AMERITAS VARAIBLE LIFE INSURANCE COMPANY LOGO
5900 "O" Street
PROSPECTUS P.O. Box 82550/Lincoln, NE 68501
APPLAUSE! II--A Flexible Premium Variable Universal Life Insurance Policy
issued by Ameritas Variable Life Insurance Company
APPLAUSE! II is a flexible premium variable universal life insurance Policy
("Policy") issued by Ameritas Variable Life Insurance Company ("AVLIC"). Like
traditional life insurance policies, an APPLAUSE! II Policy provides Death
Benefits to Beneficiaries and gives you, the Policy Owner, the opportunity to
increase the Policy's value. Unlike traditional policies, APPLAUSE! II 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.
An APPLAUSE! II Policy is different from traditional life insurance policies in
another important way: you select how Policy premiums will be invested. Although
each Policy Owner is guaranteed a minimum Death Benefit, the 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 APPLAUSE! II include investment
portfolios managed by Ameritas Investment Corp., Fidelity Management & Research
Company, Fred Alger Management, Inc., Massachusetts Financial Services Company,
and Morgan Stanley Dean Witter Investment Management Inc. 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
APPLAUSE! II prospectus. You may also choose to allocate premium payments to the
Fixed Account managed by AVLIC.
An APPLAUSE! II Policy will be issued after AVLIC accepts a prospective Policy
Owner's application. Generally, an application must specify a minimum Death
Benefit of $100,000 ($50,000 if the Insured is 50 or older), but lower minimums
may be requested. An APPLAUSE! II Policy, once purchased, may generally be
canceled within 10 days after you receive it.
This APPLAUSE! II prospectus is designed to assist you in understanding the
opportunity and risks associated with the purchase of an APPLAUSE! II Policy.
Prospective Policy Owners 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
APPLAUSE! II Policy, information about AVLIC, a list of the investment
portfolios to which you may allocate payments, as well as a detailed description
of the APPLAUSE! II Policy The appendix to the prospectus includes tables
designed to illustrate how 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 APPLAUSE! II.
Although the APPLAUSE! II Policy is designed to provide life insurance, an
APPLAUSE! II Policy is considered to be a security. It is not a deposit with, an
obligation of, or guaranteed or endorsed by any banking institution, nor is it
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency. The purchase of an APPLAUSE! II Policy involves investment
risk, including the possible loss of principal. For this reason, APPLAUSE! II
may not be suitable for all individuals. It may not be advantageous to purchase
an APPLAUSE! II 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 flexible premium variable universal life insurance policy.
The Securities and Exchange Commission ("SEC") 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.
November 1, 1999
APPLAUSE! II
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TABLE OF CONTENTS PAGE
DEFINITIONS....................................................................3
SUMMARY........................................................................6
YEAR 2000.....................................................................10
AVLIC, THE SEPARATE ACCOUNT AND THE FUNDS.....................................11
Ameritas Variable Life Insurance Company...................................11
The Separate Account.......................................................11
Performance Information....................................................12
The Funds..................................................................12
Investment Objectives and Policies of the Funds' Portfolios................14
Addition, Deletion or Substitution of Investments..........................17
Fixed Account..............................................................17
POLICY BENEFITS...............................................................17
Purposes of the Policy.....................................................17
Death Benefit Proceeds.....................................................18
Death Benefit Options......................................................18
Methods of Affecting Insurance Protection..................................20
Duration of the Policy.....................................................20
Accumulation Value.........................................................20
Net Cash Surrender Value Bonus.............................................21
Benefits at Maturity.......................................................21
Payment of Policy Benefits.................................................22
POLICY RIGHTS.................................................................22
Loan Benefits..............................................................22
Surrenders.................................................................23
Partial Withdrawals........................................................24
Transfers..................................................................24
Systematic Programs........................................................25
Free Look Privilege........................................................25
Exchange Privilege.........................................................25
PAYMENT AND ALLOCATION OF PREMIUMS............................................26
Issuance of a Policy.......................................................26
Premiums...................................................................26
Allocation of Premiums and Accumulation Value..............................27
Policy Lapse and Reinstatement.............................................27
CHARGES AND DEDUCTIONS........................................................28
Deductions From Premium Payments (Percent of Premium Charge)...............28
Charges from Accumulation Value............................................28
Surrender Charge...........................................................29
Daily Charges Against the Separate Account.................................31
Fund Expense Summary.......................................................31
GENERAL PROVISIONS............................................................33
DISTRIBUTION OF THE POLICIES..................................................36
FEDERAL TAX MATTERS...........................................................36
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS..................................39
THIRD PARTY SERVICES..........................................................39
VOTING RIGHTS.................................................................39
STATE REGULATION OF AVLIC.....................................................40
EXECUTIVE OFFICERS AND DIRECTORS OF AVLIC.....................................40
LEGAL MATTERS.................................................................41
LEGAL PROCEEDINGS.............................................................41
EXPERTS.......................................................................41
ADDITIONAL INFORMATION........................................................42
FINANCIAL STATEMENTS..........................................................42
AMERITAS VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT V ...............F-I-1
AMERITAS VARIABLE LIFE INSURANCE COMPANY..................................F-II-1
APPENDICES...................................................................A-1
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.
APPLAUSE! II
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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 Separate
Account V, the Fixed Account, and any Accumulation Value held in the General
Account which secures Outstanding Policy Debt.
ADMINISTRATIVE EXPENSE CHARGE - A charge, which is part of the Monthly
Deduction, to cover the cost of administering the Policy.
ASSET-BASED ADMINISTRATIVE EXPENSE CHARGE - A daily charge that is deducted from
the overall assets of Separate Account V to provide for expenses of ongoing
administrative services to the Policy Owners as a group.
ATTAINED AGE - The Issue Age of the Insured plus the number of complete Policy
Years that the Policy has been in force.
AVLIC ("WE, US, OUR") - Ameritas Variable Life Insurance Company, a Nebraska
stock company. AVLIC's Home Office is located at 5900 "O" Street, P.O. Box
82550, Lincoln, NE 68501.
BENEFICIARY - The person or persons to whom the Death Benefit Proceeds are
payable upon the death of the Insured. (See the sections on Beneficiary and
Change of Beneficiary.)
CONTINGENT DEFERRED ADMINISTRATIVE CHARGE - An administrative charge for the
underwriting, issuance and initial administration of the Policy that is deducted
upon Surrender of the Policy. This charge is part of the Surrender Charge.
CONTINGENT DEFERRED SALES CHARGE - A sales charge, calculated based on a
percentage of premiums received, is deducted upon Surrender of the Policy. This
charge is part of the Surrender Charge.
COST OF INSURANCE - A charge deducted monthly from the Accumulation Value to
provide the life insurance protection . The Cost of Insurance is calculated with
reference to an annual Cost of Insurance Rate. This rate is based on the
Insured's sex, Issue Age, Policy duration, Specified Amount, and risk class. The
Cost of Insurance is part of the Monthly Deduction.
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
AVLIC of Satisfactory Proof of Death of the Insured 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 death.
FIXED ACCOUNT - An account that is a part of AVLIC'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 AVLIC includes all of AVLIC's assets
except those assets segregated into separate accounts, such as Separate Account
V.
GRACE PERIOD - A 61 day period from the date written notice of lapse is mailed
to the Policy Owner's last known address. If the Policy Owner makes a payment
during the Grace Period such that the Net Cash Surrender Value of the Policy is
sufficient to pay the Monthly Deduction, 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 will vary based upon the Insured's Issue Age and rating class.
The period ranges from 3 to 25 years, and may be restricted as a result of state
law. In Massachusetts, state policy restricts the period to no greater than five
years. 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.
INSURED - The person whose life is insured under the Policy.
APPLAUSE! II
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INVESTMENT OPTIONS - Refers to the Subaccounts and/or the Fixed Account offered
under this Policy.
ISSUE AGE - The age of the Insured at the Insured's birthday nearest the Policy
Date.
ISSUE DATE - The date that all financial, contractual and administrative
requirements have been met and processed for the Policy.
MATURITY BENEFITS - The amount payable to the Policy Owner, if the Insured is
living, on the Maturity Date. The Maturity Benefit is the Accumulation Value
less any Outstanding Policy Debt.
MATURITY DATE - The date AVLIC pays any Maturity Benefit to the Policy Owner, if
the Insured is still living.
MONTHLY ACTIVITY DATE - The same date in each succeeding month as the Policy
Date, unless the Monthly Activity Date falls 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 Separate Account V to provide for the risk that mortality and
expense costs may be greater than expected.
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.
OUTSTANDING POLICY DEBT - The sum of all unpaid Policy loans and accrued
interest on Policy loans.
PERCENT OF PREMIUM CHARGE - The amount deducted from each premium received to
cover certain expenses, expressed as a percentage of the premium. This charge
may include a Sales Load Charge and/or a Premium Charge for Taxes. (See the
section on Deductions From Premium Payment.)
PLANNED PERIODIC PREMIUMS - A selected schedule of equal premiums payable at
fixed intervals. The Policy Owner 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 Guaranteed Death Benefit.
POLICY - The flexible premium variable universal life insurance Policy offered
by AVLIC and described in this prospectus.
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) there are additional premiums or
application amendments at time of delivery. (See the section on Issuance of a
Policy.)
POLICY OWNER ("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 Policy Owner. A collateral assignee is not the
Policy Owner.
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.
PREMIUM CHARGE FOR TAXES - This charge, which is part of the Percent of Premium
Charge, represents the amount AVLIC considers necessary to pay all premium taxes
imposed by the states and their subdivisions and to defray the tax cost due to
capitalizing certain Policy acquisition expenses as required under applicable
federal tax laws. AVLIC does not expect to derive a profit from the Premium
Charge for Taxes.
SALES LOAD CHARGE - This charge, which is part of the Percent of Premium Charge,
is designed to compensate AVLIC for expenses associated with distributing the
Policy; no Sales Load Charge is currently in effect.
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SATISFACTORY PROOF OF DEATH - Means all of the following must be submitted:
(1) A certified copy of the death certificate;
(2) A Claimant Statement;
(3) The Policy; and
(4) Any other information that AVLIC may reasonably require to establish the
validity of the claim.
SEPARATE ACCOUNT V - This term refers to Separate Account V, a separate
investment account established by AVLIC to receive and invest the Net Premiums
paid under the Policy and allocated by the Policy Owner to Separate Account V.
Separate Account V is segregated from the General Account and all other assets
of AVLIC.
SPECIFIED AMOUNT - The minimum Death Benefit under the Policy, as selected by
the Policy Owner.
SUBACCOUNT - A subdivision of Separate Account V. Each Subaccount invests
exclusively in the shares of a specified portfolio of the Funds.
SURRENDER - The termination of the Policy before the Maturity Date during the
Insured's life for the Net Cash Surrender Value.
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. The Surrender Charge is comprised of the
Contingent Deferred Administrative Charge and the Contingent Deferred Sales
Charge.
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.
APPLAUSE! II
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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
PREMIUM PAYMENTS
You can vary amount and frequency.
DEDUCTIONS FROM PREMIUMS
Premium Charge for Taxes--currently 3.5% (maximum 5.0%)
NET PREMIUM
The Net Premium may be invested in the Fixed Account or in Separate
Account V which offers 27 different Subaccounts. The Subaccounts invest in the
corresponding portfolios of Calvert Variable Series, Inc. Ameritas Portfolios,
Variable Insurance Products Fund, Variable Insurance Products Fund II, The Alger
American Fund, MFS Variable Insurance Trust, or Morgan Stanley Dean Witter
Universal Funds, Inc. ("Funds").
DEDUCTIONS FROM ASSETS
Monthly charge for Cost of Insurance and cost of any riders.
Monthly charge for administrative expenses currently $5.00 per month (maximum
charge $9.00/mo).
Daily charge from the Subaccounts for mortality and expense risks and
administrative expenses, at an annual rate of 0.70% for Policy Years 1-20, and
0.45% thereafter (the maximum charge for all years is 1.15%). This charge is not
deducted from Fixed Account assets.
Fund expense charges, which ranged from .28% to 1.95% at the most recent fiscal
year end, are also deducted.
The maximum Surrender Charge on a Policy we issue is $48.00 per $1,000.00 of
Specified Amount.
