when
purchasing the Policy or at a later date. The Owner can change the allocation
percentage or discontinue any program by sending written notice or calling the
Home Office. Other scheduled programs may be made available. Ameritas reserves
the right to modify, suspend or terminate such programs at any time.
Participation in any systematic program will automatically terminate upon death
of the Annuitant. Use of Systematic Programs may not be advantageous, and does
not guarantee success.
WITHDRAWALS AND SURRENDERS
Any time prior to the Annuity Date and while the Annuitant is still living, you
may make withdrawals or surrender the Policy to receive part or all of the
Accumulation Value. No withdrawal or surrender may be made after the Annuity
Date except as permitted under a particular Annuity Income Option.
The amount available for withdrawal is the Accumulation Value at the end of the
Valuation Period during which the written request for withdrawal is received,
less any applicable premium taxes and in the case of a surrender, also less the
annual policy fee that would be due on the last Valuation Date of the Policy
Year.
In the absence of specific direction from the Owner, amounts will be withdrawn
from the Subaccounts and the Fixed Account on a pro rata basis. The minimum
withdrawal amount is $250. Any withdrawal request that would reduce the
Accumulation Value to less than $1,000 will be considered a request for Policy
surrender.
Since the Owner assumes the investment risk with respect to amounts allocated to
Separate Account LLVA, the total amount paid upon withdrawal under the Policy
(taking into account any prior withdrawals) may be more or less than the total
Premium Payments made. The surrender value may be
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<PAGE> 21
paid in a lump sum to the Owner, or, if elected, all or any part may be paid out
under an Annuity Income Option. (See the section on "Annuity Income Options".)
Your proceeds will be paid within seven days of receipt of written request for
withdrawal or surrender, on a form approved by Ameritas, subject to postponement
in certain circumstances. (See the section on "Deferment of Payment".) Payments
under the Policy of any amounts derived from a premium paid by check may be
delayed until the check has cleared the payor's bank.
If, at the time you make a withdrawal request, you have not provided Ameritas
with a written election not to have federal income taxes withheld, We must by
law withhold such taxes from the taxable portion of the withdrawal and remit
that amount to the federal government. Moreover, the Internal Revenue Code
provides that a 10% penalty tax may be imposed on certain early withdrawals.
(See the section on "Federal Tax Matters.")
SYSTEMATIC WITHDRAWALS. A systematic withdrawal option is available. Automatic
withdrawals may be taken on a monthly, quarterly, semi-annual or annual mode.
FREE LOOK PRIVILEGE
You have a period of time to examine a Policy and return it for a refund. You
may cancel the Policy within 10 days after receipt of the Policy, unless state
law requires a longer period of time. The refund is equal to the greater of the
premiums paid or the premiums adjusted by investment gains or losses. To cancel
the Policy, the Owner should return it to the selling agent, or to Ameritas at
the Home Office. A refund, if the premium was paid by check, may be delayed
until the check has cleared the Owner's bank.
CHARGES AND DEDUCTIONS
There is no sales load, no withdrawal charge, and no surrender charge.
Charges will be deducted periodically from the Accumulation Value of the Policy
to compensate Ameritas for, among other things: (1) issuing and administering
the Policy; and (2) assuming certain risks in connection with the Policy. The
nature and amount of these charges are described more fully below.
No deductions are made from the Premium Payments before they are allocated to
Separate Account LLVA or the Fixed Account, unless taxes are imposed by state
law upon the receipt of a Premium Payment. In that case Ameritas will deduct the
premium tax due when the premiums are received.
ADMINISTRATIVE CHARGES
ANNUAL POLICY FEE. An annual policy fee of up to $40.00 (currently $25.00) is
deducted from the Accumulation Value on the last Valuation Date of each Policy
Year or upon a surrender. This charge reimburses Ameritas for the administrative
costs of maintaining the Policy on Ameritas' system and the cost of reporting to
Owners.
Ameritas does not expect to make a profit on the charges for the annual Policy
fee.
TRANSFER CHARGE. Transfer charges may be levied. (See the section on "Transfers
Among Portfolios and the Fixed Account.")
MORTALITY AND EXPENSE RISK CHARGE
Ameritas imposes a charge as compensation for bearing certain mortality and
expense ("M&E") risks under the Policies. The charge is assessed daily and is
equal to an annual rate of .75% of the value of the average daily net assets of
Separate Account LLVA. This charge is subtracted when determining the daily
Accumulation Unit Value. Ameritas guarantees that this charge will never exceed
.95%. If this charge is insufficient to cover assumed risks, the loss will fall
on Ameritas. Conversely, if the charge proves more than sufficient, any excess
will be added to Ameritas' surplus. No M&E charge is imposed on the Fixed
Account.
The mortality risk borne by Ameritas, assuming the selection of one of the forms
of life annuities, is to make monthly Annuity Payments (determined in accordance
with the annuity tables and other provisions contained in the Policies)
regardless of how long all Annuitants may live. This undertaking assures that
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neither an Annuitant's own longevity, nor an improvement in life expectancy
greater than expected, will have any adverse affect on the monthly annuity
payments the Annuitant will receive. It therefore relieves the Annuitant from
the risk of outliving the funds accumulated for retirement.
In addition, Ameritas bears a mortality risk under the Policies in two important
aspects. First, regardless of the Annuity Income Option selected, it guarantees
the purchase rates for the Annuity Income Options available under the Policy.
Second, Ameritas guarantees that the death benefit payable upon death of the
Annuitant prior to the Annuity Date will be the greater of the Accumulation
Value or the Premium Payments made, less withdrawals.
The expense risk undertaken by Ameritas, with respect to Separate Account LLVA,
is that the deductions for administrative costs under the Policies may be
insufficient to cover the actual future costs incurred by Ameritas for providing
administration services.
If the annual policy fee is insufficient to cover the administration expenses,
the deficiency will be met from Ameritas' general account funds, including the
amount derived from the charge levied for mortality and expense risks.
TAX CHARGES
The Owner will pay premium taxes that currently range from 0% to 3.5% of the
premium paid, where such taxes are imposed by the state law of the Owner's
residence. States impose premium taxes either upon receipt, by the company, of a
premium payment, or upon annuitization or withdrawals. Ameritas will charge and
deduct premium taxes as required by state law and in accordance with any
applicable company election. Applicable premium tax rates are subject to change.
The Owner will be notified of any applicable premium taxes. You are responsible
for informing Ameritas in writing of changes of residence.
Under present laws, Ameritas will incur state or local taxes (in addition to the
premium taxes described above) in several states. At present, these taxes are
not significant; thus, Ameritas does not currently make a charge for these other
taxes. If they increase, however, Ameritas may charge for such taxes. Such
charges would be deducted from the Accumulation Value.
Ameritas does not expect to incur any federal income tax liability attributable
to investment income or capital gains retained as part of the reserves under the
Policies. Based upon these expectations, no charge is being made currently to
Separate Account LLVA for corporate federal income taxes which may be
attributable to Separate Account LLVA. Ameritas will periodically review the
question of a charge to Separate Account LLVA for corporate federal income taxes
related to Separate Account LLVA. Such a charge may be made in future years for
any federal income taxes incurred by Ameritas. This might become necessary if
the tax treatment of Ameritas is ultimately determined to be other than what we
currently believe it to be, if there are changes made in the federal income tax
treatment of annuities at the corporate level, or if there is a change in
Ameritas' tax status. In the event that Ameritas should incur federal income
taxes attributable to investment income or capital gains retained as part of the
reserves under the Policy, the Accumulation Unit Price would be correspondingly
adjusted. (See the section on Federal Tax Matters.)
FUND INVESTMENT ADVISORY FEES AND EXPENSES
The value of the assets in Separate Account LLVA will reflect investment
advisory fees and other expenses incurred by the Funds. Fund expenses are found
in the Funds' prospectuses, and Statements of Additional Information, and the
Fee Table of this prospectus.
ANNUITY PERIOD
ANNUITY DATE
The Annuity Date is the date that Annuity Payments are scheduled to begin,
unless the Policy has been surrendered or the Annuitant is deceased and an
amount has been paid as proceeds prior to that date. The Annuity Date will be
the later of the fifth Policy anniversary date or the Policy anniversary which
is nearest the Annuitant's 85th birthday.
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However, the Owner may specify an Annuity Date at the time of purchase which may
be extended up to the Policy anniversary nearest the Annuitant's 95th birthday.
The 29th, 30th, or 31st day of any month may not be selected as the Annuity
Date.
An Annuity Date may only be changed by written request during the Annuitant's
lifetime. Written request to change the Annuity Date must be received at the
Ameritas Home Office at least 30 days before the currently scheduled Annuity
Date. The Annuity Date and Annuity Income Options available for Qualified
contracts may also be controlled by endorsements, the plan, or applicable law.
ANNUITY INCOME OPTIONS
If the Annuitant is living on the Annuity Date and the Policy is in force,
Annuity Payments will be made to the Annuitant according to the terms of the
Policy and the Annuity Income Option selected.
The amounts of any Annuity Payments payable will be based on the Accumulation
Value as of the Annuity Date less any premium taxes, if applicable. Thereafter,
the monthly Annuity Payment will not change, except in the event the Interest
Payment Option is elected, in which case the payment will vary based on the rate
of interest determined by Ameritas. All or part of the Accumulation Value may be
placed under one or more Annuity Income Options. If Annuity Payments are to be
paid under more than one option, Ameritas must be told what part of the
Accumulation Value is to be paid under each option.
The Annuity Income Options are shown below. Election of an Annuity Income Option
must be made by written request to Ameritas at least thirty (30) days in advance
of the Annuity Date. If no election is made, payments will be made as a Life
Annuity as shown below. Subject to Ameritas' approval, the Owner (or after the
Annuitant's death, the Annuitant's Beneficiary) may select any other Annuity
Income Option Ameritas then offers. Annuity Income Options are not available to:
(1) an assignee; or (2) any other than a natural person except with Ameritas'
consent.
If an Annuity Income Option selected does not generate monthly payments of at
least $100, Ameritas reserves the right to pay the Accumulation Value as a lump
sum payment or to change the frequency. If an Annuity Income Option is chosen
which depends on the continuation of life of the Annuitant, proof of birth date
may be required before Annuity Payments begin. For Annuity Income Options
involving life income, the actual age of the Annuitant or joint Annuitant will
affect the amount of each payment. Since payments to older Annuitants are
expected to be fewer in number, the amount of each Annuity Payment may be
greater. For Annuity Income Options that do not involve life income, the length
of the payment period may affect the amount of each payment: the shorter the
period, the greater the amount of each Annuity Payment.
The following Annuity Income Options are currently available:
INTEREST PAYMENT. Ameritas will hold any amount applied under this option and
pay or credit interest on the unpaid balance each month at a rate determined by
Ameritas.
DESIGNATED AMOUNT ANNUITY. Monthly Annuity Payments will be for a fixed amount.
Payments continue until the amount Ameritas holds runs out.
DESIGNATED PERIOD ANNUITY. Monthly Annuity Payments are paid for a period
certain, as the Owner elects, up to 20 years.
LIFE ANNUITY. Monthly Annuity Payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to his or her death. Variations
provide for guaranteed payments for a period of time.
JOINT AND LAST SURVIVOR ANNUITY. Monthly Annuity Payments are paid based on the
lives of the two Annuitants and thereafter on the life of the survivor, ceasing
with the last Annuity Payment due prior to the survivor's death.
The rate of interest payable under the Interest Payment, Designated Amount
Annuity or Designated Period Annuity options will be guaranteed to be no less
than 3% compounded yearly. Payments under the Life Annuity and Joint and Last
Survivor Annuity options will be based on the 1983 Table "a" Individual Annuity
Table, projected for seventeen years, at 3 1/2% interest. Ameritas may, at any
time of election of an
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Annuity Income Option, offer more favorable rates in lieu of the guaranteed
rates specified in the Annuity Tables. These rates may be based on Annuity
Tables which distinguish between males and females.
Under current administrative practice, Ameritas allows the beneficiary to
transfer amounts applied under the Interest Payment, Designated Amount Annuity,
and Designated Period Annuity options to either the Life Annuity or Joint and
Last Survivor Annuity option after the Annuity Date. However, there is no
guarantee that Ameritas will continue this practice which can be changed at any
time at Ameritas' discretion.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion is general in nature and is not intended as tax advice.
It is not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under a contract. If you are concerned about any of the tax implications
discussed, you should consult a competent tax adviser before purchasing a
Policy. This discussion is based upon Ameritas' understanding of the present
federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws, other than premium
taxes. (See the section on Tax Charges.)
TAXATION OF ANNUITIES IN GENERAL
NONQUALIFIED POLICIES. The following discussion assumes that the Policy will
qualify as an annuity policy for federal income tax purposes. The Statement of
Additional Information discusses such qualifications.
Section 72 of the Internal Revenue Code (the Code) governs taxation of
annuities. In general, the owner is not taxed on increases in the value of a
policy until some form of distribution is made under the policy. The exception
to this rule is the treatment afforded to owners that are not natural persons.
Generally, an owner that is not a natural person must include in income any
increase in excess of the owner's cash value over the owner's "investment in the
policy" during the taxable year, even if no distribution occurs. There are,
however, exceptions to this rule which you may wish to discuss with your tax
counsel. The following discussion applies to Policies owned by natural persons.
The taxable portion of a distribution (in the form of an annuity or lump sum
payment) is taxed as ordinary income, subject to any income averaging rules
applicable to taxpayers generally. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the accumulation value generally
will be treated as a distribution. A transfer of ownership of the policy without
full and adequate consideration will also be treated as a distribution under the
Internal Revenue Code, unless the transfer falls within an exception for
transfers between spouses. Generally, in the case of a withdrawal under a
nonqualified policy, amounts received which are allocable to "investment in the
policy" made after August 13, 1982 are first treated as taxable income to the
extent that the accumulation value immediately before the withdrawal exceeds the
"investment in the policy" at that time. Any additional amount is not taxable.
If a withdrawal is allocable to "investment in the policy" made prior to August
14, 1982, it is taxed under the "cost recovery rule" so that withdrawals are
treated as a recovery of "investment in the policy" until such investment has
been fully recovered. Thereafter, withdrawals are fully taxable as ordinary
income. Where a policy contains "investment in the policy" both before and after
the above referenced dates, special ordering rules apply.
Although the tax consequences may vary depending on the annuity income option
elected under the policy, in general, only the portion of an annuity payment
that represents the amount of the Payment which exceeds the payment's
proportionate share of "investment in the policy" will be taxed. For fixed
annuity payments, in general, there is no tax on the amount of each payment
which represents the same ratio that the "investment in the policy" bears to the
total expected value of the annuity payment for the term of the payment;
however, the remainder of each annuity payment is taxable. Any distribution
received subsequent to the investment in the policy being recovered will be
fully taxable.
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In the case of a distribution from a nonqualified policy a federal penalty tax
may be imposed equal to 10% of the amount treated as taxable income. In general,
however, there is no penalty tax on distributions: (1) made on or after the date
on which the owner is actual age 59 1/2, (2) made on or after the death of the
owner, (3) attributable to the taxpayer's becoming disabled within the meaning
of Internal Revenue Code Section 72 (m)(7), (4) received in substantially equal
payments (not less frequently than annually) made for the life or life
expectancy of the taxpayer or the joint lives (or joint life expectancies) of
the taxpayer and his or her designated beneficiary, subject to Internal Revenue
Service requirements, including special "recapture" rules, or (5) which are
allocable to "investment in the policy" made prior to August 14, 1982.
QUALIFIED POLICIES. Qualified policies are used by individuals in connection
with retirement plans which are intended to qualify as plans that receive
special income tax treatment under Sections 401, 403(a), 408 or 457 of the
Internal Revenue Code (the "Code"). The ultimate effect of federal income taxes
on the contributions, on the accumulation value, on annuity payments and on the
economic benefit to the owner, the annuitant or the beneficiary depends on the
type of retirement plan, on the tax and employment status of the individual
concerned and on Ameritas' tax status. In addition, certain requirements must be
satisfied in purchasing a Qualified Policy in connection with a tax qualified
plan in order to receive favorable tax treatment. With respect to qualified
policies an endorsement of the policy and/or limitations or penalties imposed by
the Code may impose limits on premiums, withdrawals, distributions or benefits,
or on other provisions of the policies. Therefore, purchasers of qualified
policies should seek competent legal and tax advice regarding the suitability of
the Policy for their situation, the applicable requirements and the tax
treatment of the rights and benefits of a Policy. Section 403(b)(11) of the Code
requires that no distribution attributable to salary deferred contributions may
be made from a plan under Section 403(b) except after age 59 1/2, separation
from service, death or disability, or in the case of hardship, except in a tax
free exchange to another qualified contract. The following discussion assumes
that qualified policies are purchased in connection with retirement plans that
qualify for the special federal income tax treatment described above.
The rules governing the tax treatment of distributions under qualified plans
vary according to the type of plan and the terms and conditions of the plan
itself. Generally, in the case of a distribution to a participant or beneficiary
under a policy purchased in connection with these plans, only the portion of the
payment in excess of the "investment in the policy" allocated to that payment is
subject to tax. The "investment in the policy" equals the portion of plan
contributions invested in the policy that was not excluded from the
participant's gross income (reduced by any amounts previously received under the
policy which were excluded from gross income), and may be zero. In general, for
allowed withdrawals prior to the annuity starting date from qualified policies
other than Roth IRAs, a ratable portion of the amount received is taxable, based
on the ratio of the "investment in the policy" to the total Policy value. The
amount excluded from a taxpayer's income will be limited to an aggregate cap
equal to the "investment in the policy." The taxable portion of annuity payments
with annuity starting dates on or before November 18, 1996 is generally
determined under rules similar to those applicable to annuity distributions from
nonqualified policies. However, for annuity payments with annuity starting dates
after November 18, 1996, annuitants must use a simplified method for determining
the tax-free portion of annuity payments by dividing "investments in the policy"
by the number of annuity payments set by tables in the Internal Revenue Code
based on the age of the primary annuitant. This method does not apply if the
annuitant is over age 75 and there are 5 or more years of guaranteed payments.
Also, for annuity payments based on the lives of more than one individual and
that have annuity starting dates after December 31, 1997, annuitants must use
the simplified method based on the combined ages of both individuals when
calculating the excludable portion of annuities based on the separate tables set
forth in the Code for that purpose. In the case of an annuity that does not
depend in whole or in part on the life expectancy of one or more individuals,
the expected number of payments is the number of monthly annuity payments under
the policy. Special favorable tax treatment may be available for certain
distributions (including lump sum distributions from plans other than IRAs made
in tax years beginning before January 1, 2000). Adverse tax consequences may
result from excess contributions, distributions made prior to age 59 1/2
(subject to certain exceptions), distributions that do not conform to specified
commencement and minimum distribution rules, and in certain other circumstances.
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Roth IRA contributions are not deductible and may be limited or unavailable
depending on your adjusted gross income. Withdrawals of earnings from Roth IRAs
may be tax free if certain requirements are met. If withdrawals do not meet
those requirements, they will be considered to be made first from contributions
then from "conversion" amounts (on a first-in, first-out basis) and then from
earnings. The earnings will be subject to income tax and an additional 10%
penalty tax may apply to distributions made prior to age 59 1/2. Conversions
from existing IRAs to Roth IRAs are permitted if certain requirements are met,
however, converted amounts not previously taxed will be subject to income tax in
the year of conversion (for 1998 only, taxpayers can elect to include the full
taxable conversion amount in income for 1998 or to have the tax spread over 4
years on a pro rata basis, beginning in 1998). Conversion amounts will not
generally be subject to the 10% penalty tax that applies to premature
distributions, unless a distribution of the conversion amount from the Roth IRA
occurs within the 5 taxable year period beginning with the year of conversion.
Also, income inclusion may be accelerated if a distribution is made of 1998
conversion amounts which are subject to the 4 year spread rule.
Distributions from qualified plans are subject to specific tax withholding
rules. "Eligible rollover distributions" from a qualified plan (other than IRAs
of any type and Section 457 plans) are subject to income tax withholding at a
rate of 20% unless the Owner elects to have the distribution paid directly by
Ameritas to an eligible retirement plan (another plan of the same type or a
rollover IRA) in a direct rollover. If the distribution is not an "eligible
rollover distribution," it is generally subject to the same withholding rules as
distributions from nonqualified policies. However, Section 457 nonqualified
deferred compensation plan distributions are generally subject to withholding as
wages and are not eligible for rollover to an IRA.
GENERAL PROVISIONS
ANNUITANT'S BENEFICIARY
The Annuitant's Beneficiary(ies) receives the death benefit proceeds upon death
of the Annuitant. The Owner may name both primary and contingent Annuitant's
Beneficiaries. The Annuitant's Beneficiary(ies) is named in the application or
as later changed and recorded in Ameritas' records.
Multiple beneficiaries may be named; however, unless otherwise indicated,
payments are made equally to those primary beneficiaries who are alive upon the
death of the Annuitant. Contingent beneficiaries are only eligible if no primary
beneficiary is alive at the time proceeds are payable. If none survive, the
final beneficiary will be the Owner or the Owner's estate.
The Owner may change the Annuitant's Beneficiary by written request on a Change
of Beneficiary form at any time during the Annuitant's lifetime unless otherwise
provided in the previous designation of Beneficiary. Ameritas, at its option,
may require that the Policy be returned to the Home Office for endorsement of
any change, or that other forms be completed. The change will take effect as of
the date the change is recorded at the Home Office. Ameritas will not be liable
for any payment made or action taken before the change is recorded. No limit is
placed on the number of changes that may be made.
DEATH OF ANNUITANT
If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The death benefit is payable upon
receipt of Satisfactory Proof of Death of the Annuitant as well as proof that
the Annuitant died prior to the Annuity Date. Ameritas guarantees the Death
Benefit will equal the greater of the Accumulation Value or total premiums paid
less withdrawals, on the date Satisfactory Proof of Death is received by
Ameritas at its Home Office. The death benefit is payable as a lump sum or under
one of the Annuity Income Options.
The Owner may elect an Annuity Income Option for the Annuitant's Beneficiary, or
if no such election was made by the Owner and a cash benefit has not been paid,
the Annuitant's Beneficiary may make this election after the Annuitant's Death.
Since Satisfactory Proof of Death includes a "Claimant's Statement", which
specifies how the beneficiary wishes to receive the benefit (unless the Owner
previously selected an Annuity Income Option), the amount of the death benefit
will continue to reflect the investment performance of Separate Account LLVA
until that information is supplied to Ameritas. The death benefit will be paid
to the Annuitant's
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Beneficiary within seven days of when it become payable, or as soon thereafter
as Ameritas has sufficient information about the Annuitant's Beneficiary to make
the payment. In order to take advantage of the favorable tax treatment accorded
to receiving the death benefit as an annuity, the Annuitant's Beneficiary must
elect to receive the benefits under an Annuity Income Option within 60 days
"after the day on which such lump sum became payable," as defined in the
Internal Revenue Code.
DEATH OF OWNER
If the Owner dies on or after the Annuity Date, annuity benefits continue to be
paid to the Annuitant under the Annuity Income Option in effect on the Owner's
date of death.
If the Owner dies before the Annuity Date and before the entire interest in the
Policy is distributed, the Accumulation Value of the Policy must be distributed
to the Owner's Designated Beneficiary so that the Policy qualifies as an annuity
under the Internal Revenue Code. The entire interest must be distributed within
five years of the Owner's death. However, a distribution period exceeding five
years will be allowed if the Owner's Designated Beneficiary purchases an
immediate annuity under which payments will begin within one year of the Owner's
death and will be paid out over the lifetime of the Owner's Designated
Beneficiary or over a period not extending beyond his or her life expectancy.
If the Owner's interest is payable to (or for the benefit of) the surviving
spouse of the Owner, the Policy may be continued with the surviving spouse
treated as the Owner for purposes of applying the rules described above.
Finally, in situations where the Owner is not an individual, these distribution
rules are applicable upon the death or change of the Annuitant.
DEFERMENT OF PAYMENT
Payment of any withdrawal, surrender or lump sum death benefit due from Separate
Account LLVA will occur within seven days from the date the amount becomes
payable, except that Ameritas may be permitted to defer such payment if:
a) the New York Stock Exchange is closed other than customary weekends or
holidays or trading on the New York Stock Exchange is otherwise restricted;
or
b) the SEC permits the delay for the protection of Owners; or
c) an emergency exists as determined by the SEC.
In addition, surrenders or withdrawals from the Fixed Account may be deferred by
Ameritas for up to 6 months from the date of written request.
CONTESTABILITY
Ameritas cannot contest the validity of this Policy after the Policy Date,
subject to the "Misstatement of Age or Sex" provision.
MISSTATEMENT OF AGE OR SEX
Ameritas may require proof of age and sex before making Annuity Payments. If the
age or sex of the Annuitant has been misstated, we will adjust the benefits and
amounts payable under this Policy.
If Ameritas made any overpayments, interest at the rate of 6% per year
compounded yearly will be charged against future payments. If we made
underpayments, the balance due plus interest at the rate of 6% per year
compounded yearly will be paid in a lump sum.
REPORTS AND RECORDS
Ameritas will maintain all records relating to Separate Account LLVA and will
mail the Owner, at the last known address of record, within 30 days after each
Policy anniversary, an annual report which shows the current Accumulation Value
as allocated among the Subaccounts or the Fixed Account, and charges made during
the Policy Year. Quarterly reports are also currently provided but except for
the annual report, Ameritas reserves the right to charge a report fee for each
requested report. The Owner will also be sent confirmations of transactions,
such as Premium Payments, transfers and withdrawals under the Policy.
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Quarterly statements are also mailed detailing Policy activity during the
calendar quarter. Instead of receiving an immediate confirmation of transactions
made pursuant to some types of periodic payment plan (such as a dollar cost
averaging program, or payment made by automatic bank draft or salary reduction
arrangement), the Owner may receive confirmation of such transactions in their
quarterly statements. The Owner should review the information in these
statements carefully. All errors or corrections must be reported to Ameritas
immediately to assure proper crediting to the Policy. Ameritas will assume all
transactions are accurately reported on quarterly statements unless Ameritas is
otherwise notified within 30 days after receipt of the statement. A periodic
report for the Fund and a list of the securities held in each Portfolio of the
Fund and any other information required by the 1940 Act will also be provided.
DISTRIBUTION OF THE POLICIES
AMERITAS INVESTMENT CORP. ("AIC"), located at 5900 "O" Street, Lincoln, Nebraska
68510, will act as the principal underwriter of the Policies, pursuant to an
Underwriting Agreement it has with Ameritas. AIC is a wholly owned subsidiary of
AMAL Corporation, and an affiliate of Ameritas. AIC is a broker-dealer
registered under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. There is no premium load to
cover sales and distribution expenses. All compensation or expense reimbursement
received by AIC for serving as the principal underwriter of the Policies will be
paid by Ameritas from its other assets or surplus in its general account, which
may include profits derived from amounts derived from mortality and expense risk
charges and other charges made under the Policies. Policies can be purchased
directly from Ameritas through its direct consumer services, with salaried
employees who are registered representatives of AIC and who will not receive
compensation related to the purchase. The Policies are also sold by individuals
who are registered representatives of AIC, or other registered broker-dealers.
In these situations, AIC or the other broker-dealers may receive compensation.
AIC will be paid by Ameritas at a rate of .05% of all premium received. Other
broker-dealers will receive from Ameritas up to .5% of premium, and an asset
based administrative compensation of .10% (annualized), which fee shall be paid
by Ameritas.
