As filed with the Securities and Exchange Commission on
January 29, 1999
Registration No.
======================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Pre-Effective No. 1
to
Form S-6
---------------
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
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Acacia National Life Insurance Company
SEPARATE ACCOUNT III
(EXACT NAME OF REGISTRANT)
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Acacia National Life Insurance Company
(Depositor)
7315 Wisconsin Avenue
Bethesda, MD 20814
----------------
ELLEN JANE ABROMSON
2nd Vice President and Associate Counsel
Acacia National Life Insurance Company
7315 Wisconsin Avenue
Bethesda, MD 20855
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Title of Securities Being Registered: Securities of Unit Investment Trust
Approximate Date Of Proposed Public offering: As soon as practicable after the
effective date of the Registration Statement.
Flexible Premium Variable Life Insurance Policies--Registration of an indefinite
amount of securities pursuant to Rule 24f-2 under the Investment Company Act of
1940.
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 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 Commission, acting pursuant to said Section 8(a) may determine.
<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS IN FORM N-8B-2
AND THE PROSPECTUS
Item No. of
Form N-8B-2 Caption In Prospectus
- ----------- -----------------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 Acacia National Life Insurance Company - Separate Account III
6 Acacia National Life Insurance Company - Separate Account III
7 Not Required
8 Not Required
9 Legal Proceedings
10 Summary; Addition, Deletion or Substitution of Investments; Policy
Benefits; Policy Rights; Payment and Allocation of Premiums; General
Provisions; Voting Rights
11 Summary; The Funds
12 Summary; The Funds
13 Summary; The Funds - Charges and Deductions
14 Summary; Payment and Allocation of Premiums
15 Summary; Payment and Allocation of Premiums
16 Summary; The Alger American Fund, Calvert Variable Series, Inc.,
Dreyfus Stock Index Fund, Neuberger&Berman Advisers Management
Trust, Oppenheimer Variable Account Funds and Strong Variable
Insurance Funds, Inc., and Van Eck Worldwide Insurance Trust.
17 Summary; Policy Rights
18 The Alger American Fund, Calvert Variable Series,
Inc., Dreyfus Stock Index Fund, Neuberger&Berman
Advisers Management Trust, Oppenheimer Variable
Account Funds, Strong Variable Insurance Funds,
Inc., and Van Eck Worldwide Insurance Trust.
19 General Provisions; Voting Rights
20 Not Applicable
21 Summary; Policy Rights; General Provisions
22 Not Applicable
23 Safekeeping of the Separate Account's Assets
24 General Provisions
25 Acacia National Life Insurance Company
26 Not Applicable
27 Acacia National Life Insurance Company
28 Executive Officers and Directors of ANLIC; Acacia National Life
Insurance Company
29 Acacia National Life Insurance Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Applicable
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41 Distribution of Policies
<PAGE>
Item No. of
Form N-8B-2 Caption In Prospectus
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42 Not Applicable
43 Not Applicable
44 Accumulation Value, Payment and Allocation of Premium
45 Not Applicable
46 The Funds; Accumulation Value
47 The Funds
48 State Regulation of ANLIC
49 Not Applicable
50 Acacia National Life Insurance Company Separate Account III
51 Cover Page; Summary; Policy Benefits; Charges and Deductions
52 Addition, Deletion or Substitution of Investments
53 Summary; Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Required
57 Not Required
58 Not Required
59 Financial Statements
<PAGE>
PROSPECTUS Acacia National Life
Insurance Company
7315 Wisconsin Avenue
Bethesda, MD 20814
Regent 2000 -- A Survivorship Flexible Premium Variable Universal Life
Insurance Policy issued by Acacia National Life Insurance Company
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Regent 2000 is a survivorship flexible premium variable universal life insurance
Policy ("Policy"), issued by Acacia National Life Insurance Company ("ANLIC"),
that pays a death benefit upon the Second Death. Like traditional life insurance
policies, a Regent 2000 Policy provides Death Benefits to Beneficiaries and
gives you, the Policyowner, the opportunity to increase the Policy's cash value.
Unlike traditional policies, Regent 2000 lets you vary the frequency and amount
of premium payments, rather than follow a fixed premium payment schedule. It
also lets you change the level of Death Benefits as often as once each year.
A Regent 2000 Policy is different from traditional life insurance policies in
another important way: you select how Policy premiums will be invested. Although
each Policyowner is guaranteed a minimum Death Benefit, the cash value of the
Policy, as well as the actual Death Benefit, will vary with the performance of
investments you select.
The Investment Options available through Regent 2000 include investment
portfolios from The Alger American Fund, Calvert Variable Series, Inc., Dreyfus
Stock Index Fund, Neuberger & Berman Advisers Management Trust, Oppenheimer
Variable Account Funds, Strong Variable Insurance Funds, Inc., and Van Eck
Worldwide Insurance Trust. Each of these portfolios has its own investment
objective and policies. These are described in the prospectuses for each
investment portfolio which must accompany this Regent 2000 prospectus. You may
also choose to allocate premium payments to the Fixed Account managed by ANLIC.
A Regent 2000 Policy will be issued after ANLIC accepts a prospective
Policyowner's application. Generally, an application must specify a Death
Benefit no less than $100,000. Regent 2000 Policies are available to cover
individuals between the ages of 20 and 90 at the time of purchase, although at
least one of the individuals must be no older than 85. A Regent 2000 Policy,
once purchased, may generally be canceled within 10 days after you receive it.
This Regent 2000 prospectus is designed to assist you in understanding the
opportunity and risks associated with the purchase of a Regent 2000 Policy.
Prospective Policyowners are urged to read the prospectus carefully and retain
it for future reference.
This prospectus includes a summary of the most important features of the Regent
2000 Policy, information about ANLIC, a list of the investment portfolios to
which you may allocate premium payments, and a detailed description of the
Regent 2000 Policy. The appendix to the prospectus includes tables designed to
illustrate how cash values and Death Benefits may change with the investment
experience of the Investment Options.
This prospectus must be accompanied by a prospectus for each of the investment
portfolios available through Regent 2000.
Although the Regent 2000 Policy is designed to provide life insurance, a Regent
2000 Policy is considered to be a security. It is not a deposit with, an
obligation of, or guaranteed or endorsed by any banking institution through
which it may be purchased, nor is it insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency. The purchase of a
Regent 2000 Policy involves investment risk, including the possible loss of
principal. For this reason, Regent 2000 may not be suitable for all individuals.
It may not be advantageous to purchase a Regent 2000 Policy as a replacement for
another type of life insurance or as a way to obtain additional insurance
protection if the purchaser already owns another survivorship flexible premium
variable universal life insurance policy.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains other information regarding registrants that file electronically
with the Securities and Exchange Commission.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORY AUTHORITY HAS APPROVED THESE SECURITIES, OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_______ __, 1999
<PAGE>
Table of Contents Page
Definitions................................................................ 4
Summary.................................................................... 7
Year 2000 ................................................................. 10
Acacia National Life Insurance Company and the Separate Account ........... 11
Acacia National Life Insurance Company.............................. 11
Acacia National Life Insurance Company Separate Account III......... 11
Performance Information.................................................... 11
The Funds........................................................... 11
Investment Objectives and Policies Of The Funds' Portfolios......... 12
Addition, Deletion or Substitution of Investments................... 15
Fixed Account....................................................... 16
Policy Benefits............................................................ 16
Purposes of the Policy.............................................. 16
Death Benefit Proceeds.............................................. 17
Death Benefit Options............................................... 17
Methods of Affecting Insurance Protection........................... 19
Duration of Policy.................................................. 19
Accumulation Value.................................................. 19
Payment of Policy Benefits.......................................... 20
Policy Rights.............................................................. 20
Loan Benefits....................................................... 20
Surrenders.......................................................... 21
Partial Withdrawals................................................. 22
Transfers........................................................... 22
Systematic Programs................................................. 23
Free Look Privilege................................................. 23
Payment and Allocation of Premiums......................................... 23
Issuance of a Policy................................................ 23
Premiums............................................................ 24
Allocation of Premiums and Accumulation Value....................... 25
Policy Lapse and Reinstatement...................................... 25
Charges and Deductions..................................................... 26
Deductions From Premium Payments.................................... 26
Charges from Accumulation Value..................................... 26
Surrender Charge.................................................... 27
Daily Charges Against the Separate Account.......................... 28
Fund Expense Summary................................................ 28
General Provisions......................................................... 30
Distribution of the Policies............................................... 32
Federal Tax Matters........................................................ 33
Safekeeping of the Separate Account's Assets............................... 35
Third Party Services....................................................... 35
Voting Rights.............................................................. 35
State Regulation of ANLIC.................................................. 36
Executive Officers and Directors of ANLIC.................................. 36
Legal Matters.............................................................. 37
Legal Proceedings.......................................................... 37
Additional Information..................................................... 37
Financial Statements....................................................... 37
Acacia National Life Insurance Company Separate Account III................
Acacia National Life Insurance Company.....................................
Appendices.................................................................
The Policy, certain Funds, and/or certain riders are not available in all
states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
3
<PAGE>
DEFINITIONS
Accrued Expense Charges - Any Monthly Deductions that are due and unpaid.
Accumulation Value - The total amount that the Policy provides for investment at
any time. It is equal to the total of the Accumulation Value held in the
Separate Account, the Fixed Account, and any Accumulation Value held in the
General Account which secures Outstanding Policy Debt.
Administrative Expense Charge - A charge to cover the cost of administering the
Policy. It is part of the Monthly Deduction.
Asset-Based Administrative Expense Charge - A daily charge that is deducted from
the overall assets of the Separate Account to provide for expenses of ongoing
administrative services to the Policyowners as a group.
Attained Age - The Issue Age of the younger Insured plus the number of complete
Policy Years that the Policy has been in force.
ANLIC - Acacia National Life Insurance Company, a Virginia stock company.
ANLIC's Home Office is located at 7315 Wisconsin Avenue, Bethesda, MD 20814.
Beneficiary - The person or persons to whom the Death Benefit Proceeds are
payable upon the Second Death. (See the sections on Beneficiary and Change of
Beneficiary.)
Cost of Insurance - A charge deducted monthly from the Accumulation Value to
provide the life insurance protection; this charge may also include one or more
Flat Extra Rating Charges. The Cost of Insurance is calculated with reference to
an annual "Cost of Insurance Rate." This rate is based on the Issue Age, sex,
and risk class of each Insured and the policy duration. The Cost of Insurance is
part of the Monthly Deduction.
Declared Rate - The interest rate declared by ANLIC to be earned on amounts in
the Fixed Account, which ANLIC guarantees to be no less than an annual rate of
3.5%.
Death Benefit - The amount of insurance coverage provided under the selected
Death Benefit option of the Policy.
Death Benefit Proceeds - The proceeds payable to the Beneficiary upon receipt by
ANLIC of Satisfactory Proof of Death of both Insureds while the Policy is in
force. It is equal to: (l) the Death Benefit; (2) plus additional life insurance
proceeds provided by any riders; (3) minus any Outstanding Policy Debt; (4)
minus any Accrued Expense Charges, including the Monthly Deduction for the month
of the Second Death.
Flat Extra Rating Charge - A charge that will be applicable if an Insured is
placed into a class that involves a higher mortality risk. One-half the amount
of any applicable Flat Extra Rating Charge will be added to the Cost of
Insurance Rate and, thus, will be deducted as part of the Monthly Deduction on
each Monthly Activity Date.
Fixed Account - An account that is a part of ANLIC's General Account to which
all or a portion of Net Premiums and transfers may be allocated for accumulation
at fixed rates of interest.
General Account - The General Account of ANLIC includes all of ANLIC's assets
except those assets segregated into separate accounts such as the Separate
Account.
Grace Period - A 61 day period from the date written notice of lapse is mailed
to the Policyowner's last known address. If the Policyowner makes the payment
specified in the notification of lapse, the policy will not lapse.
Guaranteed Death Benefit (in Maryland, "Guaranteed Death Benefit to Prevent
Lapse") Period - The number of years the "Guaranteed Death Benefit" provision
will apply. The period extends to Attained Age 85 but in no event is less than
10 years, and may be restricted as a result of state law. Not available in
Massachusetts. This benefit is provided without an additional Policy charge.
Guaranteed Death Benefit Premium - A specified premium which, if paid in advance
on a monthly prorated basis, will keep the Policy in force during the Guaranteed
Death Benefit Period so long as other Policy provisions are met, even if the Net
Cash Surrender Value is zero or less.
Insureds - The two persons whose lives are insured under the Policy.
Investment Options - Refers to the Subaccounts and/or the Fixed Account offered
under this Policy.
4
<PAGE>
Issue Age - The actual age of each Insured on the Policy Date.
Issue Date - The date that all financial, contractual and administrative
requirements have been met and processed for the Policy.
Minimum Premium - A specified premium which, if paid in advance on a monthly
prorated basis, will keep the Policy in force during the first sixty Policy
months ("Minimum Benefit" Period) so long as other Policy provisions are met,
even if the Net Cash Surrender Value is zero or less.
Monthly Activity Date - The same date in each succeeding month as the Policy
Date except should such Monthly Activity Date fall on a date other than a
Valuation Date, the Monthly Activity Date will be the next Valuation Date.
Monthly Deduction - The deductions taken from the Accumulation Value on the
Monthly Activity Date. These deductions are equal to: (1) the current Cost of
Insurance; (2) the Administrative Expense Charge; and (3) rider charges, if any.
Mortality and Expense Risk Charge - A daily charge that is deducted from the
overall assets of the Separate Account to provide for the risk that mortality
and expense costs may be greater than expected.
Net Amount at Risk - The amount by which the Death Benefit as calculated on a
Monthly Activity Date exceeds the Accumulation Value on that date.
Net Cash Surrender Value - The Accumulation Value of the Policy on any Valuation
Date (including for this purpose, the date of Surrender), less any Surrender
Charges and any Outstanding Policy Debt.
Net Policy Funding - Net Policy Funding is the sum of all premiums paid, less
any partial withdrawals and less any Outstanding Policy Debt.
Net Premium - Premium paid less the Percent of Premium Charge for Taxes.
Outstanding Policy Debt - The sum of all unpaid Policy loans and accrued
interest on Policy loans.
Percent of Premium Charge for Taxes - The amount deducted from each premium
received to cover certain expenses, expressed as a percentage of the premium.
Planned Periodic Premiums - A selected schedule of equal premiums payable at
fixed intervals. The Policyowner is not required to follow this schedule, nor
does following this schedule ensure that the Policy will remain in force unless
the payments meet the requirements of the Minimum Benefit or the Guaranteed
Death Benefit.
Policy - The survivorship flexible premium variable universal life insurance
Policy offered by ANLIC and described in this prospectus.
Policyowner - ("you," "your") The owner of the Policy, as designated in the
application or as subsequently changed. If a Policy has been absolutely
assigned, the assignee is the Policyowner. A collateral assignee is not the
Policyowner.
Policy Anniversary Date - The same day as the Policy Date for each year the
Policy remains in force.
Policy Date - The effective date for all coverage provided in the application.
The Policy Date is used to determine Policy Anniversary Dates, Policy Years and
Monthly Activity Dates. Policy Anniversaries are measured from the Policy Date.
The Policy Date and the Issue Date will be the same unless: 1) an earlier Policy
Date is specifically requested, or 2) unless there are additional premiums or
application amendments at time of delivery. (See the section on Issuance of a
Policy.)
Policy Year - The period from one Policy Anniversary Date until the next Policy
Anniversary Date. A "Policy Month" is measured from the same date in each
succeeding month as the Policy Date.
5
<PAGE>
Satisfactory Proof of Death - Satisfactory Proof of Death must be provided to us
at the time of death of each Insured. Satisfactory Proof of Death means all of
the following must be submitted:
(1) A certified copy of both death certificates;
(2) A Claimant Statement;
(3) The Policy; and
(4) Any other information that ANLIC may reasonably require to establish the
validity of the claim.
Second Death - The later of the dates of death of the Insureds.
Separate Account - This term refers to Separate Account III, a separate
investment account established by ANLIC to receive and invest the Net Premiums
paid under the Policy and allocated by the Policyowner to the Separate Account.
The Separate Account is segregated from the General Account and all other assets
of ANLIC.
Specified Amount - The minimum Death Benefit under the Policy, as selected by
the Policyowner.
Subaccount - A subdivision of the Separate Account. Each Subaccount invests
exclusively in the shares of a specified portfolio of the Funds.
Surrender - The termination of the Policy for the Net Cash Surrender Value while
at least one Insured is alive.
Surrender Charge - This charge is assessed against the Accumulation Value of the
Policy if the Policy is Surrendered on or before the 14th Policy Anniversary
Date or, in the case of an increase in the Specified Amount, on or before the
14th anniversary of the increase.
Valuation Date - Any day on which the New York Stock Exchange is open for
trading.
Valuation Period - The period between two successive valuation dates, commencing
at the close of the New York Stock Exchange ("NYSE") on one valuation date and
ending at the close of the NYSE on the next succeeding valuation date.
6
<PAGE>
SUMMARY
The following summary of prospectus information and diagram of the Policy should
be read along with the detailed information found elsewhere in this prospectus.
Unless stated otherwise, this prospectus assumes that the Policy is in force and
that there is no Outstanding Policy Debt.
Diagram of Policy
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PREMIUM PAYMENTS
You can vary amount and frequency.
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DEDUCTIONS FROM PREMIUMS
Percent of Premium Charge for Taxes - currently 2.25% (maximum 3.0%)
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NET PREMIUM
The net premium may be invested in the Fixed Account or in the Separate Account
which offers nineteen different Subaccounts. The nineteen Subaccounts invest in
the corresponding portfolios ("Funds") of The Alger American Fund, Calvert
Variable Series, Inc., Dreyfus Stock Index Fund, Neuberger&Berman Advisers
Management Trust, Oppenheimer Variable Account Funds, Strong Variable
Insurance Funds, Inc., and Van Eck Worldwide Insurance Trust.
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- --------------------------------------------------------------------------------
DEDUCTIONS FROM ASSETS
Monthly charge for cost of insurance and cost of any riders.
Monthly charge for administrative expenses (maximum charge $16.00/month plus
$.05 per month per $1000 of specified amount.)
Specified Amount Policy Years 1-5 Policy Years 6+
100,000 - 999,999 $16/mo+$.05/1000/mo $8/mo
1,000,000 - 4,999,999 $8/mo+$.05/1000/mo $4/mo
5,000,000 + $0/mo+$.05/1000/mo $0/mo
Daily charge from the Subaccounts for mortality and expense risks and
administrative expenses, at an annual rate of 0.90% for Policy Years 1-15, and
0.45% thereafter. This charge is not deducted from Fixed Account assets.
