As filed with the Securities and Exchange Commission on July 31, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Exact Name of Trust)
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Name of Depositor)
One American Square
P.O. Box 368
Indianapolis, Indiana 46206-0368
(Address of Depositor's Principal Executive Office)
John C. Swhear, Esq.
Counsel
American United Life Insurance Company(R)
One American Square
P.O. Box 368
Indianapolis, Indiana 46206-0368
(Name and Address of Agent for Service of Process)
Copies to:
Jeffrey S. Puretz
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
-----------------------------
Title of securities being registered: Interests in the Separate
Account under Modified Single Premium Variable Life Insurance
Policies.
Proposed maximum aggregate offering price to the public of the
securities being registered: The Registrant is registering an
indefinite number of securities under the Securities Act of 1933
pursuant to Rule 24f-2 under the Investment Company Act of 1940 and
will file its Rule 24f-2 Notice for the fiscal year ending December
31, 1997 on or before March 31, 1998.
Amount of filing fee: None.
Approximate date of proposed public offering: As soon as practicable
after the effective date of the Registration Statement. The Registrant
hereby amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
AUL American Individual Variable Life Unit Trust of
American United Life Insurance Company(R)
Modified Single Premium Variable
Life Insurance Policies
RECONCILIATION AND TIE
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
1. (a) Name of trust.............................. Prospectus front cover
(b) Title of securities issued................. Prospectus front cover
2. Name and address of each depositor............ Prospectus front cover
3. Name and address of trustee.................... N/A
4. Name and address of each principal
underwriter.................................. Sale of the Policies
5. State of organization of trust................. Separate Account
6. Execution and termination of trust
agreement.................................... Separate Account
9. Litigation.................................... Other Information
About the Policies
and AUL - Litigation
II. General Description of the Trust
and Securities of the Trust
10. (a) Registered or bearer Summary and Diagram
securities............................ of the Policy
(b) Cumulative or distributive Summary and Diagram
securities............................ of the Policy
i
<PAGE>
(c) Withdrawal or Redemption............. Cash Benefits-Policy
Loans; Cash Benefits
- Surrendering the
Policy for Net Cash
Value
(d) Conversion, transfer, etc............ Premium Payments and
Allocations-Transfer
Privilege; Premium
Payments and
Allocations-Dollar
Cost Averaging
Program; Premium
Payments and
Allocations-Portfolio
Rebalancing Program;
Cash Benefits-Policy
Loans; Cash Benefits
-Partial Surrenders;
Other Policy Benefits
and Provisions-
Exchange for Paid-Up
Policy
(e) Lapse or Default...................... Premium Payments and
Allocations-Premium
Payments to Prevent
Lapse; Other Policy
Benefits and
Provisions-
Reinstatement
(f) Voting rights.......................... Other Information
About the Policies
and AUL-Voting
Rights
(g) Notice to security holders.............. Other Policy Benefits
and Provisions-
Changes in the
Policy or Benefits;
Other Policy
Benefits and
Provisions Reports
to Policy Owners;
Other Information
About the Policies
and AUL-Addition,
Deletion or
Substitution of
Investments
(h) Consents required...................... Other Information
About the Policies
and AUL - Voting
Rights; Other
Policy Benefits
and Provisions -
Changes in the
Policy or Benefits;
Other Information
About the Policies
and AUL- Voting
Rights; Other
Information About
the Policies and
AUL - Addition,
Deletion or
Substitution of
Investments
ii
<PAGE>
(i) Other provisions...................... Premium Payments and
Allocations; Charges
and Deductions; Death
Benefits; Cash
Benefits;
Summary and Diagram
of the Policy
11. Type of securities comprising units............ Prospectus front
cover; General
Information About
AUL, the Separate
Account and the Funds
12. Certain information regarding
periodic payment plan certificates............ General Information
About AUL, the
Separate Account and
the Funds - The Funds
13. (a) Load, fees, expenses, etc.............. Charges and Deductions
(b) Certain information regarding
periodic payment plan
certificates..........................N/A
(c) Certain percentages.....................Charges and Deductions
(d) Certain other fees, etc................ Charges and Deductions
(e) Certain other profits or benefits..... Premium Payments and
Allocations-Transfer
Privilege;
Illustrations of
Account Values, Cash
Values, Death
Benefits and
Accumulated Premium
Payments
(f) Other benefits.........................General Information
About AUL, the
Separate Account and
the Funds - The Funds
(g) Ratio of annual charges to
income................................N/A
iii
<PAGE>
14. Issuance of trust's securities...................Summary and Diagram of
the Policy; Premium
Payments and
Allocations
15. Receipt and handling of payments Premium Payments and
from purchasers................................ Allocations
16. Acquisition and disposition of General Information
underlying securities........................... about AUL, the
Separate Account and
the Funds; Charges
and Deductions - Fund
Expenses
17. Withdrawal or redemption.........................Premium Payments and
Allocations -Transfer
Privilege; Charges
and Deductions -
Surrender Charge;
Cash Benefits -
Surrendering the
Policy for Net Cash
Value; Cash Benefits
-Policy Loans; Cash
Benefits - Partial
Surrenders; Cash
Benefits-Settlement
Options; Other
Information About
the Policies and
AUL - Reinstatement
18. (a) Receipt, custody and General Information
disposition of income ................. About AUL,
the Separate
Account and the
Funds - Separate
Account; Other
Policy Benefits and
Provisions -
Dividends; Tax
Considerations
(b) Reinvestment of
distributions........................ N/A
(c) Reserves or special funds.............. N/A
(d) Schedule of distributions.............. N/A
19. Records, accounts and reports................... Other Policy Benefits
and Provisions
- Reports to Policy
Owners
iv
<PAGE>
20. Certain miscellaneous provisions
of trust agreement:
(a) Amendment............................. N/A
(b) Termination........................... N/A
(c) and (d) Trustee, removal and
successor............................ N/A
(e) and (f) Depositors, removal
and successor........................ N/A
21. Loans to security holders....................... Cash Benefits -
Policy Loans
22. Limitations on liability........................ N/A
23. Bonding arrangements............................ N/A
24. Other material provisions of
trust agreement............................... Other Information
About the Policies
and AUL
III. Organizations, Personnel and
Affiliated Persons of Depositor
25. Organization of depositor...................... AUL
26. Fees received by depositor
(a) Under the policies.................... N/A
(b) From the Funds........................ General Information
About AUL, the
Separate Account and
the Funds - The
Funds
27. Business of depositor.......................... General Information
About AUL, the
Separate Account and
the Funds - AUL
28. Certain information as to officials
and affiliated persons of depositor.......... Other Information
About the Policies
and AUL - AUL
Directors and
Executive Officers
v
<PAGE>
29. Voting securities of depositor.................. N/A
30. Persons controlling depositor................... N/A
31. Payments by depositor for certain
services rendered to trust.................... N/A
32. Payments by depositor for certain
other services rendered to
trust........................................ N/A
33. Remuneration of employees of
depositor for certain services
rendered to trust............................ N/A
34. Remuneration of other persons
for certain services rendered
to trust..................................... N/A
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities
by states.................................... N/A
37. Revocation of authority to
distribute.................................. N/A
38. (a) Method of distribution.................. Other Information About
the Policies and AUL
-Sale of the Policies
(b) Underwriting agreements.................. Other Information
About the Policies
and AUL - Sale of the
Policies
(c) Selling agreements........................ Other Information
About the Policies
and AUL - Sale of
the Policies
39. (a) Organization of principal
underwriters........................ See Item 25
vi
<PAGE>
(b) N.A.S.D. membership of
principal underwriters............. Other Information
About the Policies
and AUL - Sale of the
Policies
40. Certain fees received by principal
underwriters.................................. See Item 26
41. (a) Business of each principal
underwriter.......................... See Item 27
42. Ownership of trust's securities
by certain persons............................ N/A
43. Certain brokerage commissions
received by principal
underwriters................................. N/A
44. (a) Method of valuation................... How Your Account
Values Vary
(b) Schedule as to offering
price............................... Charges and Deductions
(c) Variation in offering price
to certain persons.................. Charges and Deductions
45. Suspension of redemption rights................ N/A
46. (a) Redemption Valuation.................. How Your Account Value
Varies; Cash
Benefits - Surrender
Charge
(b) Schedule as to redemption
price................................. Cash Benefits -
Surrender Charge
47. Maintenance of position in
underlying securities......................... General Information
About AUL, the
Separate Account
and the Funds
Separate Account;
General Information
About AUL, the
Separate Account
and the Funds - The
Funds; Premium
Payments and
Allocations -
Premium Allocations
and Crediting
vii
<PAGE>
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of
trustee....................................... N/A
49. Fees and expenses of trustees................... N/A
50. Trustee's lien.................................. N/A
VI. Information Concerning Insurance of
Holders of Securities
51. Insurance of holders of trust's Summary and Diagram
securities.................................... of the Policy;
General Information
About AUL, the
Separate Account and
the Funds; Death
Benefits; Cash
Benefits; Other
Policy Benefits and
Provisions; Other
Information About the
Policies and AUL;
Premium Payments and
Allocations
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities.......................... Other Information
About the Policies
and AUL - Addition,
Deletion or
Substitution of
Investments; General
Information About
AUL, the Separate
Account and the Funds
(b) Transactions involving elimination
of underlying securities.............. N/A
(c) Policy regarding substitution
or elimination of under-
lying securities..................... See Item 52(a)
(d) Fundamental policy not other-
wise covered........................ N/A
53. Tax status of trust............................ Tax Considerations
viii
<PAGE>
VIII. Financial and Statistical Information
54. Trust's securities during last
ten years..................................... N/A
55. Trust's securities during last
ten years..................................... N/A
ix
<PAGE>
PROSPECTUS
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
American United Life Insurance Company(R)
One American Square
P.O. Box 368
Indianapolis, Indiana 46206-0368
This Prospectus describes a modified single premium variable life insurance
policy (the "Policy") offered by American United Life Insurance Company(R)
("AUL," "we," "us" or "our"). The Policy is designed to provide insurance
protection on the Insured (or Insureds if you choose the Last Survivor Rider)
named in the Policy.
The Policy gives you the opportunity to allocate premiums and Account Value to
one or more Investment Accounts of the AUL American Individual Variable Life
Unit Trust (the "Separate Account"). The assets of each Investment Account are
invested in a corresponding mutual fund portfolio (each, a "Portfolio") of AUL
American Series Fund, Inc., Alger American Portfolio, American Century Variable
Portfolios, Inc., Fidelity Variable Insurance Products Fund, Fidelity Variable
Insurance Products Fund II, and T. Rowe Price Equity Series, Inc. (each a
"Fund"). Each Fund, and its Portfolio(s), is managed by the investment adviser
shown below:
<TABLE>
<S> <C>
Fund Investment Adviser
AUL American Series Fund, Inc. AUL
AUL American Equity Portfolio
AUL American Bond Portfolio
AUL American Money Market Portfolio
AUL American Managed Portfolio
Alger American Fund Fred Alger & Company
Alger American Growth Portfolio
American Century Variable Portfolios, Inc. American Century Investment Management, Inc.
VP Capital Appreciation
VP International
Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
Asset Manager Portfolio
Contrafund
Index 500 Portfolio
Money Market Portfolio
<PAGE>
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc.
T. Rowe Price Equity Income Portfolio
</TABLE>
The prospectuses for the Funds describe their respective Portfolios, including
the risks of investing in the Portfolios, and provide other information on the
Funds.
AUL guarantees that the Death Benefit Proceeds will never be less than the
specified Death Benefit in force (less any outstanding loan and loan interest
and plus any benefits provided by rider) so long as sufficient premiums are paid
to keep the Policy in force.
The Policy provides for a Net Cash Value that can be obtained by surrendering
the Policy. Because this value is based on the performance of the Portfolios of
the Funds, there is no guaranteed minimum Net Cash Value.
If the Net Cash Value is insufficient to cover the Monthly Deduction under the
Policy, the Policy will lapse without value. The Policy also permits loans and
Partial Surrenders, within limits.
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy, or exchange it for a paid-up
policy for a reduced Death Benefit that provides benefits that do not vary with
the investment results of a separate account.
THIS PROSPECTUS PRESENTS THE INFORMATION YOU SHOULD KNOW BEFORE DECIDING TO
PURCHASE A POLICY. IT SHOULD BE RETAINED FOR FUTURE REFERENCE. PROSPECTUSES FOR
THE FUNDS SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE POLICY INVOLVES CERTAIN RISKS, INCLUDING THE LOSS OF PREMIUM PAYMENTS
(PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is __________, 1997.
2
<PAGE>
PROSPECTUS CONTENTS
Page
DEFINITIONS OF TERMS......................................................5
SUMMARY AND DIAGRAM OF THE POLICY.........................................8
GENERAL INFORMATION ABOUT AUL, THE SEPARATE ACCOUNT AND THE FUNDS........11
AUL.............................................................11
Separate Account................................................11
The Funds.......................................................12
PREMIUM PAYMENTS AND ALLOCATIONS.........................................15
Applying for a Policy...........................................15
Right to Examine Policy.........................................15
Premiums........................................................15
Premium Payments to Prevent Lapse...............................16
Premium Allocations and Crediting...............................16
Transfer Privilege..............................................17
Dollar Cost Averaging Program...................................18
Portfolio Rebalancing Program...................................19
CHARGES AND DEDUCTIONS...................................................19
Monthly Deduction...............................................19
Annual Contract Charge..........................................21
Surrender Charge................................................21
Taxes...........................................................22
Special Uses....................................................22
Fund Expenses...................................................22
HOW YOUR ACCOUNT VALUES VARY.............................................22
Determining the Account Value...................................22
Cash Value and Net Cash Value...................................24
DEATH BENEFIT............................................................24
Amount of Death Benefit Proceeds................................24
Death Benefit...................................................24
Selecting and Changing the Beneficiary..........................25
CASH BENEFITS............................................................25
Policy Loans....................................................25
Surrendering the Policy for Net Cash Value......................27
Partial Surrenders..............................................27
Settlement Options..............................................27
Specialized Uses of the Policy..................................28
3
<PAGE>
Life Insurance Retirement Plans.................................29
Risks of Life Insurance Retirement Plans.......................29
ILLUSTRATIONS OF ACCOUNT VALUES, CASH VALUES, DEATH BENEFITS
AND ACCUMULATED PREMIUM PAYMENTS.......................................30
OTHER POLICY BENEFITS AND PROVISIONS....................................41
Limits on Rights to Contest the Policy.........................41
Changes in the Policy or Benefits..............................41
Exchange for Paid-Up Policy....................................42
When Proceeds Are Paid.........................................42
Dividends......................................................43
Reports to Policy Owners.......................................43
Assignment.....................................................43
Reinstatement..................................................43
Rider Benefits.................................................43
TAX CONSIDERATIONS......................................................44
Tax Status of the Policy.......................................44
Tax Treatment of Policy Benefits...............................46
Estate and Generation Skipping Taxes...........................48
Life Insurance Purchased for Use in Split Dollar Arrangements..48
Non-Individual Ownership of Contracts..........................48
Possible Charge for AUL's Taxes................................49
OTHER INFORMATION ABOUT THE POLICIES AND AUL............................49
Policy Termination.............................................49
Resolving Material Conflicts...................................49
Addition, Deletion or Substitution of Investments..............49
Voting Rights..................................................50
Sale of the Policies...........................................51
AUL Directors and Executive Officers...........................51
State Regulation...............................................55
Additional Information.........................................56
Independent Auditors...........................................56
Litigation.....................................................56
Legal Matters..................................................56
Financial Statements...........................................56
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUSES OF THE FUNDS, OR THE STATEMENTS OF ADDITIONAL
INFORMATION OF THE FUNDS.
4
<PAGE>
DEFINITIONS OF TERMS
ACCOUNT VALUE
The Account Value is the sum of your interest in the Variable Account and
the Loan Account.
AGE
Issue Age means the Insured's age as of the Contract Date. Attained Age
means the Issue Age increased by one for each complete Policy Year.
CASH VALUE
The Cash Value is the Account Value less the Surrender Charge.
CONTRACT DATE
The date from which Monthiversaries, Policy Years, and Policy Anniversaries
are measured. Suicide and incontestability periods are measured from the
Contract Date.
DEATH BENEFIT AND DEATH BENEFIT PROCEEDS
This Policy has a death benefit that is described herein. The Death Benefit
Proceeds are the Death Benefit less any outstanding loan and loan interest,
plus any benefits provided by rider.
FACE AMOUNT
The Face Amount shown on the Policy Data Page of the Policy, or as
subsequently changed under the Partial Surrender provision.
HOME OFFICE
One American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368.
INITIAL MAXIMUM PREMIUM
An amount set to be less than or equal to the initial premium limit
required to qualify the Policy as life insurance under the Internal Revenue
Code.
INSURED
The insured named on the Policy Data Page of the Policy. The Insured may or
may not be the Owner. An available rider provides for coverage on the lives
of two Insureds.
5
<PAGE>
INVESTMENT ACCOUNTS
One or more of the subdivisions of the Separate Account. Each Investment
Account is invested in a different Portfolio.
ISSUE DATE
The date the Policy is issued.
LOAN ACCOUNT
A portion of the Account Value which is collateral for loan amounts.
MINIMUM INSURANCE PERCENTAGE
The minimum percentage of insurance required to qualify the Policy under
the Internal Revenue Code. A table of these amounts is on the Policy Data
Page of your Policy.
MONTHIVERSARY
The same date of each month as the Contract Date. If a Monthiversary falls
on a day which is not a Valuation Date, the processing of the Monthiversary
will be the next Valuation Date.
NET CASH VALUE
Cash Value less outstanding loans and loan interest.
OWNER
The owner named in the application for a Policy, unless changed.
PARTIAL SURRENDER
A withdrawal of a portion of the Account Value.
POLICY ANNIVERSARY
The same date each year as the Contract Date.
POLICY DATA PAGE
The Policy Data Page in your Policy, or the supplemental Policy Data Page
most recently sent to you by us.
6
<PAGE>
POLICY YEAR
One year from the Contract Date and from each Policy Anniversary.
PORTFOLIO
A separate investment fund in which the Separate Account invests.
PROPER NOTICE
Notice that is received at our Home Office in a form acceptable to us.
RISK AMOUNT
The Death Benefit divided by 1.00346627 less the Account Value.
SEPARATE ACCOUNT
AUL American Individual Variable Life Unit Trust. The Separate Account is
segregated into several Investment Accounts.
VALUATION DATE
Valuation Dates are the dates on which the Investment Accounts are valued.
A Valuation Date is any date on which the New York Stock Exchange is open
and we are open for business.
VALUATION PERIOD
A Valuation Period begins at the close of one Valuation Date and ends at
the close of the next succeeding Valuation Date.
VARIABLE ACCOUNT
The Account Value of this Policy which is invested in one or more
Investment Accounts.
WE
"We", "us" or "our" means AUL.
YOU
"You" or "your" means the Owner of this Policy.
7
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of Prospectus information and diagram of the Policy should
be read in conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policy in this
Prospectus assumes that the Policy is in force, that the Last Survivor Rider is
not in force, and that there are no outstanding loans and loan interests.
The Policy is similar in many ways to fixed-benefit life insurance. As with
fixed-benefit life insurance, the Owner of a Policy pays premium payments for
insurance coverage on the Insured. Also, like fixed-benefit life insurance, the
Policy provides for accumulation of premiums and a Net Cash Value that is
payable if the Policy is surrendered during the Insured's lifetime. As with
fixed-benefit life insurance, the Net Cash Value during the early Policy Years
is likely to be lower than the premium payments paid.
However, the Policy differs from fixed-benefit life insurance in several
important respects. Unlike fixed-benefit life insurance, the Death Benefit may
and the Account Value will increase or decrease to reflect the investment
performance of the Investment Accounts to which Account Value is allocated.
Also, there is no guaranteed minimum Net Cash Value. If the Net Cash Value is
insufficient to pay the Monthly Deduction, the Policy will lapse without value
after a grace period. See "Premium Payments to Prevent Lapse." If a Policy
lapses while loans are outstanding, adverse tax consequences may result. See
"Tax Considerations."
The most important features of the Policy, such as charges, cash surrender
benefits, Death Benefit, and calculation of Cash Values, are summarized in the
diagram on the following pages.
Purpose of the Policy. The Policy is designed to provide long-term
insurance benefits, and may also provide long-term accumulation of Cash Value.