LIVING BENEFITS
You may make partial withdrawals, subject to certain restrictions. The Death
Benefit will be reduced by the amount of the partial withdrawal. Each year you
may make up to 15 free transfers between the Investment Options. If you have
amounts in the Calvert Variable Series, Inc. Ameritas Portfolios ("Ameritas
Portfolios") as a result of the substitution which occurred at the close of
business on October 29, 1999, the following procedure applies until December 1,
1999: you may transfer amounts out of the Ameritas Portfolios to any other
Subaccount available under the Policy without any administrative charge and
without the transfer counting as one of your "free transfers." Accelerated
payment of up to 50% of the lowest scheduled Death Benefit is available under
certain conditions to Insureds suffering from terminal illness. You may
surrender the Policy at any time for its Net Cash Surrender Value. AVLIC incurs
expenses immediately upon the issuance of the Policy that are recovered over a
period of years. Therefore, a Policy Surrender prior to on or before the 14th
anniversary date will be assessed a Surrender Charge consisting of the
Contingent Deferred Sales Charge and the Contingent Deferred Administrative
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 23 and 29).
RETIREMENT INCOME BENEFITS
You may take loans at a net zero interest rate after ten years. Should the
Policy lapse while loans are outstanding, the portion of the loan attributable
to earnings will become taxable distributions. (See page 23).
You may Surrender the Policy or make a partial withdrawal and take values as
payments under one or more of five different payment options.
DEATH BENEFITS
Generally, Death Benefit Income is tax free to the Beneficiary. The Beneficiary
may be paid a lump sum or may select any of the five payment methods available
as retirement benefits.
APPLAUSE! II
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SUMMARY
The following summary is intended to highlight the most important features of an
APPLAUSE! II Policy that you, as a prospective Policy Owner, should consider.
You will find more detailed information in the main portion of the prospectus;
cross-references are provided for your convenience. Capitalized terms are
defined in the Definitions section of this prospectus. This summary and all
other parts of this prospectus are qualified in their entirety by the terms of
the APPLAUSE! II Policy, which is available upon request from AVLIC.
WHO IS THE ISSUER OF AN APPLAUSE! II POLICY?
AVLIC is the issuer of each APPLAUSE! II Policy. AVLIC enjoys a rating of A
(Excellent) for financial strength and operating performance from A.M. Best
Company, a firm that analyzes insurance carriers. This is the third highest of
Best's 15 categories. AVLIC is rated AA (Very Strong) for financial insurance
strength from Standard & Poor's. This is the third highest of Standard & Poor's
21 ratings. A stock life insurance company organized in Nebraska, AVLIC is a
wholly owned subsidiary of AMAL Corporation which is, in turn, owned by Ameritas
Life Insurance Corp. ("Ameritas Life") and AmerUs Life Insurance Company
("AmerUs Life"). Ameritas Life, AmerUs Life and AMAL Corporation guarantee the
obligations of AVLIC, including the obligations of AVLIC under each APPLAUSE! II
Policy; taken together, these companies have aggregate assets of over $14.5
billion as of December 31, 1998. (See the section on Ameritas Variable Life
Insurance Company.)
WHY SHOULD I CONSIDER PURCHASING AN APPLAUSE! II POLICY?
The primary purpose of an APPLAUSE! II Policy is to provide life insurance
protection on the Insured named in the Policy. This means that, so long as the
Policy is in force, it will provide for:
o payment of a Death Benefit, which will never be less than the Specified
Amount the Policy Owner selects. (See the section on Death Benefit
Options.)
o Policy loan, Surrender and withdrawal features. (See the section on Policy
Rights.)
o the payment of Maturity Benefits to the Policy Owner, if living, on the
Maturity Date. (See the section on Benefits at Maturity.)
An APPLAUSE! II 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 an APPLAUSE!
II Policy will reflect your investment choices over the life of the Policy.
HOW DOES THE INVESTMENT COMPONENT OF MY APPLAUSE! II POLICY WORK?
AVLIC has established Separate Account V, which is separate from all other
assets of AVLIC, as a vehicle to receive and invest premiums received from
APPLAUSE! II Policy Owners and owners of certain other variable universal life
products offered by AVLIC. Separate Account V is divided into separate
Subaccounts. Each Subaccount invests exclusively in shares of one of the
investment portfolios available through APPLAUSE! II. Each Policy Owner may
allocate Net Premiums to one or more Subaccounts, or to AVLIC's Fixed Account in
the initial application. These allocations may be changed, without charge, by
notifying AVLIC's Home Office. The aggregate value of your interests in the
Subaccounts and the Fixed Account will represent the Accumulation Value of your
APPLAUSE! II Policy. (See the section on Accumulation Value.)
WHAT INVESTMENT OPTIONS ARE AVAILABLE THROUGH THE APPLAUSE! II POLICY?
The Investment Options available through APPLAUSE! II include 27 investment
portfolios, each of which is a separate series of a mutual fund managed by
Ameritas Investment Corp., Fidelity Management & Research Company, Fred Alger
Management, Inc., Massachusetts Financial Services Company or Morgan Stanley
Dean Witter Investment Management Inc. These portfolios are:
O AMERITAS INVESTMENT CORP.:
Ameritas Money Market
Ameritas Index 500
Ameritas Growth
Ameritas Income & Growth
Ameritas Small Capitalization
Ameritas MidCap Growth
Ameritas Emerging Growth
Ameritas Research
Ameritas Growth With Income
APPLAUSE! II
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O FIDELITY MANAGEMENT & RESEARCH COMPANY:
VIP Equity-Income
VIP Growth
VIP High Income
VIP Overseas
VIP II Asset Manager
VIP II Investment Grade Bond
VIP II Asset Manager: Growth
VIP II Contrafund(R)
O FRED ALGER MANAGEMENT, INC.:
Balanced
Leveraged AllCap
O MASSACHUSETTS FINANCIAL SERVICES COMPANY:
Utilities
Global Governments
New Discovery
O MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.:
Emerging Markets Equity
Global Equity
International Magnum
Asian Equity
U.S. Real Estate
Details about the investment objectives and policies of each of the available
investment portfolios, and management fees and expenses appear in the sections
on Investment Objectives and Policies of the Funds' Portfolios and Fund Expense
Summary. In addition to the listed portfolios, you may also elect to allocate
Net Premiums to AVLIC's Fixed Account. (See the section on Fixed Account).
HOW DOES THE LIFE INSURANCE COMPONENT OF AN APPLAUSE! II POLICY WORK?
An APPLAUSE! II Policy provides for the payment of a minimum Death Benefit upon
the death of the Insured. The amount of the minimum Death Benefit--sometimes
referred to as the Specified Amount of your APPLAUSE! II Policy--is chosen by
you at the time your APPLAUSE! II Policy is established. However, Death Benefit
Proceeds-- the actual amount that will be paid after AVLIC receives Satisfactory
Proof of Death of the Insured--will vary over the life of your APPLAUSE! II
Policy, depending on which of the two available coverage options you select.
If you choose Option A, Death Benefit Proceeds payable under your APPLAUSE! II
Policy will be the Specified Amount of your APPLAUSE! II Policy or the
applicable percentage of its Accumulation Value, whichever is greater. If you
choose Option B, Death Benefit Proceeds payable under your APPLAUSE! II Policy
will be the Specified Amount of your APPLAUSE! II Policy plus the Accumulation
Value of your APPLAUSE! II Policy, or if it is higher, the applicable percentage
of the Accumulation Value on the date of death. In either case, the applicable
percentage is established based on the age of the Insured at the date of death.
(See the section on Death Benefit Options.)
If the Extended Maturity Option is in effect, the Death Benefit will be the
Accumulation Value.
ARE THERE ANY RISKS INVOLVED IN OWNING AN APPLAUSE! II POLICY?
Yes. Over the life of your APPLAUSE! II 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 APPLAUSE! II Policy and may result in loss of
principal. For this reason, the purchase of an APPLAUSE! II Policy may not be
suitable for all individuals. It may not be advantageous to purchase an
APPLAUSE! II 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 an APPLAUSE!
II Policy.
APPLAUSE! II
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WHAT IS THE PREMIUM THAT MUST BE PAID TO KEEP AN APPLAUSE! II POLICY IN FORCE?
Like traditional life insurance policies, an APPLAUSE! II 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 APPLAUSE! II Policy becomes
effective.
The distinction between traditional life policies and an APPLAUSE! II Policy is
that an APPLAUSE! II Policy will not lapse simply because premium payments are
not made according to that payment schedule. However, an APPLAUSE! II Policy
will lapse, even if scheduled premium payments are made, if the Net Cash
Surrender Value of your APPLAUSE! II Policy falls below zero or premiums paid do
not, in the aggregate, equal the premium necessary to satisfy the Guaranteed
Death Benefit. (See the section on Premiums.)
HOW ARE PREMIUMS PAID, PROCESSED AND CREDITED TO ME?
Your APPLAUSE! II Policy will be issued after a completed application is
accepted, and the initial premium payment is received, by AVLIC at its Home
Office. AVLIC's Home Office is located at 5900 "O" Street, P.O. Box 82550,
Lincoln, NE 68501. Your initial premium will be allocated to the Money Market
Subaccount for 13 days following the Issue Date, and then will be allocated to
the Subaccounts and/or the Fixed Account, according to selections you made in
your application. You have the right to examine your APPLAUSE! II Policy and
return it for a refund for a limited time, even after the Issue Date. (See the
section on Issuance of a Policy.)
You may make subsequent premium payments according to your Planned Periodic
Premium schedule; although you are not required to do so. AVLIC will send
premium payment notices to you, according to any schedule you select. When AVLIC
receives your premium payment at its Home Office, we will deduct any applicable
Percent of Premium Charge and allocate the Net Premium to the Subaccounts and/or
the Fixed Account according to your selections. (See the sections on Premiums
and Allocations of Premiums and Accumulation Value.)
As already noted, APPLAUSE! II 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 Guaranteed Death Benefit Premium and/or Net Policy Funding requirement
needed to keep your APPLAUSE! II Policy in force; maximum premium limitations
established under the federal tax laws; and the impact that reduced premium
payments may have on the Net Cash Surrender Value of your APPLAUSE! II Policy.
(See the section on Premiums.)
IS THE ACCUMULATION VALUE OF MY APPLAUSE! II POLICY AVAILABLE BEFORE THE
MATURITY DATE WITHOUT SURRENDER?
Yes. You may access the value of your APPLAUSE! II Policy in one of two ways.
First, you may obtain a loan, secured by the Accumulation Value of your
APPLAUSE! II Policy following its first Policy Anniversary. 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 APPLAUSE! II Policy at a maximum annual interest
rate of 4%; the current rate for such loans is 3.5% annually. (See the section
on Loan Benefits.)
You may also access the value of your APPLAUSE! II 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%).
(See the section on Partial Withdrawals.)
ARE THERE ANY OTHER CHARGES ASSOCIATED WITH OWNERSHIP OF AN APPLAUSE! II POLICY?
AVLIC is authorized to deduct a Percent of Premium Charge, which includes both a
Sales Load Charge and a Premium Charge for Taxes. The Sales Load Charge, of up
to 2.5%, may be deducted from each premium payment made on an APPLAUSE! II
Policy. As of the date of this prospectus, however, this Sales Load Charge is
not being applied. Certain states impose premium and other taxes in connection
with insurance policies such as APPLAUSE! II. AVLIC may deduct up to 5% of each
premium paid as a Premium Charge for Taxes. Currently, 3.5% is deducted for this
purpose.
Charges are also deducted against the Accumulation Value to cover the Cost of
Insurance under the Policy and to compensate AVLIC for administering each
individual APPLAUSE! II 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
APPLAUSE! II
9
<PAGE>
based on risk factors relating to the Insured as reflected in relevant actuarial
tables. The Monthly Deduction also includes a flat Administrative Expense
Charge. This charge, currently fixed at $9 per policy per month for the first
Policy Year and $4.50 for later Policy Years, may be increased during the life
of your APPLAUSE! II Policy, up to a guaranteed $9 maximum. (See the section on
Charges from Accumulation Value.)
For its services in administering Separate Account V and Subaccounts and as
compensation for bearing certain mortality and expense risks, AVLIC is also
entitled to receive fees. These fees are calculated daily during the first 20
years of each APPLAUSE! II Policy, at a combined current annual rate of 0.80% of
the value of the net assets of Separate Account V. After the 20th Policy
Anniversary Date, the combined current annual rate is expected to decrease to
0.45% of the daily net assets of Separate Account V. No Mortality and Expense
Risk Charges will be deducted from the amount in the Fixed Account. (See the
section on Daily Charges Against the Separate Account.)
Finally, because AVLIC incurs expenses immediately upon the issuance of an
APPLAUSE! II Policy that are recovered over a period of years, an APPLAUSE! II
Policy that is Surrendered on or before its 14th Policy Anniversary Date is
subject to a Surrender Charge. The maximum Surrender Charge is $48 per $1000 of
Specified Amount; additional Surrender Charges may apply if you increase the
Specified Amount of your APPLAUSE! II Policy. Because the Surrender Charge may
be significant upon early Surrender, you should purchase an APPLAUSE! II Policy
only if you intend to maintain your APPLAUSE! II Policy for a substantial
period. (See the section on Surrender Charge.)