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<TABLE>
<CAPTION>
LIVING BENEFITS RETIREMENT BENEFITS DEATH BENEFITS
<S> <C> <C>
You may make partial withdrawals, subject to Loans may be available on a Generally, death benefit
certain restrictions. The Death Benefit will be more favorable interest rate income is tax free to the
reduced by the amount of the partial withdrawal. basis after the tenth Policy Year. Beneficiary.
ANLIC guarantees up to 15 free transfers The Beneficiary may be
between the Investment Options each Policy Year. paid a lump sum or may
Under current practice, unlimited free transfers Should the Policy lapse while select any of the five
are permitted. loans are outstanding, the payment methods
portion of the loan attributable available as retirement
to earnings will become taxable benefits.
You may surrender the policy at any distributions. (See page 21.)
time for its Net Cash Surrender Value. You may take payment under
one or more of five different
Some expenses that ANLIC incurs immediately payment options.
upon the issuance of the Policy are recovered over
a period of years. Therefore, a Policy surrender
on or before the fourteenth anniversary date will
be assessed a Surrender Charge. The charge
decreases each year until no Surrender
Charge is applied after the 14th Policy Year.
Increases in coverage after issue will also have a
Surrender Charge associated with them. (See
pages 21 and 27.)
</TABLE>
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Accelerated payment of up to 50% of the lowest
scheduled Death Benefit is available under certain
conditions if the surviving Insured is suffering from terminal
illness.
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7
<PAGE>
Summary
The following summary is intended to highlight the most important features of a
Regent 2000 Policy that you, as a prospective Policyowner, should consider. You
will find more detailed information in the main portion of the prospectus;
cross-references are provided for your convenience. As you review this Summary,
take note of the terms that appear in italics. Each italicized term is defined
in the glossary that begins on page 3 of this prospectus. This summary and all
other parts of this prospectus are qualified in their entirety by the terms of
the Regent 2000 Policy, which is available upon request from ANLIC.
Who is the issuer of a Regent 2000 Policy?
ANLIC is the issuer of each Regent 2000 Policy. ANLIC enjoys a rating of A
(Excellent) from A.M. Best Company, a firm that analyzes insurance carriers. A
stock life insurance company organized in Virginia, ANLIC is a wholly owned
subsidiary of Acacia Life Insurance Company which is, in turn, a second tier
subsidiary of Ameritas Acacia Mutual Insurance Holding Company (page 10).
Why should I consider purchasing a Regent 2000 Policy?
The primary purpose of a Regent 2000 Policy is to provide life insurance
protection on the two Insureds named in the Policy. This means that, so long as
the Policy is in force, it will provide for:
[] payment of a Death Benefit, which will never be less than the Specified
Amount the Policyowner selects (page 17)
[] Policy loan, Surrender and withdrawal features (page 20)
A Regent 2000 Policy also includes an investment component. This means that, so
long as the Policy is in force, you will be responsible for selecting the manner
in which Net Premiums will be invested. Thus, the value of a Regent 2000 Policy
will reflect your investment choices over the life of the Policy.
How does the investment component of my Regent 2000 Policy work?
ANLIC has established a Separate Account, which is separate from all other
assets of ANLIC, as a vehicle to receive and invest premiums received from
Regent 2000 Policyowners and owners of certain other variable universal life
products offered by ANLIC. The Separate Account is divided into separate
Subaccounts. Each Subaccount invests exclusively in shares of one of the
investment portfolios available through Regent 2000. Each Policyowner may
allocate Net Premiums to one or more Subaccounts, or to ANLIC's Fixed Account in
the initial application. These allocations may be changed, without charge, by
notifying ANLIC's Home Office. The aggregate value of your interests in the
Subaccounts, the Fixed Account and any amount held in the General Account to
secure Policy debt will represent the Accumulation Value of your Regent 2000
Policy (page 19).
What investment options are available through the Regent 2000 Policy?
The Investment Options available through Regent 2000 include 19 investment
portfolios, each of which is a separate series of a mutual fund from: The Alger
American Fund; Calvert Variable Series, Inc.; Dreyfus Stock Index Fund;
Neuberger&Berman Advisers Management Trust; Oppenheimer Variable Account Funds;
Strong Variable Insurance Funds, Inc.; and Van Eck Worldwide Insurance Trust.
These portfolios are:
Alger American Growth Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
Calvert Social Money Market Portfolio
Calvert Social Small Cap Growth Portfolio
Calvert Social Mid Cap Growth Portfolio
Calvert Social International Equity Portfolio
Calvert Social Balanced Portfolio
Dreyfus Stock Index Fund
Neuberger&Berman Advisers Management Trust Limited Maturity Bond Portfolio
Neuberger&Berman Advisers Management Trust Growth Portfolio
Oppenheimer Aggressive Growth Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer High Income Fund
Oppenheimer Strategic Bond Fund
Strong International Stock Fund II
Strong Discovery Fund II
Van Eck Worldwide Hard Assets Fund
Details about the investment objectives and policies of each of the available
investment portfolios, including management fees and expenses, appear on page 12
of this prospectus. In addition to the listed portfolios, Policyowners may also
elect to allocate Net Premiums to ANLIC's Fixed Account (page 16).
8
<PAGE>
How does the life insurance component of a Regent 2000 Policy work?
A Regent 2000 Policy provides for the payment of a minimum Death Benefit upon
the Second Death. The amount of the minimum Death Benefit -- sometimes referred
to as the Specified Amount of your Regent 2000 Policy -- is chosen by you at the
time your Regent 2000 Policy is established. However, Death Benefit Proceeds --
the actual amount that will be paid after ANLIC receives Satisfactory Proof of
Death -- may vary over the life of your Regent 2000 Policy, depending on which
of the two available coverage options you select.
If you choose Option A, the Death Benefit payable under your Regent 2000 Policy
will be the Specified Amount of your Regent 2000 Policy or the applicable
percentage of its Accumulation Value, whichever is greater. If you choose Option
B, the Death Benefit payable under your Regent 2000 Policy will be the Specified
Amount of your Regent 2000 Policy plus the Accumulation Value of your Regent
2000 Policy, or if it is higher, the applicable percentage of the Accumulation
Value on the Second Death. In either case, the applicable percentage is
established based on the Attained Age at the Second Death (page 17).
Are there any risks involved in owning a Regent 2000 Policy?
Yes. Over the life of your Regent 2000 Policy, the Subaccounts to which you
allocate your premiums will fluctuate with changes in the stock market and
overall economic factors. These fluctuations will be reflected in the
Accumulation Value of your Regent 2000 Policy and may result in loss of
principal. For this reason, the purchase of a Regent 2000 Policy may not be
suitable for all individuals. It may not be advantageous to purchase a Regent
2000 Policy to replace or augment your existing insurance arrangements. Appendix
A includes tables illustrating the impact that hypothetical market returns would
have on Accumulation Values under a Regent 2000 Policy.
What is the premium that must be paid to keep a Regent 2000 Policy in force?
Like traditional life insurance policies, a Regent 2000 Policy requires the
payment of periodic premiums in order to keep the Policy in force. You will be
asked to establish a payment schedule before your Regent 2000 Policy becomes
effective.
The distinction between traditional life policies and a Regent 2000 Policy is
that a Regent 2000 Policy will not lapse simply because premium payments are not
made according to that payment schedule. However, a Regent 2000 Policy will
lapse, even if scheduled premium payments are made, if the Net Cash Surrender
Value of your Regent 2000 Policy falls below zero or premiums paid do not, in
the aggregate, equal the premium necessary to satisfy the Minimum Benefit (page
25) or the Guaranteed Death Benefit requirements (page 25 ).
How are premiums paid, processed and credited to me?
Your Regent 2000 Policy will be issued after a completed application is
accepted, and the initial premium payment is received, by ANLIC at its
Administrative Office. ANLIC's Administrative Office is located at 5900 "O"
Street, P.O. Box 82550, Lincoln, NE 68501. Your initial Net Premium will be
allocated on the Issue Date to the Subaccount and/or the Fixed Account according
to the selections you made in your application. If state or other applicable law
or regulation requires return of at least your premium payments should you
return the Policy pursuant to the Free-Look Privilege, your initial Net Premium
will be allocated to the Money Market Subaccount. Thirteen days after the Issue
Date, the Accumulation Value of the Policy will be allocated among the
Subaccounts and/or the Fixed Account according to the instructions in your
application. You have the right to examine your Regent 2000 Policy and return it
for a refund for a limited time, even after the Issue Date (page 24).
You may make subsequent premium payments according to your Planned Periodic
Premium schedule, although you are not required to do so. ANLIC will send
premium payment notices to you according to any schedule you select. When ANLIC
receives your premium payment at its Administrative Office, any applicable
Percent of Premium Charge for Taxes will be deducted and the Net Premium will be
allocated to the Subaccounts and/or the Fixed Account according to your
selections (page 25).
As already noted, Regent 2000 provides you considerable flexibility in
determining the frequency and amount of premium payments. This flexibility is
not, however, unlimited. You should keep certain factors in mind in determining
the payment schedule that is best suited to your needs. These include the amount
of the Minimum Premium, Guaranteed Death Benefit Premium and/or Net Policy
Funding requirement needed to keep your Regent 2000 Policy in force (page 24);
maximum premium limitations established under the Federal tax laws (page 24);
and the impact that reduced premium payments may have on the Net Cash Surrender
Value of your Regent 2000 Policy (page 26).
Is the Accumulation Value of my Regent 2000 Policy available without Surrender?
Yes. You may access the value of your Regent 2000 Policy in one of two ways.
First, you may obtain a loan, secured by the Accumulation Value of your Regent
2000 Policy. The maximum interest rate on any such loan is 6% annually; the
current rate is 5.5% annually. After the tenth Policy Anniversary, you may
borrow against a limited amount of the Net Cash Surrender Value of your Regent
2000 Policy at a maximum annual interest rate of 4%; the current rate for such
loans is 3.5% annually (page 22).
9
<PAGE>
You may also access the value of your Regent 2000 Policy by making a partial
withdrawal. A partial withdrawal is not subject to Surrender Charges, but is
subject to a maximum charge not to exceed the lesser of $50 or 2% of the amount
withdrawn (currently, the partial withdrawal charge is the lesser of $25 or 2%)
(page 22).
Are there any other charges associated with ownership of a Regent 2000 Policy?
Certain states impose premium and other taxes in connection with insurance
policies such as Regent 2000. ANLIC may deduct up to 3% of each premium as a
Percent of Premium Charge for Taxes. Currently, 2.25% is deducted for this
purpose.
Charges are deducted against the Accumulation Value to cover the Cost of
Insurance under the Policy and to compensate ANLIC for administering each
individual Regent 2000 Policy. These charges, which are part of the Monthly
Deduction, are calculated and paid on each Monthly Activity Date. The Cost of
Insurance is calculated based on risk factors relating to the Insureds as
reflected in relevant actuarial tables. The Administrative Expense Charges are
based on your Specified Amount and the Policy duration. They may be increased
during the life of your Regent 2000 Policy, up to a maximum of $16 per month
plus $.05 per month per $1000 of Specified Amount.
For its services in administering the Separate Account and Subaccounts and as
compensation for bearing certain mortality and expense risks, ANLIC is also
entitled to receive fees. These fees are calculated daily during the first 15
years of each Regent 2000 Policy, at a combined annual rate of 0.90% of the
value of the net assets of the Separate Account. After the 15th Policy
Anniversary Date, the combined annual rate will decrease to .45% of the daily
net assets of the Separate Account. No Mortality and Expense Risk Charge will be
deducted from the amounts in the Fixed Account. (page 28).
Finally, because ANLIC incurs expenses immediately upon the issuance of a Regent
2000 Policy that are recovered over a period of years, a Regent 2000 Policy that
is Surrendered on or before its 14th Policy Anniversary Date is subject to a
Surrender Charge. Additional Surrender Charges may apply if you increase the
Specified Amount of your Regent 2000 Policy. Because the Surrender Charge may be
significant upon early Surrender, you should purchase a Regent 2000 Policy only
if you intend to maintain your Regent 2000 Policy for a substantial period (page
27).
Policyowners who choose to allocate Net Premiums to one or more of the
Subaccounts will also bear a pro rata share of the management fees and expenses
paid by each of the investment portfolios in which the various Subaccounts
invest. No such management fees are assessed against Net Premiums allocated to
the Fixed Account (page 28).
When does my Regent 2000 Policy Terminate?
You may terminate your Regent 2000 Policy by surrendering the Policy while at
least one Insured is alive for its Net Cash Surrender Value (page 22). As noted
above, your Regent 2000 Policy will terminate if you fail to pay required
premiums or maintain sufficient Net Cash Surrender Value to cover Policy charges
(page 21).
Year 2000
Like other insurance companies and their separate accounts, ANLIC and the
Separate Account could be adversely affected if the computer systems they rely
upon do not properly process date-related information and data involving the
years 2000 and after. This issue arose because both mainframe and PC-based
computer hardware and software have traditionally used two digits to identify
the year. For example, the year 1998 is input, stored and calculated as "98."
Similarly, the year 2000 would be input, stored and calculated as "00." If
computers assume this means 1900, it could cause errors in calculations,
comparisons, and other computing functions.
Like all insurance companies, ANLIC makes extensive use of dates and date
calculations. We began a corporate-wide Year 2000(Y2K) project in mid-1997. Our
goal is to ensure that our computer systems continue to operate smoothly with no
service disruptions before, during or after the year 2000.
As of December 31, 1998 , all of our computer application and operating systems
had been updated for the year 2000. Continuous testing and monitoring throughout
1999 will help ANLIC continue to meet our contractual and service obligations to
our customers. In addition to our internal efforts, ANLIC is working closely
with vendors and other business partners to confirm that they too are addressing
Y2K issues on a timely basis. We believe that we are Y2K -compliant; however, in
the event we or our service providers, vendors, financial institutions or others
with which we conduct business, fail to be Y2K - compliant, there would be a
materially adverse effect on us.
ACACIA NATIONAL LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNT
Acacia National Life Insurance Company
10
<PAGE>
Acacia National Life Insurance Company ("ANLIC") is a stock life insurance
company organized in the Commonwealth of Virginia. ANLIC was incorporated on
December 9, 1974. ANLIC is currently licensed to sell life insurance in 46
states, and the District of Columbia. ANLIC is a wholly owned subsidiary of
Acacia Life Insurance Company ("Acacia"), a District of Columbia stock company.
Acacia is in turn a second tier subsidiary of Ameritas Acacia Mutual Holding
Corporation ("Ameritas/Acacia"), a Nebraska mutual holding corporation. The
Administrative Offices of both ANLIC and Acacia Life are at 5900 "O" Street,
P.O. Box 82550, Lincoln, Nebraska 68501.
On January 1, 1999, Ameritas Mutual Holding Corporation ("Ameritas Mutual"), a
Nebraska mutual holding corporation and Acacia Mutual Holding Corporation
("Acacia Mutual"), a District of Columbia mutual holding corporation merged and
became Ameritas Acacia Mutual Holding Company ("Ameritas Acacia") a Nebraska
mutual holding corporation. Both Ameritas Acacia and Ameritas Holding Company,
an intermediate holding company are organized under the Nebraska Mutual
Insurance Holding Company Act. Acacia Life Insurance Company, a subsidiary of
Ameritas Holding Company is regulated by the District of Columbia Insurance
Department. Prior to the Merger, Ameritas Mutual and its subsidiaries had total
assets at December 31, 1997 of over $3.4 billion and Acacia Life and its
subsidiaries had total assets as of December 31, 1997 of over $2.3 billion.
The combined group has total assets of over $5.7 billion.
Acacia National Life Insurance Company
Separate Account III
Acacia National Life Insurance Company Separate Account III ("the Separate
Account") was established under Virginia law on January 28, 1999. The assets of
the Separate Account are held by ANLIC segregated from all of ANLIC's other
assets, are not chargeable with liabilities arising out of any other business
which ANLIC may conduct, and income, gains, or losses of ANLIC. Although the
assets maintained in the Separate Account will not be charged with any
liabilities arising out of ANLIC's other business, all obligations arising under
the Policies are liabilities of ANLIC who will maintain assets in the Separate
Account of a total market value at least equal to the reserve and other contract
liabilities of the Separate Account. The Separate Account will at all times
contain assets equal to or greater than Accumulation Values invested in the
Separate Account. Nevertheless, to the extent assets in the Separate Account
exceed ANLIC's liabilities in the Separate Account, the assets are available to
cover the liabilities of ANLIC's General Account. ANLIC may, from time to time,
withdraw assets available to cover the General Account obligations.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust, which is a type of investment company. This does not involve
any SEC supervision of the management or investment policies or practices of the
Separate Account. For state law purposes, the Separate Account is treated as a
Division of ANLIC.
Performance Information
Performance information for the Subaccounts of the Separate Account and the
Funds available for investment by the Separate Account may appear in
advertisements, sales literature, or reports to Policyowners or prospective
purchasers. ANLIC may also provide a hypothetical illustration of Accumulation
Value, Net Cash Surrender Value and Death Benefit based on historical investment
returns of the Funds for a sample Policy based on assumptions as to age, sex,
and risk class of each Insured, and other Policy specific assumptions.
ANLIC may also provide individualized hypothetical illustrations of Accumulation
Value, Net Cash Surrender Value and Death Benefit based on historical investment
returns of the Funds. These illustrations will reflect deductions for Fund
expenses and Policy and Separate Account charges, including the Monthly
Deduction, Percent of Premium Charge for Taxes, and the Surrender Charge. These
hypothetical illustrations will be based on the actual historical experience of
the Funds as if the Subaccounts had been in existence and a Policy issued for
the same periods as those indicated for the Funds.
The Funds
There are currently nineteen Subaccounts within the Separate Account available
to Policyowners for new allocations. The assets of each Subaccount are invested
in shares of a corresponding portfolio of one of the following mutual funds
(collectively, the "Funds"): The Alger American Fund; Calvert Variable Series,
Inc.; Dreyfus Stock Index Fund; Neuberger&Berman Advisers Management Trust;
Oppenheimer Variable Account Fund; Strong Variable Insurance Funds, Inc.; and
Van Eck Worldwide Insurance Trust. Each Fund is registered with the SEC under
the Investment Company Act of 1940 as an open-end management investment company.
The assets of each portfolio of the Funds are held separate from the assets of
the other portfolios. Thus, each portfolio operates as a separate investment
portfolio, and the income or losses of one portfolio generally have no effect on
the investment performance of any other portfolio.
11
<PAGE>
The investment objectives and policies of each portfolio are summarized below.