The gross variable annuity compensation received by AIC on Ameritas' variable
annuity policies was $10,129 for 1998, $4,677 for 1997, and $0 for 1996.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
Ameritas holds the assets of Separate Account LLVA. The assets are held separate
and apart from general account assets. Ameritas maintains records of all
purchases and redemptions of the Funds' shares by each of the Subaccounts.
THIRD PARTY SERVICES
Ameritas is aware that certain third parties are offering money management
services in connection with the contracts. Ameritas does not engage any such
third parties to offer such services of any type. In certain cases, Ameritas has
agreed to honor transfer instructions from such services where it has received
powers of attorney, in a form acceptable to it, from the contract Owners
participating in the service. Firms or persons offering such services do so
independently from any agency relationship they may have with Ameritas for the
sale of contracts. Ameritas takes no responsibility for the investment
allocations and transfers transacted on a contract Owner's behalf by such third
parties or any investment allocation recommendations made by such parties.
Contract Owners should be aware that fees paid for such services are separate
and in addition to fees paid under the contracts.
VOTING RIGHTS
To the extent required by law, Ameritas will vote the Portfolio shares held in
Separate Account LLVA at shareholder meetings of the Funds in accordance with
instructions received from persons having voting interests in the corresponding
Subaccount. The 1940 Act currently requires shareholder voting on matters such
as the election of the Board of Trustees of the Funds, the approval of the
investment advisory contract, changes in the fundamental investment policies of
the Funds, and approval of the independent accountants. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
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interpretation thereof should change, and, as a result, Ameritas determines that
it is allowed to vote the Portfolio shares in its own right, Ameritas may elect
to do so.
Prior to the Annuity Date, the Owner holds a voting interest in each Subaccount
to which the Accumulation Value is allocated. The number of votes available to
an Owner will be calculated separately for each Subaccount of Separate Account
LLVA. The number of votes available to an Owner will be determined by dividing
the Accumulation Value attributable to a Subaccount by the net asset value per
share of the applicable Portfolio. In determining the number of votes,
fractional shares will be recognized.
The number of votes will be determined as of the record date established by the
Portfolio. Voting instructions will be solicited by written communication prior
to the shareholder meeting in accordance with procedures established by the
Funds.
Shares of Funds as to which no timely instructions are received, or shares held
by Ameritas as to which Owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Policies participating in that Subaccount.
Each person having a voting interest in a Subaccount will receive proxy
material, reports and other materials relating to the appropriate Portfolio.
On and after the Annuity Date, there are no voting rights because amounts are no
longer held in Separate Account LLVA.
LEGAL PROCEEDINGS
There are no legal proceedings to which Separate Account LLVA is a party or to
which the assets of Separate Account LLVA are subject. Ameritas is not involved
in any litigation that is of material importance in relation to its ability to
meet its obligations under the Policies, or that relates to Separate Account
LLVA. AIC is not involved in any litigation that is of material importance in
relation to its ability to perform under its underwriting agreement.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available that contains more details
concerning the subjects discussed in this Prospectus. This can be obtained by
writing to the address on the front page or by calling 1-800-255-9678.
The following is a Table of Contents for that Statement:
<TABLE>
<S> <C>
GENERAL INFORMATION AND HISTORY............................. 2
THE POLICY.................................................. 2
GENERAL MATTERS............................................. 6
FEDERAL TAX MATTERS......................................... 7
DISTRIBUTION OF THE POLICY.................................. 9
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 9
STATE REGULATION............................................ 9
LEGAL MATTERS............................................... 9
EXPERTS..................................................... 9
OTHER INFORMATION........................................... 9
FINANCIAL STATEMENTS........................................ 10
</TABLE>
NLVA
26
<PAGE> 30
APPENDIX A
QUALIFIED DISCLOSURES
* Information Statement For:
408(b) IRA Plans
408(k) SEP IRA Plans
408(p) SIMPLE IRA Plans
408A Roth IRA Plans
* Information Statement For:
401(a) Pension/Profit Sharing Plans
If this annuity is being purchased as a qualified plan as defined under
specified sections of the Internal Revenue Code, as purchaser (owner) or
fiduciary of an Employee Benefit Plan purchasing the annuity, you should
carefully review the Information Statement for your specific plan.
Depending on the type of plan, we are required to provide this disclosure to you
to meet the requirements of the Internal Revenue Service (IRS) and/or the
Employee Retirement Income Security Act of 1974 (ERISA).
Acknowledgment of your receipt of the required disclosure is included within the
application language above your signature.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Information Statement
408(b) Individual Retirement Annuity (IRA) Plans
408(k) Simplified Employee Pension (SEP IRA) Plans
408(p) Savings Incentive Match (SIMPLE IRA) Plans
408A Roth IRA..................................... QD-1
Information Statement
401(a) Pension/Profit Sharing Plans............... QD-11
</TABLE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY LOGO
<PAGE> 31
INFORMATION STATEMENT
408(B) INDIVIDUAL RETIREMENT ANNUITY (IRA) PLANS
408(K) SIMPLIFIED EMPLOYEE PENSION (SEP IRA) PLANS
408(P) SAVINGS INCENTIVE MATCH (SIMPLE IRA) PLANS
408A ROTH IRA
AMERITAS VARIABLE LIFE INSURANCE COMPANY LOGO
- --------------------------------------------------------------------------------
For purchasers of a 408(b) Individual Retirement Annuity (IRA) Plan, 408(k)
Simplified Employee Pension (SEP IRA) Plan, 408(p) Savings Incentive Match
(SIMPLE IRA) Plan or 408A Roth IRA, please review the following:
PART 1. PROCEDURE FOR REVOKING THE IRA PLAN:
After you establish an IRA Plan with Ameritas Life Insurance Corp. (Ameritas),
you are able to revoke your IRA within a limited time and receive a full refund
of the initial premium paid, if any. The period for revocation will not be less
than the legal minimum of seven (7) days following the date your IRA is
established with Ameritas.
To revoke your IRA, you should send a signed and dated written notice to:
Ameritas Life Insurance Corp., Policyholder Service Department, P.O. Box 81889,
Lincoln, NE 68501.
If your IRA contract was delivered to you, the contract should accompany your
notice of revocation. Your notice of revocation will be considered mailed on the
date of the postmark (or certification or registration, if applicable), if sent
by United States mail, properly addressed and by first class postage prepaid.
To obtain further information about the revocation procedure, contact your
Ameritas Representative or call 1-800-745-6665.
PART II. PROVISIONS OF THE IRA LAW:
Ameritas' NO LOAD VARIABLE ANNUITY (Form 4080), can be used for a Regular IRA, a
Rollover IRA, a Spousal IRA Arrangement, a Simplified Employee Pension Plan (SEP
IRA), or a salary reduction Simplified Employee Pension Plan (SARSEP) or a
SIMPLE IRA. A separate policy must be purchased for each individual under each
plan. In addition, Ameritas' NO LOAD VARIABLE ANNUITY is also available for use
as a ROTH IRA. State income tax treatment of IRAs varies, so this disclosure
only discusses the federal tax treatment of IRAs. Please discuss state income
tax treatment of an IRA with your tax advisor.
While provisions of the IRA law are similar for all such plans, the major
differences are set forth under the appropriate topics below.
A. ELIGIBILITY:
REGULAR IRA PLAN: Any individual under age 70 1/2 and earning income from
personal services, is eligible to establish an IRA Plan, although
deductibility of the contributions is determined by adjusted gross income
("AGI") and whether the individual(or the individual's spouse) is an "active
participant" in an employer sponsored retirement plan.
ROLLOVER IRA: This is an IRA plan purchased with your distributions from
another IRA (including a SEP IRA, SARSEP or SIMPLE IRA), a Section 401(a)
Qualified Retirement Plan, or a Section 403(b) Tax Sheltered Annuity (TSA).
Amounts transferred as Rollover Contributions are not taxable in the year of
distribution (provided the rules for Rollover treatment are satisfied) and may
or may not be subject to withholding. Rollover Contributions are not
deductible.
SPOUSAL IRA ARRANGEMENT: A Spousal IRA, consisting of a separate contract for
each spouse, may be set up provided a joint return is filed, the "nonworking
spouse" has less taxable compensation, if any, for the tax year than the
working spouse, and is under age 70 1/2 at the end of the tax year.
Divorced spouses can continue a spousal IRA or start a Regular IRA based on
the standard IRA eligibility rules. All taxable alimony received by the
divorced spouse under a decree of divorce or separate maintenance is treated
as compensation for purposes of the IRA deduction limit.
ROTH IRAS: A Roth IRA must be designated as such when it is established.
Eligibility to contribute to a Roth IRA (Regular, Spousal or Conversion) is
subject to income and other limits. Unlike Regular IRAs, if eligible, you may
contribute to a Roth IRA even AFTER AGE 70 1/2.
1. A REGULAR ROTH IRA is a Roth IRA established to receive annual
contributions and/or qualified rollover contributions from other Roth IRAs
or from other IRAs if permitted by the policy and endorsement.
2. A CONVERSION ROTH IRA IS a Roth IRA established to receive rollovers or
conversions from non-Roth IRAs and is limited to such contributions.
Roth IRAs are available beginning in 1998. Unlike Regular IRAs,
contributions to a Roth IRA are not deductible for tax purposes. However,
any gain accumulated in a Roth IRA may be nontaxable, depending upon how
and when withdrawals are made.
3.SPOUSAL ROTH IRA ARRANGEMENT: Beginning in 1998, a Spousal Roth IRA may be
set up for a "non-working" spouse who has less taxable compensation, if
any, for the tax year than the "working" spouse, regardless of age,
provided the spouses file a joint tax return and subject to the adjusted
gross income ("AGI") limits described in PART II, MAXIMUM CONTRIBUTIONS --
SPOUSAL ROTH IRA ARRANGEMENT. Divorced spouses can continue a Spousal Roth
IRA or start a Regular Roth IRA based on standard Roth IRA eligibility
rules. Taxable alimony
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received by the divorced spouse under a decree of divorce or separate
maintenance is treated as compensation for purposes of Roth IRA eligibility
limits.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP IRA): An employee is eligible to
participate in a SEP IRA Plan based on eligibility requirements set forth
in form 5305-SEP or other plan document provided by the employer.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN (SARSEP): An employee is
eligible to participate in a SARSEP plan based on eligibility requirements
set forth in form 5305A-SEP or the plan document provided by the employer.
New SARSEP plans may not be established after December 31, 1996. SARSEPs
established prior to January 1, 1997, may continue to receive contributions
after 1996, and new employees hired after 1996 are also permitted to
participate in such plans.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL EMPLOYERS (SIMPLE
IRA): An employee is eligible to participate in a SIMPLE IRA Plan based on
eligibility requirements set forth in Form 5304-SIMPLE or other plan
document provided by the employer. A SIMPLE IRA must be established as
such, thus some policies may not be available for use with a SIMPLE IRA
Plan.
B. NONTRANSFERABILITY: You may not transfer, assign or sell your IRA Plan
(including a SIMPLE IRA, SEP IRA, SARSEP or Roth IRA) to anyone (except in
the case of transfer incident to divorce).
C. NONFORFEITABILITY: The value of your IRA Plan (all types included) belongs to
you at all times, without risk of forfeiture.
D. PREMIUM: The annual premium (if applicable) of your IRA Plan or Roth IRA may
not exceed the lesser of $2,000, or 100% of compensation for the year (or for
Spousal IRAs, or Spousal Roth IRAs, the combined compensation of the spouses
reduced by any Roth IRA or deductible IRA contribution made by the "working"
spouse). Any premium in excess of or in addition to $2,000 will be permitted
only as a "Rollover Contribution" (or "Conversion" contribution to a Roth
IRA). Your contribution must be made in cash. For IRAs established under SEP
Plans (SEP IRAs), premiums are limited to the lesser of $30,000 or 15% of the
first $150,000 of compensation (adjusted for cost of living increases). In
addition, if the IRA is under a SARSEP Plan established prior to January 1,
1997, annual premiums made by salary reduction are limited to $7,000
(adjusted for cost of living increases). Premiums under a SIMPLE IRA are
limited to permissible levels of annual employee elective contributions (up
to $6,000 adjusted for cost of living increases) plus the applicable
percentage of employer matching contributions (up to 3% of compensation but
not in excess of $6,000, as adjusted) or of employer non-elective
contributions (2% of compensation (subject to the cap under Code Section
401(a)(17) as indexed) for each eligible employee).
E. MAXIMUM CONTRIBUTIONS:
REGULAR IRA PLAN: In any year that your annuity is maintained under the rules
for a Regular IRA Plan, your maximum contribution is limited to 100% of your
compensation or $2,000, whichever is less. Further, this is the maximum amount
you may contribute to all IRAs in a year (including Roth IRAs, but not to
Education IRAs or employer contributions or salary deferrals to SEP or SIMPLE
IRAs). The amount of permissible contributions to your Regular IRA may or may
not be deductible. Whether IRA contributions (other than Rollovers) are
deductible depends on whether you (or your spouse, if married) are an active
participant in an employer-sponsored retirement plan and whether your adjusted
gross income ("AGI") is above the "phase-out level." Beginning for tax years
after 1997, you will only be deemed to be an active participant and your
deductions for contributions subject to phase-out because of your spouse's
participation in an employer- sponsored retirement plan, if your combined
adjusted gross income exceeds $150,000. SEE PART III. C., DEDUCTIBLE IRA
CONTRIBUTIONS.
ROLLOVER IRA: A Plan to Plan Rollover is a method for accomplishing continued
tax deferral on otherwise taxable distributions from certain plans. Rollover
contributions are not subject to the contribution limits on Regular IRA
contributions, but also are not tax deductible.
There are two ways to make a rollover to an IRA:
(1) PARTICIPANT ROLLOVERS are available to participants, surviving spouses or
former spouses who receive eligible rollover distributions from 401(a)
Qualified Retirement Plans, TSAs or IRAs (including SEPs, SARSEPs, and
SIMPLE IRAs). Participant Rollovers are accomplished by contributing part
or all of the eligible amounts (which includes amounts withheld for
federal income tax purposes) to your new IRA within 60 days following
receipt of the distribution. IRA to IRA Rollovers are limited to one per
distributing plan per 12 month period, while direct IRA to IRA transfers
(where you do not directly receive a distribution) are not subject to
this limitation. Distributions from a SIMPLE IRA may not be rolled over
or transferred to an IRA (which isn't a SIMPLE IRA) during the 2 year
period following the date you first participate in any SIMPLE Plan
maintained by your employer.
(2) DIRECT ROLLOVERS are available to participants, surviving spouses and
former spouses who receive eligible rollover distributions from 401(a)
Qualified Retirement Plans or TSAs. Direct Rollovers are made by
instructing the plan trustee, custodian or issuer to pay the eligible
portion of your distribution directly to the trustee, custodian or issuer
of the receiving IRA. Direct Rollover amounts are not subject to
mandatory federal income tax withholding.
FOR RULES APPLICABLE TO ROLLOVERS OR TRANSFERS TO ROTH IRAS, SEE THE
PARAGRAPHS ON REGULAR AND CONVERSION ROTH IRAS, BELOW.
Certain distributions are not considered to be eligible for Rollover and
include: (1) distributions which are part of a series of substantially equal
periodic payments (made at least annually) for 10 years or more; (2)
distributions attributable to after-tax employee contributions to a 401(a)
Qualified Retirement Plan or TSA; (3) required minimum distributions made during
or after the year you reach age 70 1/2 or, if later and applicable, the year in
which you retire; and (4) amounts in excess of the cash (except for certain loan
offset amounts) or in excess of the proceeds from the sale of property
distributed. Also, under the Internal Revenue Service Restructuring and Reform
Act of 1998 (IRSRRA'98), hardship distributions made from 401(k) or 403(b) plans
on or after January 1, 1999, are no longer considered eligible rollover
distributions. However, the Internal Revenue Service has announced transition
relief from this rule for 1999. Under this relief, if a distribution made during
1999 would have been considered an eligible rollover distribution immediately
before that Code definition was amended by IRSRRA '98, the distribution may be
rolled over to an eligible retirement plan. In other words, hardship
distributions from a 401(k) or 403(b) plan may still be eligible for rollover in
1999.
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At the time of a Rollover, you must irrevocably designate in writing that the
transfer is to be treated as a Rollover Contribution. Eligible amounts which are
not rolled over are normally taxed as ordinary income in the year of
distribution. If a Rollover Contribution is made to an IRA from a Qualified
Retirement Plan, you may later be able to roll the value of the IRA into a new
employer's plan PROVIDED YOU MAKE NO CONTRIBUTIONS TO THE IRA OTHER THAN FROM
THE FIRST EMPLOYER'S PLAN. THIS IS KNOWN AS "CONDUIT IRA," AND YOU SHOULD
DESIGNATE YOUR ANNUITY AS SUCH WHEN YOU COMPLETE YOUR APPLICATION.
SPOUSAL IRA ARRANGEMENT: In any year that your annuity is maintained under the
rules for a Spousal IRA, the maximum combined contribution to the Spousal IRA
and the "working" spouse's IRA for tax years after 1996, is the lesser of 100%
of the combined compensation of both spouses which is includable in gross income
(reduced by the amount of any contributions to a Roth IRA or the amount allowed
as a deduction to the "working" spouse for contribution to his or her own IRA)
or $4,000. No more than $2,000 may be contributed to either spouse's IRA.
Whether the contribution is deductible or non-deductible depends on whether
either spouse is an "active participant" in an employer-sponsored retirement
plan for the year, and whether the adjusted gross income of the couple is above
the applicable phase-out level. (SEE PART III. C., DEDUCTIBLE IRA
CONTRIBUTIONS).
The contribution limit for divorced spouses is the lesser of $2,000 or the total
of the taxpayer's taxable compensation and alimony received for the year.
(Married individuals who live apart for the entire year and who file separate
tax returns are treated as if they are single when determining the maximum
deductible contribution limits).
REGULAR ROTH IRA: The maximum total annual contribution an individual can make
to all IRAs (including Roth IRAs, but not Education, SARSEP or SIMPLE IRAs) is
the lesser of $2,000 or 100% of compensation. (This limit does not apply to
rollover contributions). If an individual contributes to both a Regular IRA and
Roth IRA for the same tax year, contributions are treated as first made to the
Regular IRA. For Regular Roth IRAs (which are available beginning in the 1998
tax year) this $2,000 limitation is phased out for adjusted gross incomes
between $150,000 and $160,000 for joint filers; between $95,000 and $110,000 for
single taxpayers; and between $0 and $10,000 for married individuals who file
separate tax returns. AGI for this purpose includes any deductible contribution
to a Regular IRA, (i.e., the deduction is disregarded) but does not include any
amount included in income as a result of a rollover or conversion from a
non-Roth IRA to a Roth IRA.
Rollovers and transfers may also be made from one Roth IRA to another. Such
rollovers or transfers are generally subject to the same timing and frequency
rules as apply to Participant Rollovers and transfers from one Regular or
Rollover IRA to another. (SEE PART II, MAXIMUM CONTRIBUTIONS: ROLLOVER IRA,
ABOVE).
CONVERSION ROTH IRA: Beginning in the 1998 tax year, rollovers or conversions
may be made from non-Roth IRAs to a Conversion Roth IRA. To be eligible to make
such a conversion or rollover from a non-Roth IRA, the taxpayer's adjusted gross
income ("AGI") for the taxable year cannot exceed $100,000 (joint or individual)
and he or she must not be married filing a separate tax return (unless the
taxpayer lives apart from his of her spouse at all times during the year). A
rollover from a non-Roth IRA to a Conversion Roth IRA does not count toward the
limit of one rollover per IRA in any 12-month period under the normal IRA
rollover rules. Also, eligible rollover distributions received by you or your
spouse from a qualified plan other than an IRA, may not be directly rolled over
to a Roth IRA. However, you may be able to roll such a distribution over to a
non-Roth IRA, then convert that IRA to a Conversion Roth IRA. Also if you are
eligible to make a conversion, you may transfer amounts from most non-Roth IRAs
(other than Education IRAs). Conversion of an individual's SIMPLE IRA is only
permitted after expiration of the 2-year period which begins on the date the
individual first participated in any SIMPLE IRA Plan of the employer. Once an
amount in a SIMPLE IRA or SEP has been converted to a Roth IRA, it is treated as
a Roth IRA contribution for all purposes. Future contributions under the SEP or
SIMPLE Plan may not be made to the Roth IRA. AGI for the purpose of determining
eligibility to convert to a Roth IRA does not include any amount included in
income as a result of a rollover or conversion from a non-Roth IRA to a Roth
IRA, but does include the amount of any deductible contribution made to a
Regular IRA for the tax year. In addition, for tax years beginning before
January 1, 2005, required minimum distributions from an IRA are included in AGI
for purposes of determining eligibility for conversion to a Roth IRA. However,
for tax years beginning after December 31, 2004, required minimum distributions
from an IRA will not be included in AGI (solely for purposes of determining the
$100,000 AGI limit on conversions).
SPOUSAL ROTH IRA ARRANGEMENT: Beginning in the 1998 tax year, if the
"non-working" spouse's compensation is less than $2,000, the spouses file a
joint tax return, and their combined AGI (unreduced by any deductible IRA
contribution made for the year, but not including any amounts includable in
income as a result of a conversion to a Roth IRA) is $150,000 or below, a
contribution of up to $2,000 may be made to a separate Spousal Roth IRA in the
name of the "non-working" spouse. The $2,000 limit is phased out proportionately
between $150,000 and $160,000 of AGI (modified as described above). Spouses are
not required to make equal contributions to both Roth IRAs; however no more than
$2,000 may be contributed to the "working" or "non-working" spouse's Roth IRA
for any year, and the total amount contributed annually to all IRAs (including
both Roth and Regular IRAs, but not Education IRAs) for both spouses cannot
exceed $4,000. If the combined compensation of both spouses (reduced by any
deductible IRA or non-deductible Roth contributions made for the "working"
spouse) is less than $4,000, the total contribution for all IRAs is limited to
the total amount of the spouses' combined compensation. These limits do not
apply to rollover contributions.
For divorced spouses, the contribution limit to a Roth IRA is the lesser of
$2,000 or the total of the taxpayer's compensation and alimony received for the
year, subject to the applicable phase-out limits for eligibility to make
contributions to a Roth IRA. (Married individuals who live apart for the entire
year and who file separate tax returns are treated as if they are single when
determining the maximum contribution they are eligible to make in a Roth IRA).
SEP IRA PLAN: In any year that your annuity is maintained under the rules for a
SEP Plan, the employer's maximum contribution is the lesser of $30,000 or 15% of
your first $150,000 of compensation (adjusted for cost-of-living increases) or
as changed under Section 415 of the Code. You may also be able to make
contributions to your SEP IRA the same as you do to a Regular IRA; however, you
will be considered an "active participant" for purposes of determining your
deduction limit. In addition to the above limits, if your annuity is maintained
under the rules for a SARSEP, the maximum amount of employee pre-tax
contributions which can be made is $7,000 (adjusted for cost of living
increases). After December 31, 1996, new SARSEP plans may not be established.
Employees may, however, continue to make salary reductions to a SARSEP plan
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<PAGE> 34
established prior to January 1, 1997. In addition, employees hired after
December 31, 1996 may participate in SARSEP plans established by their employers
prior to 1997.
SIMPLE IRA: Contributions to a SIMPLE IRA may not exceed the permissible amounts
of employee elective contributions and required employer matching contributions
or non-elective contributions. Annual employee elective contributions must be
expressed as a percentage of compensation and may not exceed $6,000 (adjusted
for cost of living increases). If an employer elects a matching contribution
formula, it is generally required to match employee contributions dollar for
dollar up to 3% of the employee's compensation for the year (but not in excess
of $6,000 as adjusted for cost-of-living adjustments). An employer may elect a
lower percentage match (but not below 1%) for a year, provided certain notice
requirements are satisfied and the employer's election will not result in the
matching percentage being lower than 3% in more than 2 of the 5 years in the
5-year period ending with that calendar year. Alternatively, an employer may
elect to make non-elective contributions of 2% of compensation for all employees
eligible to participate in the plan who have at least $5,000 in compensation for
the year. The employer must notify employees of this election within specified
timeframes in advance of the plan year or election period. "Compensation" for
purposes of the 2% non-elective contribution option may not exceed the limit on
compensation under Code Section 401(a)(17) ($150,000, adjusted for cost of
living increases).
F. DISTRIBUTIONS:
1. NON-ROTH IRA MINIMUM DISTRIBUTION REQUIREMENTS:
Payments to you from your IRA Plan (other than a Roth IRA) must begin no
later than the April 1 following the close of the calendar year in which
you attain age 70 1/2, the Required Beginning Date (RBD). If you have not
already withdrawn your entire balance by this date, you may elect to
receive the entire value of your IRA Plan on or before the RBD in one lump
sum; or arrange for an income to be paid over your lifetime, your expected
lifetime, or over the lifetimes or expected lifetimes of you and your
designated beneficiary. UNDER A ROTH IRA, YOU ARE NOT REQUIRED TO TAKE
DISTRIBUTIONS WHILE YOU ARE LIVING, EVEN AFTER YOU REACH AGE 70 1/2.
RATE OF DISTRIBUTION: If you arrange for the value of your IRA Plan (other
than a Roth IRA) to be paid to you as retirement income rather than as one
lump sum, then you must abide by IRS rules governing how quickly the value
of your IRA plan must be paid out to you. Generally, it is acceptable to
have an insurance company annuity pay income to you for as long as you
live, or for as long as you and your beneficiary live.
Once you reach your RBD, you must withdraw at least a minimum amount each
year or be subject to a 50% non-deductible excise tax on the difference
between the minimum required distribution and the amount distributed. To
determine the required minimum distribution for your first "required
distribution year" (assuming an annuity payout has not been elected)
divide your entire interest (subject to certain adjustments) in your IRA
(generally as of December 31 of the calendar year immediately preceding
your age 70 1/2 year) by your life expectancy or the joint life
expectancies of you and your designated beneficiary. For subsequent
required distribution calendar years, the applicable life expectancy(ies)
will be applied to your IRA account balance as of December 31 of the
calendar year immediately preceding the distribution calendar year
(subject to adjustments). Your single or joint life expectancy is
determined by using IRS life expectancy tables. See IRS Publications 575
and 590.
Your life expectancy (and that of your spousal beneficiary, if applicable)
will be recalculated annually, unless you irrevocably elect otherwise by
the time distributions are required to begin. With the recalculation
method, if a person whose life expectancy is being recalculated dies, his
or her life expectancy will be zero in all subsequent years. The life
expectancy of a non-spouse beneficiary cannot be recalculated. Where life
expectancy is not recalculated, it is reduced by one year for each year
after your 70 1/2 year to determine the applicable remaining life
expectancy. Also, if your benefit is payable in the form of a joint and
survivor annuity, a larger minimum distribution amount may be required
under IRS regulations, unless your spouse is the designated beneficiary.
NON ROTH IRA MINIMUM DISTRIBUTION REQUIREMENTS AFTER DEATH. If you die
after the RBD, amounts undistributed at your death must be distributed at
least as rapidly as under the method being used to determine distributions
at the time of your death. If you die before the RBD, your entire interest
must generally be distributed by the end of the calendar year which
contains the fifth anniversary of your death (the "five year payout
rule"). However, if a beneficiary is designated, the beneficiary may elect
to receive distributions over his or her life expectancy if the
beneficiary so elects by December 31 of the year following the year of
your death. If the beneficiary fails to make an election, the entire
benefit will be paid to the beneficiary under the "five year payout rule".