Policy Owners 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. (See the section on Fund Expense Summary.)
WHEN DOES MY APPLAUSE! II POLICY TERMINATE?
You may terminate your APPLAUSE! II Policy by Surrendering the Policy during the
lifetime of the Insured for its Net Cash Surrender Value. As noted above, your
APPLAUSE! II Policy will terminate if you fail to pay required premiums or
maintain sufficient Net Cash Surrender Value to cover Policy charges. (See the
sections on Surrenders and Premiums.)
Finally, your APPLAUSE! II Policy will terminate on its Maturity Date if the
named Insured is living on that date unless you have elected the Extended
Maturity Option. The Maturity Date is the Policy Anniversary nearest to the
Insured's 100th birthday. On the Maturity Date, AVLIC will pay to you, the
Policy Owner, an amount--referred to as the Maturity Benefit--equal to the
Accumulation Value of your APPLAUSE! II Policy, less any Outstanding Policy
Debt. (See the section on Benefits at Maturity.)
YEAR 2000
Like other insurance companies and their separate accounts, AVLIC and Separate
Account V 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, AVLIC makes extensive use of dates and date
calculations. We began a corporate-wide Year 2000 (Y2K) project in mid-1996. Our
goal is to ensure that our computer systems continue to operate smoothly with no
service disruptions before, during or after the year 2000.
As of December 31, 1998, all of our computer application and operating systems
had been updated for the year 2000. Continuous testing and monitoring throughout
1999 will help AVLIC continue to meet our contractual and service obligations to
our customers. In addition to our internal efforts, AVLIC 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. Certain vendors and/or business partners, due
to their exposure to foreign markets, may face additional Y2K issues. Please see
the Funds' prospectuses for information on the Funds' preparedness for Y2K.
APPLAUSE! II
10
<PAGE>
AVLIC, THE SEPARATE ACCOUNT AND THE FUNDS
AMERITAS VARIABLE LIFE INSURANCE COMPANY
Ameritas Variable Life Insurance Company ("AVLIC") is a stock life insurance
company organized in the State of Nebraska. AVLIC was incorporated on June 22,
1983 and commenced business December 29, 1983. AVLIC is currently licensed to,
sell life insurance in 46 states, and the District of Columbia. AVLIC's
financial statements may be found at page F-II-1.
AVLIC is a wholly owned subsidiary of AMAL Corporation, a Nebraska stock
company. AMAL Corporation is a joint venture of Ameritas Life Insurance Corp.
("Ameritas Life"), a Nebraska stock life insurance company, which owns a
majority interest in AMAL Corporation; and AmerUs Life Insurance Company
("AmerUs Life"), an Iowa stock life insurance company, which owns a minority
interest in AMAL Corporation. The Home Offices of both AVLIC and Ameritas Life
are at 5900 "O" Street, P.O. Box 82550, Lincoln, Nebraska 68501 ("Home Office").
On April 1, 1996 Ameritas Life consummated an agreement with AmerUs Life whereby
AVLIC became a wholly owned subsidiary of a newly formed holding company, AMAL
Corporation. Under terms of the agreement AMAL Corporation is 66% owned by
Ameritas Life and 34% owned by AmerUs Life. AmerUs Life has options to purchase
an additional interest in AMAL Corporation if certain conditions are met. There
are no other owners of 5% or more of the outstanding voting securities of AVLIC.
Ameritas Life and its subsidiaries had total assets at December 31, 1998 of over
$4.1 billion. AmerUs Life had total assets as of December 31, 1998 of over $10.4
billion.
AVLIC has a rating of A (Excellent) for financial strength and operating
performance from A.M. Best Company, a firm that analyzes insurance carriers.
This is the third highest of Best's 15 categories. AVLIC is rated AA (Very
Strong) for financial insurance strength from Standard & Poor's. This is the
third highest of Standard & Poor's 21 ratings. Ameritas Life enjoys a long
standing A+ (Superior) rating from A.M. Best, the second highest of Best's
ratings.
Ameritas Life, AmerUs Life and AMAL Corporation guarantee the obligations of
AVLIC. This guarantee will continue until AVLIC is recognized by a national
rating agency as having a financial rating equal to or greater than Ameritas
Life, or until AVLIC is acquired by another insurance company which has a
financial rating by a national rating agency equal to or greater than Ameritas
Life and which agrees to assume the guarantee. AmerUs Life will be relieved of
its obligations under the guarantee if it sells its interest in AMAL Corporation
to another insurance company which has a financial rating by a national rating
agency equal to or greater than that of AmerUs Life, and the purchaser assumes
the guarantee.
Ameritas Investment Corp. ("AIC"), the principal underwriter of the Policies,
may publish in advertisements and reports to Policy Owners, the ratings and
other information assigned to Ameritas Life and AVLIC by one or more independent
rating services. Published material may also include charts and other
information concerning dollar cost averaging, portfolio rebalancing, earnings
sweep, tax-deference, asset allocation, diversification, long term market
trends, index performance, and other investment methods and programs. The
purpose of the ratings is to reflect the financial strength of AVLIC. The
ratings do not relate to the performance of Separate Account V.
THE SEPARATE ACCOUNT
Ameritas Variable Life Insurance Company Separate Account V ("Separate Account
V") was established under Nebraska law on August 28, 1985. The assets of
Separate Account V are held by AVLIC segregated from all of AVLIC's other
assets, are not chargeable with liabilities arising out of any other business
which AVLIC may conduct, and are not affected by income, gains, or losses of
AVLIC. Although the assets maintained in Separate Account V will not be charged
with any liabilities arising out of AVLIC's other business, all obligations
arising under the Policies are liabilities of AVLIC who will maintain assets in
Separate Account V of a total market value at least equal to the reserve and
other contract liabilities of Separate Account V. Separate Account V will at all
times contain assets equal to or greater than Accumulation Values invested in
Separate Account V. Nevertheless, to the extent assets in the Separate Account V
exceed AVLIC's liabilities in Separate Account V, the assets are available to
cover the liabilities of AVLIC's General Account. AVLIC may, from time to time,
withdraw assets available to cover the General Account obligations.
APPLAUSE! II
11
<PAGE>
Separate Account V 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
Separate Account V. For state law purposes, Separate Account V is treated as a
Division of AVLIC.
PERFORMANCE INFORMATION
Performance information for the Subaccounts of Separate Account V and the Funds
available for investment by Separate Account V may appear in advertisements,
sales literature, or reports to Policy Owners or prospective purchasers. AVLIC
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 Insured based on assumptions as to age, sex, and other Policy
specific assumptions.
AVLIC 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 V charges, including the Monthly
Deduction, Percent of Premium Charge, 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 27 Subaccounts within Separate Account V available to Policy
Owners 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"): Calvert Variable Series, Inc. Ameritas Portfolios ("Ameritas
Portfolios"); Variable Insurance Products Fund and Variable Insurance Products
Fund II, (respectively, "VIP" and "VIP II"; collectively "Fidelity Funds"); The
Alger American Fund ("Alger American Funds"); MFS Variable Insurance Trust ("MFS
Trust"); and Morgan Stanley Dean Witter Universal Funds, Inc. ("MSDW Universal
Funds"). The Ameritas Portfolios receive investment advisory services from
Ameritas Investment Corp. ("AIC"). AIC is a registered investment adviser under
the Investment Advisers Act of 1940 and is an affiliate of AVLIC. AIC also
contracts with subadvisers. The following subadvisers provide investment
subadvisory services to the indicated portfolios:
Portfolio Subadviser
- --------- -----------
Ameritas Money Market Calvert Asset Management Company, Inc.
Ameritas Index 500 State Street Global Advisors
Ameritas Growth Fred Alger Management, Inc. ("Alger Management")
Ameritas Income & Growth Alger Management
Ameritas Small Capitalization Alger Management
Ameritas MidCap Growth Alger Management
Ameritas Emerging Growth Massachusetts Financial Services Company
("MFS Co.")
Ameritas Research MFS Co.
Ameritas Growth With Income MFS Co.
VIP, which is managed by Fidelity Management & Research Company ("Fidelity"),
offers the following portfolios: VIP Equity-Income, VIP Growth, VIP High Income
and VIP Overseas. VIP II, also managed by Fidelity, offers the following
portfolios: VIP II Asset Manager, VIP II Investment Grade Bond, VIP II Asset
Manager: Growth, and VIP II Contrafund. The Alger American Fund, which is
managed by Fred Alger Management, Inc. ("Alger Management"), offers the
following portfolios: Alger American Balanced ("Balanced") and Alger American
Leveraged AllCap ("Leveraged AllCap"). The MFS Trust, managed by Massachusetts
Financial Services Company ("MFS Co."), offers the following portfolios or
series in connection with this Policy: MFS Utilities, MFS Global Governments,
and MFS New Discovery. The MSDW Universal Funds offer the following portfolios
in connection with the Policy, all of which are managed by Morgan Stanley Dean
Witter Investment Management Inc. ("MSDW Investment Management"): Emerging
Markets Equity, Global Equity, International Magnum, Asian Equity and U.S. Real
Estate. 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.
APPLAUSE! II
12
<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
AVLIC by the underlying Funds. AVLIC 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, 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. In
addition, certain of the portfolios may invest in securities of foreign issuers.
The Leveraged AllCap portfolio may borrow money to increase its portfolio of
securities, and may purchase or sell options and enter into futures contracts on
securities indexes to increase gain or to hedge the value of the portfolio.
Certain of the portfolios are permitted to invest a portion of their assets in
non-investment grade, high risk debt securities; these portfolios include the
VIP High Income, VIP Equity-Income, VIP II Asset Manager: Growth, VIP II Asset
Manager portfolios of the Fidelity Funds, and the Research portfolio of the
Ameritas Portfolios. Certain portfolios are designed to invest a substantial
portion of their assets overseas, such as the VIP Overseas portfolio and the
International Magnum portfolio of the MSDW Universal Funds. Other portfolios
invest primarily in the securities markets of emerging 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 Emerging
Markets Equity and Asian Equity portfolios of the MSDW Universal Funds. The
Emerging Markets Equity portfolio may also invest in non-investment grade, high
risk debt securities (also known as "junk bonds") and securities of Russian
companies. Investment in Russian companies may involve risks associated with
that nation's system of share registration and custody. Securities of non-U.S.
issuers (including issuers in emerging nations) may also be purchased by each of
the portfolios of the MFS Trust, by the Emerging Growth, Research, and Growth
With Income portfolios of the Ameritas Portfolios, and by the Global Equity
portfolio of the MSDW Universal Funds. Investments acquired by the U.S. Real
Estate portfolio of the MSDW Universal Funds may be subject to the risks
associated with the direct ownership of real estate and direct investments in
real estate investment trusts. 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.
The investments in the Funds may be managed by Fund managers which manage one or
more other mutual funds that have similar names, investment objectives, and
investment styles as the Funds. You should be aware that the Funds are likely to
differ from the other mutual funds in size, cash flow pattern, and tax matters.
Thus, the holdings and performance of the Funds can be expected to vary from
those of the other mutual funds.
You 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.
Separate Account V will purchase and redeem shares from the portfolios at the
net asset value. Shares will be redeemed to the extent necessary for AVLIC to
collect charges, pay the Surrender Values, partial withdrawals, and make Policy
loans or to transfer assets among Investment Options as you requested. 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 Separate Account V 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 their 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.
APPLAUSE! II
13
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS' PORTFOLIOS
PORTFOLIO INVESTMENT POLICIES OBJECTIVE
<S> <C> <C>
AMERITAS PORTFOLIOS
Ameritas Money Market Invests in U.S. dollar-denominated money Seeks as high a level of current
market securities of domestic and foreign income as is consistent with
issuers, including U.S. Government securities preservation of capital and
and repurchase agreements. Invests more than liquidity.
25% of total assets in the financial services
industry.
Ameritas Index 500 Under normal circumstances, seeks to track Seeks investment results that
the Standard & Poor's 500. correspond to the total return of
common stocks publicly traded in the
United States, as represented by
the Standard & Poor's 500.
Ameritas Growth Focuses on companies that generally have broad Seeks long-term capital appreciation.
product lines, markets, financial resources and
depth of management. Under normal
circumstances, the portfolio invests primarily in
equity securities, such as common or preferred
stocks, of large companies listed on U.S. exchanges
or in the U.S. over-the-counter market. The portfolio
considers a large company to have a market
capitalization of $1 billion or greater.
Ameritas Income & Under normal circumstances, invests in dividend Primarily seeks to provide a high
Growth paying equity securities, such as common or level of dividend income. Its
preferred stocks, preferably those which the secondary goal is to provide capital
subadvisor believes also offer opportunities appreciation.
for capital appreciation.