There is no assurance that any of the portfolios will achieve their stated
objectives. More detailed information, including a description of investment
objectives, policies, restrictions, expenses and risks, is in the prospectuses
for each of the Funds, which must accompany or precede this Prospectus. All
underlying fund information, including Fund prospectuses, has been provided to
ANLIC by the underlying Funds. ANLIC has not independently verified this
information. One or more of the Portfolios may employ investment techniques that
involve certain risks, including investing in non-investment grade, high risk
debt securities, entering into repurchase agreements and reverse repurchase
agreements, lending portfolio securities, hedging instruments, interest rate
swaps, engaging in "short sales against the box," investing in instruments
issued by foreign banks, entering into firm commitment agreements and investing
in warrants and restricted securities. For example, the Calvert Variable Series,
Inc. Social Balanced Portfolio may invest up to 20% of its assets in
non-investment grade obligations, commonly referred to as `junk bonds".
Oppenheimer High Income Fund may also invest in "junk bonds". In addition,
certain of the portfolios may invest in securities of foreign issuers, such as
the Calvert Variable Series, Inc. MidCap Portfolio which may invest up to 25% of
its funds in foreign securities.
Other portfolios invest primarily in the securities markets of developing
nations. Investments of this type involve different risks than investments in
more established economies, and will be affected by greater volatility of
currency exchange rates and overall economic and political factors. Such
portfolios include the Calvert Social International Equity Portfolio, Strong
International Stock Fund II Portfolio and Van Eck Worldwide Hard Assets Fund
Portfolio. The Van Eck Worldwide Hard Assets Fund will also invest at least 25%
of its total assets in "Hard Assets" including precious metals, ferrous and
non-ferrous metals, gas, petroleum, petrochemicals or other hydrocarbons, forest
products, real estate and other basic non-agricultural commodities. It may
invest up to 50% of its assets in any one of these sectors. Therefore it may be
subject to greater risks and market fluctuations than other investment companies
with more diversified portfolios. Further information about the risks associated
with investments in each of the Funds and their respective portfolios is
contained in the prospectus relating to that Fund. These prospectuses, together
with this prospectus, should be read carefully and retained.
Each Policyowner should periodically consider the allocation among the
Subaccounts in light of current market conditions and the investment risks
attendant to investing in the Funds' various portfolios.
The Separate Account will purchase and redeem shares from the Portfolios at the
net asset value. Shares will be redeemed to the extent necessary for ANLIC to
collect charges, pay the Surrender Values, partial withdrawals, and make policy
loans or to transfer assets among Investment Options as requested by
Policyowners. Any dividend or capital gain distribution received is
automatically reinvested in the corresponding Subaccount.
Since each of the Funds is designed to provide investment vehicles for variable
annuity and variable life insurance contracts of various insurance companies and
will be sold to separate accounts of other insurance companies as investment
vehicles for various types of variable life insurance policies and variable
annuity contracts, there is a possibility that a material conflict may arise
between the interests of the Separate Account and one or more of the separate
accounts of another participating insurance company. In the event of a material
conflict, the affected insurance companies agree to take any necessary steps,
including removing its separate accounts from the Funds, to resolve the matter.
The risks of such mixed and shared funding are described further in the
prospectuses of the Funds.
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------- -------------------------------------------------- ---------------------------
ALGER
AMERICAN
FUNDS
- ---------------------- -------------------------------------------------- ---------------------------
<S> <C> <C>
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
- ---------------------- -------------------------------------------------- ---------------------------
Alger American Invests in equity securities, such as common or Seeks to obtain long term
Growth Portfolio preferred stocks, or securities convertible into capital appreciation.
or exchangeable for equity securities, including
warrants and rights, primarily of companies with
total market capitalization of $1 billion or
greater.
- ---------------------- -------------------------------------------------- ---------------------------
Alger American Invests in equity securities, such as common or Seeks to provide long
MidCap Growth preferred stocks, or securities convertible into term capital appreciation.
Portfolio or exchangeable for equity securities, including
warrants and rights. Except during temporary
defensive period, the Portfolio invests at least
65% of its total assets in equity securities, of
companies that, at the time of purchase of the
securities, have total market capitalization
within the range of companies included in
the S & P MidCap 400 index.
- ---------------------- -------------------------------------------------- ---------------------------
Alger American Invests in equity securities, such as common or Seeks to achieve capital
Small Capitalization preferred stocks, or securities convertible into appreciation.
Portfolio or exchangeable for equity securities, including
warrants and rights. Except during temporary
defensive period, the Portfolio invests at least
65% of its total assets in equity securities, of
companies that, at the time of purchase
of the securities, have total market capitalization
within the range of companies included in the
Russell 2000 Growth Index.
- ---------------------- -------------------------------------------------- ---------------------------
CALVERT
VARIABLE
SERIES INVESTMENT POLICIES OBJECTIVE
- ---------------------- -------------------------------------------------- ---------------------------
Calvert Social Money Invests in money market instruments, including Seeks to provide the
Market Portfolio repurchase agreements with recognized securities highest level of current
dealers and banks secured by such instruments, income, consistent with
selected in accordance with portfolio's liquidity, safety and
investment and social criteria. security of capital.
- ---------------------- -------------------------------------------------- ---------------------------
Calvert Social Small Equity securities of small capitalized growth Seeks, with a concern for
Cap Growth Portfolio companies that have historically exhibited social impact, to achieve
exceptional growth characteristics and that in long-term capital
the investors advisors opinion have strong appreciation by investing
earnings potential relative to the U.S. market primarily in the equity
as a whole. securities of small
companies publicly traded
in the United States.
- ---------------------- -------------------------------------------------- ---------------------------
Calvert Social A portfolio of non-diversified equity securities Seeks long-term capital
MidCap Growth of small to mid-sized companies that are appreciation.
Portfolio undervalued but demonstrate a potential for
growth.
- ---------------------- -------------------------------------------------- ---------------------------
Calvert Social Normally will invest at least 65% of its assets Seeks to provide a high return
International Equity in the securities of issuers in no less than by investing in a
Portfolio three countries other than the United States. globally diversified
Investments in securities of U.S. issuers will portfolio of equity
be limited to 5% of net assets. securities.
- ---------------------- -------------------------------------------------- ---------------------------
Calvert Social An actively managed portfolio of stocks, bonds Seeks to achieve a total
Balanced Portfolio and money market instruments (including return above the rate of
repurchase agreements secured by such inflation.
instruments)selected with a concern for the
investment and social impact of each investment.
- ---------------------- -------------------------------------------------- ---------------------------
13
<PAGE>
DREYFUS
STOCK
INDEX
FUND INVESTMENT POLICIES OBJECTIVE
- ---------------------- -------------------------------------------------- ---------------------------
Dreyfus Stock Fully invested in stocks which compose the S&P To provide investment
Index Fund 500 Index, and in any event at least 80% of net results that correspond
assets will be so invested. to the price and yield
performance of publicly
traded stocks in the
aggregate, as represented
by the Standard & Poor's
500 composite Price Index.
- ---------------------- -------------------------------------------------- ---------------------------
NEUBERGER&BERMAN
ADVISERS
MANAGEMENT
TRUST
- ---------------------- -------------------------------------------------- ---------------------------
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
- ---------------------- -------------------------------------------------- ---------------------------
Limited Maturity The Portfolio will invest in a diversified Seeks to provide the
Bond Fund portfolio of fixed and variable debt securities highest current income
and seeks to increase income and preserve or consistent with low risk
enhance total return by actively managing to principal and
average portfolio maturity in light of market liquidity.
conditions and trends.
- ---------------------- -------------------------------------------------- ---------------------------
The Portfolio invests in securities believed to Seeks capital
Growth Portfolio have the maximum potential for long term capital appreciation without
appreciation. It does not seek to invest in regard to income.
securities that pay dividends or interest, and
such income is incidental.
- ---------------------- -------------------------------------------------- ---------------------------
OPPENHEIMER
VARIABLE
ACCOUNT FUNDS INVESTMENT POLICIES OBJECTIVE
- ---------------------- -------------------------------------------------- ---------------------------
Oppenheimer The Portfolio will invest in securities of Seeks to achieve capital
Aggressive Growth companies believed to have relatively favorable appreciation, by
Fund long-term prospects for increasing demand for investing in
their goods or services, or to be developing new "growth-type" companies.
products, services or markets, and normally
retain a relatively larger portion of their
earnings for research, development and
investment in capital assets.
- ---------------------- -------------------------------------------------- ---------------------------
Oppenheimer Growth The Portfolio will emphasize investments in Seeks capital
Fund securities of well-known and established appreciation by investing
companies. Such securities generally have a in "growth-type"
history of earnings and dividends and are issued companies.
by seasoned companies.
- ---------------------- -------------------------------------------------- ---------------------------
Oppenheimer Growth Its equity investments will include common Seeks a high total return
& Income Fund stocks, preferred stocks, convertible securities (which includes growth in
and warrants. Its debt securities will include the value of its shares
bonds, participation interests, asset-backed as well as current
securities, private label mortgage backed income) from equity and
securities and collateralized mortgage debt securities.
obligations, zero coupon securities and U.S.
obligations.
- ---------------------- -------------------------------------------------- ---------------------------
14
<PAGE>
- ---------------------- -------------------------------------------------- ---------------------------
Oppenheimer High Investments in high yield fixed-income Seeks a high level of
Income Fund securities (including long-term debt and current income.
preferred stock issues, including convertible
securities) believed by the Manager not to
involve undue risk. Fund will assume certain
risks in seeking high yield including securities
in the lower ratings categories, commonly known
as "junk bonds".
- ---------------------- -------------------------------------------------- ---------------------------
Oppenheimer Income is principally derived from interest on Seeks a high level of
Strategic Bond Fund debt securities and the Fund seeks to enhance current income by
such income by writing covered call options on investing primarily in a
debt securities. The Fund intends to invest diversified portfolio of
primarily in (i) foreign government and high yield fixed-income
corporate debt securities (ii)U.S. Government securities.
Securities, and (iii) lower-rated
high yield domestic debt securities,
commonly known as junk bonds.
- ---------------------- -------------------------------------------------- ---------------------------
STRONG
VARIABLE
INSURANCE
FUNDS INVESTMENT POLICIES OBJECTIVE
- ---------------------- -------------------------------------------------- ---------------------------
Strong International Invests primarily in the equity securities of Seeks growth of capital.
Stock Fund II issuers located outside the United States. The
portfolio will invest at least 65% of its total
assets in foreign equity securities, including
common stocks, preferred stocks, and securities
that are convertible into common or preferred
stocks, such as warrants and convertible bonds,
that are issued by companies whose principal
headquarters are located outside the United
States.
- ---------------------- -------------------------------------------------- ---------------------------
Strong Discovery The Portfolio invests in securities believed to Seeks to provide growth
Fund II represent long-term prospects for growth. of capital.
The Portfolio normally emphasizes equity
securities, although it has the flexibility to
invest in any type of security that the Advisor
believes has the potential for capital appreciation.
The Portfolio may invest up to 100% of its total
assets in equity securities, including
common stocks, preferred stocks, and securities that are
convertible into common or preferred stocks, such as
warrants and convertible bonds. The Portfolio may also
invest 100% of its total assets in debt obligations,
including intermediate to long-term corporate or U.S.
government debt securities.
- ---------------------- -------------------------------------------------- ---------------------------
VAN ECK
WORLDWIDE
INSURANCE
TRUST
- ---------------------- -------------------------------------------------- ---------------------------
Portfolio Investment Policies Objective
- ---------------------- -------------------------------------------------- ---------------------------
Worldwide Hard The Worldwide Hard Assets Fund must invest at Seeks long-term capital
Assets Fund least 25% of its total assets in "Hard Assets" appreciation by investing
including precious metals, ferrous and globally, primarily in
non-ferrous metals, gas, petroleum, "Hard Assets" securities.
petrochemicals or other hydrocarbons, forest Income is a secondary
products, real estate and other basic consideration.
non-agricultural commodities. An additional but
not fundamental policy, it may invest up to 50%
of its assets in any one of these sectors.
- ---------------------- -------------------------------------------------- ---------------------------
</TABLE>
Addition, Deletion or Substitution of Investments
ANLIC reserves the right, subject to applicable law, to add, delete, or
substitute investments in the Separate Account. ANLIC will notify the SEC and/or
state insurance authorities and will obtain required approvals before making
15
<PAGE>
additions, deletions, or substitutions. The Separate Account may, to the extent
permitted by law, purchase other securities for other policies or permit a
conversion between policies upon your request.
ANLIC may, in its sole discretion, also establish additional Subaccounts of the
Separate Account, each of which would invest in shares corresponding to a new
portfolio of the Funds or in shares of another investment company having a
specified investment objective. ANLIC may, in its sole discretion, establish new
Subaccounts or eliminate one or more Subaccounts if marketing needs, tax
considerations or investment conditions warrant. Any new Subaccounts may be made
available to existing Policyowners on a basis to be determined by ANLIC.
If ANLIC considers it to be in the best interest of Policyowners, and subject to
any approvals that may be required under applicable law, the Separate Account
may be operated as a management company under the 1940 Act, it may be
deregistered under that Act if registration is no longer required, or it may be
combined with other ANLIC separate accounts. To the extent permitted by
applicable law, ANLIC may also transfer the assets of the Separate Account
associated with the Policies to another separate account. In addition, ANLIC
may, when permitted by law, restrict or eliminate any voting rights of
Policyowners or other persons who have voting rights as to the Separate Account.
If any of these substitutions or changes are made, ANLIC may, by appropriate
endorsement, change the Policy to reflect the substitution or change. You will
be notified of any material change in the investment policy of any portfolio in
which you have an interest.
Fixed Account
You may elect to allocate all or a portion of your Net Premium payments to the
Fixed Account, and you may also transfer monies between the Separate Account and
the Fixed Account. (See the section on Transfers.)
Payments allocated to the Fixed Account and transferred from the Separate
Account to the Fixed Account are placed in ANLIC's General Account. The General
Account includes all of ANLIC's assets, except those assets segregated in
ANLIC's separate accounts. ANLIC has the sole discretion to invest the assets of
the General Account, subject to applicable law. ANLIC bears an investment risk
for all amounts allocated or transferred to the Fixed Account, plus interest
credits, less any deduction for charges and expenses. The Policyowner bears the
investment risk that the declared rate, described below, will fall to a lower
rate after the expiration of a declared rate period. Because of exemptions and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "1933 Act"), nor is the General
Account registered as an investment company under the Investment Company Act of
1940. Accordingly, neither the General Account nor any interest in it is
generally subject to the provisions of the 1933 or 1940 Act. We understand that
the staff of the SEC has not reviewed the disclosures in this prospectus
relating to the Fixed Account portion of the Policy; however, these disclosures
may be subject to generally applicable provisions of the Federal Securities Laws
regarding the accuracy and completeness of statements made in prospectuses.
ANLIC guarantees that it will credit interest at a Declared Rate of at least
3.5%. ANLIC may, at its discretion, set a higher Declared Rate(s ). Each month
ANLIC will establish the Declared Rate for the Policies with a Policy Date or
Policy Anniversary Date in that month. Each month is assumed to have 30 days,
and each year to have 360 days for purposes of crediting interest on the Fixed
Account. The Policyowner will earn interest on the amounts transferred or
allocated to the Fixed Account at the Declared Rate effective for the month in
which the Policy was issued, which rate is guaranteed for the remainder of the
first Policy Year. During later Policy Years, all amounts in the Fixed Account
will earn interest at the Declared Rate in effect in the month of the last
Policy Anniversary. Declared interest rates may increase or decrease from
previous periods, but will not fall below 3.5%. ANLIC reserves the right to
change the declaration practice, and the period for which a Declared Rate will
apply.
POLICY BENEFITS
The rights and benefits under the Policy are summarized in this prospectus;
however prospectus disclosure regarding the Policy is qualified in its entirety
by the Policy itself, a copy of which is available upon request from ANLIC.
Purposes of the Policy
The Policy is designed to provide the Policyowner with both lifetime insurance
protection and flexibility in the amount and frequency of premium payments and
with the level of life insurance proceeds payable under the Policy.
16
<PAGE>
You are not required to pay scheduled premiums to keep the Policy in force, but
you may, subject to certain limitations, vary the frequency and amount of
premium payments. You also may adjust the level of Death Benefits payable under
the Policy without having to purchase a new Policy by increasing (with evidence
of insurability) or decreasing the Specified Amount. An increase in the
Specified Amount will increase both the Minimum Premium and the Guaranteed Death
Benefit Premium required. If the Specified Amount is decreased, however, the
Minimum Premium and Guaranteed Death Benefit Premium will not decrease. Thus, as
insurance needs or financial conditions change, you have the flexibility to
adjust life insurance benefits and vary premium payments.
The Death Benefit may, and the Accumulation Value will, vary with the investment
experience of the chosen Subaccounts of the Separate Account. Thus the
Policyowner benefits from any appreciation in value of the underlying assets,
but bears the investment risk of any depreciation in value. As a result, whether
or not a Policy continues in force may depend in part upon the investment
experience of the chosen Subaccounts. The failure to pay a Planned Periodic
Premium will not necessarily cause the Policy to lapse, but the Policy could
lapse even if Planned Periodic Premiums have been paid, depending upon the
investment experience of the Separate Account. If the Minimum Premium or
Guaranteed Death Benefit Premium is satisfied by Net Policy Funding, ANLIC will
keep the Policy in force during the appropriate period and provide a Death
Benefit. In certain instances, this Net Policy Funding will not, after the
payment of Monthly Deductions, generate positive Net Cash Surrender Values.
Death Benefit Proceeds
As long as the Policy remains in force, ANLIC will pay the Death Benefit
Proceeds of the Policy upon Satisfactory Proof of Death, according to the Death
Benefit option in effect at the time of the Second Death. The amount of the
Death Benefits payable will be determined at the end of the Valuation Period
during which the Second Death occurs. The Death Benefit Proceeds may be paid in
a lump sum or under one or more of the payment options set forth in the Policy.
(See the section on Payment Options.)
Death Benefit Proceeds will be paid to the surviving Beneficiary or
Beneficiaries you specified in the application or as subsequently changed. If
you do not choose a Beneficiary, the proceeds will be paid to you, as the
Policyowner, or to your estate.
Death Benefit Options
The Policy provides two Death Benefit options. The Policyowner selects one of
the options in the application. The Death Benefit under either option will never
be less than the current Specified Amount of the Policy as long as the Policy
remains in force. (See the section on Policy Lapse and Reinstatement.) The
minimum initial Specified Amount is $100,000. The following graphs illustrate
the differences in the two Death Benefit options.
OPTION A.
[GRAPHIC OMITTED]
Death Benefit Option A. Pays a Death Benefit equal to the Specified Amount
or the Accumulation Value multiplied by the Death Benefit percentage
(as illustrated at Point A) whichever is greater.