Also, if the designated beneficiary is your spouse, the life annuity
distribution must begin by the later of December 31 of the calendar year
following the calendar year of your death or December 31 of the year in
which you would have attained age 70 1/2. If your designated beneficiary
is not your spouse, life annuity distributions must begin by December 31
of the year following your death. A surviving spouse may in the
alternative elect to treat the policy as his or her own IRA. This election
may be expressly made or will be deemed made if the spouse makes a regular
IRA contribution to the policy, makes a rollover to or from the IRA, or
fails to elect minimum distributions as described above.
2. ROTH IRA DISTRIBUTION REQUIREMENTS:
ROTH IRA MINIMUM DISTRIBUTION REQUIREMENTS WHILE YOU ARE LIVING. As long
as you are alive, you are not required to take distributions from a Roth
IRA, even after you reach age 70 1/2.
ROTH IRA MINIMUM DISTRIBUTION REQUIREMENTS AFTER YOUR DEATH. Minimum
distribution requirements apply to Roth IRAs only after you die. If you
die after you have reached your Annuity Date, and have begun to receive
distributions under an annuity option (not including an interest only
option), the remaining portion of your policy interests will continue to
be distributed to your designated beneficiary according to the terms of
the elected options, (provided that method satisfies the requirements of
Code Section 408(b)(3), as modified by Code Section 408A(c)(5)).
If you die before you have elected an annuity option or before
distribution of your entire interest in the policy has been made or begun,
your entire interest in your Roth IRA generally must be distributed by the
end of the calendar year which contains the fifth anniversary of your
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death (the "five year payout rule"). However, if there is a designated
beneficiary, he or she may elect to receive distributions over a period
not longer than his or her life expectancy provided the election is made
and distributions commence by December 31 of the year following the year
of your death. If the beneficiary does not make this election, the entire
benefit will be paid to him or her under the "five year payout rule". If
your designated beneficiary is your surviving spouse, he or she may elect
to delay distributions until the later of the end of the calendar year
following the year in which you died or the end of the year in which you
would have reach age 70 1/2. If your sole designated beneficiary is your
surviving spouse, he or she may elect to treat the policy as his or her
own Roth IRA by making an express election to do so, by making a regular
Roth IRA contribution or rollover contribution (as applicable or as
permissible) to the policy, or by failing to elect minimum distributions
under the "five year payout rule" or the life annuity options discussed
above.
Life expectancies will be determined by using IRS life expectancy tables.
A surviving spouse's life expectancy will be recalculated annually, unless
he or she irrevocably elects otherwise. Non-spousal beneficiary life
expectancies will be determined using the beneficiary's attained age in
the calendar year distributions are required to begin and reducing life
expectancy by one for each year thereafter.
3. TAKING REQUIRED MINIMUM DISTRIBUTIONS FROM ONE IRA:
AGGREGATING MINIMUM DISTRIBUTIONS: If you are required to take minimum
distributions from more than one IRA (either as owner of one or more
Regular IRAs and/or as a beneficiary of one or more decedent's Roth IRAs
or Regular IRAs), you may not have to take a minimum distribution from
each IRA. (Regular and Roth IRAs are treated as different types of IRAs,
so minimum distributions from a Roth IRA will not satisfy the minimum
distributions required from a Regular IRA). Instead, you may be able to
calculate the minimum distribution amount required for each IRA
(considered to be of the same type) separately, add the relevant amounts
and take the total required amount from one IRA or Roth IRA (as
applicable). However, an individual required to receive minimum
distributions as a beneficiary under a Roth IRA can only satisfy the
minimum distributions for one Roth IRA by receiving distributions from
another Roth IRA if the Roth IRAs were inherited from the same decedent.
Because of these requirements, Ameritas cannot monitor the required
distribution amounts from Ameritas IRAs. Please check with your tax
advisor to verify that you are receiving the proper amount from all of
your IRAs.
PART III. RESTRICTIONS AND TAX CONSIDERATIONS:
A. TIMING OF CONTRIBUTIONS: Once you establish an IRA, (including a Regular Roth
or Spousal Roth IRA) contributions must be made by the due date, not
including extensions, for filing your tax return. (Participant Rollovers must
be made within 60 days of your receipt of the distribution.) A CONTRIBUTION
MADE BETWEEN JANUARY 1 AND THE FILING DUE DATE FOR YOUR RETURN, MUST BE
SUBMITTED WITH WRITTEN DIRECTION THAT IT IS BEING MADE FOR THE PRIOR TAX YEAR
OR IT WILL BE TREATED AS MADE FOR THE CURRENT TAX YEAR. SEP IRA contributions
must be made by the due date of the Employer's tax return (including
extensions). SIMPLE IRA contributions, if permitted, must be made by the tax
return due date for the employer (including extensions) for the year for
which the contribution is made. Note, an employer is required to make SIMPLE
plan contributions attributable to employee elective contributions as soon as
it is administratively feasible to segregate these contributions from the
employer's general assets, but in no event later than the 30th day of the
month following the month in which the amounts would have otherwise been
payable to the employee in cash.
B. TIMING OF ROTH IRA CONVERSIONS: Conversions from a non-Roth IRA to a Roth IRA
for a TAX YEAR, MUST BE INITIATED SO THAT THE DISTRIBUTION OR TRANSFER FROM
THE NON-ROTH IRA IS MADE BY DECEMBER 31 OF THAT YEAR. YOU DO NOT HAVE UNTIL
THE DUE DATE OF YOUR TAX RETURN FOR A YEAR TO CONVERT A REGULAR IRA TO A
CONVERSION ROTH IRA FOR THAT TAX YEAR. For example, if you wish to convert a
Regular IRA to a Conversion Roth IRA in 1998, the conversion and transfer
must be made by December 31, 1998, even though your tax return for 1998 may
not be due until April 15, 1999.
C. DEDUCTIBLE IRA CONTRIBUTIONS: The amount of permissible contributions to your
Regular IRA may or may not be deductible. If you or your spouse are not
active participants in an employer sponsored retirement plan, any permissible
contribution you make to your IRA will be deductible. If you or your spouse
are an active participant in an employer-sponsored retirement plan, the size
of your deduction if any, will depend on your combined adjusted gross income
(AGI).
If you are not an active participant in an employer sponsored plan, but your
spouse is an active participant, you may take a full deduction for your IRA
contribution (other than to a Roth IRA) if your AGI is below $150,000; if you
are not an active participant but your spouse is, the maximum deductible
contribution for you is phased out at AGIs between $150,000 and $160,000.
If you are an active participant in an employer sponsored requirement plan you
may make deductible contributions if your AGI is below a threshold level of
income. For single taxpayers and married taxpayers (who are filing jointly and
are both active participants) the available deduction is reduced
proportionately over a phaseout range. If you are married and an active
participant in an employer retirement plan, but file a separate tax return
from your spouse, your deduction is phased out between $0 and $10,000 of AGI.
If your AGI is not above the maximum applicable phase out level, a minimum
contribution of $200 is permitted regardless of whether the phase out rules
provide for a lesser amount.
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Active participants with income above the phaseout range are not entitled to
an IRA deduction. Due to changes made by the Taxpayer Relief Act of 1997, the
phaseout limits are scheduled to increase as follows:
<TABLE>
<CAPTION>
YEAR MARRIED FILING JOINTLY SINGLE/HEAD OF HOUSEHOLD
---- AGI AGI
<S> <C> <C>
1998............................... $50,000 - $ 60,000................. $30,000 - $40,000
1999............................... $51,000 - $ 61,000................. $31,000 - $41,000
2000............................... $52,000 - $ 62,000................. $32,000 - $42,000
2001............................... $53,000 - $ 63,000................. $33,000 - $43,000
2002............................... $54,000 - $ 64,000................. $34,000 - $44,000
2003............................... $60,000 - $ 70,000................. $40,000 - $50,000
2004............................... $65,000 - $ 75,000................. $45,000 - $55,000
2005............................... $70,000 - $ 80,000................. $50,000 - $60,000
2006............................... $75,000 - $ 85,000................. $50,000 - $60,000
2007 and thereafter................ $80,000 - $100,000................. $50,000 - $60,000
</TABLE>
You can elect to treat deductible contributions as non-deductible. SEP IRA,
SARSEP, SIMPLE IRA and Roth IRA contributions are not deductible by you.
Remember, except for rollovers, conversions or transfers, the maximum amount
you may contribute to all IRAs (including Roth and Regular IRAs, but not
Education IRAs) for a calendar year is $2,000 or 100% of compensation,
whichever is less.
D. NON-DEDUCTIBLE REGULAR IRA CONTRIBUTIONS: It is possible for you to make
non-deductible contributions to your Regular IRA (not including SIMPLE IRAs)
even if you are not eligible to make deductible contributions to a Regular
IRA or non-deductible contributions to a Roth IRA for the year. The amount of
non-deductible contributions you can make depends on the amount of deductible
contributions you make. The sum of your non-deductible and deductible
contributions for a year may not exceed the lesser of (1) $2,000 ($4,000
combined when a Spousal IRA is also involved), or (2) 100% of your
compensation (or, if a Spousal IRA is involved, 100% of you and your spouse's
combined compensation, reduced by the amount of any deductible IRA
contribution and non-deductible Roth IRA contribution made by the "working"
spouse). For plan years beginning on or after January 1, 1998, the sum of
your annual non-deductible (including Roth IRA) and deductible contributions,
other than when combined with a Spousal IRA or Spousal Roth IRA, may not
exceed $2,000. IF YOU WISH TO MAKE A NON-DEDUCTIBLE CONTRIBUTION, YOU MUST
REPORT THIS ON YOUR TAX RETURN BY FILING FORM 8606 (NON-DEDUCTIBLE IRA).
REMEMBER, YOU ARE REQUIRED TO KEEP TRACK OF YOUR NON-DEDUCTIBLE CONTRIBUTIONS
AS AVLIC DOES NOT KEEP A RECORD OF THESE FOR YOU. THIS INFORMATION WILL BE
NECESSARY TO DOCUMENT THAT THE CONTRIBUTIONS WERE MADE ON A NON-DEDUCTIBLE
BASIS AND THEREFORE, ARE NOT TAXABLE UPON DISTRIBUTION.
E. EFFECTS OF CONVERSION OF REGULAR IRA TO ROTH IRA: If you convert all or part
of a non-Roth IRA to a Roth IRA, the amount converted from the non-Roth IRA
will be taxable as if it had been distributed to you in the year of
distribution or transfer from the non-Roth IRA. If you made non-deductible
contributions to any Regular IRA, part of the amount taken out of a Regular
IRA for conversion will be taxable and part will be non-taxable. (Use IRS
Form 8606 to determine how much of the withdrawal from your Regular IRA is
taxable and how much is non-taxable). The taxable portion of the amount
converted is includable in your income for the year of conversion. However,
if the conversion takes place in 1998, or if the conversion amount is
distributed in 1998 and contributed to a Roth IRA within 60 days of your
receipt of the distribution, one quarter of the taxable amount will be
includable in your income in 1998 and in each of the next three tax years.
However, an individual who makes a conversion prior to January 1, 1999, can
elect to include the full taxable conversion amount in income for 1998. This
election is made on IRS Form 8606 by the individual and cannot be made or
changed after the due date (including extensions) for filing the 1998 Federal
income tax return. If a taxpayer dies before the end of the 4-year spread,
the taxable portion of the conversion amount which has not been included in
income will generally be taxable in the year of the taxpayer's death.
However, if the sole beneficiary of the Roth IRA is the surviving spouse, he
or she can elect to continue the 4-year spread. In addition, if the 4-year
spread rule is utilized for 1998 conversions, any distributions of amounts
subject to the 4-year spread occurring before 2001, will require acceleration
of income inclusion as explained in the section which follows on TAXABILITY
OF ROTH IRA DISTRIBUTIONS. (SEE PART III. J.)
Amounts properly converted from a non-Roth IRA to a Roth IRA are generally
not subject to the 10% early withdrawal penalty. However, if you make a
conversion to a Roth IRA, but keep part of the money for any reason, that
amount will be taxable in the year distributed from the non-Roth IRA and the
taxable portion may be subject to the 10% early withdrawal penalty. In
addition, under 1998 technical corrections, if an amount allocable to a
conversion contribution is distributed from the Roth IRA during the 5-year
period (beginning with the first day of the individual's taxable year in
which the conversion contribution was made), it will be subject to a
10-percent premature distribution penalty tax (but only to the extent the
conversion amount distributed was includable in gross income as a result of
the conversion).
You should consult with your tax advisor to ensure that you receive the tax
benefits you desire before you contribute to a Roth IRA, convert to a Roth
IRA or take distributions from a Roth IRA. IT WILL ALSO BE IMPORTANT FOR YOU
TO KEEP TRACK OF AND REPORT ANY REGULAR OR CONVERSION CONTRIBUTIONS YOU MAKE
TO YOUR ROTH IRAS AS REQUIRED BY THE IRS. CONVERSION CONTRIBUTIONS MUST BE
REPORTED ON IRS FORM 8606.
F. RECHARACTERIZATION OF IRA AND ROTH IRA CONTRIBUTIONS: IRA owners are
permitted, beginning in 1998, to treat a contribution made to one type of IRA
as made to a different type of IRA for a taxable year in a process known as
"recharacterization". A recharacterization is accomplished by an individual
who has made a contribution to an IRA of one type for a taxable year,
electing to treat the contribution as having been made to a second IRA of a
different type for the taxable year. To accomplish the recharacterization, a
trustee-to-trustee transfer from the first IRA to the second IRA must be made
on or before the due date (including extensions) for filing the individual's
Federal income tax return for the taxable year for which the contribution was
made to the first IRA. Any net income attributable to the recharacterized
contribution must also be transferred to the second IRA. Once the transfer is
made, the election is irrevocable. The effect of recharacterizing a
contribution is that it is treated as having been originally contributed to
the second IRA on the same date and (in the case of a regular contribution)
for the same taxable year that the contribution was made to the first IRA. If
you elect to recharacterize a contribution, you must
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report the recharacterization and treat the contribution as having been made
to the second IRA, instead of the first, on your Federal income tax return.
Examples of where a recharacterization election might be useful or desired
include: where an individual discovers he was ineligible to convert a regular
IRA to a Roth IRA because his adjusted gross income exceeded $100,000; amounts
were erroneously rolled over from a traditional IRA to a SIMPLE IRA; or an
individual decides after he has made a contribution to a regular IRA for a tax
year that he is eligible for and prefers to contribute to a Roth IRA, or vice
versa. Recharacterizations are not permitted where a deduction has been taken
for the contribution to the first IRA; the contribution to the first IRA was
the result of a tax-free transfer or; the original contribution was an
employer contribution to a SIMPLE or SEP IRA.
RECONVERSION RULES:
Also, the IRS has issued guidance that indicates amounts recharacterized from
a conversion Roth IRA to a Regular IRA, may be "reconverted" to a Roth IRA one
time in 1998 after November 1, 1998; and one time in 1999. For purposes of the
rule applicable in 1998 and 1999, the IRA owner is not treated as having
previously converted an amount if the conversion failed because he or she was
ineligible to convert because of his or her AGI or tax filing status. Also,
under the 1998-1999 rule, any reconversion that violates the "one
reconversion" rule, is treated as an "excess reconversion" rather than a
"failed conversion". In other words, with an "excess reconversion" the Roth
IRA owner is still treated as having made a conversion to a Roth IRA, but the
"excess reconversion" and the last preceding recharacterization are
disregarded in determining the owner's taxable conversion amount (which is
based on the last reconversion that was not an "excess reconversion").
For taxable years after 1999, if you convert a non-Roth IRA to a Roth IRA and
then recharacterize it back to a non-Roth IRA, you are not permitted by IRS
rules to reconvert the amount from the non-Roth IRA back to a Roth IRA before
the beginning of the taxable year following the taxable year in which the
amount was converted to a Roth IRA or, if later, the end of the 30-day period
beginning on the day on which you recharacterized the Roth IRA to a non-Roth
IRA. This rule will apply even if you were not eligible to make the original
conversion because of your AGI or tax filing status. If you attempt a
reconversion prior to the time permitted, it will be treated as a "failed
conversion". The remedy for a failed conversion is recharacterization to a
non-Roth IRA. If the failed conversion is not corrected, it will be treated as
a regular contribution to a Roth IRA and thus, may be an excess contribution
subject to a 6% excise tax for each tax year it remains in the Roth IRA to the
extent it exceeds the maximum regular Roth IRA contribution permitted for the
tax year. (SEE PART III. G., EXCESS CONTRIBUTIONS, BELOW). Also, the failed
conversion will be subject to the 10% premature distribution penalty tax,
unless corrected or an exception to that tax applies. CONSULT WITH YOUR TAX
ADVISOR BEFORE ATTEMPTING A "RECONVERSION".
G. EXCESS CONTRIBUTIONS: There is a 6% IRS penalty tax on IRA contributions made
in excess of permissible contribution limits. However, excess contributions
made in one year may be applied against the contribution limits in a later
year if the contributions in the later year are less than the limit. This
penalty tax can be avoided if the excess amount, together with any earnings
on it, is returned to you before the due date of your tax return for the year
for which the excess amount was contributed. Any earnings so distributed will
be taxable in the year for which the contribution was made and may be subject
to the 10% premature distribution penalty tax (see Part III, Premature IRA
Distributions). The 6% excess contribution penalty tax will apply to each
year the excess amount remains in the IRA Plan, until it is removed either by
having it returned to you or by making a reduced contribution in a subsequent
year. To the extent an excess contribution is absorbed in a subsequent year
by contributing less than the maximum deduction allowable for that year, the
amount absorbed will be deductible in the year applied (provided you are
eligible to take a deduction). If a taxpayer transfers amounts contributed
for a tax year to a Regular IRA (and any earnings allocated to such amounts)
to a Roth IRA by the due date for filing the return for such tax year
(including extensions), the amounts are not included in the taxpayer's gross
income to the extent that no deduction was allowed for the contribution (SEE
PART III. F. RECHARACTERIZATION OF IRA AND ROTH IRA CONTRIBUTIONS ABOVE).
EXCESS CONTRIBUTIONS TO A CONVERSION ROTH IRA: If you are ineligible and
convert a Regular IRA to a Conversion Roth IRA, all or a part of the amount
you convert may be an excess contribution. (Examples may include conversions
made when your Roth AGI exceeds $100,000 or because you fail to timely make
the rollover contribution from the Regular IRA to the Conversion Roth IRA). In
tax years after 1999, you may also have an excess contribution if your
conversion is a "failed conversion" that is not timely corrected. You will
have an excess contribution if the ineligible amounts you convert and the
contributions you make to all your IRAs for the tax year exceed your IRA
contribution limits for the year. To avoid the 6% excise tax on excess
contributions, you must withdraw the excess contributions plus earnings before
the due date of your tax return (plus extensions) or recharacterize the
contribution, if permitted (SEE PART III. F. RECHARACTERIZATION OF IRA AND
ROTH IRA CONTRIBUTIONS ABOVE).
H. LOANS AND PROHIBITED TRANSACTIONS: You may not borrow from your IRA Plan
(including Roth IRAs) or pledge it as security for a loan. A loan would
disqualify your entire IRA Plan, and its full value(or taxable portions of
your Roth IRA or non-deductible Regular IRA) would be includable in your
taxable income in the year of violation. This amount would also be subject to
the 10% penalty tax on premature distributions. Your IRA Plan will similarly
be disqualified if you or your beneficiary engage in any transaction
prohibited by Section 4975 of the Internal Revenue Code. A pledge of your IRA
as security for a loan will cause a constructive distribution of the portion
pledged and also be subject to the 10% penalty tax.
I. TAXABILITY OF REGULAR IRA DISTRIBUTIONS: Any cash distribution from your IRA
Plan, other than a Roth IRA, is normally taxable as ordinary income. All IRAs
of an individual are treated as one contract. All distributions during a
taxable year are treated as one distribution; and the value of the contract,
income on the contract, and investment in the contract is computed as of the
close of the calendar year with or within which the taxable year ends. If an
individual withdraws an amount from an IRA during a taxable year and the
individual has previously made both deductible and non-deductible IRA
contributions, the amount excludable from income for the taxable year is the
portion of the amount withdrawn which bears the same ratio to the amount
withdrawn for the taxable year as the individual's aggregate non- deductible
IRA contributions bear to the balance of all IRAs of the individual.
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J. TAXABILITY OF ROTH IRA DISTRIBUTIONS: "Qualified distributions" from a Roth
IRA are not included in the taxpayer's gross income and are not subject to
the additional ten percent (10%) early withdrawal penalty tax. To be a
"qualified distribution," the distribution must satisfy a five-year holding
period and meet one of the following four requirements: (1) be made on or
after the date on which the individual attains age 59 1/2; (2) be made to a
beneficiary or the individual's estate on or after the individual's death;
(3) be attributable to the individual being disabled; or (4) be a
distribution to pay for a "qualified" first-time home purchase (up to a
lifetime limit of $10,000). The five-year holding period for escaping
inclusion in income begins with the first day of the tax year in which any
contribution (including a conversion from a Regular IRA) is made to a Roth
IRA of the taxpayer. If the Roth IRA owner dies, this 5-taxable-year period
is not redetermined for the Roth IRA while it is held in the name of a
beneficiary or a surviving spouse who treats the decedent's Roth IRA as his
or her own. However, a surviving spouse who treats the Roth IRA as his or her
own, must receive any distributions as coming from the surviving spouse's own
Roth IRA, thus it cannot be treated as being received by a beneficiary on or
after the owner's death for purposes of determining whether the distribution
is a "qualified distribution".
If a distribution from a Roth IRA is not a "qualified distribution" and it
includes amounts allocable to earnings, the earnings distributed are
includable in taxable income and may be subject to the 10% premature
distribution penalty if the taxpayer is under age 59 1/2. Also, the 10%
premature distribution penalty tax may apply to conversion amounts distributed
even though they are not includable in income, if the distribution is made
within the 5-taxable-year period beginning on the first day of the
individual's taxable year in which the conversion contribution was made. Only
the portion of the conversion includable in income as a result of the
conversion would be subject to the penalty tax under this rule. The
5-taxable-year period for this purpose is determined separately for each
conversion contribution and may not be the same as the 5-taxable-year period
used to determine whether a distribution from a Roth IRA is a "qualified
distribution" or not. FOR THIS REASON IT IS IMPORTANT THAT YOU KEEP TRACK OF
WHEN YOUR CONVERSION CONTRIBUTIONS ARE MADE TO YOUR ROTH IRA. (SEE PART III.
L., PREMATURE IRA DISTRIBUTIONS).
Unlike Regular IRAs, distributions from Roth IRAs come first from regular
contributions, then converted amounts on a first-in first-out basis, and last
from earnings. Any distributions made before 2001 which are attributable to
1998 conversion contributions for which the 4-year income-tax spread is being
utilized, will result in an acceleration of taxable income in the year of
distribution up to the amount of the distribution allocable to the 1998
conversion. This amount is in addition to the amount otherwise includable in
gross income for that taxable year as a result of the conversion, but not in
excess of the amount required to be included over the 4-year period. This tax
treatment would likewise apply in the case of distributions made by a
surviving spouse who elects to continue the 4-year spread on death of the
original owner of the Roth IRA. Generally, all Roth IRAs (both Regular Roth
IRAs and Conversion Roth IRAs) must be treated as one for purposes of
determining the taxation of distributions. However, if a Roth IRA is held by
an individual as beneficiary of a deceased Roth IRA owner, the 5-taxable-year
period used to determine whether distributions are qualified or not is
determined independently of the 5-year-taxable period for the beneficiary's
own Roth IRAs. However, if a surviving spouse elects to treat the Roth IRA as
his or her own, the 5-year-taxable period for all of the surviving spouse's
Roth IRAs is the earlier of the end of either the 5-taxable-year period for
the decedent or that applicable to the surviving spouse's own Roth IRAs.
THE RULES FOR TAXING NON-QUALIFIED DISTRIBUTIONS AND PREMATURE DISTRIBUTIONS
OF CONVERSION AMOUNTS FROM A ROTH IRA ARE COMPLEX. TO ENSURE THAT YOU RECEIVE
THE TAX RESULT YOU DESIRE, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR BEFORE
TAKING A DISTRIBUTION FROM A ROTH IRA.
K. LUMP SUM DISTRIBUTION: If you decide to receive the entire value of your IRA
Plan in one lump sum, the full amount is taxable when received (except as to
non-deductible contributions to a Regular IRA or to a Roth IRA, or "qualified
distributions" from a Roth IRA), and is not eligible for the special tax
rules under Code Section 402 on lump sum distributions which may be available
for other types of Qualified Retirement Plans.
L. PREMATURE IRA DISTRIBUTIONS: There is a 10% penalty tax on taxable amounts
distributed from your IRA (including the taxable portion of any non-qualified
distributions from a Roth IRA, and if you receive a distribution of
conversion amounts within the five-year period beginning with the year in
which the conversion occurred, any amounts distributed that were taxable as a
conversion in the year of conversion) prior to the attainment of age 59 1/2,
except for: (1) distributions made to a beneficiary on or after the owner's
death; (2) distributions attributable to the owner's being disabled as
defined in Code Section 72(m)(7); (3) distributions that are part of a series
of substantially equal periodic payments (made at least annually) for the
life of the annuitant or the joint lives of the annuitant and his or her
beneficiary; (4) distributions made on or after January 1, 1997 for medical
expenses which exceed 7.5% of the annuitant's adjusted gross income; (5)
distributions made on or after January 1, 1997, to purchase health insurance
for the individual and/or his or her spouse and dependents if he or she: (a)
has received unemployment compensation for 12 consecutive weeks or more; (b)
the distributions are made during the tax year that the unemployment
compensation is paid or the following tax year; and (c) the individual has
not been re-employed for 60 days or more; (6) distributions made on or after
January 1, 1998 for certain qualified higher education expenses of the
taxpayer, the taxpayer's spouse, or any child or grandchild of the taxpayer
or the taxpayer's spouse; or (7) qualified first-time home buyer
distributions made on or after January 1, 1998 (up to a lifetime maximum of
$10,000) used within 120 days of withdrawal to buy, build or rebuild a first
home that is the principal residence of the individual, his or her spouse, or
any child, grandchild, or ancestor of the individual or spouse. Generally,
the part of a distribution attributable to non-deductible contributions is
not includable in income and is not subject to the 10% penalty. (SEE ROTH IRA
EXCEPTIONS BELOW). Also, beginning January 1, 2000, distributions to satisfy
a levy issued by the IRS will also be exempt from the 10% penalty tax.
Distributions from a SIMPLE Plan during the two-year period beginning on the
date the employee first participated in the employer's SIMPLE Plan will be
subject to a 25% (rather than 10%) premature distribution penalty tax.
Distributions from a Roth IRA made before the expiration of the applicable 5
year holding period (SEE TAXABILITY OF ROTH IRA DISTRIBUTIONS) are not treated
as qualified distributions and are subject to the 10% penalty tax to the
extent they are includable in taxable income. In addition, any conversion
amounts distributed within the five-year period beginning with the year in
which the conversion occurred, are subject to the 10% penalty tax even if the
distribution is not currently taxable as income, unless one of the above
mentioned exceptions to the penalty tax applies. The penalty tax will only
apply to the amount of the conversion that was includable in income as a
result of the conversion.