Ameritas Small
Capitalization It focuses on small, fast-growing companies that Seeks long-term capital appreciation.
offer innovative products, services or technologies
to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in
the equity securities, such as common or preferred
stocks, of small capitalization companies
U.S. exchanges or in the U.S. over-the-counter
market. A small capitalization company is one that
has a market capitalization within the range of
companies in the Russell 2000 Growth Index or the
S&P SmallCap 600 Index.
Ameritas MidCap Growth Invests in midsize companies with promising Seeks long-term capital appreciation.
growth potential. Under normal circumstances,
the portfolio invests primarily in the equity securities,
such as common or preferred stocks, of companies
listed on U.S. exchanges or in the U.S. over-the-
counter market and having a market capitalization
within the range of companies in the S&P
MidCap 400 Index.
Ameritas Emerging Growth Invests, under normal market conditions, at least Seeks long-term growth of capital.
65% of its total assets in common stocks and related
securities, such as preferred stocks, convertible
securities and depositary receipts for those securities,
of emerging growth companies.
Ameritas Research Invests, under normal market conditions, at least Seeks long-term growth of capital and
80% of its total assets in common stocks and future income.
related securities, such as preferred stocks,
convertible securities and depositary receipts. The
portfolio focuses on companies that the subadvisor
believes have favorable prospects for long-term
growth, attractive valuations based on current and
expected earnings or cash flow, dominant or
growing market share and superior management.
The fund may invest in companies of any size. The
APPLAUSE! II
14
<PAGE>
portfolio's investments may include securities
traded on securities exchanges or in the over-the-
counter markets.
Ameritas Growth
With Income Invests, under normal market conditions, at least Seeks to provide reasonable current
65% of its total assets in common stocks and income and long-term growth of
related securities, such as preferred stocks capital and income.
convertible securities and depositary receipts for
those securities. These securities may be listed
on a securities exchange or traded in the over-the-
counter markets. While the portfolio may invest
in companies of any size, it may generally focus
on companies with larger market capitalizations
that the subadvisor believes have sustainable
growth prospects and attractive valuations based on
current and expected earnings or cash flow.
FIDELITY FUNDS
VIP Equity-Income Investing at least 65% in income-producing Seeks reasonable income. Will also
equity securities, which tends to lead to consider the potential for capital
investments in large cap "value" stocks. appreciation. Seeks a yield which
exceeds the composite yield on the
securities comprising the Standard
& Poor's 500.
VIP Growth Investing primarily in common stocks. Investing Seeks capital appreciation.
in companies that it believes have above-average
growth potential (stocks of these companies are
often called "growth" stocks). Investing in domestic
and foreign issuers.
VIP High Income Investing at least 65% of total assets in income- Seeks a high level of current income while also
producing debt securities, preferred stocks and considering growth of capital.
convertible securities, with an emphasis on
lower-quality debt securities.
VIP Overseas Investing at least 65% of total assetsin foreign Seeks long-term growth of capital.
securities. Investing primarily in common stocks.
VIP II Asset Manager Allocating the Fund's assets among stocks, Seeks high total return with reduced risk over
bonds, and short-term and money market the long term by allocating its assets among
instruments. Maintaining a neutral mix over time stocks, bonds, and short-term instruments.
of 50% of assets in stocks, 40% of assets in bonds,
and 10% of assets in short-term and money market
instruments.
VIP II Investment
Grade Bond Investing in U.S. dollar-denominated investment- Seeks as high a level of current income as is
grade bonds. consistent with the preservation of capital.
VIP II Asset Manager:
Growth Allocating the Fund's assets among stocks Seeks to maximize total return by allocating its
bonds, and short-term and money market assets among stocks, bonds, short-term
instruments. Maintaining a neutral mix over time instruments and other investments.
of 70% of assets in stocks, 25% of assets in bonds,
and 5% of assets in short-term and money market
instruments.
VIP II Contrafund Investing primarily in common stocks. Investing Seeks long-term capital appreciation.
in securities of companies whose value it believes
is not fully recognized by the public.
ALGER AMERICAN FUND
Balanced The Portfolio focuses on stocks of companies Seeks current income and long-term capital
with growth potential and fixed income appreciation by investment in common stocks
securities, with emphasis on income-producing and fixed income and convertible securities,
securities which appear to have some potential with emphasis on income producing securities
for capital appreciation. Under normal which appear to have potential for capital
circumstances, it invests in common stocks and appreciation.
fixed income securities, which include
commercial paper and bonds rated within the 4
highest rating categories by an established rating
APPLAUSE! II
15
<PAGE>
agency or if not rated, which are determined by
the Manager to be of comparable quality.
Ordinarily, at least 25% of the Portfolio's net
assets are invested in fixed-income securities.
Leveraged AllCap Under normal circumstances, the portfolio Seeks long-term capital appreciation.
invests in the equity securities of companies of
any size which demonstrate promising growth
potential. The portfolio can leverage, that is,
borrow money, up to one-third of its total assets
to buy additional securities. By borrowing money,
the portfolio has the potential to increase its
returns if the increase in the value of the
securities purchased exceeds the cost of borrowing,
including interest paid on the money borrowed.
MFS FUNDS
Utilities Series Invests, under normal market Will seek capital growth
conditions, at least 65% of its and current income
total assets in equity and debt (income above that
securities of both domestic and available from a
foreign companies in the portfolio invested
utilities industry. entirely in equity securities).
Global Governments
Series Invests, under normal market conditions, at least Will seek to provide income and capital
65% of its total assets in debt obligations that are appreciation.
issued or guaranteed as to principal and interest
by either (1) the U.S. Government, its agencies,
authorities or instrumentalities or (2) the
governments of foreign countries (including
emerging markets). May also invest in corporate
bonds (including lower rated bonds commonly
known as junk bonds) and mortgage-backed and
assets-backed securities.
New Discovery Invests, under normal market conditions, at least Will seek capital appreciation.
65% of its total assets in common stocks and related
securities, such as preferred stocks, convertible
securities and depositary receipts for those
securities, of emerging growth companies.
MSDW UNIVERSAL FUNDS
Emerging Markets
Equity Invests primarily in equity securities of emerging Long-term capital appreciation.
market country issuers with a focus on those
issuers with attractive growth characteristics,
reasonable valuations, and management teams
that focus on shareholder value.
Global Equity Invests primarily in equity securities of issuers Long-term capital appreciation.
throughout the world,including U.S. issuers and
emerging market countries, using an approach
that is oriented to the selection of individual
stocks that the portfolio's adviser believes are
undervalued.
International Magnum Invests primarily in equity securities of non- Long-term capital appreciation.
U.S. issuers, generally in accordance with
weightings determined by the portfolio's adviser,
in countries comprising the Morgan Stanley Capital
International Europe, Australasia, Far East Index
commonly known as the "EAFE Index."
Asian Equity Invests primarily in equity securities of Asian Long-term capital appreciation.
issuers, excluding Japan, using a disciplined,
value-oriented approach to security selection.
U.S. Real Estate Invests primarily in equity securities of Above-average current income and long-term
companies primarily engaged in the U.S. real capital appreciation.
estate industry, including real estate investment
trusts.
</TABLE>
APPLAUSE! II
16
<PAGE>
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
AVLIC reserves the right, subject to applicable law, to add, delete, combine, or
substitute investments in Separate Account V if, in our judgment, marketing
needs, tax considerations, or investment conditions warrant. This may happen due
to a change in law or a change in a Fund's objectives or restrictions, or for
some other reason. AVLIC may operate Separate Account V 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 AVLIC separate accounts. AVLIC
may also transfer the assets of Separate Account V to another separate account.
If necessary, we will notify the SEC and/or state insurance authorities and will
obtain any required approvals before making these changes.
If any changes are made, AVLIC may, by appropriate endorsement, change the
Policy to reflect the changes. In addition, AVLIC may, when permitted by law,
restrict or eliminate any voting rights of Policy Owners or other persons who
have voting rights as to Separate Account V. AVLIC will determine the basis for
making any new Subaccounts available to existing Policy Owners.
You will be notified of any material change in the investment policy of any Fund
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 Separate Account V and
the Fixed Account. (See the section on Transfers.)
Payments allocated to the Fixed Account and transferred from Separate Account V
to the Fixed Account are placed in AVLIC's General Account. The General Account
includes all of AVLIC's assets, except those assets segregated in AVLIC's
separate accounts. AVLIC has the sole discretion to invest the assets of the
General Account, subject to applicable law. AVLIC bears an investment risk for
all amounts allocated or transferred to the Fixed Account, plus interest
credited, less any deduction for charges and expenses. The Policy Owner 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.
AVLIC guarantees that it will credit interest at a declared rate of at least
3.5%. AVLIC may, at its discretion, set a higher declared rate(s). Each month
AVLIC will establish the declared rate for the Policies with a Policy Date or
Policy Anniversary Date 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 Policy Owner 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%. AVLIC 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 AVLIC.
PURPOSES OF THE POLICY
The Policy is designed to provide the Policy Owner with both lifetime insurance
protection to the Policy Anniversary nearest the Insured's 100th birthday and
flexibility in the amount and frequency of premium payments and with the level
of life insurance proceeds payable under the Policy.
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
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decreasing the Specified Amount. An increase in the Specified Amount will
increase the Guaranteed Death Benefit Premium required. If the Specified Amount
is decreased, however, the 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 Separate Account V. Thus the Policy
Owner 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 Separate Account V. If the Guaranteed Death Benefit
Premiums are satisfied by Net Policy Funding, AVLIC will keep the Policy in
force during the Guaranteed Death Benefit 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, AVLIC 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 Insured's death. The amount of the
Death Benefits payable will be determined at the end of the valuation period
during which the Insured's death occurred. 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 subsequently changed. If you
do not choose a Beneficiary, the proceeds will be paid to you, as the Policy
Owner, or to your estate.
DEATH BENEFIT OPTIONS
The Policy provides two Death Benefit options, unless the Extended Maturity
Option is in effect. If the Extended Maturity Option is in effect, the Death
Benefit will be the same as the Accumulation Value. Extension of the Maturity
Date may result in adverse tax consequences. (See the section on Benefits at
Maturity.) The Policy Owner 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
generally $100,000. The net amount at risk for Option A will generally be less
than the net amount at risk for Option B. If you choose Option A, your Cost of
Insurance deduction will generally be lower than if you choose Option B. (See
the section on Charges and Deductions.) The following graphs illustrate the
differences in the two Death Benefit options.
OPTION A.
OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION A, SPECIFICALLY BY
SHOWING THE RELATIONSHIPS OVER TIME, BETWEEN THE SPECIFIED AMOUNT AND THE
ACCUMULATION VALUE.
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 date of
death. The applicable percentage is 250% for Insureds with an Attained Age 40 or
younger on the Policy Anniversary Date prior to the date of death. For Insureds
with an
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Attained Age 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 100%. 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.
Policy Owners who prefer to have favorable investment performance, if any,
reflected in higher Accumulation Value, rather than increased insurance
coverage, generally should select Option A.
OPTION B.
OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION B, SPECIFICALLY BY
SHOWING THE RELATIONSHIPS OVER TIME, BETWEEN THE SPECIFIED AMOUNT AND THE
ACCUMULATION VALUE.
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 isgreater.
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 on the date of death. The applicable percentage is the
same as under Option A: 250% for Insureds with an Attained Age 40 or younger on
the Policy Anniversary Date prior to the date of death. For Insureds with an
Attained Age 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). Policy Owners 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 AVLIC 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 AVLIC. 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 (i.e. the amount by which the Death Benefit as calculated on a
Monthly Activity Date exceeds the Accumulation Value on that date). 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 Insured's age,
even though the net amount at risk will generally remain level. If, however, the
change was from Option B to Option A, the Cost of Insurance Rate may be
different for the increased Death Benefit. On a change from Option A to Option
B, the Specified Amount will decrease so that the Cost of Insurance Rate may be
different. (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 Policy Owner may increase or decrease the Specified Amount of a
Policy. A change in Specified Amount may affect the Cost of Insurance Rate and
the net amount at risk, both of which may affect a Policy Owner's Cost of
Insurance and have federal tax consequences. (See the sections on Charges and
Deductions and Federal Tax Matters.)
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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
AVLIC. The Specified Amount of a Policy may be changed only once per year and
AVLIC may limit the size of a change in a Policy Year. The Specified Amount
remaining in force after any requested decrease, for other than preferred
Insureds, may not be less than $50,000 in the first three Policy Years and
$35,000 in later Policy Years. For preferred Insureds, the Specified Amount
after 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 limit
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.)