The Policy should be evaluated in conjunction with other insurance policies that
you own, as well as the need for insurance and the Policy's long-term potential
for growth. It may not be advantageous to replace existing insurance coverage
with this Policy. In particular, replacement should be carefully considered if
the decision to replace existing coverage is based solely on a comparison of
Policy illustrations. See "Illustrations" below and "Specialized Uses of the
Policy."
Illustrations. Illustrations included in this Prospectus or used in
connection with the purchase of a Policy that illustrate Policy Cash Values and
Death Benefit Proceeds for prototype insureds are based on hypothetical rates of
return.
The illustrations show Policy values based on current charges and,
alternatively, based on guaranteed charges. See "Illustrations of Account
Values, Net Cash Values, Death Benefits and Accumulated Premium Payments."
Policy Tax Compliance. AUL intends for the Policy to satisfy the definition
of a life insurance policy under Section 7702 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"). It is expected that most
Policies will be treated as modified endowment contracts ("Modified Endowments")
under federal tax law. AUL will monitor the Policies and will attempt to notify
you on a timely basis if your Policy is in jeopardy of violating the federal tax
definition of life insurance. For further discussion of the tax status of a
Policy and the tax consequences of being treated as a life insurance contract or
a Modified Endowment, see "Tax Considerations."
8
<PAGE>
Right to Examine Policy and Policy Exchange. For a limited time, you
have the right to cancel your Policy and receive a refund. See "Right to Examine
Policy." Premiums are generally allocated to the Investment Accounts on the
later of the day the "right to examine" period expires, or the date we receive
the premium at our Home Office. See "Premium Allocations and Crediting."
You may exchange the Policy for a paid-up whole life policy with a level face
amount, not greater than the Policy's Face Amount, that can be purchased by the
Policy's Net Cash Value. See "Exchange for Paid-Up Policy."
Owner Inquiries. If you have any questions, you may write or call our Home
Office at One American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368,
1-317-263-1877.
Diagram of Contract
Premium Payments
. You may elect to pay an initial premium payment that is equivalent to 80%, 90%
or 100% of the Initial Maximum Premium plan but are not required to pay
premium payments according to the plan. You can vary the amount and frequency
and can skip planned premium payments. Subsequent premiums may be made at any
time, and in any amount, subject to limits outlined in the "Premiums" section.
. The Policy's maximum initial premium payment depends on the Insured's age, sex
and risk class, initial Face Amount selected, and any supplemental and/or
rider benefits.
. Extra premium payments may be necessary to prevent lapse.
Net Premium Payments
. You direct the allocation of Net Premium payments among 16 Investment Accounts
of the Separate Account. (See rules and limits on premium payment
allocations.)
. Each Investment Account invests in a corresponding portfolio of a mutual fund:
<TABLE>
<S> <C>
Mutual Fund Portfolio
AUL American Series Fund, Inc. Equity Portfolio
Bond Portfolio
Managed Portfolio
Money Market Portfolio
Alger American Fund Alger American Growth Portfolio
9
<PAGE>
American Century Variable Portfolios, Inc. VP Capital Appreciation
VP International
Fidelity Variable Insurance Products Fund Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
Fidelity Variable Insurance Products Fund II Asset Manager Portfolio
Contrafund Portfolio
Index 500 Portfolio
Money Market Portfolio
T. Rowe Price Equity Series, Inc. T. Rowe Price Equity Income
</TABLE>
Deductions
From Account Value
. Monthly deduction for cost of insurance, administration fees, state and
federal taxes and charges for any supplemental and/or rider benefits.
Administration fees are currently 1/12 of 0.40% of Account Value per month. An
annual contract fee of $30 will be deducted on a monthly basis if Account
Value is less than $50,000.
From Investment Accounts
. Monthly charge at a guaranteed annual rate of 0.90% from the Investment
Accounts during the first 10 Policy Years and 0.80% thereafter for mortality
and expense risks.
. Investment advisory fees and operating expenses are deducted from the assets
of each Portfolio.
Account Value
. Contract Value is equal to premiums, as adjusted each Valuation Date to
reflect Investment Account investment experience, charges deducted and other
Policy transactions (such as transfers, loans and surrenders).
. Varies from day to day. There is no minimum guaranteed Account Value. The
Policy may lapse if the Net Cash Value is insufficient to cover a Monthly
Deduction due.
. Can be transferred among the Investment Accounts. A transfer fee of $25.00 may
apply if more than 12 transfers are made in a Policy Year.
. Is the starting point for calculating certain values under a Policy, such as
the Cash Value, Net Cash Value and the Death Benefit used to determine Death
Benefit Proceeds.
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<TABLE>
<S> <C>
Cash Benefits Death Benefits
. Loans may be taken for amounts up to 90% of the . Income tax free to beneficiary.
Account Value, less loan interest due on the next
Policy Anniversary and any surrender charges. . Available as lump sum or under a variety of
settlement options.
. Partial Surrenders generally can be made provided
there is sufficient remaining Net Cash Value. . For all policies, Face Amount generated by the
selection of the initial premium amount
. The Policy may be surrendered in full at any time
for its Net Cash Value. A surrender charge will . Death Benefit equal to the specified amount.
apply during the first ten Policy Years after
issue. . Supplemental and/or rider benefits may be available.
. Settlement options are available.
. Loans, Partial Surrenders, and Full Surrenders
may have adverse tax consequences.
</TABLE>
GENERAL INFORMATION ABOUT AUL, THE SEPARATE ACCOUNT
AND THE FUNDS
AUL
The Policies are issued by AUL which is a mutual life insurance company
organized under the laws of the State of Indiana. It was originally incorporated
as a fraternal society in 1877 under the laws of the federal government, and
reincorporated under the laws of the State of Indiana in 1933. AUL is currently
licensed to transact life insurance business in 48 states and the District of
Columbia. AUL conducts a conventional life insurance, reinsurance, and annuity
business. At December 31, 1996, AUL had admitted assets of $7,852,292,848 and a
policy owners' surplus of $572,825,650.
AUL is subject to regulation by the Department of Insurance of the State of
Indiana as well as by the insurance departments of all other states and
jurisdictions in which it does business. We submit annual statements on our
operations and finances to insurance officials in such states and jurisdictions.
The forms for the Policy described in this Prospectus are filed with and (where
required) approved by insurance officials in each state and jurisdiction in
which Policies are sold.
Separate Account
The Separate Account was established as a segregated investment account under
Indiana law on July 10, 1997. It is used to support the Policies and may be used
to support other variable life insurance contracts, and for other purposes
permitted by law. The Separate Account is registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"). AUL has established other segregated
investment accounts, some of which also are registered with the SEC.
The Separate Account is divided into Investment Accounts. The Investment
Accounts available under the Policies invest in shares of Portfolios of the
Funds. The Separate Account may include other Investment Accounts that are not
available under the Policies and are not otherwise discussed in this Prospectus.
The assets in the Separate Account are owned by AUL.
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Income, gains and losses, realized or unrealized, of an Investment Account are
credited to or charged against the Investment Account without regard to any
other income, gains or losses of AUL. Applicable insurance law provides that
assets equal to the reserves and other contract liabilities of the Separate
Account are not chargeable with liabilities arising out of any other business of
AUL. AUL is obligated to pay all benefits provided under the Policies.
The Funds
Each Fund is registered with the SEC as a diversified, open-end management
investment company under the 1940 Act, although the SEC does not supervise their
management or investment practices and policies. Each of the Funds comprises one
or more of the Portfolios and other series that are not available under the
Policies. The investment objectives of each of the Portfolios is described
below.
AUL American Series Fund, Inc.
AUL American Equity Portfolio. The primary investment objective of the AUL
American Equity Portfolio is long-term capital appreciation. The Portfolio seeks
current investment income as a secondary objective. The Portfolio attempts to
achieve these objectives by investing primarily in equity securities selected on
the basis of fundamental investment research for their long-term growth
prospects.
AUL American Bond Portfolio. The primary investment objective of the AUL
American Bond Portfolio is to provide a high level of income consistent with
prudent investment risk. As a secondary objective, the Portfolio seeks to
provide capital appreciation to the extent consistent with the primary
objective. The Portfolio attempts to achieve these objectives by investing
primarily in corporate bonds and other debt securities.
AUL American Money Market Portfolio. The investment objective of the AUL
American Money Market Portfolio is to provide a high level of current income
while preserving assets and maintaining liquidity and investment quality. The
Portfolio attempts to achieve this objective by investing in short-term money
market instruments that are of the highest quality.
AUL American Managed Portfolio. The investment objective of the AUL
American Managed Portfolio is to provide a high total return consistent with
prudent investment risk. The Portfolio attempts to achieve this objective
through a fully managed investment policy utilizing publicly traded common
stock, debt securities (including convertible debentures), and money market
securities.
Alger American Fund
Alger American Growth Portfolio. The Alger American Growth Portfolio is a
growth portfolio that seeks to obtain long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have a total market capitalization of one billion dollars or greater.
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American Century Variable Portfolios, Inc.
VP Capital Appreciation. The VP Capital Appreciation Portfolio seeks
capital growth by investing primarily in common stocks (including securities
convertible into common stocks and other equity equivalents) and other
securities that meet certain fundamental and technical standards of selection
and have, in the opinion of the Portfolio's investment manager, better than
average potential for appreciation. The Portfolio tries to stay fully invested
in such securities, regardless of the movement of prices generally.
VP International. The VP International Portfolio seeks to achieve its
investment objective of capital growth by investing primarily in securities of
foreign companies that meet certain fundamental and technical standards of
selection and have, in the opinion of the investment manager, potential for
appreciation. The Portfolio will invest primarily in common stocks (defined to
include depository receipts for common stock and other equity equivalents) of
such companies. Investment in securities of foreign issuers typically involves a
greater degree of risk than investment in domestic securities.
Fidelity Variable Insurance Products Fund
Equity-Income Portfolio. The Equity-Income Portfolio seeks reasonable
income by investing primarily in income-producing equity securities; the
Portfolio will also consider the potential for capital appreciation.
Growth Portfolio. The Growth Portfolio seeks to achieve capital
appreciation. The Portfolio normally purchases common stocks, although the
Portfolio's investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including bonds and
preferred stocks.
High Income Portfolio. The High Income Portfolio seeks to obtain a high
level of current income by investing primarily in high-yielding, lower-rated,
fixed-income securities, while also considering growth of capital. These include
securities commonly referred to as junk bonds, the risks of which are described
in the prospectus for the Fund.
Overseas Portfolio. The Overseas Portfolio seeks long-term growth of
capital primarily through investments in foreign securities. The Overseas
Portfolio provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
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Fidelity Variable Insurance Products Fund II
Asset Manager Portfolio. The Asset Manager Portfolio seeks high total
return with reduced risk over the long-term by allocating its assets among
domestic and foreign stocks, bonds and short-term fixed income instruments.
Contrafund. The Contrafund Portfolio seeks capital appreciation by
investing primarily in companies that the investment adviser believes to be
undervalued due to an overly pessimistic appraisal by the public.
Index 500 Portfolio. The Index 500 Portfolio seeks to provide investment
results that correspond to the total return (i.e., the combination of capital
changes and income) of common stocks publicly traded in the United States. In
seeking this objective, the Portfolio attempts to duplicate the composition and
total return of the Standard & Poor's Composite Index of 500 Stocks.
Money Market Portfolio. The Money Market Portfolio seeks to maintain a
stable $1.00 share price and a high level of current income while preserving
capital and liquidity. The Portfolio invests its assets in high-quality, U.S.
dollar-denominated money market securities of domestic and foreign issuers.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio. The T. Rowe Price Equity Income
Portfolio seeks to provide substantial dividend income as well as long-term
capital appreciation through investments in common stocks of established
companies.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
More detailed information concerning the investment objectives, policies, and
restrictions pertaining to the Funds and Portfolios and their expenses,
investment advisory services and charges and the risks involved with investing
in the Portfolios and other aspects of their operations can be found in the
current prospectus for each Fund or Portfolio and the current Statement of
Additional Information for each Fund or Portfolio. The prospectuses for the
Funds or Portfolios should be read carefully before any decision is made
concerning the allocation of Net Premium payments or transfers among the
Investment Accounts.
AUL has entered into agreements with the Distributors/Advisers of Alger American
Fund, American Century Variable Portfolios, Inc. and Fidelity Investments under
which AUL has agreed to render certain services and to provide information about
these Funds to Owners who invest in these Funds. Under these agreements and for
providing these services, AUL receives compensation from the Distributor/Advisor
of these Funds ranging from zero basis points until a certain level of Fund
assets have been purchased to fifteen basis points on the net average aggregate
deposits made.
AUL cannot guarantee that each Fund or Portfolio will always be available for
the Policies; but, in the unlikely event that a Fund or Portfolio is not
available, AUL will take reasonable steps to secure the availability of a
comparable fund. Shares of each Portfolio are purchased and redeemed at net
asset value, without a sales charge.
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PREMIUM PAYMENTS AND ALLOCATIONS
Applying for a Policy
AUL requires satisfactory evidence of the proposed Insured's insurability, which
may include a medical examination of the proposed Insured. The available Issue
Ages are 0 through 89 on a standard basis. Issue Age is determined based on the
Insured's age as of the Contract Date. Acceptance of an application depends on
AUL's underwriting rules, and AUL reserves the right to reject an application.
Coverage under the Policy is effective as of the later of the date the initial
premium is paid or the Issue Date.
As the Owner of the Policy, you may exercise all rights provided under the
Policy while the Insured is living, subject to the interests of any assignee or
irrevocable beneficiary. The Insured is the Owner, unless a different Owner is
named in the application. In accordance with the terms of the Policy, the Owner
may in the application or by Proper Notice name a contingent Owner or a new
Owner while the Insured is living. The Policy may be jointly owned by more than
one Owner. The consent of both joint Owners is required for all transactions
except when proper forms have been executed to allow one Owner to make changes.
Unless a contingent Owner has been named, on the death of the last surviving
Owner, ownership of the Policy passes to the estate of the last surviving Owner,
which then will become the Owner. A change in Owner may have tax consequences.
See "Tax Considerations."
Right to Examine Policy
You may cancel your Policy for a refund during your "right to examine" period.
This period expires 10 days after you receive your Policy. We assume you receive
your Policy 5 days after the Issue Date. If you decide to cancel the Policy, you
must return it by mail or other delivery method to the Home Office or to the
authorized AUL representative who sold it. Immediately after mailing or
delivery, the Policy will be deemed void from the beginning. Within seven
calendar days after AUL receives the returned Policy, AUL will refund the
greater of premiums paid or the Account Value.
Premiums
The Policy permits the Owner to pay a large single premium and, subject to
restrictions, additional premiums. The minimum initial premium payment required
depends on a number of factors, such as the Age, sex and risk class of the
proposed Insured, the initial Face Amount, any supplemental and/or rider
benefits and the premium payments you propose to make. You may elect the initial
premium to be 80%, 90% or 100% of the Initial Maxmium Premium. The Initial
Maximum Premium is less than or equal to the maximum premium that can be paid
for a given Face Amount in order for an insurance policy to qualify as a life
insurance contract for tax purposes. Consult your AUL representative for
information about the initial premium required for the coverage you desire.
The initial premium is due on or before delivery of the Policy. There will be no
coverage until this premium is paid or until the Issue Date, whichever is later.
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<PAGE>
You may make other premium payments at any time and in any amount, subject to
the limits described in this section. The actual amount of premium payments will
affect the Account Value and the period of time the Policy remains in force.
Premium payments after the initial payment must be made to our Home Office. Each
payment must be at least equal to the minimum payment shown on the Policy Data
Page in your Policy. All premiums combined may not be more than $1,000,000,
unless a higher amount is agreed to by us.
If the payment of any premium would cause an increase in Risk Amount because of
the Minimum Insurance Percentage, we may require satisfactory evidence of
insurability before accepting it. If we accept the premium, we will allocate the
premium to your Account Value on the date of our acceptance. If we do not accept
the premium, we will refund it to you.
If the payment of any premium would cause this Policy to fail to meet the
federal tax definition of a life insurance contract in accordance with the
Internal Revenue Code, we reserve the right to refund the amount to you with
interest no later than 60 days after the end of the Policy Year in which we
receive the premium, but we assume no obligation to do so.
Each premium after the initial premium must be at least $1,000. AUL may increase
this minimum 90 days after we send you a written notice of such increase.
However AUL reserves the right to limit the amount of a premium payment or the
total premium payments paid.
Premium Payments to Prevent Lapse
The Policy goes into default at the start of the grace period, which is a period
to make a premium payment sufficient to prevent lapse. The grace period starts
if the Net Cash Value on a Monthiversary will not cover the Monthly Deduction. A
premium sufficient to keep the Policy in force must be submitted during the
grace period.
AUL will send notice of the grace period and the amount required to be paid
during the grace period to your last known address. The grace period shall
terminate as of the date indicated in the notice, which shall comply with any
applicable state law. The grace period will begin when the notice is sent. Your
Policy will remain in force during the grace period. If the Insured should die
during the grace period, the Death Benefit Proceeds will still be payable to the
beneficiary, although the amount paid will reflect a reduction for the Monthly
Deductions due on or before the date of the Insured's death (and for any
outstanding loan and loan interest). See "Amount of Death Benefit Proceeds." If
the grace period premium payment has not been paid before the grace period ends,
your Policy will lapse. It will have no value, and no benefits will be payable.
See "Reinstatement." A grace period also may begin if any outstanding loan and
loan interest becomes excessive. See "Policy Loans."
Premium Allocations and Crediting
In the Policy application, you specify the percentage of a premium to be
allocated to each Investment Account. The sum of your allocations must equal
100%, with at least 1% of the premium payment allocated to each Investment
Account selected by you. All premium allocations must be in whole percentages.
AUL reserves the right to limit the number of Investment Accounts to which
premiums may be allocated. You can change the allocation percentages at any
time, subject to these rules, by sending Proper Notice to the Home Office, or by
telephone if written authorization is on file with us. The change will apply to
the premium payments received with or after receipt of your notice.
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The initial premium generally is allocated to the Investment Accounts in
accordance with your allocation instructions on the later of the day the "right
to examine" period expires, or the date we receive the premium at our Home
Office. Subsequent premiums are allocated as of the end of the Valuation Period
during which we receive the premium at our Home Office.
We generally allocate all premiums received prior to the Issue Date to our
general account prior to the end of the "right to examine" period. We will
credit interest daily on premiums so allocated. However, we reserve the right to
allocate premiums to the Investment Accounts of the Separate Account in
accordance with your allocation instructions prior to the expiration of the
"right to examine" period. If you exercise your right to examine the Policy and
cancel it by returning it to us, we will refund to you the greater of any
premiums paid or the Account Value. At the end of the "right to examine" period,
we transfer the premium and interest to the Investment Accounts of the Separate
Account based on the percentages you have selected in the application. For
purposes of determining the end of the "right to examine" period, solely as it
applies to this transfer, we assume that receipt of this Policy occurs 5 days
after the Issue Date.
Premium payments requiring satisfactory evidence of insurability will not be
credited to the Policy until underwriting has been completed and the premium
payment has been accepted. If the additional premium payment is rejected, AUL
will return the premium payment immediately, without any adjustment for
investment experience.
Transfer Privilege
You may transfer amounts among Investment Accounts at any time after the "right
to examine" period.
There currently is no minimum transfer amount, although we reserve the right to
require a $100 minimum transfer. You must transfer the minimum amount, or, if
less, the entire amount in the account from which you are transferring each time
a transfer is made. If after the transfer the amount remaining in any account is
less than $25, we have the right to transfer the entire amount. Any applicable
transfer charge will be assessed. The charge will be deducted from the
account(s) from which the transfer is made on a prorata basis.
Transfers are made such that the Account Value on the date of transfer will not
be affected by the transfer, except for the deduction of any transfer charge.
Currently, all transfers are free. On a guaranteed basis, we reserve the right
to limit the number of transfers to 12 per year, or to restrict transfers from
being made on consecutive Valuation Dates.
If we determine that the transfers made by or on behalf of one or more Owners
are to the disadvantage of other Owners, we may restrict the rights of certain
Owners. We also reserve the right to limit the size of transfers and remaining
balances, to limit the number and frequency of transfers, and to discontinue
telephone transfers.
The first 12 transfers during each Policy Year are free. Any unused free
transfers do not carry over to the next Policy Year. We will assess a $25 charge
for the thirteenth and each subsequent transfer during a Policy Year. For the
purpose of assessing the charge, each request (or telephone request described
below) is considered to be one transfer, regardless of the number of Investment
Accounts affected by the transfer. The charge will be deducted from the
Investment Account(s) from which the transfers are made.