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M. MINIMUM REQUIRED DISTRIBUTIONS: SEE PART II. F.1. AND F.2., NON-ROTH IRA
MINIMUM DISTRIBUTION REQUIREMENTS AND ROTH IRA MINIMUM DISTRIBUTION
REQUIREMENTS. If a minimum distribution is not made from your IRA (including
a Roth IRA) for a tax year in which it is required, the excess, in any
taxable year, of the amount that should have been distributed over the amount
that was actually distributed is subject to an excise tax of 50%.
N. GIFT AND ESTATE TAX CONSEQUENCES: The designation of a beneficiary to receive
funds from a Regular or a Roth IRA is not considered a transfer subject to
federal gift taxes. However, funds remaining in your IRA (Regular or Roth) at
the time of your death are includable in your federal gross estate for tax
purposes. In addition, if the owner of an IRA or Roth IRA transfers his or
her IRA or Roth IRA to another individual by gift, the gift will be
considered an assignment and cause the assets of the IRA or Roth IRA to be
deemed distributed to the owner, and will no longer be treated as held in the
IRA. The IRS has indicated that for gifts of a Roth IRA made prior to October
1, 1998, if the entire interest in the Roth IRA is reconveyed to the original
Roth IRA owner prior to January 1, 1999, the IRS will disregard the gift and
reconveyance for most tax purposes.
O. MAXIMUM DISTRIBUTIONS: The Taxpayer Relief Act of 1997 repealed both the 15%
excess accumulation estate tax and excess distribution excise tax which
previously applied to excess retirement plan accumulations at death and
excess lifetime retirement plan distributions. These rules are repealed for
plan distributions made and decedents who die after December 31, 1996.
P. TAX FILING-REGULAR IRAS: You are not required to file a special IRA tax form
for any taxable year (1) for which no penalty tax is imposed with respect to
the IRA Plan, and (2) in which the only activities engaged in, with respect
to the IRA Plan, are making deductible contributions and receiving
permissible distributions. Information regarding such contributions or
distributions will be included on your regular Form 1040. In some years, you
may be required to file Form 5329 and/or Form 8606 in connection with your
Regular IRA. Form 5329 is filed as an attachment to Form 1040 or 1040A for
any tax year that special penalty taxes apply to your IRA. If you make
non-deductible contributions to a regular IRA, you must designate those
contributions as non-deductible on Form 8606 and attach it to your Form 1040
or 1040A. There is a $100 penalty each time you overstate the amount of your
non-deductible contributions unless you can prove the overstatement was due
to reasonable cause. Additional information is required on Form 8606 in years
you receive a distribution from a Regular IRA. There is a $50 penalty for
each failure to file a required Form 8606 unless you can prove the failure
was due to reasonable cause. For further information, consult the
instructions for Form 5329 (Additional Taxes Attributable to Qualified
Retirement Plans (including IRAs), Annuities, and Modified Endowment
Contracts), Form 8606 and IRS Publication 590.
Q. TAX FILING-ROTH IRA: It is your responsibility to keep records of your
regular and conversion contributions to a Roth IRA and to file any income tax
forms the Internal Revenue Service may require of you as a Roth IRA owner.
You will need this information to calculate your taxable income if any, when
distributions from the Roth IRA begin. For example, conversion contributions
must be reported to the Service on Form 8606. Form 5329 is required to be
filed to the Service by you to report and remit any penalty or excise taxes.
Consult the instructions to your tax return or your tax advisor for
additional reporting requirements that may apply.
R. TAX ADVICE: Ameritas is providing this general information as required by
regulations issued under the Internal Revenue Code and assumes no
responsibility for its application to your particular tax situation. Please
consult with your personal tax advisor regarding specific questions you may
have.
With respect to ROTH IRAS, you should be aware that Congress has recently
enacted legislation that substantially revises the rules relating to
distributions from and conversions to Roth IRAs which applies retroactive to
January 1, 1998. Because of this, and because guidance regarding these changes
has just recently been finalized by the Internal Revenue Service, you should
consult with a tax advisor prior to establishing, making contributions to, or
taking distributions from a Roth IRA, to ensure that you receive the tax
result you anticipate.
S. ADDITIONAL INFORMATION: You may obtain more information about IRA Plans from
any district office of the IRS and IRS Publication 590.
PART IV. STATUS OF AMERITAS IRA PLAN:
INTERNAL REVENUE SERVICE APPROVAL LETTER: Ameritas has received approval from
the Internal Revenue Service as to the form of No Load Variable Annuity (Form
4080), for use in funding Regular IRA plans. The Policy has also been approved
as to form for use in funding a SIMPLE IRA. It has not, however, been submitted
to the IRS for approval of its use as a Roth IRA, but it is expected that it
will be in due course. You may be required to accept a revised Roth IRA
endorsement if the IRS requires changes to your issued Roth IRA during the IRS
approval process. Such approval, when received, is a determination only as to
the form of the Annuity Contract, and does not represent a determination of the
merits of the annuity.
PART V. FINANCIAL DISCLOSURE:
The following is a general description and required financial disclosure
information for the variable annuity product, No Load Variable Annuity (Form
4080) offered by Ameritas, hereafter referred to as the policy.
In order for you to achieve your retirement objectives, you should be prepared
to make your IRA Plan a long term savings program. An IRA is not suited to
short-term savings, nor was it intended to be by Congress, as indicated by the
general rule that penalties apply to withdrawals before age 59 1/2, subject to
certain exceptions. SEE PART III; PREMATURE IRA DISTRIBUTIONS. However, you
should be aware of the values in your IRA Plan during the early years as well as
at retirement.
Prior to the annuity date, the policy allows you to accumulate funds based on
the investment experience of the assets underlying the policy in the Separate
Account or the Fixed Account. Currently, the assets which underlie the Separate
Account are invested exclusively in shares of mutual funds, the "Funds", managed
or administered by fund managers. Each of the Subaccounts of the Separate
Account invest solely in the corresponding portfolio of the Funds. The assets of
each portfolio are held separately from the other portfolios and each has
distinct investment objectives which are described in the accompanying
prospectus for the Funds which you would have received when making an
application for your
QD- 9
IRS/SEP SIMPLE/ROTH
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<PAGE> 40
annuity. The accumulation value of your IRA Plan allocated to the Separate
Account will vary in accordance with the investment performance of the
Subaccounts you selected. Therefore, for assets in the Separate Account, you
bear the entire investment risk prior to the annuity date.
Premium payments and subsequent allocations to the Fixed Account are placed in
the general account of Ameritas which supports insurance and annuity
obligations. Policyowners are paid interest on the amounts placed in the Fixed
Account at guaranteed rates (3.0%) or at higher rates declared by Ameritas.
ACCUMULATION VALUE: On the effective date, the accumulation value of the policy
is equal to the premium received, reduced by any applicable premium taxes.
Thereafter, the accumulation value of the policy is determined as of the close
of trading on the New York Stock Exchange on each valuation date by multiplying
the number of accumulation units for each Subaccount credited to the policy by
the current value of an accumulation unit for each Subaccount, and by adding the
amount deposited in the Fixed Account, plus interest. The current value of an
accumulation unit reflects the increase or decrease in value due to investment
results of the Subaccount and certain charges, as described below. The number of
accumulation units credited to the policy is decreased by any annual policy fee,
any withdrawals and, upon annuitization, any applicable premium taxes and
charges.
A valuation period is the period between successive valuation dates. It begins
at the close of trading on the New York Stock Exchange on each valuation date
and ends at the close of trading on the next succeeding valuation date. A
valuation date is each day that the New York Stock Exchange is open for
business.
The accumulation value is expected to change from valuation period to valuation
period, reflecting the net investment experience of the selected portfolios of
the Funds, interest earned in the Fixed Account, additional premium payments,
withdrawals, as well as the deduction of any applicable charges under the
policy. GROWTH IN THE ACCUMULATION VALUE BASED ON INVESTMENTS IN THE ACCOUNT IS
NEITHER GUARANTEED NOR PROJECTED.
VALUE OF ACCUMULATION UNITS: The accumulation units of each Subaccount are
valued separately. The value of an accumulation unit may change each valuation
period according to the net investment performance of the shares purchased by
each Subaccount and the daily charge under the policy for mortality and expense
risks, and if applicable, any federal and state income tax charges.
CASH SURRENDER VALUE: The amount available for withdrawal, which is the
accumulation value less any applicable premium taxes, and, in the case of a full
withdrawal, the annual policy fee.
ANNUAL POLICY FEE: An annual policy fee of $25, is deducted from the
accumulation value on the last valuation date of each policy year and on a full
withdrawal if between policy anniversaries. This charge reimburses Ameritas for
the administrative costs of maintaining the policy on Ameritas' system. This
charge may be increased to a maximum of $40.
MORTALITY AND EXPENSE RISK CHARGE: Ameritas imposes a charge to compensate it
for bearing certain mortality and expense risks under the policies. For assuming
these risks, Ameritas makes a daily charge equal to an annual rate of 0.75%
(current; 0.95% guaranteed) of the value of the average daily net assets of the
Account. This charge is subtracted when determining the daily accumulation unit
value. If this charge is insufficient to cover assumed risks, the loss will fall
on Ameritas. Conversely, if the charge proves more than sufficient, any excess
will be added to Ameritas' surplus. No mortality and expense risk charge is
imposed on the Fixed Account.
TAXES: Ameritas will charge and deduct premium taxes as required by state law
and in accordance with any applicable company election. Applicable premium tax
rates depend upon such factors as the policyowner's current state of residency,
and the insurance laws and the status of Ameritas in states where premium taxes
are incurred. Currently, premium taxes range from 0% to 3.5% of the premium
paid. Applicable premium tax rates are subject to change by legislation,
administrative interpretations, or judicial acts. The owner will be notified of
any applicable premium taxes.
WITHDRAWALS: The owner may make a withdrawal of the policy to receive part or
all of the accumulation value (less any applicable charges), at any time before
the annuity date and while the annuitant is living, by sending a written request
to Ameritas. Withdrawals may be either systematic or elective. Systematic
withdrawals provide for an automatic withdrawal, whereas, each elective
withdrawal must be elected by the owner. Systematic withdrawals are available on
a monthly, quarterly, semi-annual or annual mode. This withdrawal right may be
restricted by Section 403(b)(11) of the Internal Revenue Code if the annuity is
used in connection with a Section 403(b) retirement plan. No withdrawals may be
made after the annuity date except as permitted under the particular annuity
option. The amount available for a withdrawal is the accumulation value at the
end of the valuation period during which the written request for withdrawal is
received, less any applicable premium taxes, and in the case of a full
withdrawal, less the annual policy fee that would be due on the last valuation
date of the policy year. The accumulation value may be paid in a lump sum to the
owner, or, if elected, all or any part may be paid out under an annuity income
option.
SALES COMMISSIONS: No deductions are made from the premium payments for sales
charges. Compensation to the sales force is a maximum .5% based on premiums paid
for broker/dealers other than AIC, and an asset-based administrative
compensation of .10% (annualized).
QD- 10
IRS/SEP SIMPLE/ROTH
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<PAGE> 41
EMPLOYEE BENEFIT PLAN
INFORMATION STATEMENT
401(A) PENSION/PROFIT SHARING PLANS
AMERITAS VARIABLE LIFE INSURANCE COMPANY LOGO
- --------------------------------------------------------------------------------
For purchasers of a 401(a) Pension/Profit Sharing Plan, the purpose of this
statement is to inform you as an independent Fiduciary of the Employee Benefit
Plan, of the Sales Representative's relationship to and compensation from
Ameritas Life Insurance Corp. (Ameritas), as well as to describe certain fees
and charges under the No Load Variable Annuity Policy being purchased from the
Sales Representative.
The Sales Representative is appointed with Ameritas as its Sales Representative
and is a Securities Registered Representative. In this position, the Sales
Representative is employed to procure and submit to Ameritas applications for
contracts, including applications for No Load Variable Annuity.
COMMISSIONS, FEES AND CHARGES
The following commissions, fees and charges apply to No Load Variable Annuity
(policy):
SALES COMMISSION: No deductions are made from the premium payments for sales
charges. Compensation to the Sales Representative's Broker/ Dealer is a maximum
of up to .5% based on premiums paid for broker/dealers other than AIC, and an
asset-based administrative compensation of .10 (annualized).
ANNUAL POLICY FEE: An annual policy fee of $25 is deducted from the accumulation
value in the policy on the last valuation date of each policy year or on a full
withdrawal if between policy anniversaries. This charge reimburses Ameritas for
the administrative costs of maintaining the policy on Ameritas system. This
charge may be increased to a maximum of $40.
MORTALITY AND EXPENSE RISK CHARGE: Ameritas imposes a charge to compensate it
for bearing certain mortality and expense risks under the policies. Ameritas
makes a daily charge equal to an annual rate of 0.75% (current; 0.95%
guaranteed) of the value of the average daily net assets of the Account under
the policies. This charge is subtracted when determining the daily accumulation
unit value. If this charge is insufficient to cover assumed risks, the loss will
fall on Ameritas. Conversely, if the charge proves more than sufficient, any
excess will be added to Ameritas' surplus. No mortality and expense risk charge
is imposed on the Fixed Account.
WITHDRAWALS: The policyowner may make a withdrawal of the policy to receive part
or all of the accumulation value (less any applicable charges), at any time
before the annuity date and while the annuitant is living by sending a written
request to Ameritas. Withdrawals may be either systematic or elective.
Systematic withdrawals provide for an automatic withdrawal, whereas, each
elective withdrawal must be elected by the owner. Systematic withdrawals are
available on a monthly, quarterly, semi-annual or annual mode. No withdrawals
may be made after the annuity date except as permitted under the particular
annuity option. The amount available for withdrawal is the accumulation value at
the end of the valuation period during which the written request for withdrawal
is received, less any applicable premium taxes, and in the case of a full
withdrawal, the annual policy fee that would be due on the last valuation date
of the policy year. The accumulation value may be paid in a lump sum to the
owner, or if elected, all or any part may be paid out under an annuity income
option.
TAXES: Ameritas will deduct premium taxes upon receipt of a premium payment or
upon annuitization depending upon the requirements of the law of the state of
the policyowner's residence. Currently, premium taxes range from 0% to 3.5% of
the premium paid, but are subject to change by legislation, administrative
interpretations, or judicial act.
FUND INVESTMENT ADVISORY FEES AND EXPENSES: At the direction of the policyowner,
the Separate Account LLVA purchases shares of Funds which are available for
investment under this policy. The net assets of the Separate Account LLVA will
reflect the value of the Fund shares and therefore, investment advisory fees and
other expenses of the Funds. A complete description of these fees and expenses
is contained in the Funds' Prospectuses.
QD- 11
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<PAGE> 42
PART B REGISTRATION NO. 333-5529
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
STATEMENT OF ADDITIONAL INFORMATION
FOR
FLEXIBLE PREMIUM VARIABLE ANNUITY POLICY
OFFERED BY
AMERITAS LIFE INSURANCE CORP.
(A NEBRASKA STOCK COMPANY)
5900 "O" STREET
LINCOLN, NEBRASKA 68510
---------------
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Flexible Premium Variable Annuity Policy ("Policy")
offered by Ameritas Life Insurance Corp. ("Ameritas"). You may obtain a copy of
the Prospectus dated May 1, 1999, by writing Ameritas Life Insurance Corp., 5900
"O" Street, Lincoln, Nebraska 68510, or calling, 1-800-255-9678. Terms used in
the current Prospectus for the Policy are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
Dated: May 1, 1999
<PAGE> 43
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GENERAL INFORMATION AND HISTORY............................. 2
THE POLICY.................................................. 2
Accumulation Value..................................... 2
Value of Accumulation Units............................ 2
Calculation of Performance Data........................ 3
Total Return........................................... 3
Yields................................................. 6
GENERAL MATTERS............................................. 6
The Policy............................................. 6
Non-Participating...................................... 6
Assignment............................................. 6
Annuity Data........................................... 7
Ownership.............................................. 7
IRS Required Distributions............................. 7
FEDERAL TAX MATTERS......................................... 7
Taxation of Ameritas................................... 7
Tax Status of the Policies............................. 8
Qualified Policies..................................... 8
DISTRIBUTION OF THE POLICY.................................. 9
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 9
STATE REGULATION............................................ 9
LEGAL MATTERS............................................... 9
EXPERTS..................................................... 9
OTHER INFORMATION........................................... 9
FINANCIAL STATEMENTS........................................ 10
</TABLE>
NLVA
1
<PAGE> 44
GENERAL INFORMATION AND HISTORY:
In order to supplement the description in the Prospectus, the following provides
additional information concerning the company and its history.
Ameritas Life Insurance Corp. Separate Account LLVA ("the Separate Account") is
a separate investment account of Ameritas Life Insurance Corp. established under
Nebraska Law on October 26, 1995. Ameritas Life Insurance Corp. ("Ameritas") is
a stock life insurance company domiciled in Nebraska since 1887. The Home Office
of Ameritas is at 5900 "O" Street, Lincoln, Nebraska 68501.
Effective January 1, 1998, Ameritas converted from a mutual insurance company
structure to a mutual insurance holding company structure pursuant to the
Nebraska Mutual Insurance Holding Company Act. The conversion was approved by
the Nebraska State Department of Insurance and the policyowners of the mutual
company.
Currently, 16 Subaccounts of the Separate Account are available under the
contracts. Each Subaccount invests in a corresponding investment portfolio of,
Berger Institutional Products Trust ("Berger IPT"), the Neuberger Berman
Advisers Management Trust ("Neuberger Berman AMT"), Strong Variable Insurance
Funds, Inc., Strong Opportunity Fund II, Inc., (collectively "Strong Funds(R)")
or Rydex Variable Trust ("Rydex").
THE POLICY
In order to supplement the description in the Prospectus, the following provides
additional information about the Policy which may be of interest to the owners.
ACCUMULATION VALUE
The Accumulation Value of a Policy on each valuation date is equal to:
(1) the aggregate of the values attributable to the Policy in each Subaccount on
the valuation date, determined for each Subaccount by multiplying the
Subaccount's accumulation unit price by the number of the Subaccount
accumulation units allocated to the Policy and/or the net allocation plus
interest in the Fixed Account; plus;
(2) the amount deposited in the Fixed Account, plus interest; less
(3) any withdrawal made on the valuation date; less
(4) any annual policy fee deducted on that valuation date. In computing the
accumulation value, the number of Subaccount accumulation units allocated to
the Policy is determined after any transfer among the Subaccounts.
VALUE OF ACCUMULATION UNITS
The value of each Subaccount's accumulation units reflects the investment
performance of that Subaccount. The accumulation unit price of each Subaccount
shall be calculated by:
(1) multiplying the per share net asset value of the corresponding Fund
portfolio on the valuation date by the number of shares held by the
Subaccount, before the purchase or redemption of any shares on that date;
minus
(2) a daily charge, currently 0.002049% (equivalent to an annual rate of .75%),
not to exceed 0.002595% (equivalent to an annual rate of .95% of the average
daily net assets), for mortality and expense risks; minus
(3) any applicable charge for federal and state income taxes, if any; and
(4) dividing the result by the total number of accumulation units held in the
Subaccount on the valuation date, before the purchase or redemption of any
units on that date.
NLVA
2
<PAGE> 45
CALCULATION OF PERFORMANCE DATA
As disclosed in the prospectus, premium payments will be allocated to Separate
Account LLVA which has 16 Subaccounts, with the assets of each invested in
corresponding portfolios of Berger IPT, Neuberger & Berman AMT, Strong or Rydex
("the Funds"), or to the Fixed Account. From time to time Ameritas will
advertise the performance data of the portfolios of the Funds.
Performance information for any subaccount may be compared, in reports and
advertising to: (1) the Standard & Poor's 500 Stock Index ("S & P 500"), Dow
Jones Industrial Average ("DJIA"), Donahue Money Market Institutional Averages;
(2) other variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services or the Variable Annuity Research and Data
Service, widely used independent research firms which rank mutual funds and
other investment companies by overall performance, investment objectives, and
assets; and (3) the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in a contract. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including (i) the ranking of any
subaccount derived from rankings of variable annuity separate accounts or other
investment products tracked by Lipper Analytical Services or by rating services,
companies, publications or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and (ii) the
effect of tax deferred compounding on a subaccount's investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a taxable basis.
Standardized average annual total returns will be provided for the period since
the subaccounts have been offered in the Separate Account. The tables below are
established to demonstrate performance results for each underlying portfolio
with charges deducted at the Separate Account level as if the policy had been in
force from the commencement of the portfolio. The performance information is
based on the historical investment experience of the underlying portfolios and
does not indicate or represent future performance.
TOTAL RETURN
Total returns quoted in advertising reflect all aspects of a subaccount's
return, including the automatic reinvestment by the separate account of all
distributions and any change in the subaccount's value over the period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in the subaccount over a stated period, and
then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18% which is the steady rate
that would equal 100% grown on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not constant over
time, but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of a
subaccount.
The subaccounts, other than the Liquid Asset subaccount, will quote average
annual returns for the period since offered in the Separate Account, after
deducting charges at the Separate Account level. The average annual total
returns will be computed by finding the average annual compounded rates of
return over a period of one, five, and ten years (or, if less, up to the life of
the subaccount), that would equate the initial amount invested to the withdrawal
value, in accordance with the following formula: P(1 + T)(n) = ERV where P is a
hypothetical investment payment of $1,000, T is the average annual total return,
n is the number of years, and ERV is the withdrawal value at the end of the
periods shown. This formula is used to obtain standardized average annual total
return. The returns will reflect the mortality and expense risk charge
(guaranteed not to exceed .95% on an annual basis), and the annual policy fee.
Because there is no surrender charge, the average annual total return would be
the same for the relevant time periods if the contract is continued.
NLVA
3
<PAGE> 46
The following table shows the average annual total return on a hypothetical
investment in the subaccounts for the last year, five years, and ten years (or,
if less, up to the life of the subaccount) for the period ending December 31,
1998. The subaccounts have been offered since January 22, 1997.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING ON 12/31/98
<TABLE>
<CAPTION>
SINCE OFFERED
SUBACCOUNT IN THE
PORTFOLIOS INCEPTION DATE ONE YEAR FIVE YEAR SEPARATE ACCOUNT
---------- -------------- -------- --------- ----------------
<S> <C> <C> <C> <C>
BERGER IPT
100 Fund 1/22/97 12.91% N/A 13.63%
Small Company Growth 1/22/97 -1.40 N/A 9.80
NEUBERGER BERMAN AMT
Limited Maturity Bond 1/22/97 1.11% N/A 3.61%
Growth 1/22/97 12.17 N/A 20.48
Partners 1/22/97 0.93 N/A 15.72
Balanced 1/22/97 8.85 N/A 13.97
STRONG FUNDS(R)
Mid Cap Growth Fund II 1/22/97 25.22% N/A 26.99%
International Stock Fund II 1/22/97 -7.99 N/A -11.08
Opportunity Fund II 1/22/97 10.20 N/A 17.86
RYDEX
Nova Fund 5/1/99 N/A N/A N/A
Ursa Fund 5/1/99 N/A N/A N/A
OTC Fund 5/1/99 N/A N/A N/A
Precious Metals Fund 5/1/99 N/A N/A N/A
U.S. Government Bond Fund 5/1/99 N/A N/A N/A
Juno Fund 5/1/99 N/A N/A N/A
</TABLE>
PERFORMANCE
Quotations of average annual total return may also be shown for a Subaccount for
periods prior to the date the portfolio was offered through the Separate
Account, based upon the actual historical performance of the mutual fund
portfolio in which the subaccount invests. This information reflects all actual
charges and deductions of the mutual fund Portfolio and all Separate Account
charges and deductions, with respect to the Contracts, that hypothetically would
have been made had the Separate Account, with respect to the Contracts, been
invested in these Portfolios for all the periods indicated. This is calculated
in a manner similar to standardized average annual total return except the total
return is based on an initial investment of $30,000.
The following table shows the historical average annual total return on an
investment in the subaccounts for the last year, five years, and ten years (or,
if less, up to the life of the portfolio) for the period ending December 31,
1998.
HISTORICAL AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING ON 12/31/98
<TABLE>
<CAPTION>
10 YEARS OR
PORTFOLIOS INCEPTION ONE YEAR FIVE YEAR LIFE OF FUND
---------- --------- -------- --------- ------------
<S> <C> <C> <C> <C>
BERGER IPT
100 Fund 05/01/96 15.32% N/A 11.77%
Small Company Growth 05/01/96 1.02 N/A 7.16
NEUBERGER BERMAN AMT
Limited Maturity Bond 09/10/84 3.53% 4.32% 5.91%*
Growth 09/10/84 14.58 14.35 12.99*
Partners 03/22/94 3.35 N/A 18.54
Balanced 02/28/89 11.26 10.46 10.43
</TABLE>
NLVA
4
<PAGE> 47
<TABLE>
<CAPTION>
10 YEARS OR
PORTFOLIOS INCEPTION ONE YEAR FIVE YEAR LIFE OF FUND
---------- --------- -------- --------- ------------
<S> <C> <C> <C> <C>
STRONG FUNDS(R)
Mid Cap Growth Fund II 12/31/96 27.64% N/A 28.18%
International Stock Fund II 10/20/95 -5.57 N/A -2.94
Opportunity Fund II 05/08/92 12.62 16.07% 18.04
RYDEX
Nova Fund 05/07/97 31.24% N/A 35.47%
Ursa Fund 06/10/97 -21.85 N/A -22.71
OTC Fund 05/07/97 85.19 N/A 52.77
Precious Metals Fund 05/29/97 -17.17 N/A -31.85
U.S. Government Bond Fund 08/18/97 12.85 N/A 16.58
Juno Fund 03/03/98 N/A N/A -10.03
</TABLE>
- ---------------
* 10 Year Figure
In addition to average annual returns, the Subaccounts, other than the Liquid
Asset subaccount, may quote unaveraged or cumulative total returns reflecting
the simple change in value of an investment over a stated period. The cumulative
total return on an investment in the Subaccounts will be shown for the period of
one, five, and ten years (or, if less, up to the life of the subaccount). The
returns reflect the mortality and expense risk charge (guaranteed not to exceed
.95% on an annual basis), and the policy fee. Because there is no surrender
charge, the cumulative total return would be the same for the relevant time
periods if the contract is continued.
The following table shows the historical cumulative total return on an
investment of $30,000 in the Subaccounts for the last year, five years, and ten
years (or, if less, up to the life of the portfolio) for the period ending
December 31, 1998.
HISTORICAL CUMULATIVE TOTAL RETURN FOR PERIOD ENDING ON 12/31/98
<TABLE>
<CAPTION>
10 YEARS OR
PORTFOLIOS INCEPTION ONE YEAR FIVE YEAR LIFE OF FUND
---------- --------- -------- --------- ------------
<S> <C> <C> <C> <C>
BERGER IPT
100 Fund 05/01/96 15.32% N/A 34.73%
Small Company Growth 05/01/96 1.02 N/A 20.43
NEUBERGER BERMAN AMT
Limited Maturity Bond 09/10/84 3.53% 24.01% 78.56%
Growth 09/10/84 14.58 96.12 240.78
Partners 03/22/94 3.35 N/A 128.02
Balanced 02/28/89 11.26 65.02 166.48
STRONG FUNDS(R)
Mid Cap Growth Fund II 12/31/96 27.64% N/A 64.49%
International Stock Fund II 10/20/95 -5.57 N/A -9.02
Opportunity Fund II 05/08/92 12.62 111.26 202.93
RYDEX
Nova Fund 05/07/97 31.24% N/A 65.85%
Ursa Fund 06/10/97 -21.85 N/A -33.50
OTC Fund 05/07/97 85.19 N/A 102.65
Precious Metals Fund 05/29/97 -17.17 N/A -45.51
U.S. Government Bond Fund 08/18/97 12.85 N/A 24.28
Juno Fund 03/03/98 N/A N/A -8.43
</TABLE>
- ---------------
* 10 Year Figure
NLVA
5
<PAGE> 48
YIELDS
Some Subaccounts may also advertise yields. Yields quoted in advertising reflect
the change in value of a hypothetical investment in the Subaccount over a stated
period of time, not taking into account capital gains or losses. Yields are
annualized and stated as a percentage.