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. AVLIC 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 $25,000, and an
increase cannot be made if the Insured's Attained Age is over 80. An increase in
the Specified Amount will also increase Surrender Charges. An increase in the
Specified Amount during the time 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 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 Policy
Owner, 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. You 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.) After that, 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 you have 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; plus
(5) Any amounts credited as Net Cash Surrender Value bonus; less
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(6) Any partial withdrawal, and its charge, made on that Valuation Date; less
(7) Any Monthly Deduction to be made on that Valuation Date; less
(8) 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
(2) A charge not exceeding an annual rate of .90% for mortality and expense
risk; minus
(3) A charge not exceeding an annual rate of .35% for administrative service
expenses; 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.
NET CASH SURRENDER VALUE BONUS
Beginning with the 21st Policy Anniversary, a bonus equal to .25% of the Net
Cash Surrender Value will be credited to the Fixed Account and/or the
Subaccounts on each Policy anniversary, provided that the Net Cash Surrender
Value of the Policy on the Policy Anniversary is at least $500,000. This bonus
is not guaranteed. The bonus will be credited to the Fixed Account and/or the
Subaccounts based on the premium allocation percentages in effect at that time.
BENEFITS AT MATURITY
If the Insured is living on the Maturity Date, AVLIC will pay the Policy Owner
the Accumulation Value of the Policy, less Outstanding Policy Debt ("Maturity
Benefits"). The Policy will mature on the Policy Anniversary Date nearest the
Insured's 100th birthday, unless the maturity has been extended by election of
the Extended Maturity Option. The Extended Maturity Option, if elected, has the
effect of continuing the Policy in force for purposes of providing a benefit at
the time of the Insured's death. The Death Benefit will be the Accumulation
Value. The Extended Maturity Option does not, however, extend the Maturity Date
for purposes of determining benefits under any other option or rider. Once the
Extended Maturity Option becomes effective, no further premium payments will be
accepted and no deduction will be made for Cost of Insurance or riders. As long
as the Policy continues in force, all other Policy provisions will remain in
effect. Interest on Policy loans will continue to accrue and become part of the
Outstanding Policy Debt. The Policy may be subject to certain adverse tax
consequences when continued beyond the original scheduled Maturity Date. (See
the discussion below.)
There is no extra premium for the Extended Maturity Option, but it must be
elected by submitting a written request to AVLIC during the 90 days prior to the
Maturity Date. The Extended Maturity Option is not available in all states.
Further, the Internal Revenue Service has not issued a ruling regarding its tax
consequences.
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The Policy may be subject to certain adverse tax consequences when continued
beyond the Maturity Date. Due to the lack of specific guidance by the Internal
Revenue Service on this issue, the result is not certain. If the Policy is not
treated as a life insurance contract for federal income tax purposes after the
original scheduled Maturity Date, among other things, the Death Benefit may be
taxable to the recipient. The Policy Owner should consult a qualified tax
advisor regarding the possible adverse tax consequences resulting from extension
of the original scheduled Maturity Date.
PAYMENT OF POLICY BENEFITS
Death Benefit Proceeds under the Policy will usually be paid within seven days
after AVLIC receives Satisfactory Proof of Death. Maturity Benefits will
ordinarily be paid within seven days of receipt of a written request. Payments
may be postponed in certain circumstances. (See the section on Postponement of
Payments.) The Policy Owner may decide the form in which Death Benefit Proceeds
or Maturity Benefits will be paid. During the Insured's lifetime, the Policy
Owner 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,
AVLIC will pay Death Benefit Proceeds or Accumulation Value Benefit 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 death of the Insured, 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 OR MATURITY BENEFITS ("POLICY
PROCEEDS"). The minimum amount of each payment is $100. If a payment would be
less than $100, AVLIC 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,
Policy Proceeds will be transferred to AVLIC's General Account. AVLIC 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. AVLIC 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 AVLIC.
OPTION AII-FIXED AMOUNT PAYABLE OPTION. Each payment will be for an
agreed fixed amount. Payments continue until the amount AVLIC 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 or
Maturity Benefits may be paid in any other manner approved by AVLIC. Further,
one of AVLIC'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
Policy Owner using the rules set out above.
POLICY RIGHTS
LOAN BENEFITS
LOAN PRIVILEGES. After the first Policy Anniversary Date, the Policy Owner 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 the Insured is living, prior
to the Maturity Date. Policy Owners in certain states may borrow 100% of the Net
Cash Surrender Value after deducting Monthly Deductions and any interest on
Policy loans
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that will be due for the remainder of the Policy Year. Loans may have a tax
consequence. (See the section on Federal Tax Matters.)
INTEREST. AVLIC charges interest to Policy Owners 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 Policy Owner 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 10% of the Net Cash Surrender Value as of the most recent Policy Anniversary
Date, plus any loan previously made at a reduced loan rate. If unpaid when due,
interest will be added to the amount of the loan and bear interest at the same
rate. The Policy Owner earns 3.5% interest on the Accumulation Values 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 AVLIC 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 Guaranteed Death Benefit provision is 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 Policy Owner must pay the excess. AVLIC will send a notice
of the amount which must be paid. If you do not make the required payment within
the 61 days after AVLIC 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 loan only if the Policy Owner 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 during the lifetime of the Insured and prior to the Maturity Date,
the Policy Owner may partially withdraw a portion of the Accumulation Value or
Surrender the Policy by sending a written request to AVLIC. 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 AVLIC'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.) Surrenders may be subject to Surrender Charges.
(See the section on Surrender Charge.)
If the Policy is being Surrendered in its entirety, the Policy itself must be
returned to AVLIC along with the request. AVLIC will pay the Net Cash Surrender
Value. Coverage under the Policy will terminate as of the date of a total
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Surrender. A Policy Owner 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 charge 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.
The Specified Amount remaining in force after a partial withdrawal may not be
less than $50,000 in the first three Policy Years, and $35,000 after that. The
Specified Amount remaining in force after a partial withdrawal for preferred
Insureds may not be less than $100,000. Any request for a partial withdrawal
that would reduce the Specified Amount below this amount will not be
implemented. 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 Guaranteed Death Benefit provision is met.
TRANSFERS
Accumulation Value may be transferred among the Subaccounts of Separate Account
V and to the Fixed Account as often as desired. However, transfers out of the
Fixed Account may only be made during the 30 day period following the Policy
Anniversary Date, as noted below. 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. This amount will be deducted pro rata from each Subaccount (and if
applicable, the Fixed Account) in which the Policy Owner is invested. If you
have amounts in the Ameritas Portfolios as a result of the substitution which
occurred at the close of business on October 29, 1999 ("Substitution Date"), the
following procedure applies until December 1, 1999: you may transfer amounts out
of the Ameritas Portfolios to any other Subaccount available under the Policy
without any administrative charge and without the transfer counting as one of
your "free 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. AVLIC 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 15 free transfers per Policy
Year. AVLIC may at any time revoke or modify the transfer privilege, including
the minimum amount transferable.
Transfers out of the Fixed Account, unless part of the dollar cost averaging
systematic program described below, may be made only during the 30 day period
following the Policy Anniversary Date in any Policy Year. 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 Policy Owner
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.
The privilege to initiate transactions by telephone will be made available to
Policy Owners automatically. The registered representative designated on the
application will have the authority to initiate telephone transfers. Policy
Owners who do not wish to authorize AVLIC to accept telephone transactions from
their registered representative
APPLAUSE! II
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<PAGE>
must specify so on the application. AVLIC will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and if it does
not, AVLIC may be liable for any losses due to unauthorized or fraudulent
instructions. The procedures AVLIC follows for transactions initiated by
telephone include, but are not limited to, requiring the Policy Owner to provide
the Policy number at the time of giving transfer instructions; AVLIC's tape
recording of all telephone transfer instructions; and AVLIC, providing written
confirmation of telephone transactions.
SYSTEMATIC PROGRAMS
AVLIC may offer systematic programs as discussed below. These programs will be
subject to administrative guidelines AVLIC may establish from time to time. We
will count your transfers in these programs when determining whether the
transfer fee applies. 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. AVLIC reserves the right to
modify, suspend, or terminate such programs at any time. Participation in any
systematic program will automatically terminate upon death of the Insured. Use
of systematic programs may not be advantageous, and does not guarantee success.
PORTFOLIO REBALANCING. Under the Portfolio Rebalancing program, you can instruct
AVLIC 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
AVLIC 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 AVLIC 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 AVLIC at the Home 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.)
EXCHANGE PRIVILEGE
During the first 24 Policy Months after the Policy Date of the Policy, you may
exchange the Policy for a flexible premium adjustable life insurance policy
approved for exchange and issued by AVLIC or an affiliate. No new evidence of
insurability will be required.
The policy date, issue age and rate class for the Insured will be the same under
the new policy as under the old. In addition, the policy provisions and
applicable charges for the new policy and its riders will be based on the same
policy date and issue age as under the Policy. Accumulation values for the
exchange and payments will be established after making adjustments for
investment gains or losses and after recognizing variance, if any, between
payment or charges, dividends or accumulation values under the flexible contract
and under the new policy. You may elect either the same specified amount or the
same net amount at risk for the new policy as under the old.
To make the change, the Policy, a completed application for exchange and any
required payment must be received by AVLIC. The exchange will be effective on
the valuation date when all financial and contractual arrangements for the new
policy have been completed.
APPLAUSE! II
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PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must complete an application and submit
it to AVLIC's Home Office (5900 "O" Street, P.O. Box 82550, Lincoln, Nebraska
68501). A Policy will generally be issued only to individuals 80 years of age or
less on their nearest birthday who supply satisfactory evidence of insurability
to AVLIC. Acceptance is subject to AVLIC's underwriting rules, and AVLIC
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.
When all required premiums and application amendments have been received by
AVLIC in its Home 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 AVLIC, and the application amendments are
received and reviewed in AVLIC's Home Office. On the Issue Date, the initial
premium payment will be allocated to the Money Market Subaccount for 13 days.
After the expiration of the 13-day period, the Accumulation Value will be
reallocated to the Investment Options you select.
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 the Insured's lower Issue Age 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 the smaller of (1) the amount of
insurance applied for, (2) $100,000, or (3) $25,000 if the proposed Insured is
under age 10 or over age 60 at their nearest birthday.
PREMIUMS
No insurance will take effect before the initial premium payment is received by
AVLIC in federal funds. The initial premium payment must be at least 1/12 of the
first year Guaranteed Death Benefit Premium times the number of months between
the Policy Date and the Issue Date, plus one. Subsequent premiums are payable at
AVLIC's Home Office. A Policy Owner 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 Charges, the Policy may have a zero
Net Cash Surrender Value and lapse. Net Policy Funding, if adequate, may satisfy
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. The Planned Periodic Premium schedule may
include the Guaranteed Death Benefit Premium. You are not required to pay
premiums according to this schedule. You have considerable flexibility to alter
the amount and frequency of premiums paid. AVLIC 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 AVLIC 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 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
Guaranteed Death Benefit provision is in effect, even
APPLAUSE! II
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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 LIMIT. AVLIC's current minimum premium limit is $45, $15 if paid by
automatic bank draft. AVLIC currently has no maximum premium limit, other than
the current maximum premium limit established by federal tax laws. AVLIC
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
limit 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, AVLIC will accept only 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 limit allowed by law. AVLIC 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.
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 Policy Owner, an
additional premium payment may be required. AVLIC 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.
ALLOCATION OF PREMIUMS AND ACCUMULATION VALUE
ALLOCATION OF NET PREMIUMS. In the application for a Policy, the Policy Owner
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, AVLIC will treat the payment as a premium payment unless you
instruct otherwise by proper written notice.
On the Issue Date, the initial premium payment 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
AVLIC 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 AVLIC for the period
from the date the payment has been converted into federal funds and is available
to AVLIC. 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 Policy Owner, 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 Guaranteed Death Benefit provision is in effect. The Grace Period is 61 days
from the date AVLIC mails a notice that the Grace Period has begun. AVLIC will
notify you at the beginning of the Grace Period by mail addressed to your last
known address on file with AVLIC.
The notice will specify the premium required to keep the Policy in force. The
required premium will equal the greater of (1) the amount necessary to cover the
Monthly Deductions and Percent of Premium Charges for the three Policy Months
after commencement of the Grace Period, or (2) the amount necessary to raise the
Net Cash Surrender Value above zero as of the date of reinstatement. Failure to
pay the required premium within the Grace Period will result in lapse of the
Policy. If the Insured dies 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.)