Under Option A, the Death Benefit is the current Specified Amount of the Policy
or, if greater, the applicable percentage of Accumulation Value at the Second
Death. The applicable percentage is 250% for Attained Ages 40 or younger on the
Policy Anniversary Date prior to the Second Death. For Attained Ages over 40 on
that Policy Anniversary Date, the percentage declines. For example, the
percentage at Attained Age 40 is 250%, at Attained Age 50 is 185%, at Attained
Age 60 is 130%, at Attained Age 70 is 115%, at Attained Age 80 is 105%, and at
Attained Age 90 is 105%. The applicable percentage will never be less than 101%.
Accordingly, under Option A the Death Benefit will remain level at the Specified
Amount unless the applicable percentage of Accumulation Value exceeds the
current Specified Amount, in which case the amount of the Death Benefit will
vary as the Accumulation Value varies. Policyowners who prefer to have favorable
investment performance, if any, reflected in higher Accumulation Value, rather
than increased insurance coverage, generally should select Option A.
17
<PAGE>
OPTION B.
[GRAPHIC OMITTED]
Death Benefit Option B. Pays a Death Benefit equal to the Specified Amount
plus the Policy's Accumulation Value or the Accumulation Value multiplied
by the Death Benefit percentage, whichever is greater.
Under Option B, the Death Benefit is equal to the current Specified Amount plus
the Accumulation Value of the Policy or, if greater, the applicable percentage
of the Accumulation Value at the Second Death. The applicable percentage is the
same as under Option A: 250% for Attained Ages 40 or younger on the Policy
Anniversary Date prior to the Second Death. For Attained Ages over 40 on that
Policy Anniversary Date the percentage declines. Accordingly, under Option B the
amount of the Death Benefit will always vary as the Accumulation Value varies
(but will never be less than the Specified Amount.). Policyowners who prefer to
have favorable investment performance, if any, reflected in increased insurance
coverage, rather than higher Accumulation Values, generally should select Option
B.
Change In Death Benefit Option. The Death Benefit option may be changed once per
year after the first Policy Year by sending ANLIC a written request. The
effective date of such a change will be the Monthly Activity Date on or
following the date the change is approved by ANLIC. A change may have federal
tax consequences.
If the Death Benefit option is changed from Option A to Option B, the Specified
Amount after the change will equal the Specified Amount before the change less
the Accumulation Value as of the date of the change. If the Death Benefit option
is changed from Option B to Option A, the Specified Amount under Option A after
the change will equal the Death Benefit under Option B on the effective date of
change.
No charges will be imposed upon a change in Death Benefit option, nor will such
a change in and of itself result in an immediate change in the amount of a
Policy's Accumulation Value. However, a change in the Death Benefit option may
affect the Cost of Insurance because this charge varies depending on the Net
Amount at Risk. Changing from Option B to Option A generally will decrease the
Net Amount at Risk in the future, and will therefore decrease the Cost of
Insurance. Changing from Option A to Option B generally will result in an
increase in the Cost of Insurance over time because the Cost of Insurance rate
will increase with the ages of the Insureds, even though the Net Amount at Risk
will generally remain level. (See the sections on Charges and Deductions and
Federal Tax Matters.)
Change In Specified Amount. Subject to certain limitations, after the first
Policy Year, a Policyowner may increase or decrease the Specified Amount of a
Policy. A change in Specified Amount affects the Net Amount at Risk, which
affects the Cost of Insurance and may have federal tax consequences. (See the
sections on Charges and Deductions and Federal Tax Matters.)
Any increase or decrease in the Specified Amount will become effective on the
Monthly Activity Date on or following the date a written request is approved by
ANLIC. The Specified Amount of a Policy may be changed only once per year and
ANLIC may limit the size of a change in a Policy Year. The Specified Amount
remaining in force after any requested decrease may not be less than $100,000.
In addition, if a decrease in the Specified Amount makes the Policy not comply
with the maximum premium limits required by federal tax law, the decrease may be
limited or the Accumulation Value may be returned to you, at your election, to
the extent necessary to meet the requirements. (See the section on Premiums.)
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Increases in the Specified Amount will be allowed after the first Policy Year.
For an increase in the Specified Amount, you must submit a written supplemental
application. ANLIC may also require additional evidence of insurability.
Although an increase need not necessarily be accompanied by an additional
premium, in certain cases an additional premium will be required to put the
requested increase in effect. (See the section on Premiums upon Increases in
Specified Amount.) The minimum amount of any increase is $50,000, and an
increase cannot be made if either Insured was over age 85 on the previous Policy
Anniversary Date. An increase in the Specified Amount will also increase
Surrender Charges. An increase in the Specified Amount during the time either
the Minimum Benefit or the Guaranteed Death Benefit provision is in effect will
increase the respective premium requirements. (See the section on Charges and
Deductions.)
Methods of Affecting Insurance Protection
You may increase or decrease the pure insurance protection provided by a Policy
- - the difference between the Death Benefit and the Accumulation Value - in
several ways as your insurance needs change. These ways include increasing or
decreasing the Specified Amount of insurance, changing the level of premium
payments, and making a partial withdrawal of the Policy's Accumulation Value.
Certain of these changes may have federal tax consequences. The consequences of
each of these methods will depend upon the individual circumstances.
Duration of the Policy
The duration of the Policy generally depends upon the Accumulation Value. The
Policy will remain in force so long as the Net Cash Surrender Value is
sufficient to pay the Monthly Deduction or if the Minimum Benefit or Guaranteed
Death Benefit provision is in effect. (See the section on Charges from
Accumulation Value.) However, when the Net Cash Surrender Value is insufficient
to pay the Monthly Deduction and the Grace Period expires without an adequate
payment by the Policyowner, the Policy will lapse and terminate without value.
(See the section on Policy Lapse and Reinstatement.)
Accumulation Value
The Accumulation Value will reflect the investment performance of the chosen
Investment Options, the Net Premiums paid, any partial withdrawals, and the
charges assessed in connection with the Policy. A Policyowner may Surrender the
Policy at any time and receive the Policy's Net Cash Surrender Value. (See the
section on Surrenders.) There is no guaranteed minimum Accumulation Value.
Accumulation Value is determined on each Valuation Date. On the Issue Date, the
Accumulation Value will equal the portion of any Net Premium allocated to the
Investment Options, reduced by the portion of the first Monthly Deduction
allocated to the Investment Options. (See the section on Allocation of Premiums
and Accumulation Value.) Thereafter, on each Valuation Date, the Accumulation
Value of the Policy will equal:
(1.) The aggregate values belonging to the Policy in each of the
Subaccounts on the Valuation Date, determined by multiplying each
Subaccount's unit value by the number of Subaccount units allocated
to the Policy; plus
(2.) The value of allocations to the Fixed Account; plus
(3.) Any Accumulation Value impaired by Outstanding Policy Debt held in the
General Account; plus
(4.) Any Net Premiums received on that Valuation Date; less
(5.) Any partial withdrawal, and its charge, made on that Valuation Date;
less
(6.) Any Monthly Deduction to be made on that Valuation Date; less
(7.) Any federal or state income taxes charged against the Accumulation
Value.
In computing the Policy's Accumulation Value on the Valuation Date, the number
of Subaccount units allocated to the Policy is determined after any transfers
among Investment Options (and deduction of transfer charges), but before any
other Policy transactions, such as receipt of Net Premiums and partial
withdrawals. Because the Accumulation Value depends on a number of variables, a
Policy's Accumulation Value cannot be predetermined.
The Unit Value. The unit value of each Subaccount reflects the investment
performance of that Subaccount. The unit value of each Subaccount is calculated
by:
(1) multiplying the net asset value per share of each Fund portfolio
on the Valuation Date times the number of shares held by that
Subaccount, before the purchase or redemption of any shares on that
Valuation Date; minus
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(2) a charge for mortality and expense risk at an annual rate of .75%
in Policy Years 1-15, decreasing to .30% thereafter; minus
(3) a charge for administrative service expenses at an annual rate of
.15%; and
(4) dividing the result by the total number of units held in the
Subaccount on the Valuation Date, before the purchase or redemption
of any units on that Valuation Date. (See the section on Daily
Charges Against the Separate Account.)
Valuation Date and Valuation Period. A Valuation Date is each day on which the
New York Stock Exchange ("NYSE") is open for trading. The Net Asset Value for
each Fund Portfolio is determined as of the close of regular trading on the
NYSE. The net investment return for each Subaccount and all transactions and
calculations with respect to the Policies as of any Valuation Date are
determined as of that time. A Valuation Period is the period between two
successive Valuation Dates, commencing at the close of the NYSE on each
Valuation Date and ending at the close of the NYSE on the next succeeding
Valuation Date.
Payment of Policy Benefits
Death Benefit Proceeds under the Policy will usually be paid within seven days
after ANLIC receives Satisfactory Proof of Death. Payments may be postponed in
certain circumstances. (See the section on Postponement of Payments.) The
Policyowner may decide the form in which Death Benefit Proceeds will be paid.
While at least one Insured is alive, the Policyowner may arrange for the Death
Benefit Proceeds to be paid in a lump sum or under one or more of the optional
methods of payment described below. Changes must be in writing and will revoke
all prior elections. If no election is made, ANLIC will pay Death Benefit
Proceeds or Accumulation Value Benefits in a lump sum. When Death Benefit
Proceeds are payable in a lump sum and no election for an optional method of
payment is in force at the Second Death the Beneficiary may select one or more
of the optional methods of payment. Further, if the Policy is assigned, any
amounts due to the assignee will first be paid in one sum. The balance, if any,
may be applied under any payment option. Once payments have begun, the payment
option may not be changed.
Payment Options for Death Benefit Proceeds. The minimum amount of each payment
is $100. If a payment would be less than $100, ANLIC has the right to make
payments less often so that the amount of each payment is at least $100. Once a
payment option is in effect, Death Benefit Proceeds will be transferred to
ANLIC's General Account. ANLIC may make other payment options available in the
future. For additional information concerning these options, see the Policy
itself. The following payment options are currently available:
Option ai--Interest Payment Option. ANLIC will hold any amount applied under
this option. Interest on the unpaid balance will be paid or credited each month
at a rate determined by ANLIC.
Option aii--Fixed Amount Payable Option. Each payment will be for an agreed
fixed amount. Payments continue until the amount ANLIC holds runs out.
Option b--Fixed Period Payment Option. Equal payments will be made for any
period selected up to 20 years.
Option c--Lifetime Payment Option. Equal monthly payments are based on the life
of a named person. Payments will continue for the lifetime of that person.
Variations provide for guaranteed payments for a period of time.
Option d--Joint Lifetime Payment Option. Equal monthly payments are based on the
lives of two named persons. While both are living, one payment will be made each
month. When one dies, the same payment will continue for the lifetime of the
other.
As an alternative to the above payment options, Death Benefits Proceeds may be
paid in any other manner approved by ANLIC. Further, one of ANLIC's affiliates
may make payments under the above payment options. If an affiliate makes the
payment, it will do so according to the request of the Policyowner, using the
rules set out above.
POLICY RIGHTS
Loan Benefits
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Loan Privileges. The Policyowner may borrow an amount up to the current Net Cash
Surrender Value less twelve times the most recent Monthly Deduction, at regular
or reduced loan rates (described below). Loans usually are funded within seven
days after receipt of a written request. The loan may be repaid at any time
while at least one Insured is living. Policyowners in certain states may borrow
100% of the Net Cash Surrender Value after deducting Monthly Deductions and any
interest on policy loans will be due for the remainder of the Policy Year. Loans
may have tax consequences. (See the section on Federal Tax Matters).
Loan Interest. ANLIC charges interest to Policyowners at regular and reduced
rates. Regular loans will accrue interest on a daily basis at a rate of up to 6%
per year; currently the interest rate on regular Policy loans is 5.5%. Each year
after the tenth Policy Anniversary Date, the Policyowner may borrow a limited
amount of the Net Cash Surrender Value at a reduced interest rate. For those
loans, interest will accrue on a daily basis at a rate of up to 4% per year; the
current reduced loan rate is 3.5%. The amount available at the reduced loan rate
is (1) the Accumulation Value, minus (2) total premiums paid minus any partial
withdrawals previously taken , and minus (3) the portion of any Outstanding
Policy Debt held at a reduced loan rate. However, this amount may not exceed the
maximum loan amount described above. (See the section on Loan Privileges.) If
unpaid when due, interest will be added to the amount of the loan and bear
interest at the same rate. The Policyowner earns 3.5% interest on the
Accumulation Values held in the General Account securing the loans.
Effect of Policy Loans. When a loan is made, Accumulation Value equal to the
amount of the loan will be transferred from the Investment Options to the
General Account as security for the loan. The Accumulation Value transferred
will be allocated from the Investment Options according to the instructions you
give when you request the loan. The minimum amount which can remain in a
Subaccount or the Fixed Account as a result of a loan is $100. If no
instructions are given, the amounts will be withdrawn in proportion to the
various Accumulation Values in the Investment Options. In any Policy Year that
loan interest is not paid when due, ANLIC will add the interest due to the
principal amount of the Policy loan on the next Policy Anniversary. This loan
interest due will be transferred from the Investment Options as set out above.
No charge will be made for these transfers. A Policy loan will permanently
affect the Accumulation Value and may permanently affect the amount of the Death
Benefits, even if the loan is repaid. Policy loans will also affect Net Policy
Funding for determining whether the Minimum Benefit and Guaranteed Death Benefit
provisions are met.
Interest earned on amounts held in the General Account will be allocated to the
Investment Options on each Policy Anniversary in the same proportion that Net
Premiums are being allocated to those Investment Options at the time. Upon
repayment of loan amounts, the portion of the repayment allocated in accordance
with the repayment of loan provision (see below) will be transferred to increase
the Accumulation Value in that Investment Option.
Outstanding Policy Debt. The Outstanding Policy Debt equals the total of all
Policy loans and accrued interest on Policy loans. If the Outstanding Policy
Debt exceeds the Accumulation Value less any Surrender Charge and any Accrued
Expense Charges, the Policyowner must pay the excess. ANLIC will send a notice
of the amount which must be paid. If you do not make the required payment within
the 61 days after ANLIC sends the notice, the Policy will terminate without
value ("lapse".) Should the Policy lapse while Policy loans are outstanding, the
portion of the loans attributable to earnings will become taxable. You may lower
the risk of a Policy lapsing while loans are outstanding as a result of a
reduction in the market value of investments in the Subaccounts by investing in
a diversified group of lower risk investment portfolios and/or transferring the
funds to the Fixed Account and receiving a guaranteed rate of return. Should you
experience a substantial reduction, you may need to lower anticipated
withdrawals and loans, repay loans, make additional premium payments, or take
other action to avoid Policy lapse. A lapsed Policy may later be reinstated.
(See the section on Policy Lapse and Reinstatement.)
Repayment of Loan. Unscheduled premiums paid while a Policy loan is outstanding
are treated as repayment of the debt only if the Policyowner so requests. As a
loan is repaid, the Accumulation Value in the General Account securing the
repaid loan will be allocated among the Subaccounts and the Fixed Account in the
same proportion that Net Premiums are being allocated at the time of repayment.
Surrenders
At any time while at least one Insured is alive, the Policyowner may withdraw a
portion of the Accumulation Value or Surrender the Policy by sending a written
request to ANLIC. The amount available for Surrender is the Net Cash Surrender
Value at the end of the Valuation Period when the Surrender request is received
at ANLIC's Home Office. Surrenders will generally be paid within seven days of
receipt of the written request. (See the section on Postponement of Payments.)
Surrenders may have tax consequences. Once a Policy is Surrendered, it may not
be reinstated. (See the section on Tax Treatment of Policy Proceeds.)
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If the Policy is being Surrendered in its entirety, the Policy itself must be
returned to ANLIC along with the request. ANLIC will pay the Net Cash Surrender
Value. Coverage under the Policy will terminate as of the date of a total
Surrender. A Policyowner may elect to have the amount paid in a lump sum or
under a payment option. (See the section on Payment Options.)
Partial Withdrawals
Partial withdrawals are irrevocable. The amount of a partial withdrawal may not
be less than $500. The Net Cash Surrender Value after a partial withdrawal must
be at least $1,000 or an amount sufficient to maintain the Policy in force for
the remainder of the Policy Year.
The amount paid will be deducted from the Investment Options according to your
instructions when you request the withdrawal. However, the minimum amount
remaining in a Subaccount as a result of the allocation is $100. If no
instructions are given, the amounts will be withdrawn in proportion to the
various Accumulation Values in the Investment Options.
The Death Benefit will be reduced by the amount of any partial withdrawal and
may affect the way the Cost of Insurance is calculated and the amount of pure
insurance protection under the Policy. (See the sections on Monthly Deduction -
Cost of Insurance and Death Benefit Options--Methods of Affecting Insurance
Protection.) If Death Benefit option B is in effect, the Specified Amount will
not change, but the Accumulation Value will be reduced.
A fee which does not exceed the lesser of $50 or 2% of the amount withdrawn is
deducted from the Accumulation Value. Currently, the charge is the lesser of $25
or 2% of the amount withdrawn. (See the section on Partial Withdrawal Charge.)
Partial withdrawals will also affect Net Policy Funding for determining whether
the Minimum Benefit and Guaranteed Death Benefit provisions are met.
Transfers
Accumulation Value may be transferred among the Subaccounts of the Separate
Account and to the Fixed Account as often as desired. However, you may make only
one transfer out of the Fixed Account per Policy Year. We may limit the transfer
period to the 30 days following the Policy Anniversary Date. The transfers may
be ordered in person, by mail or by telephone. The total amount transferred each
time must be at least $250, or the balance of the Subaccount, if less. The
minimum amount that may remain in a Subaccount or the Fixed Account after a
transfer is $100. The first 15 transfers per Policy Year will be permitted free
of charge. After that, a transfer charge of $10 may be imposed each additional
time amounts are transferred and will be deducted from the Accumulation Value on
a pro rata basis. Currently, no charge is imposed for additional transfers. (See
the section on Transfer Charge.) Additional restrictions on transfers may be
imposed at the fund level. Specifically, fund managers may have the right to
refuse sales, or suspend or terminate the offering of portfolio shares, if they
determine that such action is necessary in the best interests of the portfolio's
shareholders. If a Fund manager refuses a transfer for any reason, the transfer
will not be allowed. ANLIC will not be able to process the transfer if the Fund
manager refuses. Transfers resulting from Policy loans or exercise of the
exchange privilege will not be subject to a transfer charge and will not be
counted towards the guaranteed 15 free transfers per Policy Year.