Current yield for Liquid Asset Subaccount reflects the income generated by a
subaccount over a 7-day period. Current yield is calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical
subaccount having one Accumulation Unit at the beginning of the period adjusting
for the annual policy fee, and dividing the difference by the value of the
Subaccount at the beginning of the base period to obtain the base period return,
and multiplying the base period return by (365/7). The resulting yield figure is
carried to the nearest hundredth of a percent. Effective yield for the Liquid
Asset subaccount is calculated in a similar manner to current yield except that
investment income is assumed to be reinvested throughout the year at the 7-day
rate. Effective yield is obtained by taking the base period returns as computed
above, and then compounding the base period return by adding 1, raising the sum
to a power equal to (365/7) and subtracting one from the result, according to
the formula:
Effective Yield = [(Base Period Return + 1)(365/7)] - 1.
Since the reinvestment of income is assumed in the calculation of effective
yield, it will generally be higher than current yield.
The net average yield for the 7-day period ended December 31, 1998 for the
Liquid Asset Portfolio was 3.43% and the net effective yield for the 7-day
period ended December 31, 1998 for the Liquid Asset Portfolio was 3.50%.
Current yield for subaccounts other than the Liquid Asset subaccount reflects
the income generated by a subaccount over a 30-day period. Current yield is
calculated by dividing the net investment income per accumulation unit earned
during the period by the maximum offering price per unit on the last day of the
period, according to the formula:
YIELD = 2[( a-b + 1)(6) - 1]
cd
Where a = net investment income earned during the period by the portfolio
company attributable to shares owned by the subaccount, b = expenses accrued for
the period (net of reimbursements), c = the average daily number of accumulation
units outstanding during the period, and d = the maximum offering price per
accumulation unit on the last day of the period. The yield reflects the
mortality and expense risk charge and the annual policy fee.
GENERAL MATTERS
THE POLICY
The Policy, the application, any supplemental applications, and any amendments
or endorsements make up the entire contract. All statements made in the
application, in the absence of fraud, are considered representations and not
warranties. Only statements in the application that is attached to the Policy
and any supplemental applications made a part of the Policy when a change went
into effect can be used to contest a claim or the validity of the Policy. Only
the President, Vice President, Secretary or Assistant Secretary of Ameritas can
modify the Policy. Any changes must be made in writing, and approved by
Ameritas. No agent has the authority to alter or modify any of the terms,
conditions or agreements of the Policy or to waive any of its provisions.
NON-PARTICIPATING
The Policies are non-participating. No dividends are payable and the Policies
will not share in the profits or surplus earnings of Ameritas.
ASSIGNMENT
Any non-qualified policy and any qualified policy, if permitted by the plan or
by law relevant to the plan applicable to the qualified policy, may be assigned
by the owner prior to the annuity date and during the annuitant's lifetime.
Ameritas is not responsible for the validity of any assignment. No assignment
will be
NLVA
6
<PAGE> 49
recognized until Ameritas receives written notice thereof. The interest of any
beneficiary which the assignor has the right to change shall be subordinate to
the interest of an assignee. Any amount paid to the assignee shall be paid in
one sum, not withstanding any settlement agreement in effect at the time the
assignment was executed. Ameritas shall not be liable as to any payment or other
settlement made by Ameritas before receipt of written notice.
ANNUITY DATA
Ameritas will not be liable for obligations which depend on receiving
information from a payee until such information is received in a form
satisfactory to Ameritas.
OWNERSHIP
The owner of the Policy on the policy date is the annuitant, unless otherwise
specified in the application. During the annuitant's lifetime, all rights and
privileges under this Policy may be exercised solely by the owner. Ownership
passes to the Owner's Designated Beneficiary upon the death of the owner(s). If
there is no Owner's Designated Beneficiary, or if no Owner's Designated
Beneficiary is living, ownership will pass to the owner's estate. From time to
time Ameritas may require proof that the owner is still living.
In order to change the owner of the Policy or assign Policy rights, an
assignment of the Policy must be made in writing and filed with Ameritas at its
Home Office. The change will take effect as of the date the change is recorded
at the Home Office, and Ameritas will not be liable for any payment made or
action taken before the change is recorded. The payment of proceeds is subject
to the rights of any assignee of record. A change in the owner will be valid
only upon absolute and complete assignment of the Policy. A collateral
assignment is not a change of ownership.
IRS REQUIRED DISTRIBUTIONS
If the owner dies before the entire interest in the Policy is distributed, the
value of the Policy must be distributed to the Owner's Designated Beneficiary as
described in this section so that the Policy qualifies as an annuity under the
Code. If the owner is not an individual, death of the annuitant will be treated
as death of the owner.
If the death occurs on or after the annuity date, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
If the death occurs before the annuity date, the entire interest in the Policy
will be distributed within five years after date of death or be used to purchase
an immediate annuity under which payments will begin within one year of the
owner's death and will be made for the life of the owner's designated
beneficiary or for a period not extending beyond the life expectancy of that
beneficiary.
The owner's designated beneficiary is the person to whom ownership of the Policy
passes by reason of death of the owner and must be a natural person. Ameritas
reserves the right to require proof of death.
If the owner's interest is payable to (or for the benefit of) the surviving
spouse of the owner, the surviving spouse will be treated as the original owner
for purposes of applying the above distribution requirements.
FEDERAL TAX MATTERS
TAXATION OF AMERITAS
Ameritas is taxed as a life insurance company under Part I of Subchapter L of
the Code. Since the Separate Account is not an entity separate from Ameritas and
its operations form a part of Ameritas, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized net capital gains on the assets of the Separate Account are
reinvested and are taken into account in determining the Policy values. As a
result, such investment income and realized net capital gains are automatically
retained as part of the reserves under the Policy. Under existing federal income
tax law, Ameritas believes that Separate Account investment income and realized
net capital gains should not be taxed to the extent that such income and gains
are retained as part of the reserves under the Policy.
NLVA
7
<PAGE> 50
TAX STATUS OF THE POLICIES
Section 817(h) of the Code provides in substance that Section 72 of the Code
will not apply and Ameritas will not be treated as the owner of the assets of
the Separate Account unless the investments made by the Separate Account are
"adequately diversified" in accordance with regulations prescribed by the
Secretary of Treasury (the "Treasury"). If the segregated account is not
"adequately diversified" any increase in the value of a variable annuity
contract will be taxed to the owner currently. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by
Treasury regulations which affect how the Funds' assets may be invested.
Although Ameritas does not control the Funds, it has entered into an agreement
regarding participation in the Funds, which requires the Funds to be operated in
compliance with the requirements prescribed by the Treasury.
QUALIFIED POLICIES
The Policies are designed for use with several types of qualified plans. The
following are brief descriptions of qualified plans with which the policies may
be used:
a. H.R. 10 Plans -- Section 401 of the Code permits self-employed individuals
to establish qualified plans for themselves and their employees. Such plans
commonly are referred to as "H.R. 10" or "Keogh" plans. Taxation of plan
participants depends on the specified plan.
The Code governs such plans with respect to maximum contributions,
distribution dates, non-forfeitability of interests, and tax rates
applicable to distributions. In order to establish such a plan, a plan
document, usually in prototype form preapproved by the Internal Revenue
Service, is adopted and implemented by the employer. When issued in
connection with H.R. 10 plans, a Policy may be subject to special
requirements to conform to the requirements under such plans.
b. Individual Retirement Annuities -- Section 408 of the Code permits certain
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or an "IRA." IRAs are subject to
limitations on eligibility, maximum contributions, and time of
distribution. Distributions from certain other types of qualified plans may
be "rolled over" on a tax-deferred basis into an IRA. Sales of a Policy for
use with an IRA may be subject to special requirements of the Internal
Revenue Service. Purchasers of a Policy for such purposes will be provided
with supplemental information required by the Internal Revenue Service or
other appropriate agency.
c. Roth IRAs -- Section 408A of the Code permits certain individuals to an
individual retirement program known as a "Roth Individual Retirement
Annuity" or a "Roth IRA." Roth IRAs are subject to limits on eligibility
and maximum contributions. Unlike regular IRAs, Roth IRAs are not subject
to minimum distribution requirements at age 70 1/2. In addition, certain
qualified distributions from a Roth IRA may not be subject to federal
income tax on withdrawal. Distributions from other types of qualified plans
may not, as a general rule, be rolled over to a Roth IRA. However, a
regular IRA can be converted to a Roth IRA in certain circumstances. Sales
of a Policy for use as a Roth IRA may be subject to special requirements of
the Internal Revenue Service. Purchasers of a Roth IRA Policy will be
provided with supplemental information required by the Internal Revenue
Service or other appropriate agency.
d. SIMPLE IRAs -- Section 408(p) of the Code permits certain small employers
to establish a "SIMPLE Individual Annuity" or "SIMPLE IRA" plan for the
benefit of its eligible employees. Employers who maintain SIMPLE IRA plans
make a specified amount of either matching or non-elective contributions to
SIMPLE IRAs of eligible employees. Employees may also make salary deferred
contributions to their SIMPLE IRAs. The Code specifies limits on
eligibility, contributions, and the timing of distributions, among other
things. Sales of SIMPLE IRAs may be subject to special requirements of the
Internal Revenue Service. Purchasers of a SIMPLE IRA Policy will be
provided with supplemental information required by the Internal Revenue
Service or other appropriate agency.
e. Corporation Pension and Profit Sharing Plans -- Sections 401(a) and 403(a)
of the Code permit corporate employers to establish various types of
retirement plans for employees. Such retirement plans may permit the
purchase of Policies in order to provide benefits under the plans.
NLVA
8
<PAGE> 51
DISTRIBUTION OF THE POLICY
Ameritas Investment Corp. ("AIC"), the principal underwriter of the Policies, is
registered with the Securities and Exchange Commission under the Securities and
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. AIC is wholly owned by AMAL Corporation.
Ameritas owns a majority interest in AMAL Corporation.
The Policies are offered to the public directly from Ameritas, with salaried
employees who are registered representatives of AIC and who will not receive
compensation related to the purchase. The Policies may also be purchased through
brokers licensed under the federal securities laws and state insurance laws, and
properly licensed banking institutions that have entered into agreements with
AIC. The offering of the Policies is continuous and AIC may discontinue the
offering of this policy in certain states and continue to offer it in other
states.
Gross variable annuity compensation for the Policies and for all other variable
annuity policies issued by Ameritas totaled $10,129 for 1998, $4,677 for 1997,
and $0 for 1996.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to assets of the Separate Account is held by Ameritas. The assets are kept
physically segregated and held separate and apart from Ameritas' general account
assets. Accumulation values deposited or transferred to the Fixed Account are
held in the General Account of Ameritas. Records are maintained of all purchases
and redemptions of eligible portfolio shares held by each of the Subaccounts.
STATE REGULATION
Ameritas is a stock life insurance company organized under the laws of Nebraska,
and is subject to regulation by the Nebraska State Department of Insurance. An
annual statement is filed with the Nebraska Commissioner of Insurance on or
before March 1 of each year covering the operations and reporting on the
financial condition of Ameritas as of December 31 of the preceding calendar
year. Periodically, the Nebraska Commissioner of Insurance examines the
financial condition of Ameritas, including the liabilities and reserves of the
Separate Account.
In addition, Ameritas is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
process. Where required by state law or regulation, the Policy will be modified
accordingly.
LEGAL MATTERS
All matters of Nebraska law pertaining to the validity of the Policy and
Ameritas' right to issue such Policies under Nebraska law have been passed upon
by Donald R. Stading, Senior Vice President, Secretary and Corporate General
Counsel of Ameritas.
EXPERTS
The consolidated financial statements of Ameritas as of December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998, and
the financial statements of Separate Account LLVA as of December 31, 1998, and
for each of the two years in the period then ended, included in this Statement
of Additional Information have been audited by Deloitte & Touche LLP, 1040 NBC
Center, Lincoln, Nebraska 68508, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
OTHER INFORMATION
A registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information or in the
Prospectus. Statements
NLVA
9
<PAGE> 52
contained in this Statement of Additional Information and the Prospectus
concerning the content of the policies and other legal instruments are intended
to be summaries. For a complete statement of the terms of these documents,
reference should be made to the instruments filed with the Securities and
Exchange Commission.
FINANCIAL STATEMENTS
The financial statements of Ameritas, which are included in this Statement of
Additional Information, should be considered only as bearing on the ability of
Ameritas to meet its obligations under the Policies. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
NLVA
10
<PAGE> 53
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ameritas Life Insurance Corp.
Lincoln, Nebraska
We have audited the accompanying statement of net assets of Ameritas Life
Insurance Corp. Separate Account LLVA as of December 31, 1998, and the related
statements of operations and changes in net assets for each of the two years in
the period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1998. 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, such financial statements present fairly, in all material
respects, the financial position of Ameritas Life Insurance Corp. Separate
Account LLVA as of December 31, 1998, and the results of its operations and
changes in net assets for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Lincoln, Nebraska
February 5, 1999
F-I- 1
<PAGE> 54
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
INVESTMENTS AT NET ASSET VALUE:
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
Balanced Portfolio -- 20,403.196 shares at $16.34 per
share (cost $370,646)................................. $ 333,388
Growth Portfolio -- 6,394.129 shares at $26.29 per
share (cost $161,243)................................. 168,102
Partners Portfolio -- 58,345.968 shares at $18.93 per
share (cost $1,058,638)............................... 1,104,489
Limited Maturity Bond Portfolio -- 85,552.309 shares
at $13.82 per share (cost $1,183,028)................ 1,182,333
Liquid Assets Portfolio -- 501,601.800 shares at $1.00
per share (cost $501,602)............................. 501,602
STRONG VARIABLE INSURANCE FUNDS, INC.:
International Stock Fund II Portfolio -- 14,371.502
shares at $8.78 per share (cost $152,237)............. 126,182
Growth Fund II Portfolio -- 13,728.553 shares at $16.02
per share (cost $188,514)............................. 219,931
STRONG OPPORTUNITY FUND II, INC.: (STRONG OPP. FUND II)
Opportunity Fund II, Inc. Portfolio -- 25,384.875
shares at $21.72 per share (cost $504,803)............ 550,708
BERGER INSTITUTIONAL PRODUCTS TRUST:
100 Fund Portfolio -- 15,450.338 shares at $12.89 per
share (cost $203,241)................................. 199,155
Small Company Growth Portfolio -- 7,402,572 shares
at $12.28 per share (cost $78,170)................... 90,903
----------
NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS.............. $4,476,793
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-I- 2
<PAGE> 55
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-I- 3
<PAGE> 56
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST
--------------------------------------------------------
BALANCED GROWTH PARTNERS
TOTAL PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3)
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
1998
INVESTMENT INCOME:
Dividend distributions received................ $ 65,389 $ 5,727 $ -- $ 2,423
Mortality and expense risk charge.............. 23,840 3,102 680 5,837
-------- -------- ------- --------
NET INVESTMENT INCOME (LOSS)..................... 41,549 2,625 (680) (3,414)
======== ======== ======= ========
REALIZED AND UNREALIZED GAIN(LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments........ 145,859 40,221 20,701 76,334
Net change in unrealized appreciation
(depreciation).............................. (11,596) (45,597) (1,241) (13,224)
-------- -------- ------- --------
NET GAIN (LOSS) ON INVESTMENTS................... 134,263 (5,376) 19,460 63,110
-------- -------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................ $175,812 $ (2,751) $18,780 $ 59,696
======== ======== ======= ========
1997
INVESTMENT INCOME:
Dividend distributions received................ $ 16,062 $ 201 $ -- $ --
Mortality and expense risk charge.............. 6,504 437 294 1,972
-------- -------- ------- --------
NET INVESTMENT INCOME (LOSS)..................... 9,558 (236) (294) (1,972)
-------- -------- ------- --------
REALIZED AND UNREALIZED GAIN(LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments........ 8,134 516 -- --
Net change in unrealized appreciation
(depreciation).............................. 86,268 8,338 8,100 59,076
-------- -------- ------- --------
NET GAIN (LOSS) ON INVESTMENTS................... 94,402 8,854 8,100 59,076
-------- -------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................ $103,960 $ 8,618 $ 7,806 $ 57,104
======== ======== ======= ========
</TABLE>
- ---------------
(1) Commenced business 02/12/97
(2) Commenced business 03/05/97
(3) Commenced business 03/18/97
(4) Commenced business 02/12/97
(5) Commenced business 01/22/97
(6) Commenced business 02/04/97
(7) Commenced business 02/04/97
(8) Commenced business 02/10/97
(9) Commenced business 03/05/97
(10) Commenced business 02/04/97
The accompanying notes are an integral part of these financial statements.
F-I- 4
<PAGE> 57
<TABLE>
<CAPTION>
NEUBERGER & BERMAN STRONG VARIABLE STRONG OPP. BERGER INSTITUTIONAL PRODUCTS
ADVISERS MANAGEMENT TRUST INSURANCE FUNDS, INC. FUND II TRUST
- ---------------------------- ---------------------------- ------------ ------------------------------
LIMITED INTERNATIONAL OPPORTUNITY SMALL
MATURITY STOCK GROWTH FUND II, COMPANY
BOND LIQUID ASSETS FUND II FUND II INC. 100 FUND GROWTH
PORTFOLIO(4) PORTFOLIO(5) PORTFOLIO(6) PORTFOLIO(7) PORTFOLIO(8) PORTFOLIO(9) PORTFOLIO(10)
- ------------ ------------- ------------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$32,282 $22,523 $ 918 $ -- $ 1,124 $ 355 $ 37
5,226 3,658 775 707 1,574 1,683 598
------- ------- -------- ------- ------- ------- -------
27,056 18,865 143 (707) (450) (1,328) (561)
======= ======= ======== ======= ======= ======= =======
-- -- -- -- 8,510 93 --
(4,691) -- (13,898) 29,108 43,282 (6,259) 924
------- ------- -------- ------- ------- ------- -------
(4,691) -- (13,898) 29,108 51,792 (6,166) 924
------- ------- -------- ------- ------- ------- -------
$22,365 $18,865 $(13,755) $28,401 $51,342 $(7,494) $ 363
======= ======= ======== ======= ======= ======= =======
$ 220 $11,576 $ 401 $ 233 $ 95 $ 3,336 $ --
487 1,831 259 89 179 682 274
------- ------- -------- ------- ------- ------- -------
(267) 9,745 142 144 (84) 2,654 (274)
------- ------- -------- ------- ------- ------- -------
-- -- 520 502 1,365 5,231 --
3,996 -- (12,157) 2,310 2,623 2,173 11,809
------- ------- -------- ------- ------- ------- -------
3,996 -- (11,637) 2,812 3,988 7,404 11,809
------- ------- -------- ------- ------- ------- -------
$ 3,729 $ 9,745 $(11,495) $ 2,956 $ 3,904 $10,058 $11,535
======= ======= ======== ======= ======= ======= =======
</TABLE>
F-I- 5
<PAGE> 58
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST
--------------------------------------------
BALANCED GROWTH PARTNERS
TOTAL PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3)
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
1998
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net Investment income (loss)................... $ 41,549 $ 2,625 $ (680) $ (3,414)
Net realized gain (loss) on investments........ 145,859 40,221 20,701 76,334
Net change in unrealized appreciation
(depreciation).............................. (11,596) (45,597) (1,241) (13,224)
---------- -------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................ 175,812 (2,751) 18,780 59,696
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS................................... 2,282,739 119,564 76,318 459,751
---------- -------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.......... 2,458,551 116,813 95,098 519,447
---------- -------- -------- ----------
NET ASSETS AT JANUARY 1, 1998.................... 2,018,242 216,575 73,004 585,042
---------- -------- -------- ----------
NET ASSETS AT DECEMBER 31, 1998.................. $4,476,793 $333,388 $168,102 $1,104,489
========== ======== ======== ==========
1997
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net Investment income (loss)................... $ 9,558 $ (236) $ (294) $ (1,972)
Net realized gain (loss) on investments........ 8,134 516 -- --
Net change in unrealized appreciation
(depreciation).............................. 86,268 8,338 8,100 59,076
---------- -------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................ 103,960 8,618 7,806 57,104
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS................................... 1,914,282 207,957 65,198 527,938
---------- -------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.......... 2,018,242 216,575 73,004 585,042
---------- -------- -------- ----------
NET ASSETS AT JANUARY 1, 1997.................... -- -- -- --
---------- -------- -------- ----------
NET ASSETS AT DECEMBER 31, 1997.................. $2,018,242 $216,575 $ 73,004 $ 585,042
========== ======== ======== ==========
</TABLE>
- ---------------
(1) Commenced business 02/12/97
(2) Commenced business 03/05/97
(3) Commenced business 03/18/97
(4) Commenced business 02/12/97
(5) Commenced business 01/22/97
(6) Commenced business 02/04/97
(7) Commenced business 02/04/97
(8) Commenced business 02/10/97
(9) Commenced business 03/05/97
(10) Commenced business 02/04/97
The accompanying notes are an integral part of these financial statements.
F-I- 6
<PAGE> 59
<TABLE>
<CAPTION>
NEUBERGER & BERMAN STRONG VARIABLE STRONG OPP. BERGER INSTITUTIONAL
ADVISERS MANAGEMENT TRUST INSURANCE FUNDS, INC. FUND II PRODUCTS TRUST
---------------------------- ---------------------------- ------------- ----------------------------
LIMITED LIQUID INTERNATIONAL GROWTH OPPORTUNITY SMALL COMPANY
MATURITY BOND ASSETS STOCK FUND II FUND II FUND II, INC. 100 FUND GROWTH
PORTFOLIO(4) PORTFOLIO(5) PORTFOLIO(6) PORTFOLIO(7) PORTFOLIO(8) PORTFOLIO(9) PORTFOLIO(10)
------------- ------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 27,056 $ 18,865 $ 143 $ (707) $ (450) $ (1,328) $ (561)
-- -- -- -- 8,510 93 --
(4,691) -- (13,898) 29,108 43,282 (6,259) 924
---------- -------- -------- -------- -------- -------- -------
22,365 18,865 (13,755) 28,401 51,342 (7,494) 363
658,736 182,137 76,345 172,715 454,387 56,778 26,008
---------- -------- -------- -------- -------- -------- -------
681,101 201,002 62,590 201,116 505,729 49,284 26,371
---------- -------- -------- -------- -------- -------- -------
501,232 300,600 63,592 18,815 44,979 149,871 64,532
---------- -------- -------- -------- -------- -------- -------
$1,182,333 $501,602 $126,182 $219,931 $550,708 $199,155 $90,903
========== ======== ======== ======== ======== ======== =======
$ (267) $ 9,745 $ 142 $ 144 $ (84) $ 2,654 $ (274)
-- -- 520 502 1,365 5,231 --
3,996 -- (12,157) 2,310 2,623 2,173 11,809
---------- -------- -------- -------- -------- -------- -------
3,729 9,745 (11,495) 2,956 3,904 10,058 11,535
497,503 290,855 75,087 15,859 41,075 139,813 52,997
---------- -------- -------- -------- -------- -------- -------
501,232 300,600 63,592 18,815 44,979 149,871 64,532
---------- -------- -------- -------- -------- -------- -------
-- -- -- -- -- -- --
---------- -------- -------- -------- -------- -------- -------
$ 501,232 $300,600 $ 63,592 $ 18,815 $ 44,979 $149,871 $64,532
========== ======== ======== ======== ======== ======== =======
</TABLE>
F-I- 7
<PAGE> 60
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ameritas Life Insurance Corp. Separate Account LLVA (the Account) was
established under Nebraska law on October 26, 1995. The assets of the Account
are held by Ameritas Life Insurance Corp. (ALIC) and are segregated from all of
ALIC's other assets.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. At December 31, 1998 there are ten subaccounts
within the Account. Five of the subaccounts invest only in a corresponding
Portfolio of the Neuberger & Berman Advisers Management Trust which is a
diversified open-end management investment company managed by Neuberger & Berman
Management Incorporated. Two of the subaccounts invest only in a corresponding
Portfolio of the Berger Institutional Products Trust which is a diversified
open-end management investment company managed by Berger Associates. Two of the
subaccounts invest only in a corresponding Portfolio of the Strong Variable
Insurance Funds, Inc. and one subaccount invests only in a corresponding
Portfolio of Strong Opportunity Fund II, Inc. Both funds are diversified
open-end management investment companies and are managed by Strong Capital
Management, Inc. Each Portfolio pays the manager a monthly fee for managing its
investments and business affairs. The assets of the Account are carried at the
net asset value of the underlying Portfolios of the funds, and the value of the
policyowners' units corresponds to the Account's investment in the underlying
subaccounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
VALUATION OF INVESTMENTS
The assets of the account are carried at the net asset value of the underlying
Portfolios of the Funds. The value of the policyowners' units corresponds to the
Account's investment in the underlying subaccounts. The availability of
investment portfolio and subaccount options may vary between products. Share
transactions and security transactions are accounted for on a trade date basis.
FEDERAL AND STATE TAXES
The operations of the Account are included in the federal income tax return of
ALIC, which is taxed as a life insurance company under the Internal Revenue
Code. ALIC has the right to charge the Account any federal income taxes, or
provision for federal income taxes, attributable to the operations of the
Account or to the policies funded in the Account. Currently, ALIC does not make
a charge for income or other taxes. Charges for state and local taxes, if any,
attributable to the Account may also be made.
2. POLICYOWNER CHARGES
ALIC charges the account for mortality and expense risks assumed. A daily charge
is made on the average daily value of the net assets representing equity of
policyowners held in each subaccount per each product's current policy
provisions. Additional charges are made at intervals and in amounts per each
product's current policy provisions. These charges are prorated against the
balance in each investment option of the policyowner, including the Fixed
Account option which is not reflected in this separate account.