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Telephone Transfers. Telephone transfers will be based upon instructions
given by telephone, provided the appropriate election has been made at the time
of application or proper authorization has been provided to us. We reserve the
right to suspend telephone transfer privileges at any time, for any reason, if
we deem such suspension to be in the best interests of Owners.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, and if we follow those procedures, we will not be
liable for any losses due to unauthorized or fraudulent instructions. We may be
liable for such losses if we do not follow those reasonable procedures. The
procedures we will follow for telephone transfers include requiring some form of
personal identification prior to acting on instructions received by telephone,
providing written confirmation of the transaction, and making a tape recording
of the instructions given by telephone.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program, if elected, enables you to transfer
systemically and automatically, on a monthly basis, specified dollar amounts
from The AUL American Money Market Investment Account to other Investment
Accounts. By allocating on a regularly scheduled basis, as opposed to allocating
the total amount at one particular time, you may be less susceptible to the
impact of market fluctuations. However, we make no guarantee that the Dollar
Cost Averaging Program will result in a gain.
You specify the fixed dollar amount to be transferred automatically from the AUL
American Money Market Investment Account. At the time that you elect the Dollar
Cost Averaging Program, the Account Value in the AUL American Money Market
account from which transfers will be made must be at least $2,000.
You may elect this program at the time of application by completing the
authorization on the application or at any time after the Policy is issued by
properly completing and returning the election form to us. Transfers made under
the Dollar Cost Averaging Program will commence on the Monthiversary on or next
following the election.
Once elected, transfers from the AUL American Money Market Investment Account
will be processed until the value of the Investment Account is completely
depleted, or you send us Proper Notice instructing us to cancel the transfers.
Currently, transfers made under the Dollar Cost Averaging Program will not be
subject to any transfer charge and will not count against the number of free
transfers permitted in a Policy Year. We reserve the right to impose a $25
transfer charge for each transfer effected under a Dollar Cost Averaging
Program. We also reserve the right to alter the terms or suspend or eliminate
the availability of the Dollar Cost Averaging Program at any time.
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Portfolio Rebalancing Program
You may elect to have the accumulated balance of each Investment Account
redistributed to equal a specified percentage of the Variable Account. This will
be done on an annual basis from the Monthiversary on which the Portfolio
Rebalancing Program commences. If elected, this plan automatically adjusts your
Portfolio mix to be consistent with the allocation most recently requested. The
redistribution will not count toward the 12 free transfers permitted each Policy
Year. If the Dollar Cost Averaging Program has been elected and has not been
completed, the Portfolio Rebalancing Program will commence on the Monthiversary
following the termination of the Dollar Cost Averaging Program.
You may elect this program at the time of application by completing the
authorization on the application or at any time after the Policy is issued by
properly completing the election form and returning it to us. Portfolio
rebalancing will terminate when you request any transfer or the day we receive
Proper Notice instructing us to cancel the Portfolio Rebalancing Program. We
reserve the right to alter the terms or suspend or eliminate the availability of
portfolio rebalancing at any time.
CHARGES AND DEDUCTIONS
Monthly Deduction
AUL will deduct Monthly Deductions for the Contract Date and each Monthiversary.
Monthly Deductions due on the Contract Date and any Monthiversaries prior to the
Issue Date are deducted on the Issue Date. Your Contract Date is the date used
to determine your Monthiversary. The Monthly Deduction consists of (1) cost of
insurance charge, (2) monthly administrative charge, (3) mortality and expense
risk charge, (4) tax charges, and (5) any charges for rider benefits, as
described below. The Monthly Deduction is deducted from the Investment Account
prorata on the basis of the portion of Account Value in each account.
Cost of Insurance Charge. This charge compensates AUL for the expense of
providing insurance coverage. The charge depends on a number of variables and
therefore will vary between Policies, and may vary from Monthiversary to
Monthiversary. The Policy contains guaranteed cost of insurance rates that may
not be increased. The guaranteed rates are no greater than the 1980
Commissioners Standard Ordinary Mortality Tables (the "1980 CSO Tables") (and
where unisex cost of insurance rates apply, the 1980 CSO-C Tables). The
guaranteed rates for substandard classes are based on multiples of or additives
to the 1980 CSO Tables. These rates are based on the Attained Age and
underwriting class of the Insured. They are also based on the sex of the
Insured, except that unisex rates are used where appropriate under applicable
law, including in the state of Montana, and in Policies purchased by employers
and employee organizations in connection with employment-related insurance or
benefit programs. The cost of insurance rate generally increases with the
Attained Age of the Insured. As of the date of this Prospectus, we charge
"current rates" that are generally lower (i.e., less expensive) than the
guaranteed rates, and we may also charge current rates in the future. The
current rates may also vary with the Attained Age, gender, where permissible,
duration, policy size and underwriting class of the Insured, or, alternatively,
may be a charge against Account Value that does not vary with Attained Age or
gender, and may vary with underwriting class. For any Policy, the current cost
of insurance on a Monthiversary is calculated in one of two ways: (1) if the
Initial Maximum Premium is paid, the cost of insurance equals the lesser of an
amount equal, on an annual basis, to a guaranteed maximum monthly rate
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multiplied by the Account Value or an amount equal to the Risk Amount multiplied
by the guaranteed maximum cost of insurance rate set forth in the Policy; or (2)
if less than the Initial Maximum Premium is paid, the cost of insurance is
calculated by multiplying the current cost of insurance rate for the Insured by
the Risk Amount for that Monthiversary. We reserve the right to change the
current cost of insurance rates, and, in the case of payment of the Initial
Maximum Premium, to assess a cost of insurance charge calculated solely by
multiplying the current cost of insurance rate for the Insured by the Risk
Amount for a Monthiversary, in the same manner as the cost of insurance charge
currently is calculated when less than the Initial Maximum Premium is paid. The
Risk Amount on a Monthiversary is the difference between the Death Benefit
divided by 1.00246627 and the Account Value.
AUL places the Insured in a risk class when the Policy is given underwriting
approval, based on AUL's underwriting of the application. AUL currently places
Insureds in a standard class based on underwriting. An Insured may be placed in
a substandard risk class, which involves a higher mortality risk than the
standard classes. Standard rates are available for Issue Ages 0-89. The
guaranteed maximum cost of insurance rate is set forth on the Policy Data Page
of your Policy.
Monthly Administrative Charge. The monthly administrative charge is a level
monthly charge that is guaranteed not to exceed, on an annual basis, a rate of
0.40% of Account Value. We reserve the right to charge a lower current rate.
This charge reimburses AUL for expenses incurred in the administration of the
Policies and the Separate Account. Such expenses include, but are not limited
to: underwriting and issuing the Policy, confirmations, annual reports and
account statements, maintenance of Policy records, maintenance of Separate
Account records, administrative personnel costs, mailing costs, data processing
costs, legal fees, accounting fees, filing fees, the costs of other services
necessary for Owner servicing and all accounting, valuation, regulatory and
updating requirements.
Mortality and Expense Risk Charge. AUL deducts a monthly charge from the
Investment Accounts prorata based on your amounts in each account. The current
charge is at an annual rate of 0.90% of Variable Account value during the first
10 Policy Years, and 0.80% thereafter, and is guaranteed not to increase for the
duration of a Policy. AUL may realize a profit from this charge.
The mortality risk assumed is that Insureds, as a group, may live for a shorter
period of time than estimated and, therefore, the cost of insurance charges
specified in the Policy will be insufficient to meet actual claims. The expense
risk AUL assumes is that expenses incurred in issuing and administering the
Policies and the Separate Account will exceed the amounts realized from the
monthly administrative charges assessed against the Policies.
Premium Tax Charge. AUL deducts a monthly charge at an annual rate equal to
.25% of Account Value during the first 10 Policy Years for state and local
premium taxes and administrative expenses. The state and local premium tax
charge reimburses AUL for premium taxes and related administrative expenses
associated with the Policies. AUL expects to pay an average state and local
premium tax rate (including related administrative expenses) of approximately
2.5% of premium payments for all states.
Federal Tax Charge. AUL also deducts a federal tax charge at an annual rate
equal to 0.15% of Account Value during the first 10 Policy Years.
Cost of Additional Benefits Provided by Riders. The cost of additional
benefits provided by riders is charged to the Account Value on the
Monthiversary.
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Annual Contract Charge
AUL deducts an annual contract charge from Account Value equal to $30 on each
Policy Anniversary in which the Account Value is less than $50,000. This charge
is deducted prorata from each Investment Account to which you have allocated
Account Value.
Surrender Charge
During the first 10 Policy Years, a surrender charge based on the percentage of
premium surrendered will be deducted from the Account Value if the Policy is
completely surrendered for cash, or if you make a Partial Surrender in excess of
12% of the Account Value as of the beginning of the Policy Year. The total
surrender charge will not exceed the maximum surrender charge set forth in your
Policy.
The surrender charge on the date of reinstatement of a Policy will be based on
the number of Policy Years from the original Contract Date. For purposes of
determining the surrender charge on any date after reinstatement, the period the
Policy was lapsed will count.
The table below shows the surrender charge deducted if the Policy is completely
surrendered during the first 10 Policy Years.
Table of Surrender Charges
Policy Year Percentage of Premium
1 10%
2 9%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 2%
10 1%
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Taxes
AUL does not currently assess a charge for any taxes other than the state
premium tax charge and federal tax charge. We reserve the right, however, to
assess a charge for such taxes, or taxes resulting from the performance of the
Separate Account, against the Separate Account if we determine that such taxes
will be incurred.
Special Uses
We may agree to reduce or waive the surrender charge or the Monthly Deduction,
or credit additional amounts under the Policies in situations where selling
and/or maintenance costs associated with the Policies are reduced, such as the
sale of several Policies to the same Owner(s), sales of large Policies, sales of
Policies in connection with a group or sponsored arrangement or mass
transactions over multiple Policies.
In addition, we may agree to reduce or waive some or all of these charges and/or
credit additional amounts under the Policies for those Policies sold to person
who meet criteria established by us, who may include current and retired
officers, directors and employees of us and our affiliates. We may also agree to
waive minimum premium requirements for such persons.
We will only reduce or waive such charges or credit additional amounts on any
Policies where expenses associated with the sale of the Policy and/or costs
associated with administering and maintaining the Policy are reduced. We reserve
the right to terminate waiver/reduced charge and crediting programs at any time,
including for issued Policies.
Fund Expenses
Each Investment Account of the Separate Account purchases shares at the net
asset value of the corresponding Portfolio. The net asset value reflects the
investment advisory fee and other expenses that are deducted from the assets of
the Portfolio. The advisory fees and other expenses are not fixed or specified
under the terms of the Policy and are described in the Funds' prospectuses.
HOW YOUR ACCOUNT VALUES VARY
There is no minimum guaranteed Account Value, Cash Value or Net Cash Value.
These values will vary with the investment experience of the Investment
Accounts, and will depend on the allocation of Account Value. If the Net Cash
Value on a Monthiversary is less than the amount of the Monthly Deduction to be
deducted on that date, the Policy will be in default and a grace period will
begin. See "Premium Payments to Prevent Lapse."
Determining the Account Value
On the Contract Date, the Account Value is equal to the initial premium less the
Monthly Deductions deducted as of the Contract Date. On each Valuation Day
thereafter, the Account Value is the aggregate of the Variable Account value and
the Loan Account value. The Account Value will vary to reflect the performance
of the Investment Accounts to which amounts have been allocated, interest
credited on amounts in the Loan Account, premium payments since the prior
Valuation Date, charges, transfers, Partial Surrenders and surrender charges
since the prior Valuation Date, loans and loan repayments.
22
<PAGE>
Variable Account Value. When you allocate an amount to an Investment
Account, either by premium payment allocation or transfer, your Policy is
credited with accumulation units in that Investment Account. The number of
accumulation units is determined by dividing the amount allocated to the
Investment Account by the Investment Account's accumulation unit value at the
end of the Valuation Period during which the allocation is effected. The
Variable Account value of the Policy equals the sum, for all Investment
Accounts, of the accumulation units credited to an Investment Account multiplied
by that Investment Account's accumulation unit value.
The number of Investment Account accumulation units credited to your Policy will
increase when premium payments are allocated to the Investment Account and when
amounts are transferred to the Investment Account. The number of Investment
Account accumulation units credited to a Policy will decrease when the allocated
portion of the Monthly Deduction is taken from the Investment Account, a loan is
made, an amount is transferred from the Investment Account, or a Partial
Surrender is taken from the Investment Account.
Accumulation Unit Values. An Investment Account's accumulation unit value
is determined on each Valuation Date and varies to reflect the investment
experience of the underlying Portfolio. It may increase, decrease, or remain the
same from Valuation Period to Valuation Period. The accumulation unit value for
the Money Market Investment Account was initially set at $1, and the
accumulation unit value for each of the other Investment Accounts was
arbitrarily set at $5 when each Investment Account was established. For each
Valuation Period after the date of establishment, the accumulation unit value is
determined by multiplying the value of an accumulation unit for an Investment
Account for the prior Valuation Period by the net investment factor for the
Investment Account for the current Valuation Period.
Net Investment Factor. The net investment factor is used to measure the
investment performance of an Investment Account from one Valuation Period to the
next. For any Investment Account, the net investment factor for a Valuation
Period is determined by dividing (a) by (b), where:
(a) is equal to:
1. the net asset value per share of the Portfolio held in the
Investment Account determined at the end of the current Valuation
Period; plus
2. the per share amount of any dividend or capital gain distribution
paid by the Portfolio during the Valuation Period; plus
3. the per share credit or charge with respect to taxes, if any, paid
or reserved for by AUL during the Valuation Period that are determined
by AUL to be attributable to the operation of the Investment Account;
and
(b) is equal to:
1. the net asset value per share of the Portfolio held in the
Investment Account determined at the end of the preceding Valuation
Period; plus
2. the per share credit or charge for any taxes reserved for the
immediately preceding Valuation Period.
23
<PAGE>
Loan Account Value. On any Valuation Date, if there have been any Policy
loans, the Loan Account value is equal to amounts transferred to the Loan
Account from the Investment Accounts as collateral for Policy loans and for due
and unpaid loan interest, less amounts transferred from the Loan Account to the
Investment Accounts as outstanding loans and loan interest are repaid, and plus
interest credited to the Loan Account.
Cash Value and Net Cash Value
The Cash Value on a Valuation Date is the Account Value less any applicable
surrender charges. The Net Cash Value on a Valuation Date is the Cash Value
reduced by any outstanding loans and loan interest. Net Cash Value is used to
determine whether a grace period starts. See "Premium Payments to Prevent
Lapse." It is also the amount that is available upon full surrender of the
Policy. See "Surrendering the Policy for Net Cash Value."
DEATH BENEFIT
As long as the Policy remains in force, AUL will pay the Death Benefit Proceeds
upon receipt at the Home Office of satisfactory proof of the Insured's death.
AUL may require return of the Policy. The Death Benefit Proceeds may be paid in
a lump sum, generally within seven calendar days of receipt of satisfactory
proof (see "When Proceeds Are Paid"), or in any other way agreeable to you and
us. Before the Insured dies, you may choose how the proceeds are to be paid. If
you have not made a choice before the Insured dies, the beneficiary may choose
how the proceeds are paid. The Death Benefit Proceeds will be paid to the
beneficiary. See "Selecting and Changing the Beneficiary."
Amount of Death Benefit Proceeds
The Death Benefit Proceeds are equal to the sum of the Death Benefit in force as
of the end of the Valuation Period during which death occurs, plus any rider
benefits, minus any outstanding loan and loan interest on that date. If the date
of death occurred during a grace period, the Death Benefit will still be payable
to the beneficiary, although the amount will be equal to the Death Benefit
immediately prior to the start of the grace period, plus any benefits provided
by rider, and less any outstanding loan and loan interest and overdue Monthly
Deductions as of the date of death. Under certain circumstances, the amount of
the Death Benefit may be further adjusted. See "Limits on Rights to Contest the
Policy" and "Changes in the Policy or Benefits."
If part or all of the Death Benefit Proceeds is paid in one sum, AUL will pay
interest on this sum as required by applicable state law from the date of the
Insured's death to the date of payment.
Death Benefit
The Death Benefit is the greater of the Face Amount or the Applicable Percentage
(as described below) of Account Value on the date of the Insured's death. If
investment performance is favorable, the amount of the Death Benefit may
increase. However, the Death Benefit ordinarily will not change for several
years to reflect any favorable investment performance and may not change at all.
To see how and when investment performance may begin to affect the Death
Benefit, see "Illustrations of Account Values, Cash Values, Death Benefits and
Accumulated Premium Payments."
24
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Applicable Percentages of Account Value
Attained Age Percentage Attained Age Percentage Attained Age Percentage Attained Age Percentage
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
95+ 100
</TABLE>
Selecting and Changing the Beneficiary
You select the beneficiary in your application. You may select more than one
beneficiary. You may later change the beneficiary in accordance with the terms
of the Policy. The primary beneficiary, or, if the primary beneficiary is not
living, the contingent beneficiary, is the person entitled to receive the Death
Benefit Proceeds under the Policy. If the Insured dies and there is no surviving
beneficiary, the Owner (or the Owner's estate if the Owner is the Insured) will
be the beneficiary. If a beneficiary is designated as irrevocable, then the
beneficiary's consent must be obtained to change the beneficiary.
CASH BENEFITS
Policy Loans
Prior to the death of the Insured, you may borrow against your Policy by
submitting Proper Notice to the Home Office at any time after the end of the
"right to examine" period while the Policy is not in the grace period. The
Policy is assigned to us as the sole security for the loan. The minimum amount
of a new loan is $500. The maximum amount of a new loan is:
1. 90% of the Variable Account value; less
2. any loan interest due on the next Policy Anniversary; less
3. any applicable surrender charges; less
4. any existing loans and accrued loan interest
Outstanding loans reduce the amount available for new loans. Policy loans will
be processed as of the date your written request is received and approved. Loan
proceeds generally will be sent to you within seven calendar days. See "When
Proceeds Are Paid."
Interest. AUL will charge interest on any outstanding loan at an annual
rate of 6.0%. Interest is due and payable on each Policy Anniversary while a
loan is outstanding. If interest is not paid when due, the amount of the
interest is added to the loan and becomes part of the loan.
25
<PAGE>
Loan Collateral. When a Policy loan is made, an amount sufficient to secure
the loan is transferred out of the Investment Accounts into the Policy's Loan
Account. Thus, a loan will have no immediate effect on the Account Value, but
the Net Cash Value will be reduced immediately by the amount transferred to the
Loan Account. The Owner can specify the Investment Accounts from which
collateral will be transferred. If no allocation is specified, collateral will
be transferred from each Investment Account in the same proportion that the
Account Value in each Investment Account bears to the total Account Value in
those accounts on the date that the loan is made. Due and unpaid interest will
be transferred each Policy Anniversary from each Investment Account to the Loan
Account in the same proportion that each Investment Account value bears to the
total unloaned Account Value. The amount we transfer will be the amount by which
the interest due exceeds the interest which has been credited on the Loan
Account.
The Loan Account will be credited with interest daily at an effective annual
rate of not less than 4.0%. Thus, the maximum net cost of a loan is 2.0% per
year (the net cost of a loan is the difference between the rate of interest
charged on outstanding loans and loan interests and the amount credited to the
Loan Account). On each Monthiversary, the interest earned on the Loan Account
since the previous Monthiversary will be transferred to the Loan Account.
Preferred Loan Provision. Beginning in the eleventh Policy Year, a
preferred loan may be made available by AUL. The amount available for a
preferred loan is the amount by which the Cash Value exceeds total premiums
paid. The maximum amount available for a preferred loan may not exceed the
maximum loan amount. The preferred loan amount will be credited with an
effective annual rate of interest (currently, 6.0%). Thus, the current net cost
of the preferred loan is 0% per year. The preferred loan provision is not
guaranteed.
Loan Repayment; Effect if Not Repaid. You may repay all or part of your
loan at any time while the Insured is living and the Policy is in force. Loan
repayments must be sent to the Home Office and will be credited as of the date
received. A loan repayment must be clearly marked as "loan repayment" or it will
be credited as a premium unless the premium would cause the Policy to fail to
meet the federal tax definition of a life insurance contract in accordance with
the Internal Revenue Code. When a loan repayment is made, Account Value in the
Loan Account in an amount equivalent to the repayment is transferred from the
Loan Account to the Investment Accounts. Thus, a loan repayment will have no
immediate effect on the Policy Value, but the Net Cash Value will be increased
immediately by the amount transferred from the Loan Account. Loan repayment
amounts will be transferred to the Investment Accounts according to the premium
allocation instructions in effect at that time.