Transfers out of the Fixed Account, unless part of the dollar cost averaging
systematic program described below, are limited to one per Policy Year. However,
you may make only one transfer out of the Fixed Account per Policy Year. We may
limit the transfer period to the 30 days following the Policy Anniversary Date,
as noted below. Transfers out of the Fixed Account are limited to the greater of
(1) 25% of the Fixed Account attributable to the Policy; (2) the largest
transfer made by the Policyowner out of the Fixed Account during the last 13
months; or (3) $1,000. This provision is not available while dollar cost
averaging from the Fixed Account.
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The privilege to initiate transactions by telephone will be made available to
Policyowners automatically. The registered representative designated on the
application will have the authority to initiate telephone transfers.
Policyowners who do not wish to authorize ANLIC to accept telephone transactions
from their registered representative must so specify on the application. ANLIC
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if it does not, ANLIC may be liable for any losses
due to unauthorized or fraudulent instructions. The procedures ANLIC follows for
transactions initiated by telephone include, but are not limited to, requiring
the Policyowner to provide the Policy number at the time of giving transfer
instructions; ANLIC's tape recording of all telephone transfer instructions; and
ANLIC providing written confirmation of telephone transactions.
Systematic Programs
ANLIC may offer systematic programs as discussed below. These programs will be
subject to administrative guidelines ANLIC may establish from time to time.
Transfers of Accumulation Value made pursuant to these programs will be counted
in determining whether any transfer fee may apply. Lower minimum amounts may be
allowed to transfer as part of a systematic program. No other separate fee is
assessed when one of these options is chosen. All other normal transfer
restrictions, as described above, also apply.
You can request participation in the available programs when purchasing the
Policy or at a later date. You can change the allocation percentage or
discontinue any program by sending written notice or calling the Home Office.
Other scheduled programs may be made available. ANLIC reserves the right to
modify, suspend or terminate such programs at any time. Use of systematic
programs may be advantageous, and does not guarantee success.
Portfolio Rebalancing. Under the Portfolio Rebalancing program, you can instruct
ANLIC to reallocate the Accumulation Value among the Subaccounts (but not the
Fixed Account) on a systematic basis according to Your specified allocation
instructions.
Dollar Cost Averaging. Under the Dollar Cost Averaging program, you can instruct
ANLIC to automatically transfer, on a systematic basis, a predetermined amount
or specified percentage from the Fixed Account or the Money Market Subaccount to
any other Subaccount(s). Dollar cost averaging is permitted from the Fixed
Account if each monthly transfer is no more than 1/36th of the value of the
Fixed Account at the time dollar cost averaging is established.
Earnings Sweep. This program permits systematic redistribution of earnings among
Investment Options.
Free-Look Privilege
You may cancel the Policy within 10 days after you receive it, within 10 days
after ANLIC delivers a notice of your right of cancellation, or within 45 days
of completing Part I of the application, whichever is later. When allowed by
state law, the amount of the refund is the net premiums allocated to the
Investment Options, adjusted by investment gains and losses, plus the sum of all
charges deducted from premiums paid. Otherwise, the amount of the refund will
equal the gross premiums paid. To cancel the Policy, you should mail or deliver
it to the selling agent, or to ANLIC at its Administrative Office. A refund of
premiums paid by check may be delayed until the check has cleared your bank.
(See the section on Postponement of Payments.)
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Policy
Individuals wishing to purchase a Policy must complete an application and submit
it to ANLIC's Administrative Office ( 5900 "O" Street, P.O. Box 82550, Lincoln,
Nebraska 68501). A Policy will generally be issued only to individuals between
the ages of 20 and 90 at the time of purchase, although at least one of the
individuals must be no older than 85, and both of whom supply satisfactory
evidence of insurability to ANLIC. Acceptance is subject to ANLIC's underwriting
rules, and ANLIC reserves the right to reject an application for any reason.
The Policy Date is the effective date for all coverage in the original
application. The Policy Date is used to determine Policy Anniversary Dates,
Policy Years and Policy Months. The Issue Date is the date that all financial,
contractual and administrative requirements have been met and processed for the
Policy. The Policy Date and the Issue Date will be the same unless: (1) an
earlier Policy Date is specifically requested, or (2) additional premiums or
application amendments are needed. When there are additional requirements before
issue (see below) the Policy Date will be the date the Policy is sent for
delivery and the Issue Date will be the date the requirements are met.
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When all required premiums and application amendments have been received by
ANLIC in its administrative Office, the Issue Date will be the date the Policy
is mailed to you or sent to the agent for delivery to you. When application
amendments or additional premiums need to be obtained upon delivery of the
Policy, the Issue Date will be when the Policy receipt and Federal Funds (monies
of member banks within the Federal Reserve System which are held on deposit at a
Federal Reserve Bank) are received and available to ANLIC, and the application
amendments are received and reviewed in ANLIC's Administrative Office. Your
initial Net Premium will be allocated on the Issue Date to the Subaccaounts
and/or the Fixed Account according to the selections you made in your
application. When state or other applicable law or regulation requires return of
at least your premium payments if you return the Policy under the free-look
privilege, your initial Net Premium will be allocated to the Money Market
Subaccount. Then, thirteen days after the Issue Date, the Accumulation Value of
the Policy will be allocated among the Subaccounts and/or Fixed Account
according to the instructions in your application.
Subject to approval, a Policy may be backdated, but the Policy Date may not be
more than six months prior to the date of the application. Backdating can be
advantageous if a lower Issue Age for either Insured results in lower Cost of
Insurance Rates. If a Policy is backdated, the minimum initial premium required
will include sufficient premium to cover the backdating period. Monthly
deductions will be made for the period the Policy Date is backdated.
Interim conditional insurance coverage may be issued prior to the Policy Date,
provided that certain conditions are met, upon the completion of an application
and the payment of the required premium at the time of the application. The
amount of the interim coverage is limited to $100,000. Premium will not be
accepted with applications for coverage in amounts of $1,000,000 or more.
Premiums
No insurance will take effect before the initial premium payment is received by
ANLIC in Federal Funds. The initial premium payment must be at least equal to
the monthly Minimum Premium times one more than the number of months between the
Policy Date and the Issue Date. Subsequent premiums are payable at ANLIC's Home
Office. A Policyowner has flexibility in determining the frequency and amount of
premiums. However, unless you have paid sufficient premiums to pay the Monthly
Deduction and Percent of Premium Charge for Taxes, the Policy may have a zero
Net Cash Surrender Value and lapse. Net Policy Funding, if adequate, may satisfy
Minimum Premium and/or Guaranteed Death Benefit Premium requirements. (See the
section on Policy Benefits, Purposes of the Policy.)
Planned Periodic Premiums. At the time the Policy is issued you may determine a
Planned Periodic Premium schedule that provides for the payment of level
premiums at selected intervals. You may want to consider setting the Planned
Periodic Premium no lower than the Guaranteed Death Benefit Premium to assure
proper funding of the Guaranteed Death Benefit. You are not required to pay
premiums in accordance with this schedule. You have considerable flexibility to
alter the amount and frequency of premiums paid. ANLIC reserves the right to
limit the number and amount of additional or unscheduled premium payments.
You may also change the frequency and amount of Planned Periodic Premiums by
sending a written request to the Home Office, although ANLIC reserves the right
to limit any increase. Premium payment notices will be sent annually,
semi-annually or quarterly, depending upon the frequency of the Planned Periodic
Premiums. Payment of the Planned Periodic Premiums does not guarantee that the
Policy remains in force unless the Minimum Benefit or Guaranteed Death Benefit
provision is in effect. Instead, the duration of the Policy depends upon the
Policy's Net Cash Surrender Value. (See the section on Duration of the Policy.)
Unless the Minimum Benefit or Guaranteed Death Benefit provision is in effect,
even if Planned Periodic Premiums are paid, the Policy will lapse any time the
Net Cash Surrender Value is insufficient to pay the Monthly Deduction, and the
Grace Period expires without a sufficient payment. (See the section on Policy
Lapse and Reinstatement.)
Premium Limits. ANLIC's current minimum premium limit is $45, $15 if paid by
automatic bank draft. ANLIC currently has no maximum premium limit, other than
the current maximum premium limits established by federal tax laws. ANLIC
reserves the right to change any premium limit. In no event may the total of all
premiums paid, both planned and unscheduled, exceed the current maximum premium
limits established by federal tax laws. (See the section on Tax Status of the
Policy.)
If at any time a premium is paid which would result in total premiums exceeding
the current maximum premium limits, ANLIC will only accept that portion of the
premium which will make total premiums equal the maximum. Any part of the
premium in excess of that amount will be returned or applied as otherwise agreed
and no further premiums will be accepted until allowed by the current maximum
premium limits allowed by law. ANLIC may require additional evidence of
insurability if any premium payment would result in an increase in the Policy's
Net Amount at Risk on the date the premium is received.
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Premiums Upon Increases in Specified Amount. Depending upon the Accumulation
Value of the Policy at the time of an increase in the Specified Amount of the
Policy and the amount of the increase requested by the Policyowner, an
additional premium payment may be required. ANLIC will notify you of any premium
required to fund the increase, which premium must be made in a single payment.
The Accumulation Value of the Policy will be immediately increased by the amount
of the payment, less the applicable Percent of Premium Charge for Taxes.
Allocation Of Premiums and Accumulation Value
Allocation of Net Premiums. In the application for a Policy, the Policyowner
allocates Net Premiums to one or more Subaccounts and/or to the Fixed Account.
Allocations must be whole number percentages and must total 100%. The allocation
of future Net Premiums may be changed without charge by providing proper
notification to the Home Office. If there is any Outstanding Policy Debt at the
time of a payment, ANLIC will treat the payment as a premium payment unless you
instruct otherwise by proper written notice.
On the Issue Date, the initial Net Premium will be allocated to the Investment
Options you selected. When state or other applicable law or regulation requires
return of at least your premium payments if you return the Policy under the
free-look privilege, the initial Net Premium will be allocated to the Money
Market Subaccount for 13 days. Thereafter, the Accumulation Value will be
reallocated to the Investment Options you selected. Premium payments received by
ANLIC prior to the Issue Date are held in the General Account until the Issue
Date and are credited with interest at a rate determined by ANLIC for the period
from the date the payment has been converted into Federal Funds and is available
to ANLIC. In no event will interest be credited prior to the Policy Date.
The Accumulation Value of the Subaccounts will vary with the investment
performance of these Subaccounts and you, as the Policyowner, will bear the
entire investment risk. This will affect the Policy's Accumulation Value, and
may affect the Death Benefit as well. You should periodically review your
allocations of premiums and values in light of market conditions and overall
financial planning requirements.
Policy Lapse and Reinstatement
Lapse. Unlike conventional life insurance policies, the failure to make a
Planned Periodic Premium payment will not itself cause the Policy to lapse.
Lapse will occur when the Net Cash Surrender Value is insufficient to cover the
Monthly Deduction and a Grace Period expires without a sufficient payment,
unless the Minimum Benefit or Guaranteed Death Benefit provision is in effect.
The Grace Period is 61 days from the date ANLIC mails a notice that the Grace
Period has begun. ANLIC will notify you at the beginning of the Grace Period by
mail addressed to your last known address on file with ANLIC. The notice will
specify the premium required to keep the Policy in force. The required premium
will equal the lesser of (1) Monthly Deductions plus Percent of Premium Charge
for Taxes for the three Policy Months after commencement of the Grace Period,
plus projected loan interest that would accrue over that period, or (2) the
premium required under the Minimum Benefit or Guaranteed Death Benefit
provisions, if applicable, to keep the Policy in effect for three months from
the commencement of the Grace Period. Failure to pay the required premium within
the Grace Period will result in lapse of the Policy. If the Second Death occurs
during the Grace Period, any overdue Monthly Deductions and Outstanding Policy
Debt will be deducted from the Death Benefit Proceeds.
(See the section on Charges and Deductions.)
Reinstatement. A lapsed Policy may be reinstated any time within three years
(five years in Missouri) after the beginning of the Grace Period, provided both
Insureds are living. Reinstatement will be based on the rating classes of the
Insureds at the time of the reinstatement.
Reinstatement is subject to the following:
(1) Evidence of insurability of both Insureds satisfactory to ANLIC
(including evidence of insurability of any person covered by a rider to
reinstate the rider);
(2) Any Outstanding Policy Debt on the date of lapse will be reinstated
with interest due and accrued;
(3) The Policy cannot be reinstated if it has been Surrendered for its
full Net Cash Surrender Value;
(4) The minimum premium required at reinstatement is the greater of:
(a) the amount necessary to raise the Net Cash Surrender Value as of
the date of reinstatement to equal to or greater than zero; or
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(b) three times the current Monthly Deduction.
The amount of Accumulation Value on the date of reinstatement will equal:
(1) the amount of the Net Cash Surrender Value on the date of lapse,
increased by
(2) the premium paid at reinstatement, less
(3) the Percent of Premium Charge for Taxes , plus
(4) that part of the Surrender Charge that would apply if the Policy were
Surrendered on the date of reinstatement.
The last addition to the Accumulation Value is designed to avoid duplicate
Surrender Charges. The original Policy Date, and the dates of increases in the
Specified Amount (if applicable), will be used for purposes of calculating the
Surrender Charge. If any Outstanding Policy Debt is reinstated, that debt will
be held in ANLIC's General Account. Accumulation Value calculations will then
proceed as described under the section on Accumulation Value.
The effective date of reinstatement will be the first Monthly Activity Date on
or next following the date of approval by ANLIC of the application for
reinstatement.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate ANLIC for:
(1) providing the insurance benefits set forth in the Policy and any optional
insurance benefits added by rider; (2) administering the Policy and payment of
applicable taxes; (3) assuming certain risks in connection with the Policy; and
(4) incurring expenses in distributing the Policy. The nature and amount of
these charges are described more fully below.
Deductions From Premium Payments
Percent of Premium charge for Taxes. A deduction of up to 3% of the premium is
made from each premium payment; currently the charge is 2.25%. The deduction is
intended to partially offset the premium taxes imposed by the states and their
subdivisions, and to help defray the tax cost due to capitalizing certain policy
acquisition expenses as required under applicable federal tax laws. (See the
section on Federal Tax Matters .) ANLIC does not expect to derive a profit from
the Percent of Premium Charge for Taxes.
Charges From Accumulation Value
Monthly Deduction. Charges will be deducted as of the Policy Date and on each
Monthly Activity Date thereafter from the Accumulation Value of the Policy to
compensate ANLIC for administrative expenses and insurance provided. These
charges will be allocated from the Investment Options in accordance with your
instructions. If no instructions are given the charges will be allocated
prorata among the Investment Options. Each of these charges is described in
more detail below.
Administrative Expense Charge. To compensate ANLIC for the ordinary
administrative expenses expected to be incurred in connection with a Policy, the
Monthly Deduction includes a level per policy charge plus a charge per $1000 of
Specified Amount. For Specified Amounts between $100,000 and $999,999, the
charge is currently $16 per month in Policy Years 1-5 and $8 per month
thereafter; for Specified Amounts between $1,000,000 and $4,999,999, the charge
is currently $8 per month in Policy Years 1-5 and $4 per month thereafter;
currently there is no charge for Specified Amounts $5,000,000 or greater. In
addition, for all Specified Amounts there currently is a charge of $.05 per
month per $1000 of Specified Amount in years 1-5. It is anticipated that charge
will reduce to $0 in year 6. The Administrative Expense Charge is levied
throughout the life of the Policy and is guaranteed not to increase above $16
per month plus $.05 per month per $1000 of Specified Amount. ANLIC does not
expect to make any profit from the Administrative Expense Charge.
Cost of Insurance. Because the Cost of Insurance depends upon several variables,
the cost for each Policy Month can vary from month to month. ANLIC will
determine the monthly Cost of Insurance by multiplying the applicable Cost of
Insurance Rate by the Net Amount at Risk for each Policy Month.
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<PAGE>
Cost of Insurance Rate. The Annual Cost of Insurance Rates are based on the
Issue Age, sex and risk class of each Insured and the Policy duration. The rates
will vary depending upon tobacco use and other risk factors. The rates will be
based on ANLIC's expectations of future experience with regard to mortality,
interest, persistency, and expenses, but will not exceed the Schedule of
Guaranteed Annual Cost of Insurance Rates shown in the Policy. The guaranteed
rates for standard rating classes are calculated from the 1980 Commissioners
Standard Ordinary Smoker and Non-Smoker, Male and Female Mortality Tables. The
guaranteed rates for the table-rated substandard Insureds are based on a
multiple (shown in the schedule pages of the Policy) of the above rates.
One-half the amount of any Flat Extra Rating Charge is added to the Cost of
Insurance Rate and thus will be deducted as part of the Monthly Deduction on
each Monthly Activity Date. Any change in the Cost of Insurance Rates will apply
to all Insureds of the same age, sex, risk class and whose Policies have been in
effect for the same length of time
The Cost of Insurance Rates, Surrender Charges, and payment options for Policies
issued in Montana, and perhaps other states or in connection with certain
employee benefit arrangements, are issued on a sex-neutral (unisex) basis. The
unisex rates will be higher than those applicable to females and lower than
those applicable to males.
The actual charges made during the Policy year will be shown in the annual
report delivered to Policyowners.
Rating Class. The rating class of each Insured will affect the Cost of Insurance
Rate. ANLIC currently places Insureds into both standard rating classes and
substandard rating classes that involve a higher mortality risk. In an otherwise
identical Policy, Insureds in the standard rating class will have a lower Cost
of Insurance Rate than when either or both Insureds are in a rating class with
higher mortality risks.
Surrender Charge
If a Policy is Surrendered on or before the 14th Policy Anniversary Date, ANLIC
will assess a Surrender Charge as shown in the schedule pages of the Policy. The
initial Surrender Charge is calculated based on the Issue Age, sex and risk
class of each Insured, and the Specified Amount of the Policy. The Surrender
Charge, if applicable, will be applied according to the following schedule.
Because the Surrender Charge may be significant upon early Surrender,
prospective Policyowners should purchase a Policy only if they do not intend to
Surrender the Policy for a substantial period.