F-I- 8
<PAGE> 61
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-I- 9
<PAGE> 62
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
NOTES TO FINANCIAL STATEMENTS
3. SHARES OWNED
The Account invests in shares of mutual funds. Share activity and total shares
owned are as follows:
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
-----------------------------------------------------------------------------
LIMITED
MATURITY
BALANCED GROWTH PARTNERS BOND LIQUID ASSETS
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3) PORTFOLIO(4) PORTFOLIO(5)
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Shares owned at January 1,
1998........................... 12,167.134 2,390.452 28,400.091 35,498.016 300,600.080
Shares acquired.................. 50,129.086 4,473.475 44,871.307 51,682.206 4,371,682.690
Shares disposed of............... 41,893.024 469.798 14,925.430 1,627.913 4,170,680.970
---------- --------- ---------- ---------- -------------
Shares owned at December 31,
1998........................... 20,403.196 6,394.129 58,345.968 85,552.309 501,601.800
========== ========= ========== ========== =============
Shares owned at January 1,
1997........................... -- -- -- -- --
Shares acquired.................. 12,638.796 2,932.267 30,237.460 37,110.661 4,880,248.700
Shares disposed of............... 471.662 541.815 1,837.369 1,612.645 4,579,648.620
---------- --------- ---------- ---------- -------------
Shares owned at December 31,
1997........................... 12,167.134 2,390.452 28,400.091 35,498.016 300,600.080
========== ========= ========== ========== =============
</TABLE>
- ---------------
(1) Commenced business 02/12/97
(2) Commenced business 03/05/97
(3) Commenced business 03/18/97
(4) Commenced business 02/12/97
(5) Commenced business 01/22/97
(6) Commenced business 02/04/97
(7) Commenced business 02/04/97
(8) Commenced business 02/10/97
(9) Commenced business 03/05/97
(10) Commenced business 02/04/97
F-I- 10
<PAGE> 63
<TABLE>
<CAPTION>
STRONG VARIABLE STRONG OPP. BERGER INSTITUTIONAL
INSURANCE FUNDS, INC. FUND II PRODUCTS TRUST
- ---------------------------- ------------- ----------------------------
INTERNATIONAL SMALL
STOCK GROWTH OPPORTUNITY COMPANY
FUND II FUND II FUND II, INC. 100 FUND GROWTH
PORTFOLIO(6) PORTFOLIO(7) PORTFOLIO(8) PORTFOLIO(9) PORTFOLIO(10)
- ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
6,823.144 1,511.266 2,072.755 13,489.758 5,350.946
8,593.796 16,051.054 25,586.526 38,729.529 2,807.857
1,045.438 3,833.767 2,304.406 36,768.951 756.231
---------- ---------- ---------- ---------- ----------
14,371.502 13,728.553 25,354.875 15,450.336 7,402.572
========== ========== ========== ========== ==========
-- -- -- -- --
7,748.521 1,520.146 3,281.788 14,664.414 5,888.960
925.377 8.880 1,209.033 1,174.656 538.014
---------- ---------- ---------- ---------- ----------
6,823.144 1,511.266 2,072.755 13,489.758 5,350.946
========== ========== ========== ========== ==========
</TABLE>
F-I- 11
<PAGE> 64
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-I- 12
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ameritas Life Insurance Corp.
Lincoln, Nebraska
We have audited the accompanying consolidated balance sheets of Ameritas
Life Insurance Corp. (a wholly owned subsidiary of Ameritas Holding Company) and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, comprehensive income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Ameritas Life Insurance Corp.
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Lincoln, Nebraska
February 5, 1999
F-II- 1
<PAGE> 66
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities held to maturity (fair value
$620,543 -- 1998, $792,856 -- 1997).................... $ 586,419 $ 754,581
Fixed maturity securities available for sale (amortized
cost $466,025 -- 1998, $462,831 -- 1997)............... 484,491 479,990
Equity securities (cost $59,411 -- 1998,
$59,383 -- 1997)....................................... 121,905 108,744
Mortgage loans on real estate............................. 222,151 228,709
Loans on insurance policies............................... 29,047 70,638
Real estate, less accumulated depreciation
($17,431 -- 1998, $18,324 -- 1997)..................... 33,420 43,085
Other investments......................................... 45,104 33,971
Short-term investments.................................... 1,341 655
---------- ----------
Total Investments................................. 1,523,878 1,720,373
Cash and cash equivalents................................... 79,019 83,139
Accrued investment income................................... 20,104 25,186
Deferred policy acquisition costs........................... 171,201 164,564
Property and equipment, less accumulated depreciation
($31,985 -- 1998, $29,199 -- 1997)........................ 20,946 20,191
Other assets................................................ 21,903 16,668
Closed block assets......................................... 309,326 --
Separate accounts........................................... 1,954,931 1,437,165
---------- ----------
Total............................................. $4,101,308 $3,467,286
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy and contract reserves................................ $ 100,190 $ 364,168
Policy and contract claims.................................. 29,823 27,467
Accumulated contract values................................. 1,019,849 1,039,938
Unearned policy charges..................................... 12,160 13,177
Unearned reinsurance ceded allowance........................ 1,480 1,763
Federal income taxes:
Current................................................... 6,710 339
Deferred.................................................. 50,795 46,236
Dividends payable........................................... -- 10,134
Other liabilities........................................... 45,509 41,467
Closed block liabilities.................................... 334,622 --
Separate accounts........................................... 1,954,931 1,436,677
---------- ----------
Total Liabilities................................. 3,556,069 2,981,366
---------- ----------
Commitments and contingencies
Minority interest in subsidiary............................. 27,523 24,483
Common stock, par value $0.10 per share; 25,000,000 shares
authorized, issued and outstanding........................ 2,500 --
Additional paid-in capital.................................. 5,000 --
Retained earnings........................................... 459,065 419,797
Accumulated other comprehensive income...................... 51,151 41,640
---------- ----------
Total Stockholder's Equity........................ 517,716 461,437
---------- ----------
Total............................................. $4,101,308 $3,467,286
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-II- 2
<PAGE> 67
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
INCOME:
Insurance revenues:
Premiums:
Life insurance......................................... $ 21,159 $ 26,794 $ 26,855
Accident and health insurance.......................... 256,742 181,952 163,557
Contract charges.......................................... 68,145 57,199 49,667
Reinsurance, net.......................................... 19,930 (1,037) (6,205)
Reinsurance ceded allowance............................... 3,667 2,475 1,746
Investment revenues:
Investment income, net.................................... 130,102 137,744 126,862
Realized gains, net....................................... 14,288 10,295 13,103
Other....................................................... 23,011 14,987 8,961
Loss in closed block........................................ (105) -- --
-------- -------- --------
536,939 430,409 384,546
-------- -------- --------
BENEFITS AND EXPENSES:
Policy benefits:
Death benefits............................................ 19,879 20,710 18,402
Surrender benefits........................................ 6,730 10,084 10,708
Accident and health benefits.............................. 200,405 130,908 112,005
Interest credited......................................... 68,698 66,788 65,494
Decrease in policy and contract reserves.................. (2,570) (3,307) (5,060)
Other..................................................... 21,920 23,747 23,216
Sales and operating expenses................................ 126,199 90,737 77,086
Amortization of deferred policy acquisition costs........... 18,584 16,441 16,790
-------- -------- --------
459,845 356,108 318,641
-------- -------- --------
INCOME BEFORE FEDERAL INCOME TAXES AND MINORITY INTEREST IN
EARNINGS OF SUBSIDIARY.................................... 77,094 74,301 65,905
Income taxes -- current..................................... 27,229 26,401 29,081
Income taxes -- deferred.................................... 157 39 (1,560)
-------- -------- --------
Total federal income taxes........................... 27,386 26,440 27,521
-------- -------- --------
Income before minority interest in earnings of subsidiary... 49,708 47,861 38,384
Minority interest in earnings of subsidiary................. (2,940) (1,987) (1,259)
-------- -------- --------
NET INCOME.................................................. $ 46,768 $ 45,874 $ 37,125
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-II- 3
<PAGE> 68
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income.................................................. $46,768 $45,874 $37,125
Other comprehensive income (loss), net of tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during the
period
(net of deferred tax of $6,913 -- 1998,
$11,628 -- 1997,
and $814 -- 1996).................................... 12,646 21,290 1,512
Reclassification adjustment for gains included in net
income
(net of deferred tax of $1,635 -- 1998,
$2,548 -- 1997,
and $4,285 -- 1996).................................. (3,036) (4,733) (7,958)
Minority interest...................................... (99) (158) 27
------- ------- -------
Other comprehensive income (loss)......................... 9,511 16,399 (6,419)
------- ------- -------
Comprehensive income........................................ $56,281 $62,273 $30,706
======= ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-II- 4
<PAGE> 69
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
------------------- PAID - IN RETAINED COMPREHENSIVE STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS INCOME EQUITY
--------- ------ ---------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996.......... -- $ -- $ -- $336,798 $31,660 $368,458
Net unrealized investment
losses, net................... -- -- -- -- (6,446) (6,446)
Minority interest in net
unrealized investment losses,
net........................... -- -- -- -- 27 27
Net income...................... -- -- -- 37,125 -- 37,125
--------- ------ ------ -------- ------- --------
BALANCE, December 31, 1996........ -- -- -- 373,923 25,241 399,164
Net unrealized investment gains,
net........................... -- -- -- -- 16,557 16,557
Minority interest in net
unrealized investment gains,
net........................... -- -- -- -- (158) (158)
Net income...................... -- -- -- 45,874 -- 45,874
--------- ------ ------ -------- ------- --------
BALANCE, December 31, 1997........ -- -- -- 419,797 41,640 461,437
Issuance of common stock........ 25,000,000 2,500 5,000 (7,500) -- --
Net unrealized investment gains,
net........................... -- -- -- -- 9,610 9,610
Minority interest in net
unrealized investment gains,
net........................... -- -- -- -- (99) (99)
Net income...................... -- -- -- 46,768 -- 46,768
--------- ------ ------ -------- ------- --------
BALANCE, December 31, 1998........ 25,000,000 $2,500 $5,000 $459,065 $51,151 $517,716
========= ====== ====== ======== ======= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-II- 5
<PAGE> 70
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 46,768 $ 45,874 $ 37,125
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization............................. 5,717 5,275 4,231
Amortization of deferred policy acquisition costs......... 19,090 16,441 16,790
Policy acquisition costs deferred......................... (40,349) (36,117) (30,611)
Interest credited to contract values...................... 69,487 66,788 65,494
Amortization of discounts or premiums..................... (4,611) (1,747) (1,513)
Net realized gains on investment transactions............. (14,288) (10,295) (13,103)
Deferred income taxes..................................... 157 39 (1,560)
Minority interest in earnings of subsidiary............... 2,940 1,987 1,259
Change in assets and liabilities:
Accrued investment income.............................. (455) (10) (1,071)
Other assets........................................... (6,544) (3,239) (1,372)
Policy and contract reserves........................... (2,798) (3,446) 2,266
Policy and contract claims............................. 3,992 6,047 2,538
Unearned policy charges................................ (1,017) (315) (2,141)
Unearned reinsurance ceded allowance................... (283) 511 373
Federal income taxes payable -- current................ 5,422 (7,977) 1,300
Dividends payable...................................... 479 (183) (111)
Other liabilities...................................... 6,039 6,509 5,445
Cash from closed block................................. (2,526) -- --
-------- --------- ---------
Net cash from operating activities........................ 87,220 86,142 85,339
-------- --------- ---------
INVESTING ACTIVITIES
Purchase of investments:
Fixed maturity securities held to maturity................ (62,244) (39,522) (122,182)
Fixed maturity securities available for sale.............. (137,319) (115,864) (40,572)
Equity securities......................................... (21,944) (29,432) (19,925)
Mortgage loans on real estate............................. (68,518) (56,251) (57,248)
Real estate............................................... (998) (1,676) (642)
Short-term investments.................................... (1,632) (2,124) (5,844)
Other investments......................................... (16,343) (6,026) (23,073)
Proceeds from sale of investments:
Fixed maturity securities available for sale 14,447 16,419 4,774
Equity securities -- unaffiliated......................... 24,681 19,914 18,676
Equity securities -- affiliated........................... -- -- 190
Real estate............................................... 14,117 1,723 951
Other investments......................................... 4,166 649 7,949
Proceeds from maturities or repayment of investments:
Fixed maturity securities held to maturity................ $ 84,662 $ 68,069 $ 71,317
Fixed maturity securities available for sale.............. 68,338 45,942 36,519
Mortgage loans on real estate............................. 37,810 49,750 34,594
Real estate............................................... -- -- --
Other investments......................................... 5,325 6,278 15,106
Short-term investments.................................... 958 3,050 16,571
Purchase of property and equipment.......................... (4,002) (5,413) (3,711)
Proceeds from sale of property and equipment................ 43 45 78
Net change in loans on insurance policies................... (3,377) (2,622) 1,252
Closed block investing activities........................... 178 -- --
-------- --------- ---------
Net cash from investing activities........................ (61,652) (47,091) (65,220)
-------- --------- ---------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-II- 6
<PAGE> 71
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Contribution for minority interest in subsidiary............ -- 1,530 22,445
Net change in accumulated contract values................... (30,380) (34,584) (47,186)
Closed block financing activities........................... 692 -- --
-------- --------- ---------
Net cash from financing activities........................ (29,688) (33,054) (24,741)
-------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (4,120) 5,997 (4,622)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 83,139 77,142 81,764
-------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 79,019 $ 83,139 $ 77,142
======== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes.................................. $ 21,936 $ 34,397 $ 27,748
NON-CASH FINANCING ACTIVITIES:
Issuance of common stock.................................. $ 7,500 $ -- $ --
Assets transferred to closed block........................ 307,754 -- --
Liabilities transferred to closed block................... 332,223 -- --
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-II- 7
<PAGE> 72
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS
On September 13, 1997, the Board of Directors of Ameritas Life Insurance Corp.
(Ameritas) adopted the Plan which authorized the reorganization (Reorganization)
of Ameritas into a mutual insurance holding company structure. The Nebraska
Department of Insurance held a public hearing on the Reorganization on October
14, 1997 and approved the Plan on October 24, 1997. The policyowners' of
Ameritas approved the Plan on December 8, 1997 and the Reorganization became
effective on January 1, 1998 (effective date).
Pursuant to the Reorganization, Ameritas (i) formed Ameritas Mutual Insurance
Holding Company (AMHC) as a mutual insurance holding company under the insurance
laws of the State of Nebraska, (ii) formed Ameritas Holding Company (AHC) as an
intermediate stock holding company under the general laws of the State of
Nebraska, and (iii) amended and restated its Charter and Articles of
Incorporation to authorize the issuance of capital stock and the continuance of
its existence as a stock life insurance company under the same name. As of the
effective date of the Reorganization, the membership interests and the
contractual rights of the policyowners of Ameritas were separated -- the
membership interests automatically became, by operation of law, membership
interests in AMHC and the contractual rights remained in Ameritas. Each person
who becomes the owner of a designated policy issued by Ameritas after the
effective date of the Reorganization will become a member of AMHC and have a
membership interest in AMHC so long as such policy remains in force. The
membership interests in AMHC follow, and are not severable, from the policy from
which the membership interest in AMHC is derived.
On the effective date, Ameritas issued 25 million of its authorized shares of
capital stock to AMHC. AMHC then contributed all of these to AHC in exchange for
20 million shares of its common stock. As a result, AHC directly owns Ameritas,
and AMHC indirectly owns Ameritas, through AHC. The reorganization was accounted
for at historical cost in a manner similar to a pooling of interests.
Accordingly, the accompanying financial statements and disclosures reflect the
operations of Ameritas for all periods presented.
Ameritas' insurance operations consist of life and health insurance and annuity
and pension contracts. Ameritas and its subsidiaries operates in all 50 states
and the District of Columbia. Wholly owned insurance subsidiaries include First
Ameritas Life Insurance Corp. Of New York and Pathmark Assurance Company.
Ameritas is also a 66% owner of AMAL Corporation (incorporated March 8, 1996),
which owns 100% of Ameritas Variable Life Insurance Company and Ameritas
Investment Corp. (a broker/dealer). In addition to the subsidiaries noted above,
Ameritas conducts other diversified financial-service-related operations through
the following wholly owned subsidiaries: Veritas Corp (a marketing organization
for low-load insurance products); Ameritas Investment Advisors, Inc. (an advisor
providing investment management services); and Ameritas Managed Dental Plan,
Inc. (A prepaid dental organization).
CLOSED BLOCK
Effective October 1, 1998 (the Effective Date) Ameritas formed a closed block
(the Closed Block) of policies, under an arrangement approved by the Insurance
Department of the State of Nebraska, to provide for dividends on policies that
were in force on the Effective Date and which were within the classes of
individual policies for which Ameritas had a dividend scale in effect on the
Effective Date. The Closed Block was designed to give reasonable assurance to
owners of affected policies that the assets will be available to support such
policies including maintaining dividend scales in effect at the Effective Date,
if the experience underlying such scales continues. The assets, including
revenue thereon, will accrue solely to the benefit of the owners of policies
included in the block until the block is no longer in effect.
F-II- 8
<PAGE> 73
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
The financial results of the Closed Block, while prepared on a GAAP basis,
reflect the provisions of the approved arrangement and not the actual results of
operations and financial position. The arrangement provides for the level of
expenses charged to the Closed Block, actual expenses related to the Closed
Block operations are charged outside of the Closed Block; therefore the
contribution or loss from the Closed Block does not represent the actual
operations of the Closed Block.
Summarized financial information of the Closed Block as of December 31, 1998 and
from October 1, 1998 to December 31, 1998, is as follows (in thousands):
<TABLE>
<CAPTION>
CLOSED BLOCK
------------
<S> <C>
ASSETS:
Fixed maturity securities held to maturity (fair value
$156,499).............................................. $148,398
Fixed maturity securities available for sale (amortized
cost $53,679).......................................... 56,384
Mortgage loans on real estate............................. 38,756
Loans on insurance policies............................... 44,968
Cash and cash equivalents................................. 1,656
Accrued investment income................................. 5,537
Deferred policy acquisition costs......................... 12,364
Other assets.............................................. 1,263
--------
Total Closed Block Assets.............................. $309,326
========
LIABILITIES:
Policy and contract reserves.............................. $261,180
Policy and contract claims................................ 1,636
accumulated contract values............................... 59,196
Dividends payable......................................... 10,613
Other liabilities......................................... 1,997
--------
Total Closed Block Liabilities......................... $334,622
========
INCOME, BENEFITS AND EXPENSES:
Premiums.................................................. $ 4,354
Investment income, net.................................... 5,054
Policy benefits........................................... (5,123)
Sales and operating expenses.............................. (812)
amortization of deferred policy acquisition costs......... (506)
Dividends appropriated for policyowners................... (3,072)
--------
Loss in Closed Block................................... $ (105)
========
</TABLE>
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ameritas Life
Insurance Corp. and its majority-owned subsidiaries (the Company). These
consolidated financial statements exclude the effects of all material
intercompany transactions.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
F-II- 9
<PAGE> 74
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain items on the prior year financial statements have been restated to
conform to current year presentation.
The principal accounting and reporting practices followed are:
INVESTMENTS
The Company classifies its securities into categories based upon the Company's
intent relative to the eventual disposition of the securities. The first
category, held to maturity securities, includes fixed maturity securities which
the Company has the positive intent and ability to hold to maturity. These
securities are carried at amortized cost. The second category, available for
sale securities, may be sold to address the liquidity and other needs of the
Company. Securities classified as available for sale are carried at fair value
on the balance sheet with unrealized gains and losses excluded from operations
and reported as a separate component of stockholder's equity included in
accumulated other comprehensive income, net of related deferred acquisition
costs and income tax effects. The third category, trading securities, is for
debt and equity securities acquired for the purpose of selling them in the near
term. The Company has not classified any of its securities as trading
securities.
Equity securities (common stock and nonredeemable preferred stock) are valued at
fair value, and are classified as available for sale.
Mortgage loans on real estate are carried at amortized cost less an allowance
for estimated uncollectible amounts. SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which was amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan -- Income Recognition and Disclosures,"
requires that an impaired loan be measured at the present value of expected
future cash flows, or alternatively, the observable market price or the fair
value of the collateral. Total impaired loans as of December 31, 1998 and 1997,
and the associated interest income were not material.
Investment real estate owned directly by the Company is carried at cost less
accumulated depreciation and allowances for estimated losses. Real estate
acquired through foreclosure is carried at the lower of cost or fair value minus
estimated costs to sell.
Other investments primarily include investments in venture capital partnerships
and real estate joint ventures accounted for using the equity method, and
securities owned by the broker dealer subsidiary valued at fair value. Changes
in the fair value of the securities owned by the broker dealer are included in
investment income.
Short-term investments are carried at amortized cost, which approximates fair
value.
Realized investment gains and losses on sales of securities are determined on
the specific identification method. Write-offs of investments that decline in
value below cost on other than a temporary basis and the change in the
allowances for mortgage loans and wholly owned real estate are included with
realized gains in the consolidated statements of operations.
The Company records write-offs or allowances for its investments based upon an
evaluation of specific problem investments. The Company reviews, on a continual
basis, all invested assets to identify
F-II- 10
<PAGE> 75
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
investments where the Company may have credit concerns. Investments with credit
concerns include those the Company has identified as experiencing a
deterioration in financial condition.
CASH EQUIVALENTS
The Company considers all highly liquid debt securities purchased with a
remaining maturity of less than three months to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation. The
Company provides for depreciation of property and equipment using straight-line
and accelerated methods over the estimated useful lives of the assets.
SEPARATE ACCOUNTS
The Company operates separate accounts on which the earnings or losses accrue
exclusively to contractholders. The assets (principally investments) and
liabilities of each account are clearly identifiable and distinguishable from
other assets and liabilities of the Company. The separate accounts are an
investment alternative for pension, variable life, and variable annuity products
which the Company markets. Amounts are reported at fair value.
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
RECOGNITION OF PARTICIPATING AND TERM LIFE, ACCIDENT AND HEALTH AND ANNUITY
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
Participating life insurance products include those products with fixed and
guaranteed premiums and benefits on which dividends are paid by the Company.
Premiums on participating and term life products and certain annuities with life
contingencies (immediate annuities) are recognized as premium revenue when due.
Accident and health insurance premiums are recognized as premium revenue over
the time period to which the premiums relate. Benefits and expenses are
associated with earned premiums so as to result in recognition of profits over
the premium-paying period of the contracts. This association is accomplished by
means of the provision for liabilities for future policy benefits and the
amortization of deferred policy acquisition costs.
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYOWNERS
Universal life-type policies are insurance contracts with terms that are not
fixed and guaranteed. The terms that may be changed could include one or more of
the amounts assessed the policyowner, premiums paid by the policyowner or
interest accrued to policyowners' balances. Amounts received as payments for
such contracts are reflected as deposits in accumulated contract values and are
not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading, mortality risk expense, the
cost of insurance and policy administration. Policy benefits and claims that are
charged to expense include interest credited to contracts and benefit claims
incurred in the period in excess of related policy account balances.
F-II- 11
<PAGE> 76
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYOWNERS
Contracts that do not subject the Company to risks arising from policyowner
mortality or morbidity are referred to as investment contracts. Deposit
administration plans and certain deferred annuities are considered investment
contracts. Amounts received as payments for such contracts are reflected as
deposits in accumulated contract values and are not reported as premium
revenues.
Revenues for investment products consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are directly related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable from future premiums. Such costs include
commissions, certain costs of policy issuance and underwriting, and certain
agency expenses.
Costs deferred related to term life insurance are amortized over the
premium-paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits.
Costs deferred related to participating life, universal life-type policies and
investment-type contracts are amortized generally over the lives of the
policies, in relation to the present value of estimated gross profits from
mortality, investment and expense margins. The estimated gross profits are
reviewed periodically based on actual experience and changes in assumptions.
A roll-forward of the amounts reflected in the consolidated balance sheets as
deferred policy acquisition costs is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Beginning balance........................................... $164,564 $146,405 $130,420
Acquisition costs deferred.................................. 40,324 36,117 30,611
Amortization of deferred policy acquisition costs........... (18,584) (16,441) (16,790)
Amount transferred to closed block.......................... (12,845) -- --
Adjustment for unrealized investment (gain)/loss............ (2,258) (1,517) 2,164
-------- -------- --------
Ending balance.............................................. $171,201 $164,564 $146,405
======== ======== ========
</TABLE>
To the extent that unrealized gains or losses on available for sale securities
would result in an adjustment of deferred policy acquisition costs had those
gains or losses actually been realized, the related unamortized deferred policy
acquisition costs are recorded as an adjustment of the unrealized investment
gains or losses included in stockholder's equity.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for participating and term life contracts
and additional coverages offered under policy riders are calculated using the
net level premium method and assumptions as to investment yields, mortality,
withdrawals and dividends. The assumptions are based on projections of past
F-II- 12
<PAGE> 77
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
experience and include provisions for possible unfavorable deviation. These
assumptions are made at the time the contract is issued. These liabilities are
shown as policy and contract reserves.
Liabilities for future policy and contract benefits on universal life-type and
investment-type contracts are based on the policy account balance, and are shown
as accumulated contract values.
The liabilities for future policy and contract benefits for group long-term
disability reserves are based upon interest rate assumptions and morbidity and
termination rates from published tables, modified for Company experience.
DIVIDENDS TO POLICYOWNERS
A portion of the Company's business has been issued on a participating basis.
The amount of policyowners' dividends to be paid is determined annually by the
Board of Directors.
INCOME TAXES
All companies included in these consolidated financial statements, with the
exception of AMAL and its subsidiaries, files a consolidated life/non-life tax
return. An agreement among the members of the consolidated group provides for
distribution of consolidated tax results as if filed on a separate return basis.
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the cumulative differences in assets and liabilities
determined on a tax return and financial statement basis at the current enacted
tax rates.
Federal income tax returns have been examined by the Internal Revenue Service
(IRS) through 1995. Management is currently appealing certain adjustments
proposed by the IRS for tax years 1988 and 1990 through 1995, and believes
adequate provisions have been made for any additional taxes which may become due
with respect to the adjustments proposed by the IRS.