If the Death Benefit becomes payable while a loan is outstanding, any
outstanding loans and loan interest will be deducted in calculating the Death
Benefit Proceeds. See "Amount of Death Benefit Proceeds."
If the Monthly Deduction exceeds the Net Cash Value on any Monthiversary, the
Policy will be in default. You will be sent notice of the default. You will have
a grace period to submit a sufficient payment to avoid termination of coverage
under the Policy. The notice will specify the amount that must be repaid to
prevent termination. See "Premium Payments to Prevent Lapse."
Effect of Policy Loan. A loan, whether or not repaid, will have a permanent
effect on the Death Benefit and Policy values because the investment results of
the Investment Accounts of the Separate Account will apply only to the
non-loaned portion of the Account Value. The longer the loan is outstanding, the
greater the effect is likely to be. Depending on the investment results of the
Investment Accounts while the loan is outstanding, the effect could be favorable
26
<PAGE>
or unfavorable. Policy loans may increase the potential for lapse if investment
results of the Investment Accounts are less than anticipated. Also, loans could,
particularly if not repaid, make it more likely than otherwise for a Policy to
terminate. Loans may be currently taxable and subject to a 10% penalty tax. See
"Tax Considerations," for a discussion of the tax treatment of Policy loans, and
the adverse tax consequences if a Policy lapses with loans outstanding.
Surrendering the Policy for Net Cash Value
You may surrender your Policy at any time for its Net Cash Value by submitting
Proper Notice to us. AUL may require return of the Policy. A surrender charge
may apply. See "Surrender Charge." A surrender request will be processed as of
the date your written request and all required documents are received. Payment
will generally be made within seven calendar days. See "When Proceeds are Paid."
The Net Cash Value may be taken in one lump sum or it may be applied to a
payment option. See "Settlement Options." The Policy will terminate and cease to
be in force if it is surrendered for one lump sum or applied to a settlement
option. It cannot later be reinstated. Surrenders may have adverse tax
consequences. See "Tax Considerations."
Partial Surrenders
You may make Partial Surrenders under your Policy of at least $500 at any time
after the end of the "right to examine" period by submitting Proper Notice to
us. A Partial Surrender exceeding, in any Policy Year, 12% of the Account Value
as of the beginning of the Policy Year may be subject to a surrender charge. See
"Surrender Charge." As of the date AUL receives a written request for a Partial
Surrender, the Account Value and, therefore, the Cash Value will be reduced by
the Partial Surrender.
When you request a Partial Surrender, you can direct how the Partial Surrender
will be deducted from the Investment Accounts. If you provide no directions, the
Partial Surrender will be deducted from your Cash Value in the Investment
Accounts on a prorata basis. Partial Surrenders may have adverse tax
consequences. See "Tax Considerations."
AUL will reduce the Face Amount in proportion to the reduction in the Account
Value resulting from the Partial Surrender. AUL will reject a Partial Surrender
request if the Partial Surrender would reduce the Account Value below the
minimum Account Value on the Policy Data Page, or if the Partial Surrender would
cause the Policy to fail to qualify as a life insurance contract under
applicable tax laws, as interpreted by AUL.
Partial Surrender requests will be processed as of the date your written request
is received, and generally will be paid within seven calendar days. See "When
Proceeds Are Paid."
Settlement Options
The Policy offers various options of receiving proceeds payable under the
Policy, such as on surrender or death, other than in a lump sum. These
settlement options are summarized below. All of these options are forms of
fixed-benefit annuities which do not vary with the investment performance of a
separate account. Any representative authorized to sell this Policy can further
explain these options upon request.
27
<PAGE>
You may apply proceeds of $2,000 or more which are payable under this Policy to
any of the following options:
Option 1 - Income for a Fixed Period. Proceeds are payable in equal
monthly installments for a specified number of years, not to exceed 20.
Option 2 - Life Annuity. Proceeds are paid in equal monthly
installments for as long as the payee lives. A number of payments can be
guaranteed, such as 120, or the number of payments required to refund the
proceeds applied.
Option 3 -Survivorship Annuity. Proceeds are paid in monthly
installments for as long as either the first payee or surviving payee lives. A
number of payments equal to the initial payment can be guaranteed, such as 120.
A different monthly installment payable to the surviving payee can be specified.
Any other method or frequency of payment we agree to may be used to pay the
proceeds of this Policy.
Policy proceeds payable in one sum will accumulate at interest from the date of
death or surrender to the payment date at the rate of interest then paid by us
or at the rate specified by statute, whichever is greater. We will determine the
amount payable under any option. The minimum interest rate used in computing
payments under all options will be 3% per year.
You may select or change an option by giving Proper Notice prior to the
settlement date. If no option is in effect on the settlement date, the payee may
select an option. If this Policy is assigned or if the payee is a corporation,
association, partnership, trustee or estate, a settlement option will be
available only with our consent.
If a payee dies and there is no surviving payee, we will pay a single sum to
such payee's estate. The final payment will be the commuted value of any
remaining guaranteed payments.
Settlement option payments will be exempt from the claims of creditors to the
maximum extent permitted by law.
Minimum Amounts. AUL reserves the right to pay the total amount of the
Policy in one lump sum, if less than $2,000. If monthly payments are less than
$100, payments may be made less frequently at AUL's option.
The proceeds of this Policy may be paid in any other method or frequency of
payment acceptable to us.
Specialized Uses of the Policy
Because the Policy provides for an accumulation of Cash Value as well as a Death
Benefit, the Policy can be used for various individual and business financial
planning purposes. Purchasing the Policy in part for such purposes entails
certain risks. For example, if the investment performance of Investment Accounts
to which Variable Account value is allocated is poorer than expected or if
28
<PAGE>
sufficient premiums are not paid, the Policy may lapse or may not accumulate
sufficient Variable Account value to fund the purpose for which the Policy was
purchased. Partial Surrenders and Policy loans may significantly affect current
and future Account Value, Net Cash Value, or Death Benefit Proceeds. Depending
upon Investment Account investment performance and the amount of a Policy loan,
the loan may cause a Policy to lapse. Because the Policy is designed to provide
benefits on a long-term basis, before purchasing a Policy for a specialized
purpose a purchaser should consider whether the long-term nature of the Policy
is consistent with the purpose for which it is being considered. Using a Policy
for a specialized purpose may have tax consequences. See "Tax Considerations."
Life Insurance Retirement Plans
Any Owners or applicants who wish to consider using the Policy as a funding
vehicle for (non-qualified) retirement purposes may obtain additional
information from us. An Owner could pay premiums under a Policy for a number of
years, and upon retirement, could utilize a Policy's loan and partial withdrawal
features to access Account Value as a source of retirement income for a period
of time. This use of a Policy does not alter an Owner's rights or our
obligations under a Policy; the Policy would remain a life insurance contract
that, so long as it remains in force, provides for a Death Benefit payable when
the Insured dies.
Illustrations are available upon request that portray how the Policy can be used
as a funding mechanism for (non-qualified) retirement plans, referred to herein
as "life insurance retirement plans," for individuals. Illustrations provided
upon request show the effect on Account Value, Cash Value, and the net Death
Benefit of premiums paid under a Policy and partial withdrawals and loans taken
for retirement income; or reflecting allocation of premiums to specified
Investment Accounts. This information will be portrayed at hypothetical rates of
return that are requested. Charts and graphs presenting the results of the
illustrations or a comparison of retirement strategies will also be furnished
upon request. Any graphic presentations and retirement strategy charts must be
accompanied by a corresponding illustration; illustrations must always include
or be accompanied by comparable information that is based on guaranteed cost of
insurance rates and that presents a hypothetical gross rate of return of 0%.
Retirement illustrations will not be furnished with a hypothetical gross rate of
return in excess of 12%.
The hypothetical rates of return in illustrations are illustrative only and
should not be interpreted as a representation of past or future investment
results. Policy values and benefits shown in the illustrations would be
different if the gross annual investment rates of return were different from the
hypothetical rates portrayed, if premiums were not paid when due, and loan
interest was paid when due. Withdrawals or loans may have an adverse effect on
Policy benefits.
Risks of Life Insurance Retirement Plans
Using your Policy as a funding vehicle for retirement income purposes presents
several risks, including the risk that if your Policy is insufficiently funded
in relation to the income stream from your Policy, your Policy can lapse
prematurely and result in significant income tax liability to you in the year in
which the lapse occurs. Other risks associated with borrowing from your Policy
also apply. Loans will be automatically repaid from the gross Death Benefit at
29
<PAGE>
the death of the Insured, resulting in the estimated payment to the beneficiary
of the net Death Benefit, which will be less than the gross Death Benefit and
may be less than the Face Amount. Upon surrender, the loan will be automatically
repaid, resulting in the payment to you of the Net Cash Value. Similarly, upon
lapse, the loan will be automatically repaid, and the Policy will terminate
without value. The automatic repayment of the loan upon lapse or surrender will
cause the recognition of taxable income to the extent that Net Cash Value plus
the amount of the repaid loan exceeds your basis in the Policy. Thus, under
certain circumstances, surrender or lapse of your Policy could result in tax
liability to you. In addition, to reinstate a lapsed Policy, you would be
required to make certain payments. Thus, you should be careful to fashion a life
insurance retirement plan so that your Policy will not lapse prematurely under
various market scenarios as a result of withdrawals and loans taken from your
Policy.
To avoid lapse of your Policy, it is important to fashion a payment stream that
does not leave your Policy with insufficient Net Cash Value. Determinations as
to the amount to withdraw or borrow each year warrant careful consideration.
Careful consideration should also be given to any assumptions respecting the
hypothetical rate of return, to the duration of withdrawals and loans, and to
the amount of Account Value that should remain in your Policy upon its maturity.
Poor investment performance can contribute to the risk that your Policy may
lapse. In addition, the cost of insurance generally increases with the age of
the Insured, which can further erode existing Net Cash Value and contribute to
the risk of lapse.
Further, interest on a Policy loan is due to us for any Policy Year on the
Policy Anniversary. If this interest is not paid when due, it is added to the
amount of the outstanding loans and loan interest, and interest will begin
accruing thereon from that date. This can have a compounding effect, and to the
extent that the outstanding loan balance exceeds your basis in the Policy, the
amounts attributable to interest due on the loans can add to your federal (and
possibly state) income tax liability.
You should consult with your financial and tax advisers in designing a life
insurance retirement plan that is suitable. Further, you should continue to
monitor the Net Cash Value remaining in a Policy to assure that the Policy is
sufficiently funded to continue to support the desired income stream and so that
it will not lapse. In this regard, you should consult your periodic statements
to determine the amount of the remaining Net Cash Value. Illustrations showing
the effect of charges under the Policy upon existing Account Value or the effect
of future withdrawals or loans upon the Policy's Account Value and Death Benefit
are available from your representative. Consideration should be given
periodically to whether the Policy is sufficiently funded so that it will not
lapse prematurely.
Because of the potential risks associated with borrowing from a Policy, use of
the Policy in connection with a life insurance retirement plan may not be
suitable for all Owners. These risks should be carefully considered before
borrowing from the Policy to provide an income stream.
ILLUSTRATIONS OF ACCOUNT VALUES, CASH VALUES, DEATH BENEFITS
AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how certain
values under a Policy change with investment performance over an extended period
of time. The tables illustrate how Account Values, Cash Values and Death
Benefits under a Policy covering an Insured of a given age on the Policy Date
would vary over time if the return on the assets in each of the Funds were an
assumed uniform gross annual rate of 0%, 6% and 12%. The values would be
30
<PAGE>
different from those shown if the returns averaged 0%, 6% or 12% but fluctuated
over and under those averages throughout the years shown. The hypothetical
investment rates of return are illustrative only and should not be deemed a
representation of past or future investment rates of return. The tables may be
deemed to be "forward looking statements," and are based on certain assumptions.
Actual performance under the Policy may differ materially from performance
described in the tables. Actual rates of return for a particular Policy may be
more or less than the hypothetical investment rates of return and will depend on
a number of factors, including the investment allocations made by an Owner and
prevailing interest rates and rates of inflation. These illustrations assume
that premiums are allocated equally among the 16 Investment Accounts available
under the Policy. These illustrations also assume that no Policy loans have been
made.
The illustrations reflect the fact that the net investment return on the assets
held in the Investment Accounts is lower than the gross return of the selected
Portfolios. The tables assume an average annual expense ratio of 0.76% of the
average daily net assets of the Portfolios available under the Policies. This
average annual expense ratio is based on the expense ratios of each of the
Portfolios for the last fiscal year, adjusted, as appropriate, for any material
changes in expenses effective for the current fiscal year of a Portfolio. For
information on the Portfolios' expenses, see the prospectuses for the Funds and
Portfolios.
The illustrations also reflect the deduction of the Monthly Deduction. AUL has
the contractual right to charge the guaranteed maximum charges. The current cost
of insurance charges and, alternatively, the guaranteed cost of insurance
charges are reflected in separate illustrations that follow. All the
illustrations reflect the fact that no tax charges other than the premium tax
charge and federal tax charge are currently made against the Separate Account
and assume no outstanding loans and loan interest or charges for rider benefits.
The illustrations are based on AUL's sex distinct rates. Upon request, an Owner
will be furnished with a comparable illustration based upon the proposed
Insured's individual circumstances. Such illustrations may assume different
hypothetical rates of return than those illustrated in the following tables. We
may make a reasonable charge to provide such illustrations.
31
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 50 MALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
* These values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk rates.
** These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and Mortality and Expense Risk rates.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAT THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO
THE POLICY 0%OVER A PERIOD OF YEARS OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM SHOWN, DEPENDING ON THE
INVESTMENT ALLOCATIONS MADE TO THE SEPARATE ACCOUNTS AND THE RATES OF RETURN OF
THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TOT HE
POLICY AVERAGE 0%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE
ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 50 MALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 50 MALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE
FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
34
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 60 MALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
35
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 60 MALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 60 MALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE
FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
37
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 60 MALE \ 60 FEMALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
38
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 60 MALE \ 60 FEMALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (__NET)
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
39
<PAGE>
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 60 MALE \ 60 FEMALE
INITIAL FACE AMOUNT $____
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (__NET)
LAST SURVIVOR OPTION
<TABLE>
<S> <C> <C> <C> <C> <C>
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
35
___________________________________________________________________________________________________________________________
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE
FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
40
<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
Limits on Rights to Contest the Policy
Incontestability. In the absence of fraud, after the Policy has been in
force during the Insured's lifetime for two years from the Contract Date, AUL
may not contest the Policy.
If a Policy lapses and it is reinstated, we can contest the reinstated Policy
during the first two years after the effective date of the reinstatement, but
only for statements made in the application for reinstatement.
Suicide Exclusion. If the Insured dies by suicide, while sane or insane,
within two years of the Contract Date or the effective date of any reinstatement
(or less if required by state law), the amount payable by AUL will be equal to
the premiums paid less any loan, loan interest, and any partial surrender.
Changes in the Policy or Benefits
Misstatement of Age or Sex. If it is determined the age or sex of the
Insured as stated in the Policy is not correct, the Death Benefit will be the
greater of: (1) the amount which would have been purchased at the Insured's
correct age and sex by the most recent cost of insurance charge assessed prior
to the date we receive proof of death; or (2) the Account Value as of the date
we receive proof of death, multiplied by the Minimum Insurance Percentage for
the correct age.
Other Changes. Upon notice, AUL may modify the Policy, but only if such
modification is necessary to: (1) make the Policy or the Separate Account comply
with any applicable law or regulation issued by a governmental agency to which
AUL is subject; (2) assure continued qualification of the Policy under the
Internal Revenue Code or other federal or state laws relating to variable life
contracts; (3) reflect a change in the operation of the Separate Account; or (4)
provide additional Separate Account and/or fixed accumulation options. AUL
reserves the right to modify the Policy as necessary to attempt to prevent the
Owner from being considered the owner of the assets of the Separate Account. In
the event of any such modification, AUL will issue an appropriate endorsement to
the Policy, if required. AUL will exercise these rights in accordance with
applicable law, including approval of Owners, if required.
41
<PAGE>
Any change of the Policy must be approved by AUL's President, Vice President or
Secretary. No representative is authorized to change or waive any provision of
the Policy.
Exchange for Paid-Up Policy
You may exchange the Policy for a paid-up whole life policy by Proper Notice and
upon returning the Policy to the Home Office. The new policy will be for the
level face amount, not greater than the Policy's Face Amount, which can be
purchased by the Policy's Net Cash Value. The new policy will be purchased using
the continuous net single premium for the Insured's age upon the Insured's
nearest birthday at the time of the exchange. We will pay you any remaining Net
Cash Value that was not used to purchase the new policy.
At any time after this option is elected, the cash value of the new policy will
be its net single premium at the Insured's then attained age. All net single
premiums will be based on 3% interest and the guaranteed cost of insurance rates
of the Policy. No riders may be attached to the new policy.
When Proceeds Are Paid
AUL will ordinarily pay any Death Benefit Proceeds, loan proceeds, Partial
Surrender proceeds, or Full Surrender proceeds within seven calendar days after
receipt at the Home Office of all the documents required for such a payment.
Other than the Death Benefit, which is determined as of the date of death, the
amount will be determined as of the date of receipt of required documents.
However, AUL may delay making a payment or processing a transfer request if (1)
the New York Stock Exchange is closed for other than a regular holiday or
weekend, trading is restricted by the SEC, or the SEC declares that an emergency
exists as a result of which the disposal or valuation of Separate Account assets
is not reasonably practicable; or (2) the SEC by order permits postponement of
payment to protect Owners.
42
<PAGE>
Dividends
You will receive any dividends declared by us as long as the Policy is in force.
Dividend payments will be applied to increase the Account Value in the
Investment Accounts on a prorata basis unless you request cash payment. We do
not anticipate declaring any dividends.
Reports to Policy Owners
At least once a year, you will be sent a report at your last known address
showing, as of the end of the current report period: Account Value, Cash Value,
Death Benefit, change in value of amounts in the Separate Account, premiums
paid, loans, Partial Surrenders, expenses charges, and cost of insurance charges
since the prior report. You will also be sent an annual and a semiannual report
for each Fund or Portfolio underlying an Investment Account to which you have
allocated Account Value, including a list of the securities held in each Fund,
as required by the 1940 Act. In addition, when you pay premiums, or if you take
out a loan, transfer amounts among the Investment Accounts or take surrenders,
you will receive a written confirmation of these transactions.
Assignment
The Policy may be assigned in accordance with its terms. In order for any
assignment to be binding upon AUL, it must be in writing and filed at the Home
Office. Once AUL has received a signed copy of the assignment, the Owner's
rights and the interest of any beneficiary (or any other person) will be subject
to the assignment. If there are any irrevocable beneficiaries, you must obtain
their consent before assigning the Policy. AUL assumes no responsibility for the
validity or sufficiency of any assignment. An assignment is subject to any loan
on the Policy.
Reinstatement
The Policy may be reinstated within five years (or such longer period if
required by state law) after lapse, subject to compliance with certain
conditions, including the payment of a necessary premium and submission of
satisfactory evidence of insurability. See your Policy for further information.
Rider Benefits
The following rider benefits are available and may be added to your Policy. If
applicable, monthly charges for these riders will be deducted from your Account
Value as part of the Monthly Deduction. All of these riders may not be available
in all states.
Waiver of Monthly Deduction Disability (WMDD)
Issue Ages: 20-55
This rider waives the Monthly Deduction during a period of total disability.
WMDD cannot be attached to Policies with Face Amounts in excess of
$3,000,000 or rated higher than Table H.
43
<PAGE>
Monthly Deductions are waived for total disability following a six month
waiting period. Monthly Deductions made during this waiting period are
re-credited to the Account Value upon the actual waiver of the Monthly
Deductions. If disability occurs before age 60, Monthly Deductions are
waived as long as total disability continues. If disability occurs between
ages 60-65, Monthly Deductions are waived as long as the Insured remains
totally disabled but not beyond age 65.
Last Survivor Rider (LS)
Issue Ages: 20-85
This rider modifies the terms of the Policy to provide insurance on the
lives of two Insureds rather than one. When the LS Rider is attached, the
Death Benefit Proceeds are paid to the beneficiary upon the death of the
last surviving Insured. The cost of insurance charges reflect the
anticipated mortality of the two Insureds and the fact that the Death
Benefit is not paid until the death of the surviving Insured. For a Policy
containing the LS Rider to be reinstated, either both Insureds must be alive
on the date of the reinstatement; or the surviving Insured must be alive and
the lapse occurred after the death of the first Insured. The
Incontestability, Suicide, and Misstatement of Age or Sex provisions of the
Policy apply to either Insured.