- ------------------ ---------------------- -------------- ----------------------
Policy Year Percent of Initial Policy Year Percent of Initial
Surrender Charge Surrender Charge that
that will apply will apply during
during Policy Year Policy Year
- ------------------ ---------------------- -------------- ----------------------
1-5 100% 11 40%
- ------------------ ---------------------- -------------- ----------------------
6 90% 12 30%
- ------------------ ---------------------- -------------- ----------------------
7 80% 13 20%
- ------------------ ---------------------- -------------- ----------------------
8 70% 14 10%
- ------------------ ---------------------- -------------- ----------------------
9 60% 15+ 0%
- ------------------ ---------------------- -------------- ----------------------
10 50%
- ------------------ ---------------------- -------------- ----------------------
No Surrender Charge will be assessed on decreases in the Specified Amount of the
Policy or partial withdrawals of Accumulation Value. ANLIC will, however,
require additional Surrender Charges due to increases in Specified Amount. The
initial Surrender Charge applicable to the increase in Specified Amount will
equal the initial Surrender Charge for the original Specified Amount, multiplied
by the ratio of the increase in Specified Amount to the original Specified
Amount. Surrender Charges on increases in Specified Amount will be applied with
respect to Surrenders within 14 years of the date of the increase according to
the same grading schedule as for the original Specified Amount.
Transfer Charge. Currently there is no charge for transfers among the investment
options in excess of fifteen per Policy Year. A transfer charge of $10
(guaranteed not to increase) for each transfer in excess of 15 may be imposed to
compensate ANLIC for the costs of processing the transfer. Since the charge
reimburses ANLIC only for the cost of processing the transfer, ANLIC does not
expect to make any profit from the transfer charge. This charge will be deducted
pro rata from each Subaccount (and, if applicable, the Fixed Account) in which
the Policyowner is invested. The transfer charge will not be imposed on
transfers that occur as a result of Policy loans or the exercise of exchange
rights.
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<PAGE>
Partial Withdrawal Charge. A charge will be imposed for each partial withdrawal.
This charge will compensate ANLIC for the administrative costs of processing the
requested payment and in making necessary calculations for any reductions in
Specified Amount which may be required because of the partial withdrawal. This
charge is currently the lesser of $25 or 2% of the amount withdrawn (guaranteed
not to be greater than the lesser of $50 or 2% of the amount withdrawn). No
Surrender Charge is assessed on a partial withdrawal and a partial withdrawal
charge is not assessed when a Policy is Surrendered.
Daily Charges Against The Separate Account
A daily Mortality and Expense Risk Charge will be deducted from the value of the
net assets of the Separate Account to compensate ANLIC for mortality and expense
risks assumed in connection with the Policy. This daily charge from the Separate
Account is at the rate of 0.002050% (equivalent to an annual rate of .75%) for
Policy Years 1-15 and .000820% (equivalent to an annual rate of .30%) The daily
charge will be deducted from the net asset value of the Separate Account, and
therefore the Subaccounts, on each Valuation Date. Where the previous day or
days was not a Valuation Date, the deduction on the Valuation Date will be the
applicable daily rate multiplied by the number of days since the last Valuation
Date. No Mortality and Expense Risk Charges will be deducted from the amounts in
the Fixed Account.
ANLIC believes that this level of charge is within the range of industry
practice for comparable survivorship flexible premium variable universal life
policies. The mortality risk assumed by ANLIC is that Insureds may live for a
shorter time than calculated, and that the aggregate amount of Death Benefits
paid will be greater than initially estimated. The expense risk assumed is that
expenses incurred in issuing and administering the policies will exceed the
administrative charges provided in the policies.
An Asset-Based Administrative Expense Charge will also be deducted from the
value of the net assets of the Separate Account on a daily basis. This charge is
applied at a rate of 0.000409% (equivalent to .15% annually). No Asset-Based
Administrative Expense Charge will be deducted from the amounts in the Fixed
Account.
FUND EXPENSE SUMMARY
In addition to the charges against the Separate Account described just above,
management fees and expenses will be assessed by Alger, Calvert, Dreyfus,
Neuberger&Berman, Oppenheimer Strong and Van Eck against the amounts invested in
the various portfolios. No portfolio fees will be assessed against amounts
placed in the Fixed Account.
The information shown below relating to the Funds was provided to ANLIC by the
Funds and ANLIC has not independently verified such information. Each of the
Funds is managed by an investment advisory organization that is not affiliated
with ANLIC. Each such organization is entitled to receive a fee for its services
based on the value of the relevant portfolio's net assets. The amount of
expenses, including the asset based advisory fee referred to above, borne by
each portfolio for the fiscal year ended December 31, 1997, was as follows:
<TABLE>
<CAPTION>
- ------------------------ ----------------------- ----------------------- -----------------
Portfolio Investment Advisory and Other Expenses Total
Management
Figures presented may Figures presented may Figures
reflect expense reflect expense presented may
reimbursement reimbursement reflect expense
reimbursement
- ------------------------ ------------------------ ---------------------- -----------------
<S> <C> <C> <C>
Alger American (1)
Growth Portfolio .75% .04% .79%
Small Capitalization Portfolio .85% .04% .89%
MidCap Portfolio .80% .04% .89%
Calvert
Social Money Market Portfolio .50% .19% .69%
Social Small Cap Growth Portfolio .90% 1.12% 1.92%
Social Mid Cap Growth Portfoli .80% .24% 1.04%
Social International Equity Portfolio 1.00% .56% 1.56%
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<PAGE>
Social Balanced Portfolio .70% .10% .80%
- ------------------------ ------------------------- ---------------------- -----------------
Portfolio Investment Advisory and Other Expenses Total
Management
Figures presented may Figures presented may Figures
reflect expense reflect expense presented may
reimbursement reimbursement reflect expense
reimbursement
- ------------------------ ------------------------- ---------------------- -----------------
Dreyfus
Stock Index Fund .25% .03% .28%
Neuberger & Berman
Limited Maturity Bond Portfolio 0.65% .12% .77%
Growth Portfolio 0.83% .07% .09%
Oppenheimer
High Income Fund 0.75% .07% 0.82%
Strategic Bond Fund 0.75% .08% 0.83%
Aggressive Growth Fund 0.71% .02% 0.73%
Growth Fund 0.73% .02% 0.75%
Growth & Income Fund 0.75% .08% 0.83%
Strong Funds
International Stock Fund II 1.00% 0.51% 1.51%
Discovery Fund II 1.00% 0.18% 1.18%
Van Eck
Worldwide Hard Assets Fund 1.00% 0.17% 1.17%
</TABLE>
(1) Fred Alger Management, Inc. ("Alger Management") has agreed to reimburse the
portfolios to the extent that the aggregate annual expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed
respectively: Alger American Small Capitalization, Alger American Mid Cap
Growth, and Alger American Growth, 1.50%.
(2) The figures above are based on expenses for fiscal year 1997, and have been
restated to reflect an increase in transfer agency expenses of 0.01% for each
portfolio expected to be incurred in 1998. Management fees include for CS
Balanced and CS Mid Cap a performance adjustment, which depending on
performance, could cause the fee to be as high as 0.85% or as low as 0.55% for
CS Balanced, and as high as 0.95%, or as low as 0.85% for CS Mid Cap. The CS
Small Cap expenses have been restated to reflect the lower advisory fee and
administrative services fee. Other expenses reflect an indirect fee. Net fund
operating expenses after reductions for fees paid indirectly (again restated),
would be 0.78% for CS Balanced, 0.97% for CS Mid Cap, 0.60% for CS Money Market,
1.18% for CS International Equity and 0.89% for CS Small Cap. Management Fees
for CS Mid Cap, CS Small Cap, and CS International Equity Includes an
administrative service fee of 0.10% paid to the advisor's affiliate. Prior to
January 1, 1998, Calvert Variable Series, Inc. was named Acacia Capital
Corporation and the Calvert Social Money Market Portfolio was named the Calvert
Responsibly Invested Portfolio; the Calvert Social Small Cap Growth Portfolio
was named the Calvert Responsibly Invested Strategic Growth Portfolio; the
Calvert Social Mid Cap Growth Portfolio was named the Calvert Responsibly
Invested Capital Accumulation Portfolio; the Calvert Social International Equity
Portfolio was named the Calvert Responsibly Invested Global Equity Portfolio;
and the Calvert Social Balanced Portfolio was named the Calvert Responsibly
Invested Balanced Portfolio.
(3) The Oppenheimer Aggressive Growth Fund was formerly named Oppenheimer
Capital Appreciation Fund.
(4) Prior to April 30, 1997, Van Eck Worldwide Hard Assets Fund was named Van
Eck Gold and Natural Resources Fund. Other Expenses are net of soft dollar
credits. Without such credits, Other Expenses would have been 0.18% and Total
Portfolio Annual Expenses would have been 1.18%.
Expense reimbursement agreements are expected to continue in future years but
may be terminated at any time. As long as the expense limitations continue for a
portfolio, if a reimbursement occurs, it has the effect of lowering the
portfolio's expense ratio and increasing its total return.
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<PAGE>
- -------------
ANLIC may receive administrative fees from the investment advisers of certain
Funds. ANLIC currently does not assess a separate charge against the Separate
Account or the Fixed Account for any federal, state or local income taxes. ANLIC
may, however, make such a charge in the future if income or gains within the
Separate Account will incur any federal, or any significant state or local
income tax liability, or if the federal, state or local tax treatment of ANLIC
changes.
GENERAL PROVISIONS
The Contract. The Policy, the application, any supplemental applications, and
any riders, amendments or endorsements make up the entire contract. Only the
President, Vice President, Secretary or Assistant Secretary can modify the
Policy. Any changes must be made in writing, and approved by ANLIC. No agent has
the authority to alter or modify any of the terms, conditions or agreements of
the Policy or to waive any of its provisions. The rights and benefits under the
Policy are summarized in this prospectus; however prospectus disclosure
regarding the Policy is qualified in its entirety by the Policy itself, a copy
of which is available upon request from ANLIC.
Control of Policy. The Policyowner is as shown in the application or subsequent
written endorsement. Subject to the rights of any irrevocable Beneficiary and
any assignee of record, all rights, options, and privileges belong to the
Policyowner, if living; otherwise to any successor-owner or owners, if living;
otherwise to the estate of the last Policyowner to die.
Beneficiary. Policyowners may name both primary and contingent Beneficiaries in
the application. Payments will be shared equally among Beneficiaries of the same
class unless otherwise stated. If a Beneficiary dies before the Second Death,
payments will be made to any surviving Beneficiaries of the same class;
otherwise to any Beneficiaries of the next class; otherwise to the Policyowner;
otherwise to the estate of the Policyowner.
Change of Beneficiary The Policyowner may change the Beneficiary by written
request at any time while at least one Insured is alive unless otherwise
provided in the previous designation of Beneficiary. The change will take effect
as of the date the change is recorded at the Home Office. ANLIC will not be
liable for any payment made or action taken before the change is recorded.
Change of Policyowner or Assignment. In order to change the Policyowner of the
Policy or assign Policy rights, an assignment of the Policy must be made in
writing and filed with ANLIC at its Home Office. Any such assignment is subject
to Outstanding Policy Debt. The change will take effect as of the date the
change is recorded at the Home Office, and ANLIC will not be liable for any
payment made or action taken before the change is recorded. Payment of Death
Benefit Proceeds is subject to the rights of any assignee of record. A
collateral assignment is not a change of ownership.
Payment of Proceeds. The Death Benefit Proceeds are subject first to any debt to
ANLIC and then to the interest of any assignee of record. The balance of any
Death Benefit Proceeds shall be paid in one sum to the designated beneficiary
unless an Optional Method of Payment is selected. If no Beneficiary survives the
Second Death, the Death Benefit Proceeds shall be paid in one sum to the
Policyowner, if living; otherwise to any successor-owner, if living; otherwise
to the Policyowner's estate. Any proceeds payable upon Surrender shall be paid
in one sum unless an Optional Method of Payment is elected.
Incontestability. ANLIC cannot contest the Policy or reinstated Policy while at
least one Insured is alive after it has been in force for two years from the
Policy Date (or reinstatement effective date). After the Policy Date, ANLIC
cannot contest an increase in the Specified Amount or addition of a rider while
at least one Insured is alive, after such increase or addition has been in force
for two years from its effective date. However, this two year provision shall
not apply to riders with their own contestability provision. We may require
proof prior to the end of the appropriate contestability period that both
Insureds are living.
Misstatement of Age and Sex. If the age or sex of either Insured or any person
insured by rider has been misstated, the amount of the Death Benefit and any
added riders provided will be those that would be purchased by the most recent
deduction for the Cost of Insurance and the cost of any additional riders at the
correct age and sex of the Insureds. The Death Benefit Proceeds will be adjusted
correspondingly.
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<PAGE>
Suicide. The Policy does not cover suicide within two years of the Policy Date
unless otherwise provided by a state's Insurance law. If either Insured, while
sane or insane, commits suicide within two years after the Policy Date, ANLIC
will pay only the premiums received less any partial withdrawals, the cost for
riders and any outstanding Policy debt. If either Insured, while sane or insane,
commits suicide within two years after the effective date of any increase in the
Specified Amount, ANLIC's liability with respect to such increase will only be
its total cost of insurance applicable to the increase. The laws of Missouri
provide that death by suicide at any time is covered by the Policy, and further
that suicide by an insane person may be considered an accidental death.
Postponement of Payments. Payment of any amount upon Surrender, partial
withdrawal, Policy loans, benefits payable at the Second Death, and transfers
may be postponed whenever: (1) the New York Stock Exchange (NYSE) is closed
other than customary weekend and holiday closings, or trading on the NYSE is
restricted as determined by the SEC; (2) the SEC by order permits postponement
for the protection of Policyowners; (3) an emergency exists, as determined by
the SEC, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to determine the value of the
Separate Account's net assets; or (4) Surrenders, loans or partial withdrawals
from the Fixed Account may be deferred for up to 6 months from the date of
written request. Payments under the Policy of any amounts derived from premiums
paid by check may be delayed until such time as the check has cleared the
Policyowner's bank.
Reports and Records. ANLIC will maintain all records relating to the Separate
Account and will mail to the Policyowner, at the last known address of record,
within 30 days after each Policy Anniversary, an annual report which shows the
current Accumulation Value, Net Cash Surrender Value, Death Benefit, premiums
paid, Outstanding Policy Debt and other information. Quarterly statements are
also mailed detailing Policy activity during the calendar quarter. Instead of
receiving an immediate confirmation of transactions made pursuant to some types
of periodic payment plan (such as a dollar cost averaging program, or payment
made by automatic bank draft or salary reduction arrangement), the Policyowner
may receive confirmation of such transactions in their quarterly statements. The
Policyowner should review the information in these statements carefully. All
errors or corrections must be reported to ANLIC immediately to assure proper
crediting to the Policy. ANLIC will assume all transactions are accurately
reported on quarterly statements unless ANLIC is notified otherwise within 30
days after receipt of the statement. The Policyowner will also be sent a
periodic report for the Funds and a list of the portfolio securities held in
each portfolio of the Funds.
Additional Insurance Benefits (Riders.) Subject to certain requirements, one or
more of the following additional insurance benefits may be added to a Policy by
rider. All riders are not available in all states. The cost, if any, of
additional insurance benefits will be deducted as part of the Monthly Deduction.
(See the section on Charges From Accumulation Value - Monthly Deduction.)
Accelerated Benefit Rider for Terminal Illness (Living Benefit Rider.) Upon
satisfactory Proof of Death of one Insured, and satisfactory proof of terminal
illness of the last surviving Insured after the two-year contestable period, (no
waiting period in certain states) ANLIC will accelerate the payment of up to 50%
of the lowest scheduled Death Benefit as provided by eligible coverages, less an
amount up to two guideline level premiums.
Future premium allocations after the payment of the benefit must be allocated to
the Fixed Account. Payment will not be made for amounts less than $4,000 or more
than $250,000 on all policies issued by ANLIC or its affiliates that provide
coverage on the surviving Insured. ANLIC may charge the lesser of 2% of the
benefit or $50 as an expense charge to cover the costs of administration.
Satisfactory proof of terminal illness of the last surviving Insured must
include a written statement from a licensed physician who is not related to the
Insured or the Policyowner stating that the Insured has a non-correctable
medical condition that, with a reasonable degree of medical certainty, will
result in the death of the Insured in less than 12 months (6 months in certain
states) from the date of the physician's statement. Further, the condition must
first be diagnosed while the Policy is in force.
The accelerated benefit first will be used to repay any Outstanding Policy Debt,
and will also affect future loans, partial withdrawals, and Surrenders. The
accelerated benefit will be treated as a lien against the Policy Death Benefit
and will thus reduce the Death Benefit Proceeds. Interest on the lien will be
charged at the Policy loan interest rate. There is no extra premium for this
rider.
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<PAGE>
Estate Protection Rider. This rider provides a specified amount of insurance to
the Beneficiary upon receipt of Satisfactory Proof of Death of both Insureds
during the first four Policy Years.
First-To-Die Term Rider. This rider provides a specified amount of insurance to
the Beneficiary upon receipt of Satisfactory Proof of Death of either of the two
Insureds.
Second-To-Die Term Rider. This rider provides a specified amount of insurance to
the Beneficiary upon receipt of Satisfactory Proof of Death of both Insureds.
Term Rider for Covered Insured. This rider provides a specified amount of
insurance to the Beneficiary upon receipt of Satisfactory Proof of Death of the
rider Insured, as identified. The rider may be purchased on either Insured or an
individual other than the Insureds.
Total Disability Rider. This rider provides for the payment by ANLIC of a
disability benefit in the form of premiums while the Insured is disabled. The
benefit amount may be chosen by the Policyowner at the issue of the rider. In
addition, while the Insured is totally disabled, the Cost of Insurance for the
rider will not be deducted from Accumulation Value. The rider may be purchased
on either or both Insureds.
Policy Split Option. This rider allows the Policy to be split into two
individual policies, subject to evidence of insurability on both Insureds.
DISTRIBUTION OF THE POLICIES
The principal underwriter for the Policies is The Advisors Group, Inc ("TAG"). a
second tier wholly owned subsidiary of Acacia Life Insurance Company and an
affiliate of ANLIC. TAG is registered as a broker-dealer with the SEC and is a
member of the National Association of Securities Dealers ("NASD"). ANLIC pays
TAG for acting as the principal underwriter under an Underwriting Agreement.
The Policies are sold through Registered Representatives of TAG or other
broker-dealers which have entered into selling agreements with ANLIC or TAG.
These Registered Representatives are also licensed by state insurance officials
to sell ANLIC's variable life policies. Each of the broker-dealers with a
selling agreement is registered with the SEC and is a member of the NASD. In
1998, TAG received gross variable universal life compensation of $17,177,000 and
retained $11,250 in underwriting fees, and $3,113,000 in brokerage commissions
on ANLIC's variable universal life policies.