2. INVESTMENTS
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities held to maturity.................. $ 53,680 $ 59,700 $ 59,366
Fixed maturity securities available for sale................ 33,846 32,605 30,039
Equity securities........................................... 1,783 1,899 1,571
Mortgage loans on real estate............................... 20,312 19,866 19,376
Real estate................................................. 11,871 12,317 9,699
Loans on insurance policies................................. 3,849 4,341 4,265
Other investments........................................... 9,639 15,494 8,572
Short-term investments and cash and cash equivalents........ 8,665 4,266 5,069
-------- -------- --------
Gross investment income................................... 143,645 150,488 137,957
Investment expenses......................................... 13,543 12,744 11,095
-------- -------- --------
Net investment income..................................... $130,102 $137,744 $126,862
======== ======== ========
</TABLE>
F-II- 13
<PAGE> 78
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS -- (CONTINUED)
Net pretax realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net gains (losses) on disposals, including calls, of
investments
Fixed maturity securities held to maturity................ $ 2,235 $ 1,059 $ 237
Fixed maturity securities available for sale.............. 1,906 494 802
Equity securities......................................... 2,764 6,787 11,439
Mortgage loans on real estate............................. 1,583 959 66
Real estate............................................... 5,877 502 136
Other..................................................... (2) 564 503
-------- -------- --------
14,363 10,365 13,183
-------- -------- --------
Provisions for losses on investments
Mortgage loans on real estate............................. (100) (20) (80)
Real estate............................................... 25 (50) --
-------- -------- --------
Net pretax realized investment gains........................ $ 14,288 $ 10,295 $ 13,103
======== ======== ========
</TABLE>
Proceeds from sales of securities and gross gains and losses realized on those
sales were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------
PROCEEDS GAINS LOSSES
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $ 14,447 $ 433 $ 302
Equity securities........................................... 24,681 3,874 1,110
-------- -------- --------
$ 39,128 $ 4,307 $ 1,412
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------
PROCEEDS GAINS LOSSES
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $ 16,419 $ 161 $ 8
Equity securities........................................... 19,914 7,725 938
-------- -------- --------
$ 36,333 $ 7,886 $ 946
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------
PROCEEDS GAINS LOSSES
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $ 4,774 $ 30 $ 247
Equity securities........................................... 18,676 11,796 357
-------- -------- --------
$ 23,450 $ 11,826 $ 604
======== ======== ========
</TABLE>
F-II- 14
<PAGE> 79
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS -- (CONTINUED)
The amortized cost and fair value of investments in securities by type of
investment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------
COST GAINS LOSSES FAIR VALUE
---------- -------- ------ ----------
<S> <C> <C> <C> <C>
Fixed maturity securities held to maturity
U.S. Corporate................................... $ 351,099 $ 20,258 $ 417 $ 370,940
Mortgage-backed.................................. 114,146 6,294 -- 120,440
U.S. Treasury securities and obligations of U.S.
government agencies........................... 57,879 5,870 -- 63,749
Foreign.......................................... 63,295 2,231 112 65,414
---------- -------- ------ ----------
Total fixed maturity securities held to
maturity.................................... 586,419 34,653 529 620,543
---------- -------- ------ ----------
Fixed maturity securities available for sale
U.S. Corporate................................... 305,576 12,361 466 317,471
Mortgage-backed.................................. 80,018 1,295 19 81,294
Asset-backed..................................... 7,998 202 -- 8,200
U.S. Treasury securities and obligations of U.S.
government agencies........................... 58,841 4,425 -- 63,266
Foreign.......................................... 13,592 668 -- 14,260
---------- -------- ------ ----------
Total fixed maturity securities available for
sale........................................ 466,025 18,951 485 484,491
---------- -------- ------ ----------
Equity securities................................ 59,411 63,511 1,017 121,905
Short-term investments........................... 1,341 -- -- 1,341
---------- -------- ------ ----------
Total available for sale securities........... 526,777 82,462 1,502 607,737
---------- -------- ------ ----------
Total....................................... $1,113,196 $117,115 $2,031 $1,228,280
========== ======== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------
COST GAINS LOSSES FAIR VALUE
---------- -------- ------ ----------
<S> <C> <C> <C> <C>
Fixed maturity securities held to maturity
U.S. Corporate................................... $ 448,344 $ 23,764 $ 423 $ 471,685
Mortgage-backed.................................. 147,741 6,523 14 154,250
U.S. Treasury securities and obligations of U.S.
government agencies........................... 82,107 5,764 -- 87,871
Foreign.......................................... 76,389 2,769 108 79,050
---------- -------- ------ ----------
Total fixed maturity securities held to
maturity.................................... 754,581 38,820 545 792,856
---------- -------- ------ ----------
Fixed maturity securities available for sale
U.S. Corporate................................... 282,265 11,742 280 293,727
Mortgage-backed.................................. 86,370 1,957 165 88,162
Asset-backed..................................... 7,997 169 -- 8,166
U.S. Treasury securities and obligations of U.S.
government agencies........................... 67,342 3,455 242 70,555
Foreign.......................................... 18,857 524 1 19,380
---------- -------- ------ ----------
Total fixed maturity securities available for
sale........................................ 462,831 17,847 688 479,990
---------- -------- ------ ----------
Equity securities................................ 59,383 49,893 532 108,744
Short-term investments........................... 655 -- -- 655
---------- -------- ------ ----------
Total available for sale securities........... 522,869 67,740 1,220 589,389
---------- -------- ------ ----------
Total....................................... $1,277,450 $106,560 $1,765 $1,382,245
========== ======== ====== ==========
</TABLE>
F-II- 15
<PAGE> 80
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS -- (CONTINUED)
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1998 are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
--------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Due in one year or less............................. $ 15,916 $ 16,110 $ 7,600 $ 7,693
Due after one year through five years............... 168,635 175,041 130,762 136,181
Due after five years through ten years.............. 150,487 156,680 243,218 257,923
Due after ten years................................. 42,971 47,167 90,693 98,306
Mortgage-backed and asset-backed securities......... 88,016 89,493 114,146 120,440
-------- -------- -------- --------
Total............................................. $466,025 $484,491 $586,419 $620,543
======== ======== ======== ========
</TABLE>
3. INCOME TAXES
The items that give rise to deferred tax assets and liabilities relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Net unrealized investment gains............................. $ 35,211 $ 29,569
Equity in subsidiaries...................................... 12,058 9,992
Deferred policy acquisition costs........................... 53,003 47,713
Prepaid expenses............................................ 3,903 3,246
Other....................................................... 2,277 2,327
-------- --------
Gross deferred tax liability................................ 106,452 92,847
-------- --------
Future policy and contract benefits......................... 38,333 30,593
Deferred future revenues.................................... 5,845 6,091
Policyowner dividends....................................... 3,715 3,547
Pension and postretirement benefits......................... 2,917 2,715
Other....................................................... 4,847 3,665
-------- --------
Gross deferred tax asset.................................... 55,657 46,611
-------- --------
Net deferred tax liability................................ $ 50,795 $ 46,236
======== ========
</TABLE>
The difference between the U.S. federal income tax rate and the consolidated tax
provision rate is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
--------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate.................................. 35.0% 35.0% 35.0%
Equity in subsidiaries...................................... 2.6 2.4 1.2
Surplus tax................................................. -- (2.7) 7.1
Other....................................................... (2.1) 0.9 (1.5)
---- ---- ----
Effective tax rate........................................ 35.5% 35.6% 41.8%
==== ==== ====
</TABLE>
The "surplus tax," IRC Section 809, is an imputation of income to mutual life
insurance companies according to a formula based on a comparison of the returns
of equity of the mutual and stock segments of the life insurance industry. The
Company's provision for its surplus tax is based on the Company's best estimate
of what its final surplus tax will be.
F-II- 16
<PAGE> 81
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
4. EMPLOYEE AND AGENT BENEFIT PLANS
The Company has a noncontributory defined benefit plan covering substantially
all employees. Plan benefits are based on years of credited service and the
employee's compensation during the last five years of employment. The Company's
funding policy is to make contributions each year at least equal to the minimum
funding requirements for tax-qualified retirement plans. Pension costs include
current service costs, which are accrued and funded on a current year basis, and
past service costs, which are amortized over the average remaining service life
of all employees on the adoption date. The assets of the plan are not
segregated.
The Company also provides certain health care benefits to retired employees.
These benefits are a specified percentage of premium until age 65 and a flat
dollar amount thereafter. Employees become eligible for these benefits upon the
attainment of age 55, 15 years of service and participation in the Company
medical plan for the immediately preceding five years.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets over the two-year period ending
December 31, 1998, and a statement of the funded status as of December 31 of
both years:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation
Benefit obligation at beginning of year............... $23,232 $20,261 $ 4,498 $ 4,746
Service cost.......................................... 1,970 1,408 141 158
Interest cost......................................... 1,777 1,496 251 304
Actuarial (gain)/loss................................. 4,488 1,023 (711) (552)
Benefits paid......................................... (721) (956) (155) (158)
------- ------- ------- -------
Benefit obligation at end of year..................... $30,746 $23,232 $ 4,024 $ 4,498
======= ======= ======= =======
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year........ $24,271 $20,153 $ 1,767 $ 1,252
Actual return on plan assets.......................... 2,517 3,330 120 90
Employer contributions................................ 2,201 1,744 -- 425
Benefits paid......................................... (721) (956) -- --
------- ------- ------- -------
Fair value of plan assets at end of year.............. $28,268 $24,271 $ 1,887 $ 1,767
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Funded Status
Funded status at end of year.......................... $(2,478) $ 1,039 $(2,137) $(2,731)
Unrecognized net actuarial (gain)/loss................ 3,086 (875) (2,075) (1,498)
Unrecognized prior service cost....................... 1,143 1,236 (15) (18)
------- ------- ------- -------
Prepaid/(accrued) benefit cost........................ $ 1,751 $ 1,400 $(4,227) $(4,247)
======= ======= ======= =======
</TABLE>
F-II- 17
<PAGE> 82
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
4. EMPLOYEE AND AGENT BENEFIT PLANS -- (CONTINUED)
Periodic pension expense for the Company included the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost................................................ $ 1,970 $ 1,408 $ 1,223
Interest cost............................................... 1,777 1,496 1,866
Expected return on plan assets.............................. (2,517) (3,329) (2,817)
Amortization of transition (asset) obligation............... 94 94 94
Amortization of net loss.................................... 526 1,742 838
------- ------- -------
Net periodic benefit cost................................... $ 1,850 $ 1,411 $ 1,204
======= ======= =======
</TABLE>
Periodic postretirement medical expense for the Company included the following
components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Service cost................................................ $ 141 $ 158 $ 177
Interest cost............................................... 251 304 315
Expected return on plan assets.............................. (124) (89) (57)
Amortization of prior service cost.......................... (2) -- --
Amortization of net gain.................................... (130) (77) (35)
----- ----- -----
Net periodic benefit cost................................... $ 136 $ 296 $ 400
===== ===== =====
</TABLE>
The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table:
<TABLE>
<CAPTION>
PENSION
BENEFITS OTHER BENEFITS
------------ --------------
1998 1997 1998 1997
---- ---- ----- -----
<S> <C> <C> <C> <C>
Weighted-average assumptions as of December 31
Discount rate............................................. 6.75 7.25 6.75 7.25
Expected return on plan assets............................ 8.00 8.00 7.50 7.50
Rate of compensation increase............................. 4.50 4.50 -- --
</TABLE>
The assumed health care trend line rate used in measuring the accumulated
postretirement benefit obligation, for pre-65 employees, was 7.5% in 1997
decreasing linearly each successive year until it reaches 5.5% in 1999, after
which it remains constant.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in health care trend rates would
have the following effects:
<TABLE>
<CAPTION>
1% INCREASE 1% DECREASE
----------- -----------
<S> <C> <C>
Effect on total of service and interest cost components of
net periodic postretirement health care benefit cost...... $ 17 $ (17)
Effect on the health care component of the accumulated
postretirement benefit obligation......................... $ 117 $(131)
</TABLE>
The Company's employees and agents also participate in defined contribution
plans that cover substantially all full-time employees and agents. Company
contributions were $852 in 1998, $868 in 1997 and $800 in 1996.
F-II- 18
<PAGE> 83
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
5. INSURANCE REGULATORY MATTERS
STATUTORY SURPLUS AND NET INCOME
Net income of Ameritas and its insurance subsidiaries, as determined in
accordance with statutory accounting practices, was $41,019, $47,200, and
$44,100 for 1998, 1997 and 1996, respectively and statutory surplus was
$357,700, $311,300, and $257,300 at December 31, 1998, 1997 and 1996,
respectively. Insurance companies are required to maintain a certain level of
surplus to be in compliance with state laws and regulations. Surplus is
monitored by state regulators to ensure compliance with risk based capital
requirements.
Under statutes of the Insurance Department of Nebraska, the amount of dividends
payable to stockholders are limited.
6. REINSURANCE
In the ordinary course of business, the Company assumes and cedes reinsurance
with other insurers and reinsurers. These arrangements provide greater
diversification of business and limit the maximum net loss potential on large
risks.
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Assumed..................................................... $ 32,191 $ 9,740 $ 6,344
Ceded....................................................... (12,261) (10,777) (12,549)
-------- -------- --------
$ 19,930 $ (1,037) $ (6,205)
======== ======== ========
</TABLE>
The Company remains contingently liable in the event that a reinsurer is unable
to meet the obligations ceded under the reinsurance agreement.
7. RESERVE FOR UNPAID CLAIMS
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1........................................ $ 22,433 $ 17,957 $ 14,925
Reinsurance reserves (net).................................. (1,748) (89) 121
-------- -------- --------
20,685 17,868 15,046
-------- -------- --------
Incurred related to:
Current year.............................................. 186,940 132,940 117,610
Prior year................................................ (6,678) (4,675) (2,051)
-------- -------- --------
Total incurred......................................... 180,262 128,265 115,559
-------- -------- --------
Paid related to:
Current year.............................................. 161,843 112,255 99,742
Prior year................................................ 14,007 13,193 12,995
-------- -------- --------
Total paid............................................. 175,850 125,448 112,737
-------- -------- --------
25,097 20,685 17,868
Reinsurance reserves (net).................................. 2,561 1,748 89
-------- -------- --------
Balance at December 31...................................... $ 27,658 $ 22,433 $ 17,957
======== ======== ========
</TABLE>
F-II- 19
<PAGE> 84
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
7. RESERVE FOR UNPAID CLAIMS -- (CONTINUED)
The liability for unpaid accident and health claims and claim adjustment
expenses is included in policy and contract claims on the consolidated balance
sheets.
8. COMMITMENTS AND CONTINGENCIES
INVESTMENTS
Securities commitments of $30,545 and $25,848, and mortgage loan and real estate
commitments of $8,284 and $17,742 were outstanding for investments to be
purchased in subsequent years as of December 31, 1998 and 1997, respectively.
These commitments have been made in the normal course of investment operations
and are not reflected in the accompanying financial statements. The Company's
exposure to credit loss is represented by the contractual notional amount of
those instruments. The Company uses the same credit policies and collateral
requirements in making commitments and conditional obligations as it does for
on-balance sheet instruments.
LINE OF CREDIT
The Company has a $25,000 unsecured line of credit available at December 31,
1998. No balance was outstanding at any time during 1998 or 1997.
STATE LIFE AND HEALTH GUARANTY FUNDS
As a condition of doing business, all states and jurisdictions have adopted laws
requiring membership in life and health insurance guaranty funds. Member
companies are subject to assessments each year based on life, health or annuity
premiums collected in the state. In some states these assessments may be applied
against premium taxes. The Company has estimated its costs related to past
insolvencies and has provided a reserve included in other liabilities of $2,650
and $2,325 as of December 31, 1998 and 1997, respectively.
LITIGATION
From time to time, the Company and its subsidiaries is subject to litigation in
the normal course of business. Management does not believe that the Company is
party to any such pending litigation which would have a material adverse effect
on its financial statements or future operations.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made regarding fair value information about
certain financial instruments for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates, in many cases, could not be realized on immediate
settlement of the instrument. All nonfinancial instruments are excluded from
disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1998 and 1997. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
F-II- 20
<PAGE> 85
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for each class of financial instrument for which it is
practicable to estimate a value:
FIXED MATURITY SECURITIES -- For publicly traded securities, fair
value is determined using an independent pricing source. For securities
without a readily ascertainable fair value, the value has been determined
using an interest rate spread matrix based upon quality, weighted average
maturity and Treasury yields.
EQUITY SECURITIES -- For publicly traded securities, fair value is
determined using prices from an independent pricing source.
LOANS ON INSURANCE POLICIES -- Fair value for loans on insurance
policies is estimated using a discounted cash flow analysis at interest
rates currently offered for similar loans. Loans on insurance policies with
similar characteristics are aggregated for purposes of the calculations.
MORTGAGE LOANS ON REAL ESTATE -- Mortgage loans in good standing are
valued on the basis of discounted cash flow. The interest rate that is
assumed is based upon the weighted average term of the mortgage and
appropriate spread over Treasuries.
OTHER INVESTMENTS -- Fair value for venture capital partnerships is
estimated based on values as last reported by the partnership and
discounted for their lack of marketability. Real estate partnerships are
carried on the equity method and are excluded from the fair value
disclosure.
SHORT-TERM INVESTMENTS -- The carrying amount approximates fair value
because of the short maturity of these instruments.
CASH AND CASH EQUIVALENTS -- The carrying amounts equal fair value.
ACCRUED INVESTMENT INCOME -- Fair value equals book value.
ACCUMULATED CONTRACT VALUES -- Funds on deposit with a fixed maturity
are valued at discounted present value using market interest rates. Funds
on deposit which do not have fixed maturities are carried at the amount
payable on demand at the reporting date, which approximates fair value.
COMMITMENTS -- The estimated fair value of commitments approximates
carrying value because the fees currently charged for these arrangements
and the underlying interest rates approximate market.
F-II- 21
<PAGE> 86
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
Estimated fair values are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------
1998 1997
---------------------- ----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturity securities
Held to maturity............................... $586,419 $ 620,543 $754,581 $ 792,856
Available for sale............................. 484,491 484,491 479,990 479,990
Equity securities................................. 121,905 121,905 108,744 108,744
Loans on insurance policies....................... 29,047 30,332 70,638 63,356
Mortgage loans on real estate..................... 222,151 238,006 228,709 240,583
Other investments................................. 23,901 28,391 22,717 32,466
Short-term investments............................ 1,341 1,341 655 655
Cash and cash equivalents......................... 79,019 79,019 83,139 83,139
Accrued investment income......................... 20,104 20,104 25,186 25,186
Financial liabilities:
Accumulated contract values excluding amounts held
under insurance contracts...................... 783,275 786,152 764,505 764,998
</TABLE>
10. SUBSEQUENT EVENT
In September, 1998, Ameritas and Acacia Life Insurance Company (Acacia) agreed
in principle that all of Acacia Financial Group, Ltd.'s (the stock holding
company of Acacia) outstanding common stock, would be acquired by Ameritas
Holding Company in a business combination accounted for as a pooling of
interests. This merger became effective January 1, 1999. In addition the members
interest in Acacia Mutual Holding Corporation were merged with those of Ameritas
Mutual Insurance Holding Company. Concurrently, the name was changed to Ameritas
Acacia Mutual Holding Company. Historical financial information presented in
future reports will be restated to included the financial information of the
merged companies.
The following summarized unaudited data gives effect to the acquisition as if
the combination had been consummated. The most current combined financial
information available is as of September 30, 1998.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Assets...................................................... $6,049,266 $5,740,880
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED
FOR THE NINE MONTH DECEMBER 31
PERIOD ENDED --------------------
SEPTEMBER 30, 1998 1997 1996
------------------ -------- --------
<S> <C> <C> <C>
Income................................................. $619,170 $721,568 $664,578
Net Income............................................. $ 39,363 $ 62,341 $ 44,505
</TABLE>
F-II- 22
<PAGE> 87
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements:
The financial statements of Ameritas Life Insurance Corp. Separate Account LLVA
and Ameritas Life Insurance Corp. are filed in Part B.
Ameritas Life Insurance Corp. Separate Account LLVA:
- - Report of Deloitte & Touche LLP, independent auditors.
- - Statement of Net Assets as of December 31, 1998.
- - Statements of Operations for the years ended December 31, 1998 and 1997.
- - Statements of Changes in Net Assets for the years ended December 31, 1998 and
1997.
- - Notes to Financial Statements for the years ended December 31, 1998 and 1997.
Ameritas Life Insurance Corp.:
- - Report of Deloitte & Touche LLP, independent auditors.
- - Consolidated Balance Sheets as of December 31, 1998 and 1997.
- - Consolidated Statements of Operations for the years ended December 31, 1998,
1997 and 1996.
- - Consolidated Statements of Comprehensive Income for the years ended December
31, 1998, 1997 and 1996.
- - Consolidated Statements of Stockholder's Equity for the years ended December
31, 1998, 1997 and 1996.
- - Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996.
- - Notes to the Consolidated Financial Statements for the years ended December
31, 1998, 1997 and 1996.
All schedules of Ameritas Life Insurance Corp. for which provision is made in
the applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions, are inapplicable or have been
disclosed in the Notes to the Financial Statements and therefore have been
omitted.
There are no financial statements included in Part A.
1
<PAGE> 88
b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<S> <C>
(1) Resolution of Board of Directors of Ameritas Life Insurance
Corp. establishing Ameritas Life Insurance Corp. Separate
Account LLVA.*
(2) Not applicable.
(3)(a) Principal Underwriting Agreement.**
(3)(b) Form of Selling Agreement.*
(4) Form of Variable Annuity Contract.****
(5) Form of Application for Variable Annuity Contract.***
(6)(a) Certificate of Incorporation of Ameritas Life Insurance
Corp.*
(6)(b) Bylaws of Ameritas Life Insurance Corp.*****
(7) Not applicable.
(8)(a) Participation Agreement.*
(8)(b) Proposed Participation Agreement.*
(8)(c) Proposed Participation Agreement**
(8)(d) Proposed Participation Agreement**
(8)(e) Form of Proposed Participation Agreement.
(9) Opinion and consent of Donald R. Stading.
(10)(a) Independent Auditors' Consent.
(11) No financial statements are omitted from Item 23.
(12) Not applicable.
(13) Not applicable.
</TABLE>
- ---------------
* Incorporated by reference to the initial registration statement for
Ameritas Life Insurance Corp. Separate Account LLVA (File No.
333-5529), filed on June 7, 1996.
** Incorporated by reference to the Pre-Effective Amendment No. 1 for
Ameritas Life Insurance Corp. Separate Account LLVA (File No. 333-5529),
filed on October 3, 1996.
*** Incorporated by reference to the Pre-Effective Amendment No. 2 for
Ameritas Life Insurance Corp. Separate Account LLVA (File No. 333-5529),
filed on November 20, 1996.
**** Incorporated by reference to the Post-Effective Amendment No. 3 for
Ameritas Life Insurance Corp. Separate Account LLVA (File No. 333-5529),
filed on February 27, 1998.
***** Incorporated by reference to the Post-Effective Amendment No. 4 for
Ameritas Life Insurance Corp. Separate Account LLVA (File No. 333-5529),
filed on February 26, 1999.
2
<PAGE> 89
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION AND OFFICES WITH DEPOSITOR
------------------ -----------------------------------
<S> <C>
Lawrence J. Arth*.............. Director, Chairman of the Board and Chief Executive Officer
Kenneth C. Louis*.............. Director, President and Chief Operating Officer
Donald R. Stading*............. Senior Vice President, Secretary and Corporate General
Counsel
James P. Abel**................ Director
Duane W. Acklie**.............. Director
Haluk Ariturk*................. Executive Vice President -- Ameritas Acacia Shared Services
Center
Robert C. Barth*............... Vice President and Controller
Edward M. Beller*.............. Vice President -- Individual Administration and Chief
Underwriter
Eldon Bohmont*................. Vice President -- Individual Client Services
Roxann Brennfoerder*........... Vice President -- Group Administration, Underwriting and
Compliance
Jan M. Connolly*............... Senior Vice President -- Operations, Planning and Quality
William W. Cook, Jr.**......... Director
Gerald B. Dimon*............... Vice President -- Human Resources
Bert A. Getz**................. Director
William R. Giovanni*........... Senior Vice President, President and Chief Executive
Officer -- Ameritas Investment Corp.
Lori S. Gohde*................. Vice President -- Group Business Development and Planning
B. Douglas Gritton*............ Vice President -- Individual Agency Distribution
Arnold D. Henkel*.............. Vice President -- Pensions
Thomas D. Higley*.............. Vice President and Financial Actuary
Leslie D. Inman*............... Vice President -- Group Marketing and Training
Michael Jaskolka*.............. Vice President -- Information Services
Marty L. Johnson*.............. Second Vice President -- Individual Underwriting
Kenneth R. Jones*.............. Vice President -- Corporate Compliance and Assistant
Secretary
James R. Knapp**............... Director
Norman M. Krivosha*............ Executive Vice President -- Legal and Governmental Affairs
Robert F. Krohn**.............. Director
Robert G. Lange*............... Vice President and General Counsel -- Insurance and
Assistant Secretary
William W. Lester*............. Vice President-Securities
Wilfred J. Maddux**............ Director
JoAnn M. Martin*............... Senior Vice President and Chief Financial Officer
David C. Moore*................ President -- Group Division
William W. Nelson*............. Vice President -- Group Claims and Consultant Review
Dale K. Niebuhr*............... Second Vice President -- Audit Services
Donald W. Parker*.............. Second Vice President -- Accounting and Assistant Controller
Gary R. Raymond*............... Vice President -- Group Actuary
Todd W. Reimers*............... Vice President -- Group Field Sales
Barry C. Ritter*............... Senior Vice President -- Information Services
Mary H. Rutford*............... Second Vice President -- Accounting
Paul C. Schorr, III**.......... Director
William C. Smith**............. Director
Neal E. Tyner**................ Director
</TABLE>
3
<PAGE> 90
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION AND OFFICES WITH DEPOSITOR
------------------ -----------------------------------
<S> <C>
Kenneth L. VanCleave*.......... Vice President -- Group Managed Care and Partnering
Richard W. Vautravers*......... Senior Vice President and Corporate Actuary
Winston J. Wade**.............. Director
Jon B. Weinberg*............... Vice President -- Mortgage Loans and Real Estate
Steven L. Welton*.............. Vice President-Individual Marketing
Russell J. Wiltgen*............ Vice President -- Individual Product Management
</TABLE>
- ---------------
* Principal business address: Ameritas Life Insurance Corp., 5900 "O" Street,
Lincoln, Nebraska 68510
** Principal address for: James P. Abel, NEBCO, Inc., P.O. Box 80268, Lincoln,
Nebraska 68501; Duane W. Acklie, Crete Carrier Corporation, P.O. Box 81228,
Lincoln, Nebraska 68501; William W. Cook, Jr., The Beatrice National Bank and
Trust Company, P.O. Box 100, Beatrice, Nebraska 68310; Bert A. Getz, Globe
Corporation, Scottsdale Spectrum, 6730 N. Scottsdale Road, Suite 250,
Scottsdale, Arizona 85253; James R. Knapp, The Brookhollow Group, 535 Anton
Boulevard, Suite 100, Costa Mesa, California 92626; Robert F. Krohn, PSI
Group, Inc., 10011 "J" Street, Omaha, Nebraska 68127; Wilfred J. Maddux,
Maddux Cattle Company, P.O. Box 217, Wauneta, Nebraska 69045; Paul C. Schorr,
III, ComCor Holding, Inc., 6940 "O" Street, Suite 336, P.O. Box 57310,
Lincoln, Nebraska 68505, William C. Smith, William C. Smith & Co., Cornhusker
Plaza, Suite 401, 301 So. 13th Street, Lincoln, Nebraska 68508; Neal E.
Tyner, NET Consultants, 6940 "O" Street, Suite 324, Lincoln, Nebraska 68510;
Winston J. Wade, c/o PMI-USW 843-1, P.O. Box 311, Mendham, New Jersey 07945.
4
<PAGE> 91
ITEM 26.
The depositor, Ameritas Life Insurance Corp., is a stock life insurance company
domiciled in Nebraska. The Registrant is a segregated asset account of Ameritas
Life Insurance Corp.
The following chart indicates the persons controlled by or under common control
with Ameritas Life Insurance Corp.:
[AMERITAS ORGANIZATION CHART]
(OMITTED CHART SHOWS AMERITAS ORGANIZATION: AMERITAS ACACIA MUTUAL HOLDING
COMPANY IS AT THE UPPERMOST TIER; AMERITAS HOLDING COMPANY IS AT THE SECOND
TIER; THIRD TIER ENTITIES ARE: AMERITAS LIFE INSURANCE CORP. WITH ITS SEPARATE
ACCOUNTS AND ACACIA LIFE INSURANCE COMPANY: THE FOURTH TIER COMPANIES ARE:
AMERITAS INVESTMENT ADVISORS, INC., AMERITAS MANAGED DENTAL PLAN, INC., FIRST
AMERITAS LIFE INSURANCE CORP. OF NEW YORK, PATHMARK ASSURANCE COMPANY, VERITAS
CORP., AND AMAL CORPORATION; FIFTH TIER COMPANIES, WHICH ARE OWNED BY AMAL
CORPORATION, ARE AMERITAS INVESTMENT CORP. AND AMERITAS VARIABLE LIFE INSURANCE
COMPANY WITH ITS SEPARATE ACCOUNTS.)
All entities are Nebraska entities, except First Ameritas Life Insurance Corp.
of New York, which is a New York entity, Ameritas Managed Dental Plan, Inc.,
which is a California entity, and Acacia Life Insurance Company, which is a
District of Columbia entity.