LS Rider also provides a Policy Split Option, allowing the Policy on two
Insureds to be split into two separate Policies, one on the life of each
Insured. The LS Rider also includes an Estate Preservation Benefit which
increases the Face Amount of the Policy under certain conditions. The Estate
Preservation Benefit is only available to standard risks.
Joint First-to-Die Level Term Insurance Rider
Issue Ages: 20-85
This rider may be attached to a Policy in conjunction with the Last Survivor
Rider. The Joint First-to-Die Rider provides a death benefit to the
beneficiary on the death of the first of the Insureds to die. The cost of
insurance charges reflect the anticipated joint mortality of the two Ins
ureds. The Incontestability, Suicide, and Misstatement of Age or Sex
provisions of the Policy apply to either Insured.
Accelerated Death Benefit Rider (ABR)
This rider allows for a prepayment of a portion of the Policy's Death
Benefit while the Insured is still alive, if the Insured has been diagnosed
as terminally ill, and has 12 months or less to live. The minimum amount
available is $5,000. The maximum benefit payable (in most states) is the
lesser of $500,000 or 50% of the Face Amount. ABR may be added to the Policy
at any time while it is still in force. There is no charge for ABR.
Your determination as to how to purchase a desired level of insurance coverage
should be based on your specific insurance needs. Consult your sales
represenative for further information.
Additional rules and limits apply to these rider benefits. Not all such benefits
may be available at any time, and rider benefits in addition to those listed
above may be made available. Please ask your AUL representative for further
information, or contact the Home Office.
TAX CONSIDERATIONS
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon AUL's understanding of the present
federal tax laws as they currently are interpreted by the Internal Revenue
Service (the "IRS").
Tax Status of the Policy
In order to attain the tax benefits normally associated with life insurance, the
Policy must be classified for federal income tax purposes as a life insurance
contract. Section 7702 of the Internal Revenue Code sets forth a definition of a
life insurance contract for federal income tax purposes. The U.S. Treasury
Department (the "Treasury") is authorized to prescribe regulations implementing
Section 7702. While proposed regulations and other interim guidance has been
issued, final regulations have not been adopted. In short, guidance as to how
Section 7702 is to be applied is limited. If a Policy were determined not to be
a life insurance contract for purposes of Section 7702, such Policy would not
provide the tax advantages normally provided by a life insurance contract.
44
<PAGE>
With respect to a Policy issued on a standard basis, AUL believes that such a
Policy should meet the Section 7702 definition of a life insurance contract.
With respect to a Policy that is issued on a substandard basis (i.e., a premium
class with extra rating involving higher than standard mortality risk)or one
involving joint Insureds, there is less guidance, in particular as to how the
mortality and other expense requirements of Section 7702 are to be applied, in
determining whether such a Policy meets the Section 7702 definition of a life
insurance contract. If the requirements of Section 7702 were deemed not to have
been met, the Policy would not provide the tax benefits normally associated with
life insurance and the tax status of all contracts invested in the Investment
Account to which premiums were allocated under the non-qualifying contract might
be affected.
If it is subsequently determined that a Policy does not satisfy Section 7702,
AUL may take whatever steps are appropriate and reasonable to attempt to cause
such a Policy to comply with Section 7702. For these reasons, AUL reserves the
right to modify the Policy as it deems necessary in its sole discretion to
attempt to qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Internal Revenue Code requires that the investments of
each of the Investment Accounts must be "adequately diversified" in accordance
with Treasury regulations in order for the Policy to qualify as a life insurance
contract under Section 7702 of the Internal Revenue Code. The Investment
Accounts, through the Portfolios, intend to comply with the diversification
requirements prescribed in Treas. Reg. Section 1.817-5, which affect how the
Portfolio's assets are to be invested. AUL believes that the Investment Accounts
will, thus, meet the diversification requirements, and AUL will monitor
continued compliance with this requirement.
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
investment accounts used to support their contracts. In those circumstances,
income and gains from the investment account assets would be includable in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of investment
account assets if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. The
Treasury has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which contract holders may direct their
investments to particular investment accounts without being treated as owners of
the underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of investment account assets. For example,
an Owner has additional flexibility in allocating premium payments and Account
Value. These differences could result in an Owner being treated as the owner of
a prorata portion of the assets of the Investment Accounts. In addition, AUL
does not know what standards will be set forth, if any, in the regulations or
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rulings which the Treasury has stated it expects to issue. AUL therefore
reserves the right to modify the Policy as necessary to attempt to prevent an
Owner from being considered the Owner of a prorata share of the assets of the
Investment Accounts.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
Tax Treatment of Policy Benefits
In General. AUL believes that the proceeds and Account Value increases of a
Policy should be treated in a manner consistent with a fixed-benefit life
insurance contract for federal income tax purposes. Thus, the Death Benefit
under the Policy should be excludable from the gross income of the beneficiary
under Section 101(a)(1) of the Internal Revenue Code. However, if you elect a
settlement option for a Death Benefit other than in a lump sump, a portion of
the payment made to you may be taxable.
Depending on the circumstances, the exchange of a Policy, a Policy loan, a
Partial Surrender, a surrender, a change in ownership, or an assignment of the
Policy may have federal income tax consequences. In addition, federal, state and
local transfer, and other tax consequences of ownership or receipt of Policy
proceeds depends on the circumstances of each Owner or beneficiary.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should consult a qualified tax adviser
regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Account Value, including increments thereof, until there is a distribution. The
tax consequences of distributions from, and loans taken from or secured by, a
Policy depend on whether the Policy is classified as a Modified Endowment. Upon
a complete surrender or lapse of a Policy, whether or not a Modified Endowment,
the excess of the amount received plus the amount of any outstanding loans and
loan interest over the total investment in the Policy will generally be treated
as ordinary income subject to tax.
Modified Endowments. Section 7702A establishes a class of life
insurance Policies designated as "Modified Endowment Contracts." The rules
relating to whether a Policy will be treated as a Modified Endowment are
extremely complex and cannot be adequately described in the limited confines of
this summary. In general, a Policy will be a Modified Endowment if the
accumulated premiums paid at any time during the first seven Policy Years exceed
the sum of the net level premiums which would have been paid on or before such
time if the Policy provided for paid-up future benefits after the payment of
seven level annual premiums. A Policy may also become a Modified Endowment after
a material change. The determination of whether a Policy will be a Modified
Endowment after a material change generally depends upon the relationship of the
Death Benefit and Account Value at the time of such change and the additional
premiums paid in the seven years following the material change.
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It is expected that most Policies will be Modified Endowments. Due to the
Policy's flexibility, classification as a Modified Endowment will depend on the
individual circumstances of each Policy. In view of the foregoing, a current or
prospective Owner should consult with a tax adviser to determine whether a
Policy transaction will cause the Policy to be treated as a Modified Endowment.
Policies classified as Modified Endowments will be subject to the following:
First, all distributions, including distributions upon surrender and Partial
Surrender, from such a Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the Account Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, loans taken from or secured by such a Policy, are treated as
distributions from the Policy and taxed accordingly. Past due loan interest that
is added to the loan amount will be treated as a loan. Third, a 10 percent
additional income tax is imposed on the portion of any distribution from, or
loan taken from or secured by, such a Policy that is included in income except
where the distribution or loan is made on or after the Owner attains age 59 1/2,
is attributable to the Owner's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's beneficiary.
If a Policy becomes a Modified Endowment after it is issued, distributions made
during the Policy Year in which it becomes a Modified Endowment, distributions
in any subsequent Policy Year and distributions within two years before the
Policy becomes a Modified Endowment will be subject to the tax treatment
described above. This means that a distribution from a Policy that is not a
Modified Endowment could later become taxable as a distribution from a Modified
Endowment.
All Modified Endowments that are issued by AUL (or its affiliates) to the same
Owner during any calendar year are treated as one Modified Endowment for
purposes of determining the amount includable in an Owner's gross income under
Section 72(e) of the Internal Revenue Code.
Distributions from a Policy that is not a Modified Endowment are generally
treated as first recovering the investment in the Policy (described below) and
then, only after the return of all such investment in the Policy, as
distributing taxable income. An exception to this general rule occurs in the
case of a decrease in the Policy's Death Benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment are not
treated as distributions. Instead, such loans are treated as indebtedness of the
Owner.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment are subject
to the 10 percent additional income tax.
Policy Loan Interest. Generally, consumer interest paid on any loan under a
Policy which is owned by an individual is not deductible. The deduction of other
forms of interest paid on Policy loans may also be subject to other restrictions
under the Internal Revenue Code. A qualified tax adviser should be consulted
before deducting any Policy loan interest.
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Investment in the Policy. Investment in the Policy means: (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any loan from, or secured by, a Policy
that is a Modified Endowment, to the extent such amount is excluded from gross
income, will be disregarded), plus (iii) the amount of any loan from, or secured
by, a Policy that is a Modified Endowment to the extent that such amount is
included in the gross income of the Owner.
Estate and Generation Skipping Taxes
When the Insured dies, the Death Benefits will generally be includable in the
Owner's estate for purposes of federal estate tax if the Insured owned the
Policy. If the Owner was not the Insured, the fair market value of the Policy
would be included in the Owner's estate upon the Owner's death. Nothing would be
includable in the Insured's estate if he or she neither retained incidents of
ownership at death nor had given up ownership within three years before death.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, estates less than $600,000 will not incur a federal estate
tax liability. In addition, an unlimited marital deduction may be available for
federal estate and gift tax purposes. The unlimited marital deduction permits
the deferral of taxes until the death of the surviving spouse.
If the Owner (whether or not he or she is the Insured) transfers ownership of
the Policy to someone two or more generations younger, the transfer may be
subject to the generation-skipping transfer tax, the taxable amount being the
value of the Policy. The generation-skipping transfer tax provisions generally
apply to transfers which would be subject to the gift and estate tax rules.
Individuals are generally allowed an aggregate generation skipping transfer
exemption of $1 million. Because these rules are complex, the Owner should
consult with a qualified tax adviser for specific information if ownership is
passing to younger generations.
Life Insurance Purchased for Use in Split Dollar Arrangements
On January 26, 1996, the IRS released a technical advice memorandum ("TAM") on
the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
Non-Individual Ownership of Contracts
If the Owner of a Policy is an entity rather than an individual, the tax
treatment may differ from that described above. Accordingly, prospective Owners
that are entities should consult a qualified tax adviser.
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Possible Charge for AUL's Taxes
At the present time, AUL makes no charge for any federal, state or local taxes
(other than the premium tax charge and federal tax charge) that it incurs that
may be attributable to the Investment Accounts or to the Policies. However, AUL
reserves the right to make additional charges for any such tax or other economic
burden resulting from the application of the tax laws that it determines to be
properly attributable to the Investment Accounts or to the Policies.
OTHER INFORMATION ABOUT THE POLICIES AND AUL
Policy Termination
The Policy will terminate, and insurance coverage will cease, as of: (1) the end
of the Valuation Period during which we receive a notice in good order from you
to surrender the Policy; (2) the expiration of a grace period; or (3) the death
of the Insured. See "Surrendering the Policy for Net Cash Value." "Premium
Payments to Prevent Lapse," and "Death Benefit."
Resolving Material Conflicts
The Funds presently serve as the investment medium for the Policies. In
addition, the Funds have advised us that they are available to registered
separate accounts of insurance companies, other than AUL, offering variable
annuity and variable life insurance policies.
We do not currently foresee any disadvantages to you resulting from the Funds
selling shares as an investment medium for products other than the Policies.
However, there is a theoretical possibility that a material conflict of interest
may arise between Owners whose Cash Values are allocated to the Separate Account
and the owners of variable life insurance policies and variable annuity
contracts issued by other companies whose values are allocated to one or more
other separate accounts investing in any one of the Funds. Shares of some of the
Funds may also be sold to certain qualified pension and retirement plans
qualifying under Section 401 of the Internal Revenue Code. As a result, there is
a possibility that a material conflict may arise between the interests of Owners
or owners of other contracts (including contracts issued by other companies),
and such retirement plans or participants in such retirement plans. In the event
of a material conflict, we will take any necessary steps, including removing the
Separate Account from that Fund, to resolve the matter. The Board of
Directors/Trustees of each Fund will monitor events in order to identify any
material conflicts that may arise and determine what action, if any, should be
taken in response to those events or conflicts.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to applicable law, to make additions to, deletions
from, or substitutions for the shares that are held in the Separate Account or
that the Separate Account may purchase. If the shares of a Portfolio are no
longer available for investment or if, in our judgment, further investment in
any Portfolio should become inappropriate in view of the purposes of the
Separate Account, we may redeem the shares, if any, of that Portfolio and
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substitute shares of another registered open-end management investment company.
We will not substitute any shares attributable to a Policy's interest in an
Investment Account of the Separate Account without notice to you and prior
approval of the SEC and state insurance authorities, to the extent required by
the 1940 Act or other applicable law.
We also reserve the right to establish additional Investment Accounts of the
Separate Account, each of which would invest in shares corresponding to a
Portfolio of a Fund or in shares of another investment company having a
specified investment objective. Any new Investment Accounts may be made
available to existing Owners on a basis to be determined by AUL. Subject to
applicable law and any required SEC approval, we may, in our sole discretion,
eliminate one or more Investment Accounts if marketing needs, tax considerations
or investment conditions warrant.
If any of these substitutions or changes are made, we may, by appropriate
endorsement, change the Policy to reflect the substitution or change.
If we deem it to be in the best interests of persons having voting rights under
the Policies (subject to any approvals that may be required under applicable
law), the Separate Account may be operated as a management investment 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 AUL separate accounts.
Voting Rights
AUL is the legal owner of the shares of the Portfolios held by the Investment
Accounts of the Separate Account. In accordance with its view of present
applicable law, AUL will exercise voting rights attributable to the shares of
each Portfolio held in the Investment Accounts at any regular and special
meetings of the shareholders of the Funds or Portfolios on matters requiring
shareholder voting under the 1940 Act. AUL will exercise these voting rights
based on instructions received from persons having the voting interest in
corresponding Investment Accounts of the Separate Account and consistent with
any requirements imposed on AUL under contracts with any of the Funds, or under
applicable law. However, if the 1940 Act or any regulations thereunder should be
amended, or if the present interpretation thereof should change, and as a result
AUL determines that it is permitted to vote the shares of the Portfolios in its
own right, it may elect to do so.
The person having the voting interest under a Policy is the Owner. AUL or the
pertinent Fund shall send to each Owner a Fund's proxy materials and forms of
instruction by means of which instructions may be given to AUL on how to
exercise voting rights attributable to the Portfolio's shares.
Unless otherwise required by applicable law or under a contract with any of the
Funds, with respect to each of the Portfolios, the number of Portfolio shares as
to which voting instructions may be given to AUL is determined by dividing the
value of all of the Accumulation Units of the corresponding Investment Account
attributable to a Policy on a particular date by the net asset value per share
of that Portfolio as of the same date. Fractional votes will be counted. The
number of votes as to which voting instructions may be given will be determined
as of the date coincident with the date established by a Fund for determining
shareholders eligible to vote at the meeting of the Fund or Portfolio. If
required by the SEC or under a contract with any of the Funds, AUL reserves the
right to determine in a different fashion the voting rights attributable to the
shares of the Portfolio. Voting instructions may be cast in person or by proxy.
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Voting rights attributable to the Policies for which no timely voting
instructions are received will be voted by AUL in the same proportion as the
voting instructions which are received in a timely manner for all Policies
participating in that Investment Account. AUL will vote shares of any Investment
Account, if any, that it owns beneficially in its own discretion, except that if
a Fund offers its shares to any insurance company separate account that funds
variable annuity contracts or if otherwise required by applicable law or
contract, AUL will vote its own shares in the same proportion as the voting
instructions that are received in timely manner for Policies participating in
the Investment Account.
Neither the Separate Account nor AUL is under any duty to inquire as to the
instructions received or the authority of Owners or others to instruct the
voting of shares of any of the Portfolios.
If required by state insurance officials, AUL may disregard Owner voting
instructions if such instructions would require shares to be voted so as to
cause a change in sub-classification or investment objectives of one or more of
the Portfolios, or to approve or disapprove an investment advisory agreement. In
addition, AUL may under certain circumstances disregard voting instructions that
would require changes in the investment advisory contract or investment adviser
of one or more of the Portfolios, provided that AUL reasonably disapproves of
such changes in accordance with applicable federal regulations. If AUL ever
disregards voting instructions, Owners will be advised of that action and of the
reasons for such action in the next semiannual report. Finally, AUL reserves the
right to modify the manner in which the weight to be given to pass-through
voting instructions is calculated when such a change is necessary to comply with
current federal regulations or the current interpretation thereof.
Sale of the Policies
The Policies will be offered to the public on a continuous basis, and we do not
anticipate discontinuing the offering of the Policies. However, we reserve the
right to discontinue the offering. Applications for Policies are solicited by
representatives who are licensed by applicable state insurance authorities to
sell our variable life contracts and who are also registered representatives of
AUL. AUL is registered with the SEC under the Securities Exchange Act of 1934 as
a broker-dealer and is a member of the National Association of Securities
Dealers, Inc.
AUL acts as the "principal underwriter," as defined in the 1940 Act, of the
Policies for the Separate Account. We are not obligated to sell any specific
number of Policies.
Registered representatives may be paid commissions on Policies they sell.
Representatives generally will be paid 4% of the initial premium. Additional
commissions may be paid in certain circumstances. Other allowances and overrides
also may be paid.
AUL Directors and Executive Officers
The following table sets forth the name and principal occupations during the
past five years of each of AUL's directors and executive officers. Unless
otherwise indicated, the address of each of the following individuals is One
American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368, and the
individual position is with AUL.
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<TABLE>
<S> <C>
NAME Principal Occupation During Past Five Years
Jerry D. Semler President and Chief Operating Officer, 1980-1989;
President & Chief Exec. Officer, 1989-8/91; Chairman of
the Board, Pres. & CEO, 9/91-present; Mental Health
Board, State of Indiana, 10/87-10/91; Dir. Jenn
Foundation Board, 5/92-present; IWC Resources Corp.,
4/96-present
John H. Barbre Sr. Vice Pres., Individual Div., 5/80-present
William R. Brown General Counsel & Secretary, 1/85-present; Dir., Health
& Hospital Corp. of Marion County Board, 1/84-1/92;
Member, Metro Development Com. of Indpls., 1/92-10/93
Dir., NOLHGA Board, 1/95-present
Charles D. Lineback Sr. Vice Pres., Reinsurance Div., 12/87-present
James W. Murphy Sr. Vice Pres., Corporate Finance, 8/69-present
Jerry L. Plummer Sr. Vice Pres., Human Resources, 1/93-present; V.P.
Human Res., 1/81-1/93
R. Stephen Radcliffe Executive Vice Pres., 8/94-present; Sr. V.P.,
Chief Actuary, 5/83-8/94; Director, 2/91-present
G. David Sapp Sr. Vice Pres., Investments, 1/92-Present; V.P.,
Securities, 8/75-1/92
James P. Shanahan Sr. Vice Pres., Pension Div., 1/83-Present
Gerald T. Walker Sr. Vice Pres., Group Life & Health Div., 10/89-present
Kent R. Adams Vice Pres., Fixed Income Securities, 1/92-present;
Asst. V.P., Securities, 1/77-1/92
Catherine B. Husman V.P. and Chief Actuary, 7/97-present; V.P. and
Corporate Actuary, 1/84-7/97
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Scott A. Kincaid V.P. & Chief Information Officer, 1/95-present; V.P.