Under these selling agreements, ANLIC pays commission to the broker-dealers,
which in turn pay commissions to the Registered Representative who sells this
Policy. During the first Policy Year, the commission may equal an amount up to
95% of the first year target premium paid plus the first year cost of any riders
and 2% for premiums paid in excess of the first year target premium. For Policy
Years two through four, the commission may equal an amount up to 2% of premiums
paid. Broker-dealers may also receive a service fee up to an annualized rate of
.25% of the Accumulation Value beginning in the fifth Policy Year. Compensation
arrangements may vary among broker-dealers. In addition, ANLIC may also pay
override payments, expense allowances, bonuses, wholesaler fees, and training
allowances. Registered Representatives who meet certain production standards may
receive additional compensation. ANLIC may reduce or waive the sales charge
and/or other charges on any Policy sold to directors, officers or employees of
ANLIC or any of its affiliates, employees and registered representatives of any
broker dealer that has entered into a sales agreement with ANLIC or TAG and the
spouses or children of the above persons. In no event will any such reduction or
waiver be permitted where it would be unfairly discriminatory to any person.
ADMINISTRATION
ANLIC has contracted with Ameritas Acacia Service Corporation ("Ameritas'),
having its principal place of business at One Ameritas Way, Lincoln, Nebraska
68501 for it to provide ANLIC with certain administrative services for the
Survivorship flexible premium variable life policies. Ameritas is an affiliate
of ANLIC and a Member of the Ameritas Acacia Family of Companies. Pursuant to
the terms of a Service Agreement, Ameritas will act as record keeping Service
Agent for the policies and riders for an initial term of three years and any
subsequent renewals thereof. Ameritas under the direction of ANLIC will perform
Administrative functions including issuance of policies for reinstatement, term
conversion, plan changes and guaranteed insurability options, generation of
billing and posting of premium, computation of valuations, calculation of
benefits payable, maintenance of administrative controls over all activities,
correspondence, and data, and providing management reports to ANLIC.
FEDERAL TAX MATTERS
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The following discussion provides a general description of the federal income
tax considerations associated with the Policy and does not purport to be
complete or cover all situations. This discussion is not intended as tax advice.
No attempt has been made to consider in detail any applicable state or other tax
laws. This discussion is based upon ANLIC's understanding of the relevant laws
at the time of filing. Counsel and other competent tax advisors should be
consulted for more complete information before a Policy is purchased. ANLIC
makes no representation as to the likelihood of the continuation of present
federal income tax laws nor of the interpretations by the Internal Revenue
Service. Federal tax laws are subject to change and thus tax consequences to the
Insureds, Policyowner or Beneficiary may be altered.
1. Taxation of ANLIC. ANLIC is taxed as a life insurance company under Part
I of Subchapter L of the Internal Revenue Code of 1986, (the "Code"). At
this time, since the Separate Account is not a separate entity from
ANLIC, and its operations form a part of ANLIC, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the
Code. Net investment income and realized net capital gains on the assets
of the Separate Account are reinvested and automatically retained as a
part of the reserves of the Policy and are taken into account in
determining the Death Benefit and Accumulation Value of the Policy. ANLIC
believes that Separate Account net investment income and realized net
capital gains will not be taxable to the extent that such income and
gains are retained as reserves under the Policy.
ANLIC does not currently expect to incur any federal income tax liability
attributable to the Separate Account with respect to the sale of the
Policies. Accordingly, no charge is being made currently to the Separate
Account for federal income taxes. If, however, ANLIC determines that it
may incur such taxes attributable to the Separate Account, it may assess
a charge for such taxes against the Separate Account.
ANLIC may also incur state and local taxes (including premium taxes). At
present, they are not charges against the Separate Account. If there is a
material change in state or local tax laws, charges for such taxes
attributable to the Separate Account, if any, may be assessed against the
Separate Account.
2. Tax Status of the Policy. The Code (Section 7702) includes a definition
of a life insurance contract for federal tax purposes which places
limitations on the amount of premiums that may be paid for the Policy and
the relationship of the Accumulation Value to the Death Benefit. While
ANLIC believes that the Policy meets the statutory definition of a life
insurance contract under Internal Revenue Code Section 7702 and should
receive federal income tax treatment consistent with that of a
fixed-benefit life insurance policy, the area of tax law relating to the
definition of life insurance does not explicitly address all relevant
issues (including, for example, certain tax requirements relating to
survivorship variable universal life policies). ANLIC reserves the right
to make changes to the Policy if deemed appropriate by ANLIC to attempt
to assure qualification of the Policy as a life insurance contract. If
the Policy were determined not to qualify as life insurance under Code
Section 7702, the Policy would not provide the tax advantages normally
provided by life insurance. If the Death Benefit of a Policy is changed,
the applicable defined limits may change.
The Code (Section 7702A) also defines a "modified endowment contract" for
federal tax purposes. If a life insurance policy is classified as a
modified endowment contract, distributions from it (including loans) are
taxed as ordinary income to the extent of any gain. This Policy will
become a "modified endowment contract" if the premiums paid into the
Policy fail to meet a 7-pay premium test as outlined in Section 7702A of
the Code. Basically, Section 7702A of the Code defines a "modified
endowment contract" as a policy issued or materially changed on or after
June 21, 1988 on which the total premiums paid during the first seven
years exceed the amount that would have been paid if the policy provided
for paid up benefits after seven level annual premiums.
33
<PAGE>
Certain benefits the policyowner may elect under this Policy may be
material changes that affect or cause retesting under the 7-pay premium
test. These include, but are not limited to, changes in Death Benefits
and changes in the Specified Amount. One may avoid a Policy becoming a
modified endowment contract by, among other things, not making excessive
payments or reducing benefits. Should you deposit excessive premiums
during a Policy Year, that portion that is returned by ANLIC within 60
days after the Policy Anniversary Date will reduce the premiums paid to
prevent the Policy from becoming a modifed endowment contract. All
modified endowment policies issued by ANLIC to the same Policyholder in
any 12 month period are treated as one modified endowment contract for
purposes of determining taxable gain under Section 72(e) of the Internal
Revenue Code. Any life insurance policy received in exhcnage for a
modified endowment contract will also be treated as a modified endowment
contract. You should contact a competent tax professional before paying
additional premiums or making other changes to the Policy to determine
whether such payments or changes would cause the Policy to become a
modified endowment contract.
The Code (Section 817(h)) also authorizes the Secretary of the Treasury
(the "Treasury") to set standards by regulation or otherwise for the
investments of the Separate Account to be "adequately diversified" in
order for the Policy to be treated as a life insurance contract for
federal tax purposes. The Separate Account, through the Funds, intends to
comply with the diversification requirements prescribed by the Treasury
in regulations published in the Federal Register on March 2, 1989, which
affect how the Fund's assets may be invested.
ANLIC does not have control over the Funds or their investments. However,
ANLIC believes that the Funds will be operated in compliance with the
diversification requirements of the Internal Revenue Code. Thus, ANLIC
believes that the Policy will be treated as a life insurance contract for
federal tax purposes.
In connection with the issuance of regulations relating to the
diversification requirements, the Treasury announced that such
regulations do not provide guidance concerning the extent to which
Policyowners may direct their investments to particular divisions of a
separate account. Regulations in this regard may be issued in the future.
It is not clear what these regulations will provide nor whether they will
be prospective only. It is possible that when regulations are issued, the
Policy may need to be modified to comply with such regulations. For these
reasons, ANLIC reserves the right to modify the Policy as necessary to
prevent the Policyowner from being considered the owner of the assets of
the Separate Account or otherwise to qualify the Policy for favorable tax
treatment.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal tax purposes.
3. Tax Treatment of Policy Proceeds. ANLIC believes that the Policy will be
treated in a manner consistent with a fixed benefit life insurance policy
for federal income tax purposes. Thus, ANLIC believes that the Death
Benefit will generally be excludable from the gross income of the
Beneficiary under Section 101(a)(1) of the Code and the Policyowner will
not be deemed to be in constructive receipt of the Accumulation Value
under the Policy until its actual Surrender.
Distributions From Policies That Are Not "Modified Endowment Contracts".
Distributions (while one or both Insureds are still alive) from a Policy
that is not a modified endowment contract are generally treated as first
a recovery of the investment in the Policy and then only after the return
of all such investment, as disbursing taxable `income. However, in the
case of a decrease in the Death Benefit, a partial withdrawal, a change
in Death Benefit option, or any other such change that reduces future
benefits under the Policy during the first 15 years after a Policy is
issued and that results in a cash distribution to the Policyowner in
order for the Policy to continue complying with the Section 7702 defined
limits on premiums and Accumulation Values, such distributions will be
taxable as ordinary income to the Policyowner (to the extent of any gain
in the Policy) as prescribed in Section 7702. In addition, upon a
complete surrender or lapse of a Policy that is not a "modified endowment
contract", if the amount received plus the amount of any outstanding
Policy Debt exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income for tax purposes. Investment in
the Policy means (1) the total amount of any premiums paid for the Policy
plus the amount of any loan received under the policy to the extent the
loan is included in gross income of the Policy owner minus (2) the total
amount received under the Policy by the Policyowner that was excludable
from gross income, excluding any non-taxable loan received under the
Policy.
ANLIC also believes that loans received under a Policy that is not a
"modified endowment contract" will be treated as debt of the Policyowner
and that no part of any loan under a Policy will constitute income to the
Policyowner so long as the Policy remains in force, unless the Policy
becomes a "modified endowment contract." See discussion of modified
endowment contract distributions in the section on Tax Status of the
Policy. Should the Policy lapse while Policy loans are outstanding the
portion of the loans attributable to earnings will become taxable.
Generally, interest paid on any loan under a Policy owned by an
individual will not be tax-deductible.
34
<PAGE>
Except for Policies with respect to a limited number of key persons of an
employer (both as defined in the Internal Revenue Code), and subject to
applicable interest rate caps, the Health Insurance Portability and
Accountability Act of 1996 (the "Health Insurance Act") generally repeals
the deduction for interest paid or accrued after October 13, 1995 on
loans from corporate owned life insurance Policies on the lives of
officers, employees or persons financially interested in the taxpayer's
trade or business. Certain transitional rules for existing debt are
included in the Health Insurance Act. The transitional rules include a
phase-out of the deduction for debt incurred (1) before January 1, 1996,
or (2) before January 1, 1997, for Policies entered into in 1994 or 1995.
The phase-out of the interest expense deduction occurs over a transition
period between October 13, 1995 and January 1, 1999. There is also a
special rule for pre-June 21, 1986 Policies. The Taxpayer Relief Act of
1997 ("TRA `97"), further expanded the interest deduction disallowance
for businesses by providing, with respect to Policies issued after June
8, 1997, that no deduction is allowed for interest paid or accrued on any
debt with respect to life insurance covering the life of any individual
(except as noted above under pre-'97 law with respect to key persons and
pre-June 21, 1986 policies). TRA `97 also provides that no deduction is
permissible for premiums paid on a life insurance Policy if the taxpayer
is directly or indirectly a Beneficiary under the Policy. Also under TRA
`97 and subject to certain exceptions, for Policies issued after June 8,
1997, no deduction is allowed for that portion of a taxpayer's interest
expense that is allocable to unborrowed Policy cash values. This
disallowance generally does not apply to Policies owned by natural
persons. Policyowners should consult a competent tax advisor concerning
the tax implications of these changes for their Policies.
Distribution From Policies That Are "Modified Endowment Contracts".
Should the Policy become a "modified endowment contract", partial
withdrawals, full surrenders, assignments, pledges, and loans (including
loans to pay loan interest) under the Policy will be taxable to the
extent of the gain under the Policy. A 10% penalty tax also applies to
the taxable portion of any distribution prior to the Policyowner's age
591/2. The 10% penalty tax does not apply if the Policyowner is disabled
as defined under the Code or if the distribution is paid out in the form
of a life annuity on the life of the Policyowner or the joint lives of
the Policyowner and Beneficiary.
The right to exchange the Policy for a survivorship flexible premium
adjustable life insurance policy (See the section on Exchange
Privilege.), the right to change Policyowners (See the section on General
Provisions.), and the provision for partial withdrawals (See the section
on Surrenders.) may have tax consequences depending on the circumstances
of such exchange, change, or withdrawal. Upon complete Surrender, if the
amount received plus any Outstanding Policy Debt exceeds the total
premiums paid (the "basis"), that are not treated as previously withdrawn
by the Policyowner, the excess generally will be taxed as ordinary
income.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Death Benefit Proceeds depend on
applicable law and the circumstances of each Policyowner or Beneficiary.
In addition, if the Policy is used in connection with tax-qualified
retirement plans, certain limitations prescribed by the Internal Revenue
Service on, and rules with respect to the taxation of, life insurance
protection provided through such plans may apply. The advice of competent
tax counsel should be sought in connection with use of life insurance in
a qualified plan.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
ANLIC holds the assets of the Separate Account. The assets are kept physically
segregated and held separately and apart from the General Account assets, except
for the Fixed Account. ANLIC maintains records of all purchases and redemptions
of Funds' shares by each of the Subaccounts.
THIRD PARTY SERVICES
ANLIC is aware that certain third parties are offering investment advisory,
asset allocation, money management and timing services in connection with the
Policies. ANLIC does not engage any such third parties to offer such services of
any type. In certain cases, ANLIC has agreed to honor transfer instructions from
such services where it has received powers of attorney, in a form acceptable to
it, from the Policyowners participating in the service. Firms or persons
offering such services do so independently from any agency relationship they may
have with ANLIC for the sale of Policies. ANLIC takes no responsibility for the
investment allocations and transfers transacted on a Policyowner's behalf by
such third parties or any investment allocation recommendations made by such
parties. Policyowners should be aware that fees paid for such services are
separate and in addition to fees paid under the Policies.
VOTING RIGHTS
ANLIC is the legal holder of the shares held in the Subaccounts of the Separate
Account and as such has the right to vote the shares, to elect Directors of the
Funds, and to vote on matters that are required by the Investment Company Act of
1940 and upon any other matter that may be voted upon at a shareholders's
meeting. To the extent required by law, ANLIC will vote all shares of each of
the Funds held in the Separate Account at regular and special shareholder
meetings of the Funds according to instructions received from Policyowners based
on the number of shares held as of the record date for such meeting.
35
<PAGE>
The number of Fund shares in a Subaccount for which instructions may be given by
a Policyowner is determined by dividing the Accumulation Value held in that
Subaccount by the net asset value of one share in the corresponding portfolio of
the Fund. Fractional shares will be counted. Fund shares held in each Subaccount
for which no timely instructions from Policyowners are received and Fund shares
held in each Subaccount which do not support Policyowner interests will be voted
by ANLIC in the same proportion as those shares in that Subaccount for which
timely instructions are received. Voting instructions to abstain on any item to
be voted will be applied on a pro rata basis to reduce the votes eligible to be
cast. Should applicable federal securities laws or regulations permit, ANLIC may
elect to vote shares of the Fund in its own right.
Disregard of Voting Instruction. ANLIC may, if required by state insurance
officials, disregard voting instructions if those instructions would require
shares to be voted to cause a change in the subclassification or investment
objectives or policies of one or more of the Funds' portfolios, or to approve or
disapprove an investment adviser or principal underwriter for the Funds. In
addition, ANLIC itself may disregard voting instructions that would require
changes in the investment objectives or policies of any portfolio or in an
investment adviser or principal underwriter for the Funds, if ANLIC reasonably
disapproves those changes in accordance with applicable federal regulations. If
ANLIC does disregard voting instructions, it will advise Policyowners of that
action and its reasons for the action in the next annual report or proxy
statement to Policyowners.
STATE REGULATION OF ANLIC
ANLIC, a stock life insurance company organized under the laws of Virginia, is
subject to regulation by the Virginia Department of Insurance. On or before
March 1 of each year an NAIC convention blank covering the operations and
reporting on the financial condition of ANLIC and the Separate Account as of
December 31 of the preceding year must be filed with the Virginia Department of
Insurance. Periodically, the Virginia Department of Insurance examines the
liabilities and reserves of ANLIC and the Separate Account.
In addition, ANLIC is subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate. The
policies offered by the Prospectus are available in the various states as
approved. Generally, the Insurance Department of any other state applies the
laws of the state of domicile in determining permissible investments.
EXECUTIVE OFFICERS AND DIRECTORS OF ANLIC
Shows name and position(s) with ANLIC followed by the principal occupations for
the last five years.***
OFFICERS AND DIRECTORS OF ANLIC
Name and Position(s) Principal Occupation
- -------------------- --------------------
With Acacia National Last Five Years
- -------------------- ---------------
Charles T. Nason Chairman of the Board and
Chairman of the Board, Chief Executive Officer since Nov. 1, 1998
and Chief Executive Officer Chairman, President and Chief Executive Officer
and Director until Nov. 1, 1998 Acacia Life Insurance Company
Robert W. Clyde President and Chief Operating Officer since
President, Nov. 1, 1998 Executive Vice President, Marketing
Chief Operating and Sales since September 1994 until Dec.1997;
Officer Vice President, Retail Long-Term Care
September 1993 until August 1994, Vice President,
General Agency July 1991 until August 1993,
John Hancock Mutual Life.
Robert-John H. Sands Senior Vice President and General Counsel
Senior Vice President, since 1991 Acacia Life Insurance Company.
General Counsel and Director
Paul L. Schneider Senior Vice President, Chief Financial Officer
Senior Vice President, since March 1989 and Chief Investment Officer since
Chief Financial Officer, April 1997; Chief Acacia Life Insurance Company.
Investment Officer,
and Director
Haluk Ariturk Senior Vice President, Operations and Chief Actuary
Senior Vice President, since June 1989, Acacia Life Insurance Company.
36
<PAGE>
Operations and Chief
Actuary and Director
Janet L. Schmidt Senior Vice President, Human Resources since 1994
Senior Vice President, Acacia Life Insurance Company
Human Resources
Brian J. Owens Agency Manager from 1981 to Feb. 1995
Senior Vice President, Prudential Insurance Company of America;
Career Distribution Regional Vice President Feb. 1995 - Jan. 1997
Acacia Life Insurance Company;
Vice President, Acacia Financial Centers
1997 - Jan. 1999
Acacia Life Insurance Company;
Jan. 1999 - Senior Vice President, Career
Distribution Acacia Life Insurance Company
R. Larry Mauzy Vice President, Chief Information Officer 1991-1997
Senior Vice President Acacia Life Insurance Company;
Senior Vice President, Chief Information Officer
1998- Acacia Life Insurance Company
(1) The principal business address of each person listed is Acacia National Life
Insurance Company, 7315 Wisconsin Avenue, Bethesda, MD 20814
EXPERTS
The statutory basis financial statements of ANLIC as of and for the years ended
December 31,1998 and 1997, as found in this Prospectus have been included herein
in reliance upon the reports of PriceWaterhouseCoopers L.L.P., independent
accountants, appearing elsewhere herein, given on the authority of that firm as
experts in accounting and auditing.
Actuarial matters included in the Prospectus have been examined by Peter
Whipple, FSA, an actuary of ANLIC, as stated in his opinion filed as an exhibit
to the Registration Statement.