APPLAUSE! II
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Reinstatement. A lapsed Policy may be reinstated any time within three years
(five years in Missouri) after the beginning of the Grace Period, but before the
Maturity Date. We will reinstate your Policy based on the Insured's rating class
at the time of the reinstatement. Reinstatement is subject to the following:
(1) Evidence of insurability of the Insured satisfactory to AVLIC
(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
(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 Charges and the amounts stated above, plus
(4) That part of the Contingent Deferred Sales Charge and Contingent
Deferred Administrative 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 AVLIC'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 AVLIC of the application for
reinstatement.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate AVLIC 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)
SALES CHARGE. A front-end Sales Load Charge will be deducted from each premium
payment upon receipt and prior to allocation of Net Premium to any Investment
Option. AVLIC is authorized to deduct such a Sales Load Charge of up to 2.5% of
the amount of each premium; currently, no such sales charge is being applied.
The Policy is also subject to a Contingent Deferred Sales Load Charge, which is
part of the Surrender Charge. (See the section on "Surrender Charge".)
The sales charges applied in any Policy Year are not necessarily related to
actual distribution expenses incurred in that year. Instead, AVLIC expects to
incur the majority of distribution expenses in the early Policy Years and to
recover amounts to pay such expenses over the life of the Policy. To the extent
that sales and distribution expenses exceed sales charges in any year, AVLIC
will pay such expenses from its other assets or surplus in its General Account,
including amounts derived from Mortality and Expense Risk Charges, and other
charges made under the Policy. AVLIC believes that this distribution financing
arrangement will benefit Separate Account V and the Policy Owners.
PREMIUM CHARGE FOR TAXES. A deduction of up to 5% of the premium is made from
each premium payment to pay applicable taxes; currently the charge is 3.5%. The
deduction is an amount AVLIC considers necessary to pay all premium taxes
imposed by the states and their subdivisions, and to 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.)
AVLIC does not expect to derive a profit from the 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 AVLIC for administrative expenses and insurance
APPLAUSE! II
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<PAGE>
provided. These charges will be allocated among the Subaccounts, and the Fixed
Account on a pro rata basis. Each of these charges is described in more detail
below.
ADMINISTRATIVE EXPENSE CHARGE. To compensate AVLIC for the ordinary
administrative expenses expected to be incurred in connection with a Policy, the
Monthly Deduction includes a $9.00 per Policy charge (currently $9.00 the first
year and $4.50 during each year thereafter). The Administrative Expense Charge
is levied throughout the life of the Policy and is guaranteed not to increase
above $9.00 per month. AVLIC 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. AVLIC 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. The net amount
at risk on any Monthly Activity Date is based on the amount by which the Death
Benefit which would have been payable on that Monthly Activity Date exceeds the
Accumulation Value on that date.
COST OF INSURANCE RATE. The Annual Cost of Insurance Rate is based on the
Insured's sex, Issue Age, Policy duration, Specified Amount, and rating class.
The rate will vary depending upon tobacco use and other risk factors. For the
initial Specified Amount, the Cost of Insurance Rate will not exceed those shown
in the Schedule of Guaranteed Annual Cost of Insurance Rates shown in the
schedule pages of the Policy. These guaranteed rates are based on the Insured's
Attained Age and are equal to the 1980 Insurance Commissioners Standard Ordinary
Smoker and Non-Smoker, Male and Female Mortality Tables. The current rates range
between 40% and 100% of the rates based on the 1980 Commissioners Standard
Ordinary Tables, based on AVLIC's own mortality experience. Policies issued on a
unisex basis are based on the 1980 Insurance Commissioners Standard Ordinary
Table B assuming 80% male and 20% female lives. The Cost of Insurance Rates,
Surrender Charges, and payment options for Policies issued in Montana and
certain other states are on a sex-neutral (unisex) basis. Any change in the Cost
of Insurance Rates will apply to all persons of the same age, sex, Specified
Amount, and rating class and whose Policies have been in effect for the same
length of time.
If the rating class for any increase in the Specified Amount is not the same as
the rating class at issue, the Cost of Insurance Rate used after such increase
will be a composite rate based upon a weighted average of the rates of the
different rating classes. Decreases may be reflected in the Cost of Insurance
Rate, as discussed earlier.
The actual charges made during the Policy Year will be shown in the annual
report delivered to Policy Owners.
RATING CLASS. The rating class of an Insured will affect the Cost of Insurance
Rate. AVLIC currently places Insureds into both standard rating classes and
substandard rating classes that involve a higher mortality risk. In an otherwise
identical Policy, an Insured in the standard rating class will have a lower Cost
of Insurance Rate than an Insured in a rating class with higher mortality risks.
If, when issued, a Policy is rated with a tabular extra rating, the guaranteed
rate is a multiple of the guaranteed rate for a standard issue Policy. This
multiple factor is shown in the Schedule of Benefits in the Policy, and may be
from 1.18 to 4 times the guaranteed rate for a standard issue Policy.
If appropriate, Insureds may also be assigned a flat extra rating charge to
reflect higher mortality risks. The 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.
SURRENDER CHARGE
If a Policy is Surrendered on or before the 14th Policy Anniversary Date, AVLIC
will assess a Surrender Charge based upon percentages of the premiums actually
paid and a charge per $1,000 of insurance issued based upon sex, Issue Age and
tobacco use.
The total Surrender Charge on the initial Specified Amount is made up of two
parts, the Contingent Deferred Administrative Charge and Contingent Deferred
Sales Charge.
The Contingent Deferred Administrative Charge is an amount per $1,000 of
Specified Amount that varies by Issue Age, sex, and tobacco use. It is 60% of
the maximum Surrender Charge not to exceed $28.80 per $1,000 of Specified
Amount.
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The Contingent Deferred Sales Charge will be based upon the actual premiums
received. It will be calculated as the lesser of (1) 30% of the premiums
received up to the SEC Guideline Premium, plus 10% of the premiums received in
excess of the SEC Guideline, up to an amount equal to twice the SEC Guideline
Premium, plus 9% of the premiums received in excess of the second SEC Guideline
Premium; or (2) 40% of the maximum Surrender Charge not to exceed $19.20 per
$1,000 of Specified Amount. The SEC Guideline Premium is a benchmark amount, set
by SEC rule, which is relevant in defining the limits of certain charges we may
assess.
Your maximum Surrender Charge on a Policy we issue is $48.00 per $1,000 of
Specified Amount.
The Surrender Charge, if applicable, will be applied according to the following
schedule. Because the Surrender Charge may be significant upon early Surrender,
prospective Policy Owners should purchase a Policy only if they do not intend to
Surrender the Policy for a substantial period.
PERCENT OF SURRENDER
CHARGE MAXIMUM THAT PERCENT OF SURRENDER
WILL APPLY DURING CHARGE MAXIMUM THAT WILL
POLICY POLICY YEAR POLICY YEAR APPLY DURING POLICY YEAR
------ -------------- ----------- -----------------------
1 100% 9 50%
2 96% 10 42%
3 92% 11 33%
4 88% 12 25%
5 83% 13 17%
6 75% 14 8%
7 67% 15+ 0%
8 58%
No Surrender Charge will be assessed on decreases in the Specified Amount of the
Policy or partial withdrawals of Accumulation Value. AVLIC will, however, assess
Surrender Charges due to increases in the Specified Amount. The Contingent
Deferred Sales Charge component of the Surrender Charge will be assessed on such
increases based on the premiums allocated to the increase, at the lesser of (1)
15% of the allocated premiums received up to the SEC Guideline Premium, plus 5%
of the allocated premiums received in excess of the SEC Guideline Premium for
the increase, up to an amount equal to twice the SEC Guideline Premium for the
increase, plus 4.5% of the allocated premiums received in excess of two SEC
Guideline Premium(s) for the increase; or (2) 40% of the maximum Surrender
Charge applicable to the increase. The Contingent Deferred Administrative Charge
component of the Surrender Charge will be assessed on increases in the Specified
Amount as noted above with respect to the initial Specified Amount. It will be
based on the Attained Age at the time of the increase and the amount of the
increase in the Specified Amount. Surrender Charges in increases in the initial
Specified Amount will be applied with respect to Surrenders within 15 years of
the date of the increase.
TRANSFER CHARGE. After 15 transfers among the Investment Options in a Policy
Year, a transfer charge of $10 (guaranteed not to increase) may be imposed for
each additional transfer to compensate AVLIC for the costs of processing the
transfer. Since the charge reimburses AVLIC only for the cost of processing the
transfer, AVLIC 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 Policy Owner 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.
If you have amounts in the Ameritas Portfolios as a result of the substitution
which occurred on the Substitution Date, the following procedure applies until
December 1, 1999: you may transfer amounts out of the Ameritas Portfolios to any
other Subaccount available under the Policy without any administrative charge
and without the transfer counting as one of your "free transfers."
PARTIAL WITHDRAWAL CHARGE. A charge will be imposed for each partial withdrawal.
This charge will compensate AVLIC 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.
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DAILY CHARGES AGAINST THE SEPARATE ACCOUNT
A daily Mortality and Expense Risk Charge will be deducted from the value of the
net assets of Separate Account V to compensate AVLIC for mortality and expense
risks assumed in connection with the Policy. This daily charge from Separate
Account V is currently at the rate of 0.001229% (equivalent to an annual rate of
0.45%) for Policy Years 1-20 and at the rate of 0.000820% (equivalent to an
annual rate of 0.30%) for the years thereafter, and will not exceed 0.90% of the
average daily net assets of Separate Account V. The daily charge will be
deducted from the net asset value of Separate Account V, 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.
AVLIC believes that this level of charge is within the range of industry
practice for comparable flexible premium variable universal life policies. The
mortality risk assumed by AVLIC 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 Separate Account V on a daily basis. Currently, this
charge is 0.000956% (equivalent to 0.35% annually) for Policy Years 1-20 and at
a rate of 0.000409% (equivalent to 0.15% annually) for each Policy Year
thereafter. The rate of this charge will never exceed 0.35% 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 Separate Account V described just above,
management fees and expenses will be assessed by AIC, Fidelity, Alger
Management, MFS Co., and MSDW Investment Management 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 AVLIC by the
Funds and AVLIC has not independently verified such information. Each of the
Funds, other than the Ameritas Portfolios, is managed by an investment advisory
organization that is not affiliated with AVLIC. Each such organization is
entitled to receive a fee for its services based on the value of the relevant
portfolio's net assets. The Ameritas Portfolios are managed by AIC, an AVLIC
affiliate. Unless otherwise noted, the amount of expenses, including the asset
based advisory fee referred to above, borne by each portfolio for the fiscal
year ended December 31, 1998, was as follows:
<TABLE>
<CAPTION>
INVESTMENT WAIVERS TOTAL
ADVISORY OTHER AND/OR (REFLECTING
PORTFOLIO & MANAGEMENT EXPENSES TOTAL REIMBURSEMENTS WAIVERS AND/OR
REIMBURSEMENTS,
IF ANY)
<S> <C> <C> <C> <C> <C>
AMERITAS PORTFOLIOS(1)
Ameritas Money Market .20% .15% .35% .05% .30%
Ameritas Index 500 .24% .17% .41% .13% .28%
Ameritas Growth .75% .14% .89% .10% .79%
Ameritas Income & Growth .625% .195% .82% .12% .70%
Ameritas Small Capitalization .85% .15% 1.00% .11% .89%
Ameritas MidCap Growth .80% .17% .97% .13% .84%
Ameritas Emerging Growth .75% .16% .91% .06% .85%
Ameritas Research .75% .40% 1.15% .29% .86%
Ameritas Growth With Income .75% .25% 1.00% .12% .88%
FIDELITY PORTFOLIOS - INITIAL CLASS
VIP Equity-Income .49% .09% .58% - .58%(2)
VIP Growth .59% .09% .68% - .68%(2)
VIP High Income .58% .12% .70% - .70%
VIP Overseas .74% .17% .91% - .91%(2)
VIP II Asset Manager .54% .10% .64% - .64%(2)
VIP II Investment Grade Bond .43% .14% .57% - .57%
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VIP II Asset Manager: Growth .59% .14% .73% - .73%(2)
VIP II Contrafund .59% .11% .70% - .70%(2)
ALGER AMERICAN FUND(3)
Balanced .75% .17% .92% - .92%
Leveraged AllCap .85% .11% .96% - .96%
MFS TRUST
Utilities .75% .26%(4) 1.01% - 1.01%
Global Governments .75% .36%(4) 1.11% .11% 1.00%(5)
New Discovery .90% 4.32%(4) 5.22% 4.07% 1.15%(5)
MSDW UNIVERSAL FUNDS
Emerging Markets Equity 1.25% 2.20% 3.45% 1.50% 1.95%(6)
Global Equity .80% .83% 1.63% .48% 1.15%(6)
International Magnum .80% 1.00% 1.80% .65% 1.15%(6)
Asian Equity .80% 2.00% 2.80% 1.59% 1.21%(6)
U.S. Real Estate .80% .93% 1.73% .63% 1.10%(6)
</TABLE>
(1) This is a new Fund. Total expenses are estimated. Each portfolio's
aggregate expenses are limited to the advisory and administrative fees
disclosed in the table under the column "Total (reflecting waivers and/or
reimbursements, if any)" for a period of one year following the
Substitution Date. Following this one year period, expenses of the
Ameritas Portfolios will not be permitted to exceed an expense ratio which
is .10% greater than the prior expense ratio of the corresponding replaced
fund, unless an amendment to the investment advisory contract is approved
modifying or eliminating the expense guarantee.