Data Center, 9/91-1/95; Asst. V.P. Data Center, 8/83-9/91
Steven C. Berring, M.D. Director, 2/90-present; Director, NIPSCO Industries,
575 McCormick Rd. Inc., 2/86-present; Director, Arvin Industries, Inc.,
West Lafayette, IN 47906 11/83-present; Director, Eli Lilly, 4/83-present;
President, Purdue University, 2/83-present, Director,
Guidant Corp., 12/94-8/95; Dir., State Life Ins. Co.,
11/94-present
Arthur L. Bryant Director, 11/94-present; President, The State Life
11817 Sand Dollar Ct. Insurance Company, 9/83-present; Chairman of Board, The
Indianapolis, IN 46256 State Life Ins., 2/85-11/94
James M. Cornelius Director, 2/96-present; V.P. & CFO, Eli Lilly & Co.,
1055 Park Place 1/83-1995; Chairman, Guidant Corp., 10/95-present; Dir.
Zionsville, IN 46077 State Life Ins. Co, 11/94-present; Dir., National Bank
of Indpls., 11/93-present; Dir. Lilly Industries, Inc.,
4/96-present
James A. Dora Director, 2/89-present; Chairman/CEO and Owner, General
5121 Green Braes, E. Dr. Hotels Corp., 1/90-present; President and Owner, General
Indianapolis, IN 46234 Hotels Corp., 1967-1989; Dir., Indiana National Bank, 4/83-10/93
Div., NBD Bank, N.A. (formely Indiana National Bank),
10/93-present; Dir., State Life, 11/94-present
Otto N. Frenzel Director, 2/71-present (Chairman of Audit Comm.);
11330 Templin Rd. Chairman,, Executive Comm., National City Bank Indiana,
Zionsville, IN 46077 1/96-present; Chrmn. National City Bank Indiana,
10/92-1/96; Dir., National City Corp., 10/92-present;
Chairman, Merchants National Corp. 4/79-1/93; Vice
Chrmn., Merchants National Bank & Trust Co. of Indpls.,
4/86-10/92; Director, Indpls. Water Co., 4/63-present;
Dir., Indiana Gas Co., Inc., 1/67-present; Dir. Indpls.
Power & Lights Cop. 4/77-present; Dir. Baldwin & Lyons,
Inc., 5/79-present; Dir., IPALCO Enterprises, Inc.,
9/83-present; Dir., IWC Resources Corp., 3/86-present;
Dir. Indiana Energy, Inc., 10/85-present; Dir., State
Life Ins. Co., 11/94-present
David W. Goodrich Director, 2/95-present; Exec. Vice Pres., F.C. Tucker
6060 Sunset Ln. Co., 1/86-present; Chrmn., Methodist Hosp. of Indiana
Indianapolis, IN 46228 1/93-6/96; Director, The State Life Ins. Co.,
7/90-present; Director, Irwin Financial Corp.,
1/88-present; Director, Citizens Gas & Coke Utility,
9/94-present; Vice Chairman, Clarian Health Partners,
6/96-present
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William P. Johnson Director, 7/78-present; Chairman of the Board & CEO,
19448 Rio Verde Dr. Goshen Rubber Co., 7/91-present, Pres. & Treas., Goshen
Goshen, IN 46526 Rubber Co., 9/76-7/91; Pres. & Dir., GNC Corp.,
9/76-7/91; Pres. & Dir., GSH Corp., 7/91-present; Pres.
& Dir. GRN Corp., 9/76-7/91; Chrmn., GRN Corp.,
7/91-present; Pres. & Dir., Goshen Rubber of Canada,
Ltd., 9/76-7/91; Chrmn., Goshen Rubber of Canada, Ltd.,
7/91-present; Dir., Society Bank Ind. (formely
Trustcorp Inc.) So. Bend, IN, 2/88-12/95; Member of
Advisory Comm., Society Bank Ind. Goshen, IN,
2/88-12/95; Dir., Coachman Industries, 1978-present;
Chrmn. & CEO, Syracuse Rubber Co., 1981-present; Chrmn.
& CEO, Bond-Flex Rubber Co., 4/86-present; Dir., Peetro
Go, Inc., 4/86-5/96; Dir., Flair Inc., 3/86 present;
Dir., Lightfoot Enterprises, 4/86-present; Chrmn.,
Palmer Plastics, 10/87-present; Chrmn.,Dayton
Polymrics, 10/89-present; Chrmn., GR Plastics,
10/89-present; Chrmn. & CEO, ETI Inc., 9/92-present;
Chrmn. & CEO, GKI Inc., 7/91-present; Chrmn. & CEO,
Prolon, Inc., 10/92-present; Chrmn. & CEO, Yeasel, Inc.,
1/90-present; Chrmn. & CEO, Bower Mfg., 7/91-present;
Dir., State Life Ins. Co., 11/94-present
James T. Morris Director, 2/87-presnet; Chairman & CEO, Indianapolis
8191 N. Pennsylvania Water Co., 1/92-present; Pres., Indianapolis Water Co.,
Indianapolis, IN 46240 1/89-1/92; Pres., Chrmn. & CEO, IWC Resources Corp.,
1/89-present; Director, MSA Realty Corp., 11/84-9/94;
Dir., National City Bank Corp, 7/89-present; Advisor,
Logo 7, Inc., 9/90-12/91; Dir., Paul Harris,
12/96-present; Dir., State Life Ins. Co., 11/94-present
Thomas E. Reilly, Jr. Director, 2/90-present; Chairman, Reilly Industries,
8877 Pickwick Dr. Inc., 1/90-present; President, Reilly Indus., 1963-1/90;
Indianapolis, IN 46260 Director, Lilly Indus. Inc., 4/81-present; Director,
INB National Bank, 4/84-10/93; Dir. NBD Indiana,
subsid. of NBD Bancorp, 4/84-1994; Dir., NBD Bancorp,
3/94-2/95; Dir,. First Chicago NBD Corp., 2/95-present;
Dir., Herff Jones Corp., 10/95-present; Dir., State Life
Ins. Co., 11/94-present
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William R. Riggs Director, 2/92-present; Attorney (Partner), Ice Miller
7614 Silver Pine Ct. Donadio & Ryan, 6/63-present; Dir, State Life Ins. Co.,
Indianapolis, IN 46250 11/94-present
Yvonne H. Shaheen Director, 8/93-present; Utility Pres. & CEO, Bright Sheet
11808 Rolling Springs Dr. Metal, 2/87-1/95; Pres. & CEO, Long Elec. Co.,
Indianapolis, IN 46032 2/87-present; Dir., Corporate Community Council,
1/93-1/95; Director, Community Hospital Foundation,
1/92-2/96; Dir., Junior Achievement, 4/90-present; Dir.,
National Elec. Contractors Assoc., 1/91-present; Dir.,
Indianapolis Chamber of Commerce, 1/90-present; Dir.,
Greater Indianapolis Progress Committee, 12/88-present;
Dir., Boy Scouts of America, 10/91-present, Director,
State Life Ins. Co., 11/94-present
Frank D. Walker Director, 11/94-present; Chairman of the Board & CEO,
3613 Bay Rd. N. Dr. Walker Information, Inc., 6/60-present; Managing
Indianapolis, IN 46240 Partner, W.R. Properties, 6/84-present; Dir., Citizens
Gas & Coke Utility, 10/87-present; Dir., NBD Bank N.A.
Indiana, 4/88-present; Dir., State Life Ins. Co.,
8/88-present; Advisor, Wild Birds Unlimited, Inc.,
8/95-present
</TABLE>
State Regulation
AUL is subject to regulation by the Department of Insurance of the State of
Indiana, which periodically examines the financial condition and operations of
AUL. AUL is also subject to the insurance laws and regulations of all
jurisdictions where it does business. The Policy described in this Prospectus
has been filed with and, where required, approved by, insurance officials in
those jurisdictions where it is sold.
AUL is required to submit annual statements of operations, including financial
statements, to the insurance departments of the various jurisdictions where it
does business to determine solvency and compliance with applicable insurance
laws and regulations.
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Additional Information
A registration statement under the Securities Act of 1933 has been filed with
the SEC relating to the offering described in this Prospectus. This Prospectus
does not include all the information set forth in the registration statement.
The omitted information may be obtained at the SEC's principal office in
Washington, D.C. by paying the SEC's prescribed fees.
Independent Auditors
The consolidated balance sheets for AUL at December 31, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year ended December 31, 1996, appearing herein have been audited by Coopers &
Lybrand LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Stephen J.
Pearson, FSA, MAAA, Assistant Vice President and Individual Product Actuary of
AUL.
Litigation
The Separate Account is not a party to any litigation. Its depositor, AUL, as an
insurance company, ordinarily is involved in litigation. AUL is of the opinion
that such litigation is not material to the Owners of the Policies.
Legal Matters
Dechert Price & Rhoads of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws. Matters of Indiana law
pertaining to the Policies, including AUL's right to issue the Policies and its
qualification to do so under applicable laws and regulations issued thereunder,
have been passed upon by Richard A. Wacker, Associate General Counsel of AUL.
Financial Statements
AUL's financial statements as of December 31, 1996 for the year ended December
31, 1996 are included in this Prospectus. The financial statements of AUL should
be distinguished from financial statements of the Separate Account and should be
considered only as bearing upon AUL's ability 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. Because the Separate Account had not
commenced operations before the date of this Prospectus, no financial statements
of the Separate Account are included in this Prospectus.
[To be provided]
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PART II
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any regulation of
the Commission heretofore or hereafter duly adopted pursuant to authority
conferred in that section.
Rule 484 Undertaking
Article IX, Section 1 of the by-laws of American United Life Insurance
Company(R) ("AUL") provides as follows:
The corporation shall indemnify any director or officer or former
director or officer of the corporation against expenses actually and
reasonably incurred by him (and for which he is not covered by
insurance) in connection with the defense of any action, suit or
proceeding (unless such action, suit or proceeding is settled) in which
he is made a party by reason of being or having been such director or
officer, except in relation to matters as to which he shall be adjudged
in such action, suit or proceeding, to be liable for negligence or
misconduct in the performance of his duties. The corporation may also
reimburse any director or officer or former director or officer of the
corporation for the reasonable costs of settlement of any such action,
suit or proceeding, if it shall be found by a majority of the directors
not involved in the matter in controversy (whether or not a quorum)
that it was to the interest of the corporation that such settlement be
made and that such director or officer was not guilty of negligence or
misconduct. Such rights of indemnification and reimbursement shall not
be exclusive of any other rights to which such director or officer may
be entitled under any By-law, agreement, vote of members or otherwise.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
Section 26(e)(2) Representation
AUL, the sponsoring insurance company of the AUL American Individual
Variable Life Unit Trust, hereby represents that the fees and charges deducted
under the Policies are reasonable in relation to the services rendered, the
expenses expected to be incurred and the risks assumed by AUL.
Contents of Registration Statement
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet.
Reconciliation and tie.
The Prospectus consisting of 56 pages (including
illustrations).
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation pursuant to Section 26(e)(2).
The signatures.
Written consent of the following persons (included
in the exhibits shown below):
Independent Public Accountants
Dechert Price & Rhoads
Actuary
The following exhibits:
1. (1) Resolution of the Board of Directors of the Depositor
dated July 10, 1997 concerning AUL American Individual
Variable Life Unit Trust (1)
(2) Inapplicable
(3) (a) Inapplicable
(b) Inapplicable
(c) Schedule of Sales Commissions(*)
(4) Inapplicable
(5) (a) Form of Modified Single Premium Variable Life
Insurance Policy
(b) Form of Last Survivor Rider (1)
(c) Form of Waiver of Monthly Deduction Disability (1)
(d) Form of Accelerated Death Benefit Rider (1)
(e) Form of Joint First-to-Die Level Term Insurance
Rider (1)
2
<PAGE>
(6) (a) Articles of Incorporation of American United Life
Insurance Company(R)(2)
(b) Bylaws of American United Life Insurance Company(R)
(2)
(7) Inapplicable
(8) (a) Form of Participation Agreement between American
United Life Insurance Company(R) and Alger American
Fund (3)
(b) Form of Participation Agreement between American
United Life Insurance Company(R) and American
Century Variable Portfolios, Inc.(3)
(c) Form of Participation Agreement between American
United Life Insurance Company(R) and Fidelity
Variable Insurance Products Fund(2)
(d) Form of Participation Agreement between American
United Life Insurance Company(R) and Fidelity
Variable Insurance Products Fund II(2)
(e) Form of Participation Agreement between American
United Life Insurance Company(R) and T. Rowe Price
Equity Series, Inc.(3)
(9) Inapplicable
(10) Form of Application for Modified Single Premium
Variable Life Insurance Policy(*)
2. Opinion and consent of legal officer of American United Life
Insurance Company(R) as to legality of Policies being
registered(*)
3. Inapplicable
4. Inapplicable
5. Inapplicable
6. Consent of Independent Accountants(*)
7. Consent of Dechert Price & Rhoads(*)
8. Opinion of Actuary(*)
3
<PAGE>
9. Memorandum Describing Issuance, Transfer, and Redemption
Procedures
10. Powers of Attorney(1)
- ---------------
(1) Incorporated herein by reference to the Registration Statement for the
Flexible Premium Adjustable Variable Life Insurance Policy funded by
AUL American Individual Variable Life Unit Trust (File No. 333-_____)
filed with the Securities and Exchange Commission on July 31, 1997.
(2) Incorporated herein by reference to the Registration Statement of AUL
Unit Trust (File No. 33-31375) on Form N-4.
(3) Incorporated herein by reference to the registration statement of AUL
American Individual Unit Trust (File No. 33-79562) on Form N-4.
(*) To be filed by amendment.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
AUL American Individual Variable Life Unit Trust, has duly caused this
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the city of Indianapolis, and the state of Indiana, on the
31st day of July, 1997.
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
(Registrant)
By: American United Life Insurance Company
By: Jerry D. Semler*
Name: Jerry D. Semler
Title: Chairman of the Board, President,
and Chief Executive Officer
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Depositor)
By: Jerry D. Semler*
Name: Jerry D. Semler
Title: Chairman of the Board, President,
and Chief Executive Officer
* By: /s/ Richard A. Wacker
______________________
Richard A. Wacker as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<S> <C> <C>
Name Capacity Date
Jerry D. Semler* Director, President, and Chief Executive Officer July 31, 1997
James W. Murphy* Principal Financial and Accounting Officer July 31, 1997
Arthur L. Bryant* Director July 31, 1997
James E. Cornelius* Director July 31, 1997
James E. Dora* Director July 31, 1997
Otto N. Frenzel III* Director July 31, 1997
William P. Johnson* Director July 31, 1997
R. Stephen Radcliffe* Director July 31, 1997
Yvonne H. Shaheen* Director July 31, 1997
Frank D. Walker* Director July 31, 1997
</TABLE>
* By: /s/ Richard A. Wacker
_______________________________
Richard A. Wacker as attorney-in-fact
* Powers of Attorney incorporated by reference herein.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
FORM S-6
For Registration Under the Securities Act of 1933
of Securities of Unit Investment Trust
Registered on Form N-8B-2
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
OF AMERICAN UNITED LIFE INSURANCE COMPANY
Exhibit Number Name of Exhibit
1.(5)(a) Form of Modified Single Premium Variable Life Insurance
Policy
9 Memorandum Describing Issuance, Transfer, and
Redemption Procedures
American United Life Insurance Company
One American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368
American United Life Insurance Company (R) (AUL) will pay the Death Benefit
Proceeds to the beneficiary if the Insured dies while this policy is in force,
subject to the terms of this policy.
10-DAY RIGHT TO EXAMINE THE POLICY
THIS POLICY MAY BE SENT BACK TO AUL OR ITS REPRESENTATIVE WITHIN 10
DAYS AFTER IT IS RECEIVED. IN SUCH CASE, THIS POLICY WILL BE VOID FROM
THE BEGINNING. AUL WILL REFUND THE GREATER OF ANY PREMIUMS PAID OR THE
ACCOUNT VALUE WITHIN SEVEN DAYS AFTER THIS POLICY IS RETURNED.
NOTIFICATION OF THE RIGHT TO EXAMINE PERIOD WILL BE SENT WITH THE
POLICY WHEN ISSUED.
THE DURATION OR AMOUNT OF THE DEATH BENEFIT MAY VARY DEPENDING ON THE INVESTMENT
EXPERIENCE. THE DEATH BENEFIT IS DESCRIBED IN THE DEATH BENEFIT SECTION.
THE CASH VALUE IS BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT,
AND MAY INCREASE OR DECREASE. NO MINIMUM CASH VALUE IS GUARANTEED.
------------------------------------------------------------------------
READ YOUR POLICY CAREFULLY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
PARTICIPATING
PERIOD OF COVERAGE NOT GUARANTEED
This policy is a legal contract between the owner and AUL.
------------------------------------------------------------------------
Signed for American United Life Insurance Company by
------------- -----------------------------
Secretary Chairman of the Board, President,
and Chief Executive Officer
A Mutual Company Established 1877
<PAGE>
Table of Contents
Page
POLICY DATA PAGE.............................................................4
DEFINITIONS..................................................................7
BENEFITS AVAILABLE UNDER THE POLICY.........................................10
GENERAL PROVISIONS..........................................................10
POLICY.............................................................10
RELIANCES..........................................................10
INCONTESTABILITY...................................................10
SUICIDE............................................................10
MISSTATEMENT OF AGE OR SEX.........................................11
OWNER AND BENEFICIARY.......................................................11
OWNERSHIP..........................................................11
ASSIGNMENT.........................................................11
BENEFICIARY........................................................11
CHANGE OF OWNER OR BENEFICIARY.....................................12
DEATH BENEFIT...............................................................12
DEATH BENEFIT......................................................12
AMOUNT OF THE DEATH BENEFIT........................................12
EXCHANGE FOR PAID-UP POLICY........................................13
PREMIUMS................................................................... 13
PAYMENT OF PREMIUM.................................................13
ALLOCATION OF PREMIUM..............................................14
POLICY CHARGES..............................................................14
MONTHLY DEDUCTION..................................................14
MORTALITY AND EXPENSE RISK CHARGE..................................15
ADMINISTRATIVE CHARGE..............................................15
TAX CHARGES........................................................15
COST OF INSURANCE..................................................15
ANNUAL CONTRACT CHARGE.............................................15
SURRENDER CHARGE...................................................16
TAXES..............................................................16
CHANGES IN COST FACTORS............................................16
POLICY VALUES...............................................................16
ACCOUNT VALUE......................................................16
CASH VALUE.........................................................17
NET CASH VALUE.....................................................17
2
<PAGE>
VARIABLE ACCOUNT PROVISIONS.................................................17
SEPARATE ACCOUNT...................................................17
INVESTMENT ACCOUNTS................................................17
VARIABLE ACCOUNT VALUE.............................................17
CREDITING OF ACCUMULATION UNITS....................................17
ACCUMULATION UNIT VALUE............................................18
NET INVESTMENT FACTOR..............................................18
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS.................19
CASH BENEFITS...............................................................19
TRANSFERS..........................................................19
LOANS..............................................................20
INTEREST CHARGED ON LOANS..........................................20
LOAN ACCOUNT.......................................................21
REPAYMENT OF LOANS.................................................21
SURRENDER...................................................................21
PARTIAL SURRENDER..................................................21
FULL SURRENDER.....................................................22
TERMINATION OF THE POLICY...................................................22
GRACE PERIOD.......................................................22
TERMINATION........................................................22
REINSTATEMENT......................................................23
OTHER POLICY PROVISIONS.....................................................23
DEFERRAL OF PAYMENTS...............................................23
DIVIDENDS..........................................................23
ANNUAL REPORT......................................................24
CONFORMITY WITH LAWS...............................................24
COMPUTATIONS.......................................................24
SETTLEMENT OPTIONS.................................................24
3
<PAGE>
POLICY DATA PAGE
- -------------------------------------------------------------------
ISSUE DATE: POLICY NUMBER:
CONTRACT DATE:
NAME OF INSURED: INITIAL PREMIUM:
AGE AT ISSUE: MINIMUM INITIAL PREMIUM:
[$10,000]
SEX: MAXIMUM INITIAL PREMIUM:
RATE CLASS: [ ]
FACE AMOUNT OF INSURANCE: ALLOWABLE
PERCENTAGE OF
THE INITIAL MAXIMUM
DEATH BENEFIT OPTION: PREMIUM: [80% to 100%]
SEPARATE ACCOUNT:.[ ]
MINIMUM PREMIUM ALLOCATION TO ANY INVESTMENT ACCOUNT:
[1% of the premium payment]
All allocations must be in whole percentages.