LEGAL MATTERS
Matters of the State of Virginia law pertaining to the Policies, including
ANLIC's right to issue the Policies and its qualification to do so under
applicable laws and regulations issued thereunder, have been passed upon by
Ellen Jane Abromson, Legal Officer of ANLIC.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. ANLIC is not involved in
any litigation that is of material importance in relation to its total assets or
that relates to the Separate Account.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, ANLIC and the Policy offered
hereby. Statements contained in this Prospectus as to the contents of the Policy
and other legal instruments are summaries. For a complete statement of the terms
thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of ANLIC which are included in this Prospectus should
be considered only as bearing on the ability of ANLIC 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.
37
<PAGE>
Appendix A
Illustrations of Death Benefits and Accumulation Value
The following tables illustrate how the Accumulation Values and Death Benefits
of a Policy may change with the investment experience of the Fund. The tables
show how the Accumulation Values and Death Benefits of a Policy issued to two
Insureds of given ages and specified underwriting risk classifications who pay
the given premium at issue would vary over time if the investment return on the
assets held in each portfolio of the Funds were a uniform, gross, after-tax
annual rate of 0%, 6%, or 12%. The tables on pages 39 through 42 illustrate a
Policy issued to a male, age 45, under a Preferred rate non-tobacco underwriting
risk classification and a female age 45, also under a Preferred non-tobacco
underwriting risk classification. This Policy provides for a standard tobacco
use and non-tobacco use, and preferred non-tobacco classification. The
Accumulation Values and Death Benefits would be different from those shown if
the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above and below those averages for individual
Policy Years, or if the Insureds were assigned to a different underwriting risk
classification.
The second column of the tables shows the accumulated value of the premiums paid
at 5%. The following columns show the Death Benefits and the Accumulation Values
for uniform hypothetical rates of return shown in these tables. The tables on
pages 39 and 41 are based on the current Cost of Insurance Rates, current
expense deductions and the current percent of premium loads. These reflect the
basis on which ANLIC currently sells its Policies. The maximum allowable Cost of
Insurance Rates under the Policy are based upon the 1980 Commissioner's Standard
Ordinary Smoker and Non-Smoker, Male and Female Mortality Tables (Smoker is
referenced for tobacco use rates; Non-Smoker is referenced for non-tobacco use
rates). Since these are recent tables and are split to reflect tobacco use and
sex, the current Cost of Insurance Rates used by ANLIC are at this time equal to
the maximum Cost of Insurance Rates for many ages. ANLIC anticipates reflecting
future improvements in actual mortality experience through adjustments in the
current Cost of Insurance Rates actually applied. ANLIC also anticipates
reflecting any future improvements in expenses incurred by applying lower
percent of premiums of loads and other expense deductions. The Death Benefits
and Accumulation Values shown in the tables on pages 40 and 42 are based on the
assumption that the maximum allowable Cost of Insurance Rates as described above
and maximum allowable expense deductions are made throughout the life of the
Policy.
The amounts shown for the Death Benefits, Surrender values and Accumulation
Values reflect the fact that the net investment return of the Subaccounts is
lower than the gross, after-tax return of the assets held in the Funds as a
result of expenses paid by the Fund and charges levied against the Subaccounts.
The values shown take into account an average of the expenses paid by each
portfolio available for investment (the equivalent to an annual rate of .95% of
the aggregate average daily net assets of the Fund) and the daily charge by
ANLIC to each Subaccount for assuming mortality and expense risks and
administrative expenses (which is equivalent to a charge at an annual rate of
0.90% for Policy Years 1-15 and 0.45% thereafter of the average net assets of
the Subaccounts).
The hypothetical values shown in the tables do not reflect any charges for
Federal Income tax burden attributable to the Separate Account, since ANLIC is
not currently making such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return would have
to exceed 0 percent, 6 percent, or 12 percent by an amount sufficient to cover
the tax charges in order to produce the Death Benefits and values illustrated.
(See the section on Federal Tax Matters.)
The tables illustrate the Policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all Net Premiums are allocated to the Separate Account, and if no Policy loans
have been made. The tables are also based on the assumptions that the
Policyowner has not requested an increase or decrease in the initial Specified
Amount, that no partial withdrawals have been made, and that no more than 15
transfers have been made in any Policy Year so that no transfer charges have
been incurred. Illustrated values would be different if the proposed Insureds
were tobacco users, in substandard risk classifications, or were other ages, or
if a higher or lower premium was illustrated.
Upon request, ANLIC will provide comparable illustration based upon the proposed
Insureds' ages, sexes and underwriting classifications, the Specified Amount,
the Death Benefit option, and planned periodic premium schedule requested, and
any available riders requested. In addition, upon client request, illustrations
may be furnished reflecting allocation of premiums to specified Subaccounts.
Such illustrations will reflect the expenses of the portfolio in which the
Subaccount invests.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
ACACIA NATIONAL LIFE INSURANCE COMPANY
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
Female Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $500000
DEATH BENEFIT OPTION: A
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.85% Net) ( 4.15% Net) (10.15% Net)
------------------------- ------------------------ -------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------- ----------- --------- -------- ------- ------- ------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
65
70
75
</TABLE>
1) Assumes an annual $6000 premium is paid at the beginning of each Policy Year.
Values would be different if premiums with a different frequency or in different
amounts.
2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may
cause this Policy to lapse because of insufficient Accumulation Value.
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 RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
ACCUMULATION VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATIONS CAN BE MADE BY ANLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
ACACIA NATIONAL LIFE INSURANCE COMPANY
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
Female Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $500000
DEATH BENEFIT OPTION: A
USING MAXIMUM ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.85% Net) ( 4.15% Net) (10.15% Net)
------------------------- ------------------------ -------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------- ----------- --------- -------- ------- ------- ------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
65
70
75
</TABLE>
* In the absence of an additional premium the Policy would lapse.
1) Assumes an annual $6000 premium is paid at the beginning of each Policy Year.
Values would be different if premiums with a different frequency or in different
amounts.
2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may
cause this Policy to lapse because of insufficient Accumulation Value.
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 RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
ACCUMULATION VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATIONS CAN BE MADE BY ANLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
ACACIA NATIONAL LIFE INSURANCE COMPANY
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
Female Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $500000
DEATH BENEFIT OPTION: B
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.85% Net) ( 4.15% Net) (10.15% Net)
------------------------- ------------------------ -------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------- ----------- --------- -------- ------- ------- ------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
65
70
75
</TABLE>
1) Assumes an annual $20000 premium is paid at the beginning of each Policy
Year. Values would be different if premiums with a different frequency or in
different amounts.
2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may
cause this Policy to lapse because of insufficient Accumulation Value.
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 RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
ACCUMULATION VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATIONS CAN BE MADE BY ANLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
ACACIA NATIONAL LIFE INSURANCE COMPANY
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
Female Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $500000
DEATH BENEFIT OPTION: B
USING MAXIMUM ALLOWALBE SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.85% Net) ( 4.15% Net) (10.15% Net)
------------------------- ------------------------ -------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------- ----------- --------- -------- ------- ------- ------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
65
70
75
</TABLE>
1) Assumes an annual $20000 premium is paid at the beginning of each Policy
Year. Values would be different if premiums with a different frequency or in
different amounts.
2) Assumes that no Policy loan has been made. Excessive loans or withdrawals may
cause this Policy to lapse because of insufficient Accumulation Value.
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 RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, DEATH BENEFIT OPTION SELECTED,
PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
ACCUMULATION VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO
REPRESENTATIONS CAN BE MADE BY ANLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
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 rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
Registrant makes the following representation pursuant to the National
Securities Markets Improvements Act of 1996:
Acacia National Life Insurance Company represents that the fees and charges
deducted under the contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
RULE 484 UNDERTAKING
ANLIC'S By-laws provide as follows:
In the event any action, suit or proceeding is brought against a present or
former Director, elected officer, appointed officer or other employee because of
any action taken by such person as a Director, officer or other employee of the
Company or which he omitted to take as a Director, officer or employee of the
Company, the Company shall reimburse or indemnify him for all loss reasonably
incurred by him in connection with such action to the fullest extent permitted
by ss.13.1-696 through ss.13.1-704 of the Code of Virginia, as is now or
hereafter amended, except in relation to matters as to which such person shall
have been finally adjudged to be liable by reason of having been guilty of gross
negligence or willful misconduct in the performance of duties as such Director,
officer or employee. In case any such suit, action or proceeding shall result in
a settlement prior to final judgment and if, in the judgment of the Board of
Directors, such person in taking the action or failing to take the action
complained of was not grossly negligent or guilty of wilful misconduct in the
performance of his duty, the Company shall reimburse or indemnify him for the
amount of such settlement and for all expenses reasonably incurred in connection
with such action and its settlement. This right of indemnification shall not be
exclusive of any other rights to which such person may be entitled.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following:
(a)
(b) Ellen Jane Abromson
(c)
The Following Exhibits:
1. The Following exhibits correspond to those required by paragraph IX A of the
instructions as to exhibits in Form N-8B-2.
(A)(1) Board Resolution Establishing Separate Account III(3)
(A)(2) Not applicable
(A)(3)(a) Underwriting Agreement between The Advisors Group, Inc. and Acacia
National Life Insurance Company - To be filed by later amendment.
(A)(3)(b) Proposed form of Selling Agreement - To be filed by later amendment.
(A)(3)(c) Schedules of Sales Commissions - To be filed by later amendment
(A)(4) Not Applicable
(A)(5)(a) Proposed form of Policy. - To be filed by later amendment.
(A)(5)(b) Proposed form of Policy Riders - To be filed by later amendment.
(A)(6) Certificate of Organization of Acacia National Life Insurance Company(2)
(A)(6) Bylaws of Acacia National Life Insurance Company(2)
(A)(7) Notapplicable
(A)(8)(a) Participation Agreement Alger American Fund(1)
(A)(8)(b) Participation Agreement Calvert Variable Series, Inc.(1)
(A)(8)(c) Participation Agreement Dreyfus Stock Index Fund(1)
(A)(8)(d) Participation Agreement Neuberger&Berman Advisers Management Trust(1)
(A)(8)(e) Participation Agreement Oppenheimer Variable Account Funds(2)
(A)(8)(f) Participation Agreement Strong Variable Insurance Funds, Inc.(1)
(A)(8)(g) Participation Agreement Van Eck Worldwide Hard Assets Fund(1)
(A)(9) NotApplicable
(A)(10) Application for Policy - To be filed by later amendment
2. (A)(b) Opinion and Consent of Ellen Jane Abromson, 2nd Vice President and
Associate Counsel(3)
3. No financial statements will be omitted from the final Prospectus pursuant to
Instruction 1(b) or (c) or Part I.
4. Not applicable.
5. Not applicable.
6. To be filed by later amendment.
7. Consent of Independent Auditors - to be filed by later amendment.
8. Not applicable.
Incorporated by reference to the initial Registration Statement for Acacia
National Life Insurance Company Separate Account II on Form N-4 (File No 333
- -03963), Filed.
Incorporated by Reference to the Post-Effective No. 3 to the Registration
Statement on Form S-6 for Acacia National Life Insurance Company Separate
Account (File No. 33 -90208), Filed on May 1, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Acacia National Variable Life Insurance Separate Account III and has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bethesda, State of
Maryland on the 28th day of January 1998.
ACACIA NATIONAL VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT III
(Registrant)
By: ACACIA NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Ellen Jane Abromson
-------------------------------------
Ellen Jane Abromson
2nd Vice President and Associate Counsel
Attest:/s/ Todd Green
-------------------
Todd Green
Assistant Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities with the depositor and on the dates indicated.
Signatures Title Date
/s/ Charles T. Nason Chairman of the Board, January 28, 1999
- ---------------------- and Chief Executive Officer
Charles T. Nason
/s/ Robert W. Clyde President and Chief January 28, 1999
- ---------------------- Operating Officer
Robert W. Clyde
/s/ Paul L. Schneider Senior Vice President, January 28, 1999
- ----------------------
Paul L. Schneider Chief Financial Officer
and Chief Investment Officer
/s/ Robert-John H. Sands Senior Vice President, January 28, 1999
- ------------------------- Co-General Counsel
Robert-John H. Sands
/s/ Haluk Ariturk Senior Vice President January 28, 1999
- -------------------- Operations, Chief Actuary
Haluk Ariturk and Director
/s/ Janet L. Schmidt Senior Vice President January 28, 1999
- --------------------- Human Resources
Janet L. Schmidt
/s/ Brian J. Owens Senior Vice President January 28, 1999
- ------------------- Career Distributions
Brian J. Owens
/s/ R. Larry Mauzy Senior Vice President January 28, 1999
- ------------------- and Chief Information Officer
R. Larry Mauzy
EXHIBIT (A)(1) Board Resolution Establishing Separate Account III
RESOLUTION OF DIRECTORS OF
ACACIA NATIONAL LIFE INSURANCE COMPANY
BE IT RESOLVED, that the Company, pursuant to the provisions of Section
38.2.3113 of the Code of Virginia, hereby establishes a separate account
designated, "Acacia National Variable Life Insurance Separate Account III"
(hereinafter "Variable Account III") for the following use and purposes, and
subject to such conditions as hereinafter set forth:
FURTHER RESOLVED, that Variable Account III shall be established for the purpose
of providing for the issuance by the Company of such survivorship variable life
or such other policies as the Board may designate for such purpose and shall
constitute a separate account into which are allocated amounts paid to or held
by the Company under such policies; and
FURTHER RESOLVED, that the income, gains and losses, whether or not realized,
from assets allocated to Variable Account III shall, in accordance with the
policies, be credited to or charged against such account without regard to other
income, gains, or losses of the Company; and
FURTHER RESOLVED, that the fundamental investment policy of Variable Account III
shall be to invest or reinvest the assets of Variable Account III in securities
issued by investment companies registered under the Investment Company Act of
1940 as may be specified in the respective policies; and
FURTHER RESOLVED, that the Variable Account III may be divided into sub-accounts
and that each such investment division shall invest only in the shares of a
single mutual fund or a single mutual fund portfolio of an investment company
organized as a series fund pursuant to the Investment Company Act of 1940; and
FURTHER RESOLVED, that the President, a Vice President, Secretary and Treasurer,
each be, and hereby are, authorized to take all necessary and appropriate action
to accomplish the registration of the Variable Account III as an investment
company under the Investment Company Act of 1940 and the registration of the
variable life insurance policies issued in connection with the Variable Account
III as securities under the Securities Act of 1933, and to take all action
necessary to comply with the Acts, including but not limited to the execution
and filing of registration statements and amendments thereto, applications for
exemptions from the provisions of the Acts as may be necessary or desirable, and
agreements for the management of the Variable Account III and for the
distribution of survivorship variable life insurance policies carrying an
interest in the Variable Account III assets;
FURTHER RESOLVED, that the President or a Vice President be, and hereby are,
authorized to adopt Rules and Regulations for the administration of the Variable
Account III;
FURTHER RESOLVED, that the President or a Vice President be, and hereby are,
authorized to take all necessary and appropriate action to enter into an
agreement for the sale or purchase of shares and to take such other actions and
execute such other agreements as they deem necessary or desirable to carry out
the foregoing resolutions and the intent and purposes thereof.
BE IT RESOLVED, that the following Standards of Conduct with respect to
investments of the Variable Account III and variable life operations are hereby
adopted:
Unless otherwise approved in writing by the insurance commissioner of the
applicable state in advance of the transaction, with respect to the Variable
Account III, the Company shall not:
1. Sell to, or purchase from, such separate account established by the company
any securities or other property, other than variable life insurance
policies.
<PAGE>
2. Purchase, or allow to be purchased, for such separate account, any
securities of which the Company or an affiliate is the issuer.
3. Accept any compensation, other than a regular salary or wages from the
Company or affiliate, for the sale or purchase of securities to or from
such separate account other than as provided by law.
4. Engage in any joint transaction, participation or common undertaking
whereby the Company or an affiliate participates with such separate account
in any transaction in which the Company or any of its affiliates obtain an
advantage in the price or quality of the item purchased, in the service
received, or in the cost of such service or is disadvantaged in any of
these respects by the same transaction.
5. Borrow money or securities from such separate account other than under a
policy loan provision.
BE IT RESOLVED, that the following Standards of Suitability shall apply to
Acacia National Life Insurance Company, its officers, directors, employees,
affiliates and agents with respect to the suitability of a variable life
insurance policy for an applicant for such contract:
No recommendation shall be made to an applicant(s) to purchase a survivorship or
other variable life policy, and no survivorship or other variable life policy
shall be issued, in the absence of reasonable grounds to believe that the
purchase of such a policy is suitable for such applicant(s) on the basis of
information furnished after reasonable inquiry into the following subjects of
concern to the applicant:
1.) the applicant's insurance and investment objectives;
2.) the applicant's financial situation and needs; and
3.) other relevant information known to Acacia National Life Insurance
Company or the agent making the recommendation.
A copy of this resolution shall be distributed to the officers, employees,
affiliates and agents of this Company assigned to distribute and administer the
variable life policies.
AND BE IT FURTHER RESOLVED, that the President, a Vice President, Secretary or
other appropriate officer of the Company are hereby authorized and directed to
carry into full force and effect the purposes and provisions of this resolution.
Attest:__________________
Todd Green
Assistant Secretary
EXHIBIT 2.(A)(b) Opinion and Consent of Ellen Jane Abromson
OPINION AND CONSENT
January 27, 1999
Acacia National Life Insurance Company
7315 Wisconsin Avenue.
Bethesda, MD 20814
Gentlemen:
With reference to the Registration Statement on S-6, filed by Acacia National
Life Insurance Company and Acacia National Variable Annuity Separate Account III
with the Securities and Exchange Commission covering its survivorship flexible
premium deferred variable life policy, "Regent 2000", I have examined such
documents and such law as I considered necessary and appropriate, and on the
basis of such examination, it is my opinion that:
1. Acacia National Life Insurance Company is duly organized and
validly existing under the laws of the Commonwealth of Virginia
and has been duly authorized to issue variable annuity policies
by the Corporation Insurance Commission of the Commonwealth of
Virginia.
2. Acacia National Variable Annuity Separate Account III is duly
authorized and existing separate account established pursuant to
the provisions of Section 38.2.3113 of the Code of Virginia.
3. The survivorship flexible premium deferred variable life policy,
when issued as contemplated by said Form S-6 Registration
Statement, will constitute legal, validly issued and binding
obligations of Acacia National Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to said
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
/s/ Ellen Jane Abromson
- ------------------------
Ellen Jane Abromson
2nd Vice President & Associate Counsel
Acacia National Life Insurance Company