All entities are wholly owned by the person immediately controlling it, except
AMAL Corporation, a holding company, which is jointly owned by Ameritas Life
Insurance Corp., which owns a majority interest in AMAL Corporation, and AmerUs
Life Insurance Company, which owns a minority interest in AMAL Corporation.
AMAL Corporation is a holding company. Veritas is a marketing agency. Pathmark
Assurance Company is an insurance company.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of December 31, 1998, there were 188 contractowners.
ITEM 28. INDEMNIFICATION
Ameritas Life Insurance Corp.'s By-laws provide as follows:
"The Company shall indemnify any person who was, or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or employee of the
Company or is or was serving at the request of the Company as a director,
officer or employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses including attorney's fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding to the full extent authorized
by the laws of Nebraska."
Section 21-2004 of the Nebraska Business Corporation Act, in general, allows a
corporation to indemnify any director, officer, employee or agent of the
corporation for amounts paid in settlement actually and reasonably incurred by
him or her in connection with an action, suit or proceeding, if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
In a case of a derivative action, no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his or her duty to
the corporation, unless a court in which the action was brought shall determine
that such person is fairly and reasonably entitled to indemnify for such
expenses which the Court shall deem proper.
5
<PAGE> 92
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
a) Ameritas Investment Corp. which will serve as the principal underwriter for
the variable annuity contracts issued through Ameritas Life Insurance Corp.
Separate Account LLVA, also serves as the principal underwriter for variable
life insurance contracts issued through Ameritas Life Insurance Corp.
Separate Account LLVL. Ameritas Investment Corp. also serves as the
principal underwriter for variable life insurance contracts issued through
Ameritas Variable Life Insurance Company Separate Account V, and variable
annuity contracts issued through Ameritas Variable Life Insurance Company
Separate Account VA-2.
b) The following table sets forth certain information regarding the officers
and directors of the principal underwriter, Ameritas Investment Corp.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
- --------------------------------------------- ---------------------------------------------
<S> <C>
Lawrence J. Arth*............................ Director and Chairman of the Board
Kenneth C. Louis*............................ Director, Senior Vice President
Gary R. McPhail**............................ Director, Senior Vice President
Norman M. Krivosha*.......................... Secretary and General Counsel
Director, President and Chief Executive
William R. Giovanni*......................... Officer
Michael G. Fraizer**......................... Director
Thomas C. Godlasky**......................... Director
Billie B. Beavers***......................... Senior Vice President
Thomas C. Bittner*........................... Vice President-Marketing and Administration
Alan R. Eveland*............................. Vice President-Public Finance
James R. Fox***.............................. Senior Vice President
Vice President-Trading and Institutional
Cynthia Susan Hahn*.......................... Sales
Michael P. Heaton***......................... Senior Vice President
William J. Janssen*.......................... Vice President -- Retail Sales Manager
Vice President-Corporate Compliance and
Kenneth R. Jones*............................ Assistant Secretary
Bruce D. Lefler***........................... Vice President
Robert W. Morrow*............................ Vice President
Vice President Sales Manager -- AIC /
John V. Scheer*.............................. Ameritas
Vice President -- Fixed Income Trading &
Michael E. Shoemaker*........................ Underwriting
Michael VanHorne***.......................... Senior Vice President
Janell D. Winsor*............................ Vice President
</TABLE>
- ---------------
* Principal business address: Ameritas Investment Corp., 5900 "O" Street,
Lincoln, Nebraska 68510.
** Principal business address: AmerUs Life Insurance Company, 611 Fifth Avenue,
Des Moines, Iowa 50309.
*** Principal business address: Ameritas Investment Corp., 440 Regency Parkway
Drive, Suite 222, Omaha, Nebraska 68114.
6
<PAGE> 93
c)
<TABLE>
<CAPTION>
NET UNDERWRITING COMPENSATION
NAME OF PRINCIPAL DISCOUNTS AND ON BROKERAGE
UNDERWRITER(1) COMMISSIONS(2) REDEMPTION(3) COMMISSIONS(4) COMPENSATION(5)
- ----------------- ---------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Ameritas Investment Corp. $7,569 $0 $0 $2,560
</TABLE>
- ---------------
(2)+(4)+(5) = Gross variable annuity compensation received by AIC.
(2) = Sales compensation received and paid out by AIC as underwriter, AIC
retains 0.
(4) = Sales compensation received by AIC for retail sales.
(5) = Sales compensation received by AIC and retained as underwriting fee.
ITEM 30. LOCATION OF SEPARATE ACCOUNT AND RECORDS
The books, records and other documents required to be maintained by Section
31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder are maintained at
Ameritas Life Insurance Corp., 5900 "O" Street, Lincoln, Nebraska 68510.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the audited
financial statements in the registration statement are never more than 16
months old for so long as payments under the variable annuity contracts may
be accepted.
b) Registrant undertakes to include either (1) as part of any application to
purchase a contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a post card
or similar written communication affixed to or included in the prospectus
that the applicant can remove and send for a Statement of Additional
Information.
c) Registrant undertakes to deliver any Statement of Additional Information and
any financial statements required to be made available under this form
promptly upon written or oral request.
d) The Registrant is relying upon the Division of Investment Management
(Division) no-action letter of November 28, 1988 concerning annuities sold
in 403(b) plans and represents that the requirements of the no-action letter
have been, are and/or will be complied with.
e) Ameritas Life Insurance Corp. represents that the fees and charges deducted
under the contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed by the insurance company.
7
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Ameritas Life Insurance Corp. Separate Account LLVA, certifies that it meets all
the requirements of effectiveness of this Post-Effective Amendment No. 5 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized in the City of Lincoln,
County of Lancaster, State of Nebraska on this 19th day of April, 1999.
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA, Registrant
AMERITAS LIFE INSURANCE CORP., Depositor
<TABLE>
<S> <C>
Attest: /s/ Donald R. Stading By: /s/ Lawrence J. Arth
- -------------------------------------------- --------------------------------------------
Secretary Chairman of the Board
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the Directors and Principal Officers of Ameritas
Life Insurance Corp. on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Lawrence J. Arth Director, Chairman of the Board and April 19, 1999
- --------------------------------------------- Chief Executive Officer
Lawrence J. Arth
/s/ Kenneth C. Louis Director, President and April 19, 1999
- --------------------------------------------- Chief Operating Officer
Kenneth C. Louis
/s/ Donald R. Stading Senior Vice President, Secretary April 19, 1999
- --------------------------------------------- and Corporate General Counsel
Donald R. Stading
/s/ Jon C. Headrick Executive Vice April 19, 1999
- --------------------------------------------- President-Investments and Treasurer
Jon C. Headrick
/s/ JoAnn M. Martin Senior Vice President and April 19, 1999
- --------------------------------------------- Chief Financial Officer
JoAnn M. Martin
/s/ James P. Abel Director April 19, 1999
- ---------------------------------------------
James P. Abel
/s/ Duane W. Acklie Director April 19, 1999
- ---------------------------------------------
Duane W. Acklie
/s/ Robert W. Clyde Director April 19, 1999
- ---------------------------------------------
Robert W. Clyde
/s/ William W. Cook, Jr. Director April 19, 1999
- ---------------------------------------------
William W. Cook, Jr.
/s/ Bert A. Getz Director April 19, 1999
- ---------------------------------------------
Bert A. Getz
/s/ James R. Knapp Director April 19, 1999
- ---------------------------------------------
James R. Knapp
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert F. Krohn Director April 19, 1999
- ---------------------------------------------
Robert F. Krohn
/s/ Wilfred J. Maddux Director April 19, 1999
- ---------------------------------------------
Wilfred J. Maddux
/s/ Charles T. Nason Director April 19, 1999
- ---------------------------------------------
Charles T. Nason
/s/ Paul C. Schorr, III Director April 19, 1999
- ---------------------------------------------
Paul C. Schorr, III
/s/ William C. Smith Director April 19, 1999
- ---------------------------------------------
William C. Smith
/s/ Neal E. Tyner Director April 19, 1999
- ---------------------------------------------
Neal E. Tyner
/s/ Winston J. Wade Director April 19, 1999
- ---------------------------------------------
Winston J. Wade
</TABLE>
<PAGE> 96
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20,
1999 REGISTRATION NO. 333-5529
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
REGISTRATION STATEMENT
ON
FORM N-4
------------------------
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
(8)(e) Form of Proposed Participation Agreement (Rydex)
(9) Opinion and consent of Donald R. Stading
(10)(a) Consent of Deloitte & Touche LLP
</TABLE>
<PAGE> 1
PARTICIPATION AGREEMENT
Among
RYDEX VARIABLE TRUST,
PADCO FINANCIAL SERVICES, INC.
and
AMERITAS VARIABLE LIFE INSURANCE COMPANY
DATED AS OF
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Purchase of Trust Shares ........................ 2
ARTICLE II Representations and Warranties .................. 4
ARTICLE III Prospectuses, Reports to Shareholders............
and Proxy Statements, Voting .................. 6
ARTICLE IV Sales Material and Information .................. 7
ARTICLE V Fees and Expenses ............................... 9
ARTICLE VI Diversification ................................. 9
ARTICLE VII Potential Conflicts ................. .......... 9
ARTICLE VIII Indemnification ................................. 11
ARTICLE IX Applicable Law .................................. 17
ARTICLE X Termination ..................................... 17
ARTICLE XI Notices ......................................... 19
ARTICLE XII Miscellaneous ................................... 19
SCHEDULE A Separate Accounts and Contracts .... ..... ...... 22
SCHEDULE B Proxy Voting Procedures ......................... 23
</TABLE>
<PAGE> 3
THIS AGREEMENT, made and entered into as of the day of ______________, by
and among AMERITAS VARIABLE LIFE INSURANCE COMPANY (hereinafter the "Company"),
a _____ corporation, on its own behalf and on behalf of each separate account of
the Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), RYDEX VARIABLE
TRUST (hereinafter the "Trust"), a Delaware business trust, and PADCO FINANCIAL
SERVICES, INC. (hereinafter the "Underwriter"), a Maryland corporation.
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and individual and group annuity contracts with variable
accumulation and/or pay-out provisions (hereinafter referred to individually
and/or collectively as "Variable Insurance Products") and (ii) the investment
vehicle for certain qualified pension and retirement plans (hereinafter
"Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Trust as an investment
vehicle under their Variable Insurance Products enter into participation
agreements with the Trust and the Underwriter (the "Participating Insurance
Companies");
WHEREAS, beneficial interests in the Trust are divided into several series
of interests or shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement as may be amended from time to time by mutual
agreement of the parties hereto (each such series is hereinafter referred to as
a "Fund"); and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission, dated ________ (File No. _____), granting Participating
Insurance Companies and Variable Insurance Product separate accounts exemptions
from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended (hereinafter the "1940 Act"), and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of a Fund to be sold to and held by Variable Insurance Product separate
accounts of both affiliated and unaffiliated life insurance companies and
Qualified Plans (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, the Underwriter is registered as a broker/dealer under the Securities
Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a member
in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Trust; and
<PAGE> 4
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforementioned
Variable Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Funds on behalf of
each Account to fund certain of the aforementioned Variable Insurance Products
and the Underwriter is authorized to sell such shares to each such Account at
net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Trust and each Underwriter agree as follows:
ARTICLE I. PURCHASE OF TRUST SHARES
1.1. The Trust agrees to make available for purchase by the Company shares
of the Trust and shall execute orders placed for each Account on a daily basis
at the net asset value next computed after receipt by the Trust or its designee
of such order. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from each Account and receipt
by such designee shall constitute receipt by the Trust; provided that the Trust
receives notice of such order not later than the appropriate fund closing time
on the same Business Day that such order is received by the Company. "Business
Day" shall mean any day on which the New York stock exchange is open for trading
and on which the Trust calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission.
1.2. The Trust, so long as this Agreement is in effect, agrees to make its
shares available indefinitely for purchase at the applicable net asset value per
share by the Company and its Accounts on those days on which the Trust
calculates its net asset value pursuant to rules of the Securities and Exchange
Commission and the Trust shall use reasonable efforts to calculate such net
asset value on each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust
(hereinafter the "Board") may refuse to permit the Trust to sell shares of any
Fund to any person, or suspend or terminate the offering of shares of any Fund
if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Fund.
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<PAGE> 5
1.3. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Fund will be sold to the general public.
1.4. The Trust will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
substantially the same as in Section 1.3 of Article I, Section 3.5 of Article
III, Article VI and Article VII of this Agreement is in effect to govern such
sales.
1.5. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional shares of a Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of the request for redemption. Subject to and in
accordance with applicable laws, and subject to written consent of the Company,
the Trust may redeem shares for assets other than cash. For purposes of this
Section 1.5, the Company shall be the designee of the Trust for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of such
order not later than the appropriate fund closing time on the same Business Day
that such order is received by the Company.
1.6. The Company agrees that purchases and redemptions of Fund shares
offered by the then current prospectus of the Trust shall be made in accordance
with the provisions of such prospectus. The Variable Insurance Products issued
by the Company, under which amounts may be invested in the Trust (hereinafter
the "Contracts"), are listed on Schedule A attached hereto and incorporated
herein by reference, as such Schedule A may be amended from time to time by
mutual written agreement of all of the parties hereto. The Company will give the
Trust and the Underwriter 45 days advance written notice of its intention to
make available in the future as a funding vehicle under the Contracts, any other
investment company,
1.7. The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purposes of Section 2.9 and 2.10, upon receipt by the Trust of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Trust.
1.8. Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or any account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Trust shall furnish same day notice (by electronic means, wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on Fund Shares. The Company
hereby elects to receive all such income dividends and capital gain
distributions as are payable on Fund shares in additional shares of
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<PAGE> 6
that Fund. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. The Trust
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Trust shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section ____ and has registered or, prior to any issuance or sale of the
Contracts, will register each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant to
this Agreement shall be registered under the 1933 Act., duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Trust is and shall
remain registered under the 1940 Act. The Trust shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Trust
shall register and qualify the shares for sale in accordance with the laws of
the various states, to the extent required by applicable state law.
2.3. The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify in the future.
2.4 The Company represents and warrants that the Contracts are currently
treated as life insurance policies or annuity contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Trust immediately upon
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<PAGE> 7
having a reasonable basis for believeing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5. The Trust represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, it will have a
board of trustees, a majority of whom are not interested persons of the Trust,
formulate and approve any plan under Rule l2b-1 to finance distribution
expenses.
2.6. The Trust represents that the Trust's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware and the Trust represents that their respective operations are
and shall at all times remain in material compliance with the laws of the State
of Delaware to the extent required to perform this Agreement.
2.7. The Trust represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.8. The Underwriter represents and warrants that it is and shall remain
duly registered in all material respects to the extent under all applicable
federal and state securities laws and that it will perform its obligations for
the Trust in compliance in all material respects with the laws of its state of
domicile and any applicable state and federal securities laws.
2.9. The Trust represents and warrants that its directors, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Trust are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Trust in an
amount not less than the minimum coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment Underwriter, and other individuals/entities
dealing with the money and/or securities of the Trust are covered by a blanket
fidelity bond or similar coverage, in an amount not less $5 million. The
aforesaid includes coverage for larceny and embezzlement is issued by a
reputable bonding company. The Company agrees to make all reasonable efforts to
see that this bond or another bond containing these provisions is always in
effect, and agrees to notify the Trust and the underwriter in the event that
such coverage no longer applies.
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<PAGE> 8
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1. The Trust or its designee shall provide the Company with as many
printed copies of the Trust's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies the Trust shall provide camera-ready film or
computer diskettes containing the Trust's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Trust is amended during the year)
to have the prospectus for the Contracts and the Trust's prospectus printed
together in one document, and to have the statement of additional information
for the Trust and the statement of additional information for the Contracts
printed together in one document. Alternatively, the Company may print the
Trust's prospectus and/or its statement of additional information in combination
with other Trust companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of printing and
distributing Trust prospectuses and statements of additional information shall
be the expense of the Company. For prospectuses and statements of additional
information provided by the Company to its existing owners of Contracts in
order to update disclosure as required by the 1933 Act and/or the 1940 Act, the
cost of printing shall be borne by the Trust. The Trust will provide
camera-ready film or computer diskettes in lieu of receiving printed copies of
the Trust's prospectus. The Company agrees to provide the Trust or its designee
with such information as may be reasonably requested by the Trust to assure that
the Trust's expenses do not include the cost of printing any prospectuses or
statements of additional information other than those actually distributed to
existing owners of the Contracts.
3.3. The Trust's statement of additional information shall be obtainable
from the Trust, the Company or such other person as the Trust may designate, as
agreed upon by the parties.
3.4. The Trust, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.5. If and to the extent required bylaw the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
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<PAGE> 9
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Trust shares of such Fund for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any Account in its own right to the extent permitted by law. The
Trust and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations as set forth in Schedule B attached hereto and incorporated herein
by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in a Fund calculates
voting privileges in a manner consistent with the standards set forth on
Schedule B, which standards will also be provided to the other Participating
Insurance Companies.
3.6. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Trust will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Trust
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Trust Will act
in accordance with the Securities and Exchange Commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of
directors and with whatever rules the Commission may promulgate with respect
thereto.
3.7. The Trust shall use reasonable efforts to provide Trust prospectuses,
reports to shareholders, proxy materials and other Trust communications (or
camera-ready equivalents) to the Company sufficiently in advance of the
Company's mailing dates to enable the Company to complete, at reasonable cost,
the printing, assembling and distribution of the communications in accordance
with applicable laws and regulations.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish or shall cause to be furnished, to the
Underwriter, each piece of sales literature or other promotional material in
which the Trust or the Underwriter is named, at least five Business Days prior
to its use. No such material shall be used if the Trust or its designee
reasonably objects to such use within five Business Days after receipt of such
material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Trust,
or in sales
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<PAGE> 10
literature or other promotional material approved by the Trust or its designee,
except with the permission of the Trust.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account(s) or
Contracts are named at least five Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably
objects to such use within five Business Days after receipt of such material.
4.4. The Trust and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Trust or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in the Trust under the Contracts, contemporaneously with the filing of such
document with the Securities and Exchange Commission or other regulatory
authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, any of the following that
refer to the Trust or any affiliate of the Trust: advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or public media), sales literature (i.e.,
any written communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or exerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or
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<PAGE> 11
all agents or employees, and registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, except that if the Trust or any Fund adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses or a shareholder
servicing plan to finance investor services, then payments may be made to the
Company, or to the underwriter for the Contracts, or to other service providers
if and in amounts agreed upon by the parties.
5.2. All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Trust, in accordance with
applicable state laws prior to their sale. The Trust shall bear the expenses for
the cost of registration and qualification of Fund shares, preparation and
filing of the Trust's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, and all taxes on the issuance
or transfer of Fund shares.
5.3. The Company shall bear the expenses of distributing the Trust's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company, other than the expenses of distributing prospectuses and statements of
additional information to existing contract owners.
ARTICLE VI. DIVERSIFICATION
6.1. The Trust will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Trust will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1,817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by a Fund the Trust will take all
reasonable steps (a) to notify Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 1.817-5.
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<PAGE> 12
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by Variable Insurance Product owners, or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Trust or any Fund and reinvesting such assets in a different investment
medium, including (but not limited to) another Fund of the Trust, or submitting
the question whether such segregation should be implemented to a vote of all
affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance policy owners,
or variable contract owners of one or more Participating Insurance Companies)
that votes in favor of such segregation, or offering to the affected contract
owners the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account (at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
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<PAGE> 13
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the position of the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Trust shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Trust be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification By The Company
------------------------------
8.1(a) The Company agrees to indemnify and hold harmless the Trust and each
member of the Board and each officer and employee of the Trust, the Underwriter
and each director, officer and employee of the Underwriter, and each person, if
any, who controls the Trust, or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, and "Indemnified Parties" and individually,
"Indemnified Party," for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the
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<PAGE> 14
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities, or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of Fund shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus or statement of additional
information for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf
of the Trust for use in the registration statement or prospectus or
statement of additional information for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature of the Trust not supplied by the
Company, or persons under its control and other than statements or
representations authorized by the Trust or the Underwriter) or
unlawful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares;
or
(iii) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, statement of additional information or sales
literature of the Trust or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon and in conformity with information furnished to the
Trust by or on behalf of the Company; or
(iv) arise as a result of any failure, by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Company, as
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<PAGE> 15
limited by and in accordance with the provisions of Sections 8.1(b) and 8.1
(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors, officers and employees and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, an "Indemnified Parties" and individually, "Indemnified Party,"
for purposes of this Section 8.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Underwriter) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of shares of a Fund or the Contracts and:
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<PAGE> 16
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Trust by or
on behalf of the Company for use in the registration statement,
prospectus, statement of additional information for the Trust or in
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature for the Contracts not supplied by the
Trust or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of the
Trust, Underwriter(s) or Underwriter or persons under their control,
with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, statement of additional
information or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Trust; or
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement,
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach
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<PAGE> 17
of this Agreement by the Underwriter; as limited by and in accordance
with the provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities, or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification by the Trust
8.3(a). The Trust agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Trust) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross
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<PAGE> 18
negligence, bad faith or willful misconduct of the Board or any member thereof,
and are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this
Agreement; or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust;
8.3(b). The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.3(c). The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve the Trust from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Trust.
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<PAGE> 19
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the substantive laws of the State of
Delaware.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund based upon the Company's
determination that shares of such Fund are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event any of the
Fund's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes
the use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event that such Fund
ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Trust
may fail to so qualify; or
(e) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event that such Fund
falls to meet the diversification requirements specified in
Article VI hereof; or
(f) termination by either the Trust by written notice to the Company
if the Trust shall determine, in its sole judgement exercised in
good faith, that the Company and/or
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<PAGE> 20
its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity, or
(g) termination by the Company by written notice to the Trust and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Trust or the Underwriter
has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(h) termination by the Trust or the Underwriter by written notice to
the Company, if the Company gives the Trust and the Underwriter
the written notice specified in Section 1.6 hereof and at the
time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(h)
shall be effective forty five (45) days after the notice
specified in Section 1.6 was given.
10.2. Notwithstanding any termination of this Agreement, the Trust shall,
at the option of the Company, continue to make available additional shares of
the Trust pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing, Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to direct
reallocation of investments in the Trust, redemption of investments in the Trust
and investment in the Trust upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Trust shares attributable to the
Contracts (as distinct from Trust shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Trust the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Trust) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Fund that was otherwise
available under the Contracts without first giving the Trust 90 days prior
written notice of its intention to do so.
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<PAGE> 21
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
Rydex Variable Trust
6116 Executive Boulevard, Suite 400
Rockville, MD 20852
If to Underwriter:
PADCO Financial Services, Inc.
6116 Executive Boulevard, Suite 400
Rockville, MD 20852
If to the Company:
Ameritas Variable Life Insurance Company
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Trust must look solely to the property
of the Trust for the enforcement of any claims against the Trust as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
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<PAGE> 22
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto; provided, however, that an Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days after
the end of each quarterly period;
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
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<PAGE> 23
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as
soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified above.
AMERITAS VARIABLE LIFE INSURANCE COMPANY
By:
-------------------------------------
RYDEX VARIABLE TRUST
By:
-------------------------------------
PADCO FINANCIAL SERVICES, INC.
By:
-------------------------------------
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<PAGE> 24
CONSECO VARIABLE INSURANCE COMPANY
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
------------------------------------------
Shares of the Funds of the Trust shall be made available as investments for
the following Separate Accounts:
NAME OF SEPARATE ACCOUNT AND FORM NUMBER AND NAME OF CONTRACT
DATE ESTABLISHED BY BOARD OF DIRECTORS FUNDED BY SEPARATE ACCOUNT
- -------------------------------------- --------------------------
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<PAGE> 25
SCHEDULE B
PROXY VOTING PROCEDURES
-----------------------
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Trust. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1 The proxy proposals are given to the Company by the Trust as early as
possible before the date set by the Trust for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Trust will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
2 Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities described
in this Step #2. The Company will use its best efforts to call in the number of
Customers to the Trust, as soon as possible, but no later than two weeks after
the Record Date.
3 The Trust's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Trust will provide the last Annual
Report to the Company pursuant to the terms of Section 3.3 of the Agreement
to which this Schedule relates.
4 The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Trust. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Trust or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
a name(legal name as found on account registration)
b address
c Trust or account number
d coding to state number of units
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<PAGE> 26
e individual card number for use in tracking and verification of votes
(already on Cards as printed by the Trust).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5 During this time, the Trust will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
a Voting Instruction Card(s)
b one proxy notice and statement (one document)
c return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Trust.)
e cover letter - optional, supplied by Company and reviewed and approved
in advance by the Trust
6 The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Trust.
7 Package mailed by the Company.
* The Trust must allow at least a 15-day solicitation time to the
Company as the shareowner, (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
8 Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Trust in the past.
9 Signatures on Card checked against legal name on account registration which
was printed on the Card.
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<PAGE> 27
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
10 If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
11 There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12 The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Trust receives the tabulations
stated in terms of a percentage and the number of shares.) The Trust must
review and approve tabulation format.
13 Final tabulation in shares is verbally given by the Company to the Trust on
the morning of the meeting not later than 10:00 a.m. Eastern time. The
Trust may request an earlier deadline if reasonable and if required to
calculate the vote in time for the meeting.
14 A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Trust will provide a standard form for each Certification.
15 The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Trust will be
permitted reasonable access to such Cards.
16 All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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<PAGE> 1
EXHIBIT 9
[AMERITAS LIFE INSURANCE CORP. LETTERHEAD]
April 20, 1999
Ameritas Life Insurance Corp.
5900 "O" Street
Lincoln, Nebraska 68501
Gentlemen:
With reference to Post-Effective Amendment No. 5 to the Registration Statement
on Form N-4, filed by Ameritas Life Insurance Corp. and Ameritas Life Insurance
Corp. Separate Account LLVA with the Securities & Exchange Commission covering
flexible premium variable annuity policies, I have examined such documents and
such laws as I considered necessary and appropriate, and on the basis of such
examination, it is my opinion that:
1. Ameritas Life Insurance Corp. is duly organized and validly existing
under the laws of the State of Nebraska and has been duly authorized by
the Insurance Department of the State of Nebraska to issue variable
annuity policies.
2. Ameritas Life Insurance Corp. Separate Account LLVA is a duly
authorized and existing separate account established pursuant to the
provisions of Sections 44-310.06 (subsequently repealed) and/or
44-402.01 of the Statutes of the State of Nebraska.
3. The flexible premium variable annuity policies, when issued as
contemplated by said Form N-4 Registration Statement, will constitute
legal, validly issued and binding obligations of Ameritas Life
Insurance Corp.
I hereby consent to the filing of this opinion as an exhibit to said
Post-Effective Amendment No. 5 to the Registration Statement on Form N-4 and to
the use of my name under the caption "Legal Matters" in the Statement of
Additional Information contained in the Registration Statement.
Sincerely,
/s/ Donald R. Stading
Donald R. Stading
Senior Vice President, Secretary
and Corporate General Counsel
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 5 to Registration
Statement No. 333-5529 of Ameritas Life Insurance Corp. Separate Account LLVA on
Form N-4 of our reports dated February 5, 1999, on the financial statements of
Ameritas Life Insurance Corp. and Ameritas Life Insurance Corp. Separate Account
LLVA, appearing in the Statement of Additional Information, which is a part of
such Registration Statement, and to the reference to us under the heading
"Experts" in such Statement of Additional Information.
/s/ DELOITTE & TOUCHE LLP
Lincoln, Nebraska
April 19, 1999