MINIMUM PREMIUM PAYMENT SUBSEQUENT TO THE INITIAL PREMIUM:
[ $1,000 ]
ADMINISTRATIVE CHARGE:
1/12 of [.4%] of the Account Value
TAX CHARGES:
PREMIUM TAX CHARGE: 1/12 of [.25%] of the Account Value during the
first [10] Policy Years
FEDERAL TAX CHARGE: 1/12 of [.15%] of the Account Value during the
first [10] Policy Years
MORTALITY AND EXPENSE RISK CHARGE:
1/12 of the following percentage of the Variable Account Value:
[.90%] during the first [10] Policy Years
[.80%] thereafter
4
<PAGE>
ANNUAL CONTRACT
CHARGE: [$30] if the Account Value on the Policy Anniversary is less
than [$50,000]
TRANSFER CHARGE:
Current: [0]
Guaranteed: [0] for the first [12] transfers in any Policy Year
[$25] for each subsequent transfer in the Policy Year
SURRENDER CHARGE:
Policy year Percent of premium surrendered:
[ 1 [ 10%
2 9%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 2%
10 1%
11+] 0%]
ANNUAL WITHDRAWAL AMOUNT: [12% of the premiums which have not been previously
surrendered]
INTEREST RATE CHARGED ON LOANS: [6%]
INTEREST RATE CREDITED ON THE LOAN ACCOUNT:
Guaranteed rate: [4%]
Current rate: [4% during the first 10 Policy Years, 5% thereafter on
loaned amounts equal to total premiums paid, 6% on loaned amounts in
excess of total premiums paid}]
MINIMUM ACCOUNT VALUE: [$5,000]
MINIMUM TRANSFER AMOUNT: [Currently no minimum. AUL may set a minimum of $100.]
MINIMUM LOAN AMOUNT: [$500]
MINIMUM PARTIAL SURRENDER AMOUNT: [$500]
5
<PAGE>
ASSUMED DATE OF DELIVERY OF THE POLICY, FOR PURPOSES OF THE TRANSFER AT THE END
OF THE RIGHT TO EXAMINE PERIOD: [5] days after the Issue Date
HOME OFFICE:
American United Life Insurance Company
One American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368
TABLE OF MONTHLY GUARANTEED COST OF INSURANCE RATES PER $1000 OF RISK AMOUNT,
and MINIMUM INSURANCE PERCENTAGES
Attained Age Monthly Guaranteed Minimum Insurance
Cost of Insurance Rate Percentage
..... ....
.... ....
The minimum insurance percentages are determined to comply with Section 7702 of
the Internal Revenue Code.
Mortality Table: 1980 Commissioners Standard
Ordinary Mortality Table, age last birthday
6
<PAGE>
DEFINITIONS
ACCOUNT VALUE
The Account Value is the sum of your interest in the Variable Account
and the Loan Account. Details are on page ___.
AGE
Issue Age means the Insured s age as of the Contract Date. Attained Age
means the Issue Age increased by one for each complete Policy Year.
CASH VALUE
The Cash Value is the Account Value less the Surrender Charge. The Net
Cash Value is the Cash Value less any outstanding loan and loan
interest.
CONTRACT DATE
The date from which Monthiversaries, Policy Years, and Policy
Anniversaries are measured. Suicide and Incontestability periods are
measured form the Contract Date.
DEATH BENEFIT AND DEATH BENEFIT PROCEEDS
The Death Benefit is described on page _____. The Death Benefit
Proceeds are the Death Benefit less any outstanding loan and loan
interest, plus any benefits provided by rider.
FACE AMOUNT
The Face Amount shown on the Policy Data Page, or as subsequently
changed under the partial cash surrender provision.
HOME OFFICE
AUL's Home Office as shown on the Policy Data Page.
INITIAL MAXIMUM PREMIUM
An amount set to be less than or equal to the initial premium limit
required to qualify this policy as life insurance under the Internal
Revenue Code.
INSURED
The Insured named on the Policy Data Page. The Insured may or may not
be the Owner.
INVESTMENT ACCOUNTS
One or more of the subdivisions of the Separate Account. Each
Investment Account is invested in a different fund Portfolio. The
Investment Accounts are shown on the Policy Data Page.
7
<PAGE>
ISSUE DATE
The date this policy is issued.
LOAN ACCOUNT
A portion of the Account Value which is collateral for loan amounts.
The Loan Account is described in the Loans section on page XX.
MINIMUM INSURANCE PERCENTAGE
The minimum percentage of insurance required to qualify the policy
under the Internal Revenue Code. A table of these amounts is on the
Policy Data Page.
MONTHIVERSARY
The same date of each month as the Contract Date. If a Monthiversary
falls on a day which is not a Valuation Date, the processing of the
Monthiversary will be the next Valuation Date.
NET CASH VALUE
The Net Cash Value is the Cash Value less outstanding loans and loan
interest.
OWNER
The Owner named in the application, unless changed.
PARTIAL SURRENDER
A withdrawal of a portion of the Account Value.
POLICY ANNIVERSARY
The same date each year as the Contract Date.
POLICY DATA PAGE
The Policy Data Page or the supplemental Policy Data Page most recently
sent to You by Us.
POLICY YEAR
One year from the Contract Date and from each Policy Anniversary.
PORTFOLIO
A separate investment fund in which the Separate Account invests.
PROPER NOTICE
Notice that is received at our Home Office in a form acceptable to Us.
RISK AMOUNT
The Death Benefit divided by 1.00246627 less the Account Value.
8
<PAGE>
SEPARATE ACCOUNT
The Separate Account of AUL identified on the Policy Data Page. The
Separate Account is segregated into several Investment Accounts.
VALUATION DATE
Valuation Dates are the dates on which the Investment Accounts are
valued. A Valuation Date is any date on which the New York Stock
Exchange is open for trading and we are open for business.
VALUATION PERIOD
A Valuation Period begins at the close of one Valuation Date and ends
at the close of the next succeeding Valuation Date.
VARIABLE ACCOUNT
The Account Value of this policy which is invested in one or more
Investment Accounts.
WE
We , us or our means AUL.
YOU
You or your means the Owner of this Policy.
9
<PAGE>
BENEFITS AVAILABLE UNDER THE POLICY
This Policy has a Death Benefit, a surrender benefit, and a loan value. The
terms of these benefits are described in the Policy.
GENERAL PROVISIONS
POLICY
The entire policy consists of:
1. the basic policy;
2. riders and endorsements, if any;
3. the attached copy of your application.
This policy is issued in consideration of the application and payment
of the initial premium.
Any change in this policy must be approved by AUL s President, Vice
President or Secretary. No agent is authorized to change or waive any
policy provision.
RELIANCES
All statements made in the application, in the absence of fraud, are
deemed representations and not warranties. No statement will void this
policy or be used in defense of a claim unless contained in the
application. We are not liable for a request made in accordance with
your instructions.
INCONTESTABILITY
In the absence of fraud, we will not contest this policy after it has
been in force during the lifetime of the Insured for two years from the
Contract Date. If this policy is reinstated, the incontestable period
will start over again beginning on the effective date of the
reinstatement, but only for statements made in the application for
reinstatement.
SUICIDE
If the Insured commits suicide, while sane or insane, within two years
from the Contract Date or the effective date of any reinstatement, we
will not pay a death benefit. We will terminate this policy and refund
the premiums paid, less any loan, loan interest, and any Partial
Surrender.
10
<PAGE>
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex has been misstated, the amount of the Death
Benefit will be the greater of:
1. the amount which would have been purchased at the Insured s
correct age and sex by the most recent cost of insurance charge
assessed prior to the date we receive proof of death; or
2. the Account Value as of the date we receive proof of death,
multiplied by the Minimum Insurance Percentage for the correct
age.
OWNER AND BENEFICIARY
OWNERSHIP
You have all rights in this policy while the Insured is living. Your
rights are subject to the interests of any assignee or irrevocable
beneficiary. If you die before the Insured, any contingent Owner named
in the application will be the new Owner. If there is no contingent
Owner, then your estate becomes the new Owner.
ASSIGNMENT
You may assign this policy. Your rights and the rights of any
beneficiary will be secondary to the rights of the assignee. An
assignment will be subject to any loan on this policy. If there are any
irrevocable beneficiaries, you must obtain their consent before
assigning your policy. We assume no responsibility for the validity of
an assignment. Any assignment will not be binding upon us until we
receive Proper Notice.
BENEFICIARY
The beneficiary will receive the Death Benefit Proceeds of this policy
upon the Insured s death. Beneficiaries are as named in the application
unless later changed by you. You can name more than one beneficiary.
The interests of a beneficiary who dies before the Insured will pass to
any surviving beneficiaries unless you specify otherwise. If no
beneficiary survives the Insured, you will be the beneficiary, or your
estate if you are the Insured.
11
<PAGE>
CHANGE OF OWNER OR BENEFICIARY
While the Insured is living, you may transfer ownership or change the
beneficiary of this policy by giving Proper Notice to us. A change will
take effect on the date the notice is signed. The change will not apply
to any payments made or actions taken by us before we receive the
notice. An irrevocable beneficiary may be changed only with the written
consent of that beneficiary.
DEATH BENEFIT
DEATH BENEFIT
We will pay the Death Benefit Proceeds to the beneficiary upon receipt
of proof that the Insured died while this policy was in force. Coverage
under this policy is effective on the later of the date the initial
premium is paid or the Issue Date.
The proceeds may be paid in a lump sum, or in any other way agreeable
to you and us. Before the Insured dies, you may choose how the proceeds
are to be paid. If you have not made a choice before the Insured dies,
the beneficiary may choose how the proceeds are paid. When part or all
of the proceeds are paid in a lump sum, we will include interest from
the date we receive proof of death to the payment date. The rate will
not be less than required by law.
The Death Benefit Proceeds are:
1. the Death Benefit in force as of the end of the Valuation
Period during which death occurs; less
2. any outstanding loan and loan interest as of the date of
death; plus
3. any benefits provided by rider payable at the Insured's death.
If the Insured dies during the grace period, the proceeds paid on
death will be equal to:
1. the Death Benefit immediately prior to the start of the grace
period; plus
2. any benefits provided by rider; less
3. loans and loan interest and overdue Monthly Deductions as of
the date of death.
AMOUNT OF THE DEATH BENEFIT
The Face Amount is shown on the Policy Data Page. The Death Benefit is
the greater of: (1) the Face Amount; or (2) the Account Value
multiplied by the appropriate percentage from the Table of Minimum
Insurance Percentages on the Policy Data Page. Partial Surrenders may
decrease the Face Amount, as described in the Surrender section.
12
<PAGE>
EXCHANGE FOR PAID-UP POLICY
You may exchange this policy for a paid-up whole life policy by Proper
Notice and returning this policy to the Home Office. The new policy
will be for the level face amount, not greater than this policy s Face
Amount, which can be purchased by this policy s Net Cash Value. We will
pay you any Net Cash Value which is not used to purchase the new
policy.
The new policy will be purchased using the continuous net single
premium for the Insured s age nearest birthday at the time of exchange.
At any time after this option is elected, the cash value of the new
policy will be its net single premium at the Insured s then attained
age. All net single premiums will be based on 3% interest and the
guaranteed cost of insurance rates of this policy.
No riders may be attached to the new policy.
PREMIUMS
PAYMENT OF PREMIUM
The initial premium is due on or before delivery of the policy. There
will be no coverage under this policy until the later of the date the
initial premium is paid or the Issue Date. The initial premium must be
at least equal to the Minimum Initial Premium shown on the Policy Data
Page. The initial premium must also be within the percentages of the
Maximum Initial Premium shown on the Policy Data Page.
You may make other premium payments at any time and in any amount,
subject to the limits described in this section. The actual amount of
premium payments will affect the Account Value and the period of time
the policy remains in force.
Premium payments after the initial payment must be made to our Home
Office. Each payment must be at least equal to the minimum payment
shown on the Policy Data Page. We reserve the right to increase the
minimum initial and subsequent premiums 90 days after we send you
Proper Notice of each increase. All premiums combined may not be more
than $1,000,000, unless a higher amount is agreed to by us.
If the payment of any premium would cause an increase in Risk Amount
because of the Minimum Insurance Percentage, we may require
satisfactory evidence before accepting it. If we accept the premium, we
will allocate the premium to your Account Value on the date of our
acceptance. If we do not accept the premium, we will refund it to you.
13
<PAGE>
If the payment of any premium would cause this policy to fail to meet
the federal tax definition of a life insurance contract in accordance
with the Internal Revenue Code, we reserve the right to refund the
amount to you with interest within 60 days after the end of the Policy
Year in which we receive the premium, but we assume no obligation to do
so.
ALLOCATION OF PREMIUM
The initial premium is allocated to the Fixed and/or Variable Accounts
on the later of the Contract Date or the date we receive the premium at
our Home Office. Subsequent premiums are allocated as of the end of the
Valuation Period during which we receive the premium at our Home
Office.
All Net Premiums received prior to the Issue Date are allocated to our
General Account until the expiration of the Right to Examine period. We
credit interest daily on these funds, at a rate equal to at least 3%
annually. At the end of the Right to Examine period, we transfer your
Account Value to the Investment Accounts of the Variable Account based
on the percentages you have selected in the application. We reserve the
right to allocate Net Premiums to the accounts you have selected prior
to the end of the Right to Examine period. For purposes of determining
the end of the Right to Examine period, solely as it applies to this
transfer, we assume that receipt of this policy occurs on the date
shown on the Policy Data Page.
You may change the allocation of subsequent premiums at any time by
Proper Notice, or by telephone if written authorization is on file with
us.
POLICY CHARGES
MONTHLY DEDUCTION
The Monthly Deduction is a charge made against the Account Value.
The Monthly Deduction is the sum of:
1. the Mortality and Expense Charge; plus
2. the Administration Charge; plus
3. the Tax Charges; plus
4. the cost of insurance; plus
5. the cost for any policy riders.
14
<PAGE>
The Monthly Deduction is deducted on the Contract Date and each
Monthiversary of the Contract Date. Monthly Deductions due on any
Monthiversaries prior to the Issue Date are deducted on the Issue Date.
The Monthly Deduction is deducted prorata from the Investment Accounts
based on your amounts in each account.
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is compensation for our
assumption of the mortality and expense risks. The amount of this
charge is shown on the Policy Data Page.
ADMINISTRATIVE CHARGE
The administrative charge is shown on the Policy Data Page.
TAX CHARGES
The Premium Tax Charge and Federal Tax Charge are shown on the Policy
Data Page.
COST OF INSURANCE
The guaranteed maximum cost of insurance rate is shown on the Policy
Data Page.
The maximum cost of insurance is the cost of insurance rate multiplied
by the Risk Amount determined as of the date of the Monthly Deduction.
The Risk Amount is:
1. the Death Benefit on the Monthiversary divided by 1.00246627;
less
2. the Account Value.
A current cost of insurance charge less than the guaranteed maximum
cost of insurance charge may be used at our option.
ANNUAL CONTRACT CHARGE
The Annual Contract Charge is deducted on each Policy Anniversary. It
is deducted prorata from the amounts in each Investment Account. The
amount of the charge is shown on the Policy Data Page.
15
<PAGE>
SURRENDER CHARGE
The Surrender Charge is shown on the Policy Data Page.
TAXES
We reserve the right to deduct any taxes levied by any government
entity which, at our sole discretion, are determined to have resulted
from the establishment or maintenance or operation of the Separate
Account, or from the investment performance of the Separate Account.
CHANGES IN COST FACTORS
We bear the mortality and expense risks of this policy. We may change
the cost of insurance rates up to the maximum guaranteed amounts stated
in this policy. Changes will be made by class and will be based on
changes in expectations for future experience. Policy cost factors will
be reviewed as needed.
POLICY VALUES
ACCOUNT VALUE
The Account Value is the sum of your interest in the Variable Account
and the Loan Account.
The Account Value on the Contract Date of this policy is the initial
premium received for this policy as of the Contract Date, less any
Monthly Deduction charged as of the Contract Date.
The Account Value on each Valuation Date after the Contract Date will
be:
1. the Account Value on the prior Valuation Date; plus
2. interest credited to the Loan Account; plus
3. the positive or negative investment experience on amounts
allocated to the Variable Account, as reflected by the change in
value of the accumulation units; plus
4. any premium for the policy allocated since the prior Valuation
Date; less
5. any Partial Surrender and associated Surrender Charges
deducted since the prior Valuation Date; less
6. any Monthly Deduction, Annual Contract Charge, or transfer
charges assessed.
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CASH VALUE
The Cash Value of this policy is:
1. the Account Value of this policy; less
2. the Surrender Charge, if any, shown on the Policy Data Page.
NET CASH VALUE
The Net Cash Value is the Cash Value less any outstanding loan and
loan interest.
VARIABLE ACCOUNT PROVISIONS
SEPARATE ACCOUNT
The Separate Account is shown on the Policy Data Page. It is a separate
account established and owned by us. The assets of the Separate Account
will be used to provide values and benefits under this contract and
similar contracts, but the assets of the account equal to the
liabilities may not be charged with liabilities arising from any other
business in which we take part.
INVESTMENT ACCOUNTS
The Separate Account is subdivided into Investment Accounts, each of
which invests in a different Portfolio.
VARIABLE ACCOUNT VALUE
The Variable Account value of this policy equals the sum for all
Investment Accounts of:
(a) the number of accumulation units credited to an Investment
Account; multiplied by
(b) the appropriate accumulation unit value
CREDITING OF ACCUMULATION UNITS
We credit amounts allocated to the Investment Accounts in the form of
accumulation units. The number of accumulation units to be credited is
determined by dividing:
1. the dollar amount allocated to the particular Investment
Account, by
2. the accumulation unit value for the particular Investment
Account at the end of the Valuation Period during which the
allocation is made.
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<PAGE>
Accumulation units are credited when premiums are allocated or amounts
are transferred into an Investment Account. Accumulation units are
deducted when the Monthly Deduction are assessed or when amounts are
partially surrendered or transferred out of an Investment Account.
ACCUMULATION UNIT VALUE
We determine the accumulation unit value for each Investment Account on
each Valuation Date. The accumulation unit value for the Money Market
account was initially set at one dollar ($1) and the value of each of
the other Investment Accounts was set at five dollars ($5) when
operations commenced. The value for any later Valuation Period is found
by multiplying:
1. the net investment factor for the particular Investment
Account, by
2. the accumulation unit value for the same Investment Account
for the preceding Valuation Period.
The accumulation unit value may increase or decrease from one Valuation
Period to the next.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance
of an Investment Account from one Valuation Period to the next. For any
Investment Account, the net investment factor for a Valuation Period is
determined by dividing (a) by (b), where:
(a) is equal to:
1. the net asset value per share of the mutual fund held in the
Investment Account determined at the end of the current Valuation
Period; plus
2. the per share amount of any dividend or capital gain
distribution paid by the mutual fund during the Valuation Period;
plus
3. the per share credit or charge with respect to taxes, if any,
paid or reserved for by us during the Valuation Period that are
determined by us to be attributable to the operation of the
Investment Account.
(b) is equal to:
1. the net asset value per share of the mutual fund held in the
Investment Account determined at the end of the preceding
Valuation Period; plus
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<PAGE>
2. the per share credit or charge for any taxes reserved for the
immediately preceding Valuation Period.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the Portfolio shares that are held
by the Separate Account or that the Separate Account may purchase. We
reserve the right to eliminate the shares of any of the eligible
Portfolios and to substitute shares of another Portfolio, or of another
open-end, registered investment company, if the shares of an eligible
Portfolio are no longer available for investment, or if in our judgment
further investment in any eligible Portfolio should become
inappropriate in view of the purposes of the Separate Account. We will
not substitute any shares attributable to your interest in an
Investment Account without Proper Notice to you and prior approval of
the Securities and Exchange Commission, to the extent required by the
Investment Company Act of 1940.
We reserve the right to establish additional Investment Accounts, each
of which would invest in a new Portfolio, or in shares of another
open-end investment company. We also reserve the right to eliminate
existing Investment Accounts. If deemed by us to be in the best
interest of persons having voting rights under the policies, the
Separate Account may be operated as a management company under the
Investment Company Act of 1940, or it may be deregistered under such
Act in the event such registration is no longer required, or it may be
combined with other AUL Separate Accounts.
We may, by appropriate endorsement, make such changes in this policy as
may be necessary to reflect any substitution or change.
The investment policy of the Separate Account will not be changed
without the approval of the Insurance Commissioner of the State of
Indiana. If required, the approval process is on file with the
Commissioner of the state in which this policy is issued.
CASH BENEFITS
TRANSFERS
You may transfer amounts among Investment Accounts at any time after
the Right to Examine period. The transfer will be made as of the end of
the Valuation Period during which we receive the request.
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The minimum transfer amount is shown on the Policy Data Page. The
transfer must be at least for the minimum amount, or, if less, the
entire amount in the Investment Account each time that a transfer is
made. If after the transfer the amount remaining in any account is less
than $25, we have the right to transfer the entire amount. Any
applicable transfer charge shown on the Policy Data Page will be
assessed. The charge will be deducted from the account(s) from which
the transfer is made on a prorata basis; and, if those remaining
Account Values are not sufficient, from Account Values determined by
us.