(2) A portion of the brokerage commissions that certain Funds pay was used to
reduce Fund expenses. In addition, certain Funds, or Fidelity on behalf of
certain Funds, have entered into arrangements with their custodian whereby
credits realized as a result of uninvested cash balances were used to
reduce custodian expenses. Including these reductions, the total operating
expenses presented in the table would have been:
VIP Equity-Income .57%
VIP Growth .66%
VIP Overseas .89%
VIP II Asset Manager .63%
VIP II Asset Manager: Growth .72%
VIP II Contrafund .66%
(3) 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 Balanced, 1.25%, and Alger American
Leveraged AllCap, 1.50%. Included in "Other Expenses" of Leveraged AllCap
is .03% of interest expense.
(4) Each MFS Trust series has an expense offset arrangement which reduces the
series' custodian fee based upon the amount of cash maintained by the
series with its custodian and dividend disbursing agent. Each series may
enter into other such arrangements and directed brokerage arrangements
(which would also have the effect of reducing the series' expenses).
Expenses do not take into account these expense reductions and are
therefore higher than the actual expenses of the series.
(5) MFS has agreed to bear expenses for the Global Governments Series and New
Discovery Series, subject to reimbursement by the series, such that each
series "Other Expenses" shall not exceed .25% of the average daily net
assets of the series during the current fiscal year. Utilities Series has
no such limitation. The payments made by MFS on behalf of the Global
Governments Series and New Discovery Series under this arrangement are
subject to reimbursement by the series to MFS, which will be accomplished
by the payment of an expense reimbursement fee by the series to MFS
computed and paid monthly at a percentage of the series average daily net
assets for its then current fiscal year, with a limitation that immediately
after such payment the series "Other Expenses" will not exceed the
percentage set forth above for that series. The obligation of MFS to bear a
series "Other Expenses" pursuant to this arrangement and the series'
obligation to pay the reimbursement fee to MFS,
APPLAUSE! II
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terminates on the earlier of the date on which payments made by the series
equal the prior payment of such reimbursement expenses by MFS, or December
31, 2004.
(6) The Portfolios' investment adviser has voluntarily agreed to reduce its
management fee and/or reimburse each Portfolio so that total annual
operating expenses will not exceed 1.75% for the MSDW Universal Funds
("MSDWUF") Emerging Markets Equity Portfolio, 1.15% for each of the MSDWUF
Global Equity Portfolio and MSDWUF International Magnum Portfolio, 1.20%
for the MSDWUF Asian Equity Portfolio and 1.10% for the MSDWUF U.S. Real
Estate Portfolio. The investment adviser reserves the right to terminate
any waiver and/or reimbursement at any time and without notice.
In determining the actual amount of voluntary management fee waiver and/or
expense reimbursement for a Portfolio, if any, certain investment related
expenses, such as foreign coutnry tax expense and interest expense on
borrowing are excluded from annual operating expenses. If these expenses
were incurred, the Portfolios' total expenses after voluntary fee waivers
and/or expense reimbursements could exceed the expense ratios shown above.
For the year ended December 31, 1998, after giving effect to the above
voluntary management fee waiver and/or expense reimbursement, the total
expenses for each Portfolio, excluding certain investment related expenses,
were as stated in the table.
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.
AVLIC may receive administrative fees from the investment advisers of certain
Funds. AVLIC currently does not assess a separate charge against Separate
Account V or the Fixed Account for any federal, state or local income taxes.
AVLIC may, however, make such a charge in the future if income or gains within
Separate Account V will incur any federal, or any significant state or local
income tax liability, or if the federal, state or local tax treatment of AVLIC
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 AVLIC. 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 AVLIC.
CONTROL OF POLICY. The Policy Owner 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 Policy
Owner, if living; otherwise to any successor-owner or owners, if living;
otherwise to the estate of the last Policy Owner to die.
BENEFICIARY. Policy Owners 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 Insured,
payments will be made to any surviving Beneficiary(ies) of the same class;
otherwise to any Beneficiary(ies) of the next class; otherwise to the Policy
Owner; otherwise to the estate of the Policy Owner.
CHANGE OF BENEFICIARY. The Policy Owner may change the Beneficiary by written
request at any time during the Insured's lifetime 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. AVLIC will not be liable for any
payment made or action taken before the change is recorded.
CHANGE OF POLICY OWNER OR ASSIGNMENT. In order to change the Policy Owner of the
Policy or assign Policy rights, an assignment of the Policy must be made in
writing and filed with AVLIC 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 AVLIC will not be liable for any
payment made or action taken before the change is
APPLAUSE! II
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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
AVLIC 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
Insured, the Death Benefit Proceeds shall be paid in one sum to the Policy
Owner, if living; otherwise to any successor-owner, if living; otherwise to the
Policy Owner's estate. Any proceeds payable on the Maturity Date or upon
Surrender shall be paid in one sum unless an optional method of payment is
elected.
INCONTESTABILITY. AVLIC cannot contest the Policy or reinstated Policy during
the lifetime of the Insured after it has been in force for two years from the
Policy Date (or reinstatement effective date). After the Policy Date, AVLIC
cannot contest an increase in the Specified Amount or addition of a rider during
the lifetime of the Insured 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.
MISSTATEMENT OF AGE AND SEX. If the age or sex of the 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
Insured's correct age or sex. The Death Benefit Proceeds will be adjusted
correspondingly.
SUICIDE. The Policy does not cover suicide within two years of the Policy Date
unless otherwise provided by a state's insurance law. If the Insured, while sane
or insane, commits suicide within two years after the Policy Date, AVLIC will
pay only the premiums received less any partial withdrawals, the cost for
riders, and any outstanding Policy debt. If the Insured, while sane or insane,
commits suicide within two years after the effective date of any increase in the
Specified Amount, AVLIC'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 death or maturity, 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 Policy Owners; (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
Separate Account V'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 Policy
Owner's bank.
REPORTS AND RECORDS. AVLIC will maintain all records relating to Separate
Account V 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 Policy Owner
may receive confirmation of such transactions in their quarterly statements. The
Policy Owner should review the information in these statements carefully. All
errors or corrections must be reported to AVLIC immediately to assure proper
crediting to the Policy. AVLIC will assume all transactions are accurately
reported on quarterly statements unless AVLIC is notified otherwise within 30
days after receipt of the statement. The Policy Owner 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.)
APPLAUSE! II
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<PAGE>
ACCELERATED BENEFIT RIDER FOR TERMINAL ILLNESS (LIVING BENEFIT RIDER). Upon
satisfactory proof of terminal illness after the two-year contestable
period (no waiting period in certain states). AVLIC 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 AVLIC or its
affiliates. AVLIC 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 must include a written statement
from a licensed physician who is not related to the Insured or the Policy
Owner 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.
ACCIDENTAL DEATH BENEFIT RIDER. This rider provides additional insurance if
the Insured's death results from accidental death, as defined in the rider.
Under the terms of the rider, the additional benefits provided in the
Policy will be paid upon receipt of proof by AVLIC that death resulted
directly and independently of all other causes from accidental bodily
injuries incurred before the rider terminates and within 91 days after such
injuries were incurred.
CHILDREN'S PROTECTION RIDER. This rider provides for term insurance on the
Insured's children, as defined in the rider. Under the terms of the rider,
the Death Benefit will be payable to the named Beneficiary upon the death
of any insured child. Upon receipt of proof of the Insured's death before
the rider terminates, the rider will be considered paid up for the term of
the rider.
WAIVER OF MONTHLY DEDUCTIONS ON DISABILITY RIDER. This rider provides for
the waiver of Monthly Deductions for the Policy and all riders while the
Insured is disabled.
PAYOR WAIVER OF MONTHLY DEDUCTIONS ON DISABILITY. This rider provides for
the waiver of Monthly Deductions for the Policy and all riders while the
covered person is disabled. This rider is available for Insureds ages 0 to
14.
GUARANTEED INSURABILITY RIDER. This rider provides that the Policy Owner
can purchase additional insurance for the Insured by increasing the
Specified Amount of the Policy at certain future dates without evidence of
insurability.
DISABILITY BENEFIT PAYMENT RIDER. This rider provides for the payment by
AVLIC of a disability benefit in the form of premiums while the Insured is
disabled. The benefit amount may be chosen by the Policy Owner 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.
PAYOR DISABILITY RIDER. This rider provides for the payment by AVLIC of a
disability benefit in the form of premiums while the Covered Person as
defined in the rider is totally disabled. The benefit amount may be chosen
by the Policy Owner when the rider is issued. In addition, while the
Covered Person is totally disabled, the Cost of Insurance for the rider
will not be deducted from Accumulation Value.
TERM RIDER FOR COVERED INSURED. This rider provides a Specified Amount of
insurance to the Beneficiary upon receipt of Satisfactory Proof of Death of
any covered Insured, as identified in the rider.
APPLAUSE! II
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<PAGE>
DISTRIBUTION OF THE POLICIES
The principal underwriter for the Policies is AIC, a wholly owned subsidiary of
AMAL Corporation and an affiliate of AVLIC. AIC was organized under Nebraska law
on December 29, 1983, and is registered as a broker-dealer with the SEC and is a
member of the National Association of Securities Dealers ("NASD"). AVLIC pays
AIC for acting as the principal underwriter under an Underwriting Agreement. In
1998, AIC received gross variable universal life compensation of $12,564,917,
and retained $394,171 in underwriting fees, and $3,514 in brokerage commissions
on AVLIC's variable universal life policies.
AIC offers its clients a wide variety of financial products and services and has
the ability to execute stock and bond transactions on a number of national
exchanges. AIC also serves as principal underwriter for AVLIC's variable
annuities, and for Ameritas Life's variable life and variable annuity. AIC is
the underwriter for the Ameritas Portfolios, and also serves as its investment
adviser. It also has executed selling agreements with a variety of mutual funds,
unit investment trusts and direct participation programs.
The Policies are sold through registered representatives of AIC or other
broker-dealers which have entered into selling agreements with AVLIC or AIC.
These registered representatives are also licensed by state insurance officials
to sell AVLIC'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.
Under these selling agreements, AVLIC 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
100% of the first year target premium paid plus the first year cost of any
riders and 4% for premiums paid in excess of the first year target premium. For
Policy Years two through seven, the commission may equal an amount up to 4% 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 eighth Policy Year.
Compensation arrangements may vary among broker-dealers. In addition, AVLIC may
also pay override payments, expense allowances, bonuses, wholesaler fees, and
training allowances. Registered representatives who meet certain production
standards may receive additional compensation. AVLIC may reduce or waive the
sales charge and/or other charges on any Policy sold to directors, officers or
employees of AVLIC or any of its affiliates, employees and registered
representatives of any broker-dealer that has entered into a sales agreement
with AVLIC or AIC, 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.
FEDERAL TAX MATTERS
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 except premium taxes (See discussion in the section on Premium Charge for
Taxes) laws. This discussion is based upon AVLIC'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. AVLIC
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
Insured, Policy Owner or Beneficiary may be altered.
(1) TAXATION OF AVLIC. AVLIC 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 Separate Account V is not a separate entity from AVLIC, and its
operations form a part of AVLIC, 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 Separate
Account V 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. AVLIC believes that Separate
Account V 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.
AVLIC does not currently expect to incur any federal income tax liability
attributable to Separate Account V with respect to the sale of the
Policies. Accordingly, no charge is being made currently to
APPLAUSE! II
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<PAGE>
Separate Account V for federal income taxes. If, however, AVLIC determines
that it may incur such taxes attributable to Separate Account V, it may
assess a charge for such taxes against Separate Account V.
AVLIC may also incur state and local taxes (in addition to premium taxes
for which a deduction from premiums is currently made). At present, they
are not charges against Separate Account V. If there is a material change
in state or local tax laws, charges for such taxes attributable to Separate
Account V, if any, may be assessed against Separate Account V.
(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. AVLIC
believes that the Policy meets the statutory definition of a life insurance
contract. If the Death Benefit of a Policy is changed, the applicable
defined limits may change. In the case of a decrease in the Death Benefit,
a partial Surrender, 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 Policy Owners 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 Policy Owner (to
the extent of any gain in the Policy) as prescribed in Section 7702.
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.
Certain benefits the Insured may elect under this Policy may be material
changes affecting the 7-pay premium test. These include, but are not
limited to, changes in Death Benefits and changes in the Specified Amount.