Transfers are made such that the Account Value on the date of transfer
will not be affected by the transfer, except for the deduction of any
transfer charge.
We reserve the right to limit the number of transfers to 12 per year,
or to restrict transfers from being made on consecutive Valuation
Dates.
If we determine that the transfers made by on or behalf of one or more
Owners is to the disadvantage of other Owners, we may restrict the
rights of certain Owners. Such restrictions would be applied in any
manner reasonably designed to prevent transfers of some Owners from
being disadvantageous to other Owners. We also reserve the right to
limit the size of transfers and remaining balances, require a minimum
time period between transfers, to limit the number and frequency of
transfers, and to discontinue telephone transfers.
LOANS
You may request a loan at any time after the Right to Examine period
while the policy is not in the grace period. This policy is assigned to
us as sole security for the loan.
The minimum amount of a new loan is shown on the Policy Data Page. The
maximum amount of a new loan is:
1. 90% of the Variable Account Value; less
2. any loan interest due on the next Policy Anniversary; less
3. any applicable Surrender Charges; less
4. any existing loans and accrued loan interest.
INTEREST CHARGED ON LOANS
Interest accrues daily from the date of the loan at the rate shown on
the Policy Data Page. Interest is due on each Policy Anniversary. If
you do not pay interest when due, we will add that amount to the loan.
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<PAGE>
LOAN ACCOUNT
At the time any loan is issued, we transfer an amount equal to the loan
from the Investment Accounts into a Loan Account as collateral for the
loan. On your loan request, you may specify that the transfer is to be
made from specific Investment Accounts. If you make no specification,
this transfer is made in proportion to the Account Value in each
Investment Account.
The Loan Account will be credited with interest daily which will be at
least equal to the rate shown on the Policy Data Page. We may credit a
higher rate.
If you do not pay any loan interest when it is due, we make a transfer
from the Investment Accounts into the Loan Account as collateral for
the interest due. The amount we transfer is the amount by which the
interest due exceeds the interest which has been credited on the Loan
Account. The transfer is made from each account in proportion to the
amount in the account.
A loan has a permanent effect on the policy values even if the loan is
repaid, since the Account Value held in the Loan Account as collateral
earns different rates than it might have experienced if it were
invested in the Investment Accounts.
REPAYMENT OF LOANS
A loan may be paid in full or in part at any time while this policy is
in force and the Insured is alive. When a loan repayment is made, the
amount of the Loan Account equivalent to the amount of loan repayment
is transferred to the Investment Accounts based on the proportions in
your current premium allocation instructions.
Unless you request otherwise at the time you make any payments to us,
all amounts received while a loan is outstanding will be considered as
premium payments.
SURRENDER
PARTIAL SURRENDER
At any time after the end of the Right to Examine period, you may
surrender part of this policy for cash by Proper Notice to us. The
minimum amount of any Partial Surrender is shown on the Policy Data
Page. The Surrender Charge is applicable to any amount surrendered in
excess of the Annual Withdrawal Amount shown on the Policy Data Page.
The amount you request plus any associated Surrender Charge will be
deducted from the Account Value, and therefore also reduces the Cash
Value. The deduction will be made from the Investment Accounts in
proportion to your amounts in each account, unless you request
deduction from specific Investment Accounts.
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<PAGE>
The Face Amount will be reduced proportional to the reduction in the
Account Value resulting from the partial cash surrender.
The remaining Account Value must be at least equal to the minimum
Account Value shown on the Policy Data Page.
FULL SURRENDER
At any time after the right to examine, you may surrender this policy
for the Net Cash Value by Proper Notice to us.
TERMINATION OF THE POLICY
GRACE PERIOD
The grace period begins on the Monthiversary when the Net Cash Value is
less than the Monthly Deduction. This policy goes into default at the
start of the grace period. We will send you Proper Notice of the length
of the grace period and the amount of premium due. The amount of
premium due is the amount which is required to keep the policy in force
during the grace period. This notice will be sent to your last known
address. The grace period shall terminate as of the date indicated
in the notice, which shall comply with any applicable state law.
If the premium due is not paid within the grace period, all insurance
stops and the policy terminates without value.
TERMINATION
This policy will terminate and all insurance will stop:
1. as of the end of the Valuation Period during which we receive
Proper Notice order from you to surrender the contract; or
2. when the Insured dies; or
3. at the end of the grace period if the premium due is not paid.
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<PAGE>
REINSTATEMENT
You may reinstate this policy by Proper Notice to us within 5 years of
the date the policy terminated if:
1. the policy had not been surrendered for its Net Cash Value;
and
2. satisfactory evidence of insurability is provided to us; and
3. payment is made of sufficient premium to cover past due
Monthly Deductions during the grace period and to keep this
policy in force for three months; and
4. interest on any loan amount which is reinstated is paid at the
annual rate applicable to policy loans during the period of
lapse, from the date insurance stopped.
The effective date of the reinstatement is the next Monthiversary
following our approval of the reinstatement.
The Account Value on the effective date of reinstatement is equal to
the Account Value at the time of termination, adjusted for past due
charges during the grace period, plus the premium paid at the time of
reinstatement. The Surrender Charge will be based on the number of
Policy Years from the original Contract Date.
OTHER POLICY PROVISIONS
DEFERRAL OF PAYMENTS
While payments will generally be made within 7 days of a request in
good order, we may suspend or delay withdrawal payments or transfers
from the Variable Account when permitted under applicable federal laws,
rules and regulations.
DIVIDENDS
As long as this policy is in force, you will receive any dividends
declared by us. It is anticipated that no dividends will be declared.
The amount of any dividend will be applied to increase the Account
Value unless you request it to be paid in cash.
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<PAGE>
ANNUAL REPORT
At least once a year we will send you a report showing the current
Account Value, Cash Value, Death Benefit, change in value of amounts in
the Variable Account, premiums paid, loans, Partial Surrenders, expense
charges, and cost of insurance charges since the prior report. Any
other information required by the Insurance Department of the state
where the application is signed will also be included in the annual
report.
You may request other information about this policy, including a
hypothetical illustration of future policy benefits and values. We may
make a reasonable charge to provide this information.
CONFORMITY WITH LAWS
This policy is subject to the laws of the state where the application
is signed. We reserve the right to make any changes without your
consent which are necessary to comply with any federal or state
statute, rule, or regulation.
COMPUTATIONS
Calculations are based on the mortality table referenced on the Policy
Data Page.
All of the values are the same as or more than the minimums set by the
laws of the state where the application was signed. If required, we
have filed a detailed statement with your State Insurance Department.
SETTLEMENT OPTIONS
OPTIONS
All or any part of the proceeds payable at death or upon full surrender
of this policy may be paid in one sum or according to one of the
following options:
1. Income for a Fixed Period. Proceeds are payable in equal
monthly installments for a specified number of years, not to
exceed 20.
2. Life Annuity. Proceeds are paid in equal monthly installments
for as long as the payee lives. A number of payments can be
guaranteed, such as 120, or the number of payments required to
refund the proceeds applied.
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<PAGE>
3. Survivorship Annuity. Proceeds are paid in monthly
installments for as long as either the first payee or surviving
payee lives. A number of payments equal to the initial payment
can be guaranteed, such as 120. A different monthly installment
payable to the surviving payee can be specified.
The proceeds of this policy may be paid in any other method or
frequency of payment acceptable by us.
Policy proceeds payable in one sum will accumulate at interest from the
date of death or surrender to the payment date at the rate of interest
then paid by us or at the rate specified by statute, whichever is
greater.
SELECTION
You may select or change an option by giving us Proper Notice prior to
the settlement date. If no option is in effect on the settlement date,
the payee may select an option. If this policy is assigned or if the
payee is a corporation, association, partnership, trustee or estate, a
settlement option will be available only with our consent.
PAYMENTS
We will determine the amount payable under any option. The minimum
interest rate used in computing payments under all options will be 3%
per year.
The settlement option tables show the guaranteed monthly payments
available under options 1, 2 and 3. The amounts shown are for exact
adjusted ages. The values for other ages and fractional ages not shown
will be calculated on the same basis as those shown and will be
furnished upon request.
If the monthly payment under a chosen settlement option is less than
$100, we may require that payments be made on a less frequent basis.
ADJUSTED AGE
An adjusted age is calculated as follows:
(a) Determine a payee s actual age in years and full months on
the date payments are to begin.
(b) Subtract 1 1/2 months for each year the payee s year of birth
exceeds 1900.
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<PAGE>
DEATH OF LAST PAYEE
If a payee dies and there is no surviving payee, we will pay a single
sum to such payee s estate. The final payment will be the commuted
value of any remaining guaranteed payments.
CLAIMS OF CREDITORS
Settlement option payments will be exempt from the claims of creditors
to the maximum extent permitted by law.
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<PAGE>
Settlement Option Tables
Guaranteed Monthly Income Per $1,000 of Proceeds
Option 1 - Income for Fixed Period
Number Monthly Number Monthly
of Years Income of Years Income
1 $84.47 11 $8.86
2 42.86 12 8.24
3 28.99 13 7.71
4 22.06 14 7.26
5 17.91 15 6.87
6 15.14 16 6.53
7 13.16 17 6.23
8 11.68 18 5.96
9 10.53 19 5.73
10 9.61 20 5.51
Quarterly Income is 2.993 times the monthly income and annual income is 11.839
Option 2 - Life Annuity
The amount of income is based on the adjusted age of the payee on the date of
the first payment.
Adjusted: Number of Guaranteed Payments
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Age None 120 Refund* Age None 120 Refund*
55 $4.34 $4.30 $4.17 63 $5.21 $5.10 $4.86
56 4.42 4.38 4.24 64 5.35 5.22 4.96
57 4.52 4.47 4.31 65 5.51 5.35 5.08
58 4.61 4.56 4.39 66 5.67 5.49 5.20
59 4.72 4.65 4.47 67 5.85 5.64 5.33
60 4.83 4.76 4.56 68 6.04 5.80 5.46
61 4.95 4.86 4.66 69 6.24 5.96 5.61
62 5.08 4.98 4.75 70 6.46 6.13 5.76
</TABLE>
*The sum of all guaranteed payments will equal the amount applied under this
option.
Option 3 - Survivorship Annuity
The amount of income is based on the adjusted age of each of the payees on the
date of the first payment.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50% to Survivor 100% to Survivor
120 Guaranteed Payments 120 Guaranteed Payments
Payee #1 Payee #2 Age Payee #1 Payee #2 Age
Age 50 55 60 65 70 Age 50 55 60 65 70
50 $3.95 $4.12 $4.31 $4.55 $4.80 50 $3.56 $3.67 $3.76 $3.83 $3.88
55 4.12 4.30 4.52 4.77 5.05 55 3.67 3.83 3.97 4.08 4.17
60 4.31 4.52 4.76 5.04 5.36 60 3.76 3.97 4.17 4.36 4.51
65 4.55 4.77 5.04 5.35 5.72 65 3.83 4.08 4.36 4.64 4.90
70 4.80 5.05 5.36 5.72 6.13 70 3.88 4.17 4.51 4.90 5.28
</TABLE>
Income for other combinations of ages will be furnished on request.
27
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
DESCRIPTION OF TRANSFER AND REDEMPTION PROCEDURES
This document sets forth, as required by Rule 63-3(T)(b)(12)(ii), the
administrative procedures that will be followed by American United Life
Insurance Company(R) ("AUL") in connection with the issuance of its Modified
Single Premium Variable Life Insurance policy (the "Policy"), the transfer of
assets held thereunder, and the redemption by Policy Owners of their interests
in said Policies.
TRANSFER AND REDEMPTION PROCEDURES
I. PURCHASE AND RELATED TRANSACTIONS
A. PREMIUM SCHEDULES AND UNDERWRITING STANDARDS
The Policy permits the Owner to pay a large single premium and
additional premiums subject to restrictions. The initial Face
Amount for the Policies will not be the same for all Policy Owners
as the amount of the is based upon the Insured's Age, premium
class and the Initial Premium of the Policy. The Policies will be
offered and sold pursuant to established underwriting standards
and in accordance with state insurance laws, which prohibit unfair
discrimination among Policy Owners, but recognize that premiums
must be based upon factors such as age, health or occupation.
B. APPLICATION AND INITIAL PREMIUM PROCESSING
Upon receipt of a completed application, AUL will follow certain
insurance underwriting (i.e., evaluation of risks) procedures
designed to determine whether the applicant is insurable. This
process may involve such verification procedures as medical
examinations and may require that further information be provided
by the proposed Insured before a determination can be made. A
policy will not be issued and consequently a Policy Issue Date
established, until this underwriting procedure has been completed.
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<PAGE>
If a premium is submitted with the Policy application, insurance
coverage will begin immediately if the proposed Insured is
insurable at a standard rate under a conditional receipt
agreement. Otherwise, insurance coverage will not begin until the
Policy's Issue date.
If a premium is not paid with the application, insurance coverage
will begin and the Policy will be effective on the later of the
Policy Issue Date or the date the initial premium is received.
C. PREMIUM ALLOCATION
In the application for a Policy, the Policy Owner can allocate the
initial premium among the Investment Accounts. AUL will generally
allocate the net initial premium to our general account. At a
later date, the value of the Policy Owner's interest in the
general account will be allocated to the Investment Accounts in
accordance with the Policy Owner's instructions in the application
for insurance. An allocation to any Investment Account must be at
least 1% in whole percentages.
2
<PAGE>
D. POLICY LOANS
A Policy Owner may obtain a cash loan from AUL, which is secured
by the Policy, any time after the "Right to Examine" period while
the policy is not in the grace period. The maximum amount of a new
loan is:
1. 90% of the Account Value; less
2. any loan interest due on the next Policy Anniversary; less
3. any applicable Surrender Charges; less
4. any existing loans and accrued loan interest.
The amount of each loan will be transferred on a pro rata basis
from each of the Investment Accounts (unless the Policy Owner
specifies otherwise) to the Loan Account. The Loan Account is a
mechanism used to ensure that any outstanding loans and loan
interest remain fully secured by the policy values.
LOAN INTEREST
Interest will accrue daily on the indebtedness at the Policy Loan
Interest Rate indicated in the Policy .
PREFERRED LOANS
Beginning in the eleventh Policy Year, a preferred loan may be
made available by AUL. The amount available for a Preferred Loan
is the amount by which the Cash Value exceeds total premiums paid.
The maximum amount available for a preferred loan may not exceed
the maximum loan amount.
CREDITED INTEREST
During the first ten Policy Years, any amounts in the Loan Account
will be credited with interest at a rate equal to the Policy Loan
Rate, minus 2%, but never less than 4%. For Policy Years 11 and
beyond, the Loan Account will be credited with interest at a rate
equal to the Policy Loan Rate, minus 1%, but never less than 4%.
The Preferred Loan amount will be credited at a rate equal to the
Policy Loan Rate, but never less than 4%.
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<PAGE>
LOAN REPAYMENTS
If loan interest is not paid when it is due, AUL will make a
transfer from the Investment Accounts into the Loan Account as
collateral for the interest due. The amount transferred is the
amount by which the interest due exceeds the interest which has
been credited on the Loan Account. The transfer is made from each
account in proportion to the amount in the account.
A loan may be paid in full or in part at any time while this
policy is in force and the Insured is alive. When a loan repayment
is made, the amount of the Loan Account equivalent to the amount
of loan repayment is transferred to the Investment Accounts based
on the current premium allocation.
TERMINATION DUE TO EXCESSIVE INDEBTEDNESS
A loan may affect the length of time the Policy remains in force.
The Policy will lapse when Net Cash Value is insufficient to cover
the monthly deduction against the Policy and the minimum payment
required is not made during the 61 day grace period.
4
<PAGE>
EFFECT OF LOANS ON ACCOUNT VALUE
A loan, whether or not repaid, will have a permanent effect on the
Death Benefit and Policy values because the investment results of
the Investment Accounts of the Separate Account will apply only to
the non-loaned portion of the Account Value. The longer the loan
is outstanding, the greater the effect is likely to be. Depending
on the investment results of the Investment Accounts while the
loan is outstanding, the effect could be favorable or unfavorable.
Policy loans may increase the potential for lapse if investment
results of the Investment Accounts are less than anticipated.
Also, loans could, particularly if not repaid, make it more likely
than otherwise for a Policy to terminate.
II. TRANSFER AMONG INVESTMENT DIVISIONS
The Separate Account currently has 16 Investment Accounts, each of which
invests in shares of an open-end diversified management investment
company registered with the SEC. At any time after the "Right to Examine
Period", the Policy Owner may transfer value among the Investment
Accounts. AUL reserves the right to limit the size of transfers,
remaining balances and to limit the number and frequency of transfers.
A transfer between the Loan Accounts and the Separate Account incident to
the repayment or making of a loan under the Policy will not be considered
a transfer. A transfer from the general account at the end of the Right
to Examine Period or a transfer arising because of a substitution of
securities by AUL will also not be considered a transfer. Currently
transfers through the Portfolio Rebalancing Plan or Dollar Cost Averaging
Program will not count against the limited number of transfers.
5
<PAGE>
III. "REDEMPTION" PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. SURRENDER FOR NET CASH VALUE
At any time after the end of the "Right to Examine" period, you
may surrender part of this policy for cash by Proper Notice to us.
The minimum amount of any Partial Surrender is shown in the
Policy. The amount surrendered is deducted from the Account Value,
and therefore also reduces the Cash Value. The deduction will be
made from the Investment Accounts in proportion to the amounts in
each account, unless specific Accounts are requested.
The Face Amount will be reduced in proportion to the reduction in
the Account Value resulting from the Partial Surrender. The
remaining Account Value must be at least equal to the minimum
Account Value shown in the Policy.
At any time after the Right to Examine Period and while the Policy
is in force, the Policy Owner may completely surrender the Policy
by submitting Proper Notice to us. The surrender payment from the
Investment Accounts will generally be made within seven days after
AUL receives Proper Notice, unless payment is postponed pursuant
to the relevant provision of the Investment Company Act of 1940.
The surrender payment will equal the Policy Owner's Net Cash
Value.
B. BENEFIT CLAIMS
As long as the Policy remains in force, AUL will generally pay the
Death Proceeds to the named Beneficiary within seven days after
receipt of due proof of death of the Insured unless the Policy is
contested. Payment of the Death Proceeds may be postponed as
permitted pursuant to the relevant provisions of the Investment
Company Act of 1940.
The Death Benefit Proceeds equal the Death Benefit in force as of
the end of the Valuation Period during which death occurs less all
outstanding loans and loan interest plus any benefits provided by
rider payable at Insured's death.
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<PAGE>
If the Insured dies during the grace period, the proceeds paid on
death will be equal to the Death Benefit immediately prior to the
start of the grace period, plus any benefits provided by the
rider, less any outstanding loan and loan interest and less
overdue Monthly Deductions as of the date of death.
In lieu of payment of the death proceeds in a single sum, an
election may be made to apply all or a portion of the proceeds
under one of the settlement options described in the Policy or the
election may be made by the Policy Owner during the Insured's
lifetime. The Beneficiary may make or change an election of
settlement option unless the Policy Owner has made an irrevocable
election.
C. POLICY LAPSATION
The grace period begins on the Monthiversary when the Net Cash
Value is less than the Monthly Deduction. This policy goes into
default at the start of the grace period. The grace period is a 61
day period to make a premium payment sufficient to prevent lapse.
AUL will send written notice of the length of the grace period and
the amount of premium due. The amount of premium due is the amount
which is required to keep the policy in force during the grace
period. This notice will be sent to your last known address. If
the premium due is not paid within the grace period, all insurance
stops and the policy terminates without value.
7
<PAGE>
D. REINSTATEMENT
You may reinstate this policy by Proper Notice to us within 5
years of the date the policy terminated if:
1. the policy had not been surrendered for its Net Cash
Value; and
2. satisfactory evidence of insurability is provided to AUL;
an
3. payment is made of sufficient premium to cover past due
monthly deductions during the grace period and to keep this
policy in force for three months; and
4. interest on any loan amount which is reinstated is paid
at the annual rate applicable to policy loans during the
period of lapse, from the date insurance stopped.
The effective date of the reinstatement is the next Monthiversary
following approval of the reinstatement.
E. POLICY LOANS
See "Purchase and Related Transactions," Section I.D. on page 3 of
this Exhibit.
8