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 any gain under the Policy. A 10% penalty tax also applies to the taxable
portion of any distribution made prior to the taxpayer's age 59 1/2. The
10% penalty tax does not apply if the distribution is made because the
taxpayer becomes 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 taxpayer or
the joint lives of the taxpayer and Beneficiary. One may avoid a Policy
becoming a modified endowment contract by, among other things, not making
excessive payments or reducing benefits. Should one deposit excessive
premiums during a Policy Year, that portion that is returned by the
insurance company within 60 days after the policy anniversary date will
reduce the premiums paid to avoid the policy becoming a modified endowment
contract. All modified endowment policies issued by AVLIC to the same
Policy Owner 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 exchange
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 Separate Account V to be "adequately diversified" in order
for the Policy to be treated as a life insurance contract for federal tax
purposes. Separate Account V, 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.
While AIC, an AVLIC affiliate, is the adviser to certain of the portfolios,
AVLIC does not have control over any of the Funds or their investments.
However, AVLIC believes that the Funds will be operated in compliance with
the diversification requirements of the Internal Revenue Code. Thus, AVLIC
believes that the Policy will be treated as a life insurance contract for
federal tax purposes.
APPLAUSE! II
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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 policy owners 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, AVLIC
reserves the right to modify the Policy as necessary to prevent the Policy
Owner from being considered the owner of the assets of Separate Account V
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. AVLIC believes that the Policy will be
treated in a manner consistent with a fixed benefit life insurance policy
for federal income tax purposes. Thus, AVLIC believes that the Death
Benefit payable prior to the original Maturity Date will generally be
excludable from the gross income of the Beneficiary under Section 101(a)(1)
of the Code and the Policy Owner will not be deemed to be in constructive
receipt of the Accumulation Value under the Policy until its actual
Surrender. However, in the event of certain cash distributions under the
Policy resulting from any change which reduces future benefits under the
Policy, the distribution will be taxed in whole or in part as ordinary
income (to the extent of gain in the Policy). (See previous discussion on
Tax Status of the Policy.)
AVLIC also believes that loans received under a Policy will be treated as
debt of the Policy Owner and that no part of any loan under a Policy will
constitute income to the Policy Owner 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.
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 and debt limits, 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 then 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. Policy Owners should
consult a competent tax advisor concerning the tax implications of these
changes for their Policies.
The right to exchange the Policy for a flexible premium adjustable life
insurance policy (See the section on Exchange Privilege.), the right to
change Policy Owners (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 or when Maturity Benefits are paid,
if the amount received plus any Outstanding Policy Debt exceeds the
APPLAUSE! II
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<PAGE>
total premiums paid (the "basis") that are not treated as previously
withdrawn by the Policy Owner, 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 Policy Owner 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
AVLIC holds the assets of Separate Account V. The assets are kept physically
segregated and held separate and apart from the General Account assets, except
for the Fixed Account. AVLIC maintains records of all purchases and redemptions
of Funds' shares by each of the Subaccounts.
THIRD PARTY SERVICES
AVLIC is aware that certain third parties are offering investment advisory,
asset allocation, money management, and timing services in connection with the
Policies. AVLIC does not engage any such third parties to offer such services of
any type. In certain cases, AVLIC has agreed to honor transfer instructions from
such services where it has received powers of attorney, in a form acceptable to
it, from the Policy Owners participating in the service. Firms or persons
offering such services do so independently from any agency relationship they may
have with AVLIC for the sale of Policies. AVLIC takes no responsibility for the
investment allocations and transfers transacted on a Policy Owner's behalf by
such third parties or any investment allocation recommendations made by such
parties. Policy Owners should be aware that fees paid for such services are
separate and in addition to fees paid under the Policies.
VOTING RIGHTS
AVLIC is the legal holder of the shares held in the Subaccounts of Separate
Account V 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 shareholder
meeting. To the extent required by law, AVLIC will vote all shares of each of
the Funds held in Separate Account V at regular and special shareholder meetings
of the Funds according to instructions received from Policy Owners based on the
number of shares held as of the record date for such meeting.
The number of Fund shares in a Subaccount for which instructions may be given by
a Policy Owner 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 Policy Owners are received and Fund shares
held in each Subaccount which do not support Policy Owner interests will be
voted by AVLIC 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, AVLIC may elect to vote shares of the Fund in its own right.
DISREGARD OF VOTING INSTRUCTION. AVLIC 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, AVLIC 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 AVLIC reasonably
disapproves those changes in accordance with applicable federal regulations. If
AVLIC does disregard voting instructions, it will advise Policy Owners of that
action and its reasons for the action in the next annual report or proxy
statement to Policy Owners.
APPLAUSE! II
39
<PAGE>
STATE REGULATION OF AVLIC
AVLIC, a stock life insurance company organized under the laws of Nebraska, is
subject to regulation by the Nebraska 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 AVLIC and Separate Account V as of
December 31 of the preceding year must be filed with the Nebraska Department of
Insurance. Periodically, the Nebraska Department of Insurance examines the
liabilities and reserves of AVLIC and Separate Account V.
In addition, AVLIC 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 AVLIC
This list shows name and position(s) with AVLIC followed by the principal
occupations for the last five years. Where an individual has held more than one
position with an organization during the last 5-year period, the last position
held has been given.
LAWRENCE J. ARTH, DIRECTOR, CHAIRMAN OF THE BOARD, AND CHIEF EXECUTIVE OFFICER*
Director, Chairman of the Board, and Chief Executive Officer: Ameritas Life;
also serves as officer and/or director of other subsidiaries and/or affiliates
of Ameritas Life.
WILLIAM J. ATHERTON, DIRECTOR, PRESIDENT, AND CHIEF OPERATING OFFICER*
Director: AMAL Corporation; President: North American Security Life Insurance
Company; also served as officer and/or director of other subsidiaries and/or
affiliates of North American.
KENNETH C. LOUIS, DIRECTOR, EXECUTIVE VICE PRESIDENT*
Director, President and Chief Operating Officer: Ameritas Life; also serves as
officer and/or director of other subsidiaries and/or affiliates of Ameritas
Life.
GARY R. MCPHAIL, DIRECTOR, EXECUTIVE VICE PRESIDENT**
Director, President, and Chief Executive Officer: AmerUs Life; also serves as
officer and/or director of other subsidiaries and/or affiliates of AmerUs Life;
Executive Vice President--Marketing and Individual Operations: New York Life
Insurance Company; President: Lincoln National Sales Corporation.
CHARLES J. CAVANAUGH, SENIOR VICE PRESIDENT, NATIONAL SALES MANAGER*
Director, Product Manufacturing and Supply: Merrill Lynch Insurance Group;
Director of Marketing: ITT Hartford Life Insurance Companies.
BRIAN J. CLARK, VICE PRESIDENT-FIXED ANNUITY PRODUCT DEVELOPMENT**
Senior Vice President--Product Management: AmerUs Life.
MICHAEL G. FRAIZER, DIRECTOR**
Controller: AmerUs Life; also serves as director of an affiliate of AVLIC.
THOMAS C. GODLASKY, DIRECTOR, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT
OFFICER**
Executive Vice President and Chief Investment Officer: AmerUs Life Holdings,
Inc.; Executive Vice President and Chief Investment Officer: AmerUs Life (f.k.a.
American Mutual Life Insurance Company); Manager-Fixed Income and Derivatives
Department: Providian Corporation; also serves as director of an affiliate of
AVLIC; also serves as officer and/or director of other affiliates of AmerUs
Life.
JOSEPH K. HAGGERTY, ASSISTANT GENERAL COUNSEL**
Senior Vice President and General Counsel: AmerUs Life Holdings, Inc.; Senior
Vice President and General Counsel: AmerUs Life (f.k.a. American Mutual Life
Insurance Company f.k.a. Central Life Assurance Company***); Senior Vice
President, Deputy General Counsel: I.C.H. Corporation; also serves as an officer
to an affiliate of AVLIC, and served as officer and/or director of other
subsidiaries and/or affiliates of I.C.H. Corporation; also serves as officer of
other affiliates of AmerUs Life.
APPLAUSE! II
40
<PAGE>
SANDRA K. HOLMES, VICE PRESIDENT-FIXED ANNUITY CUSTOMER SERVICE**
Senior Vice President: AmerUs Life (f.k.a. American Mutual Life Insurance
Company, f.k.a. Central Life Assurance Company***).
KENNETH R. JONES, VICE PRESIDENT-CORPORATE COMPLIANCE AND ASSISTANT SECRETARY*
Vice President, Corporate Compliance & Assistant Secretary: Ameritas Life; also
serves as officer of other subsidiaries and/or affiliates of Ameritas Life.
CYNTHIA J. LAVELLE, VICE PRESIDENT--PRODUCT, OPERATIONS AND TECHNOLOGY*
Assistant Vice President--Variable Operations: Ameritas Life.
WILLIAM W. LESTER, TREASURER*
Senior Vice President - Investments and Treasurer: Ameritas Life; also serves as
officer of affiliates of Ameritas Life.
JOANN M. MARTIN, DIRECTOR, CONTROLLER*
Senior Vice President and Chief Financial Officer: Ameritas Life; also serves as
officer and/or director of other subsidiaries and/or affiliates of Ameritas
Life.
SHIELA SANDY, ASSISTANT SECRETARY**
Manager Annuity Services: AmerUs Life (f.k.a. American Mutual Life Insurance
Company).
DONALD R. STADING, SECRETARY AND GENERAL COUNSEL*
Senior Vice President, Secretary and Corporate General Counsel: Ameritas Life;
also serves as officer and/or director of other subsidiaries and/or affiliates
of Ameritas Life.
KEVIN WAGONER, ASSISTANT TREASURER**
Director Investment Accounting: AmerUs Life (f.k.a. American Mutual Life
Insurance Company, f.k.a. Central Life Assurance Company***); Senior Financial
Analyst: Target Stores.
* Principal business address: Ameritas Variable Life Insurance Company, 5900
"O" Street, P.O. Box 82550, Lincoln, Nebraska 68501
** Principal business address: AmerUs Life Insurance Company, 611 Fifth
Avenue, Des Moines, Iowa 50309
*** Central Life Assurance Company merged with American Mutual Life Insurance
Company on December 31, 1994. Central Life Assurance Company was the
survivor of the merger. Contemporaneous with the merger, Central Life
Assurance Company changed its name to American Mutual Life Insurance
Company. (American Mutual Life Insurance Company changed its name to AmerUs
Life Insurance Company on July 1, 1996.)
LEGAL MATTERS
All matters of Nebraska law pertaining to the Policy, including the validity of
the Policy and AVLIC's right to issue the Policy under Nebraska Insurance Law,
have been passed upon by Donald R. Stading, Secretary and General Counsel of
AVLIC.
LEGAL PROCEEDINGS
There are no legal proceedings to which Separate Account V is a party or to
which the assets of Separate Account V are subject. AVLIC is not involved in any
litigation that is of material importance in relation to its ability to meet its
obligations under the Policies or that relates to Separate Account V. AIC is not
involved in any litigation that is of material importance in relation to its
ability to perform under its underwriting agreement.
EXPERTS
The financial statements of AVLIC as of December 31, 1998 and 1997, and for each
of the three years in the period ended December 31, 1998, and the financial
statements of Separate Account V as of December 31, 1998, and for each of the
three years in the period then ended, included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Russell J.
Wiltgen, Vice President - Individual Product Management of Ameritas Life
Insurance Corp., as stated in the opinion filed as an exhibit to the
registration statement.
APPLAUSE! II
41
<PAGE>
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 Separate Account V, AVLIC 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 AVLIC which are included in this prospectus should
be considered only as bearing on the ability of AVLIC to meet its obligations
under the Policies. They should not be considered as bearing on the investment
performance of the assets held in Separate Account V.
APPLAUSE! II
42
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ameritas Variable Life Insurance Company
Lincoln, Nebraska
We have audited the accompanying statement of net assets of Ameritas Variable
Life Insurance Company Separate Account V as of December 31, 1998, and the
related statements of operations and changes in net assets for each of the three
years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ameritas Variable Life Insurance Company
Separate Account V as of December 31, 1998, and the results of its operations
and changes in its net assets for each of the three years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Lincoln, Nebraska
February 5, 1999
F-I-1
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
INVESTMENTS AT NET ASSET VALUE:
VARIABLE INSURANCE PRODUCTS FUND:
Money Market Portfolio -- 11,105,124.310 shares at
$1.00 per share (cost $11,105,124).................... $ 11,105,124
Equity Income Portfolio -- 1,160,172.618 shares at
$25.42 per share (cost $20,499,629)................... 29,491,589
Growth Portfolio -- 1,030,142.884 shares at $44.87 per
share (cost $24,624,171).............................. 46,222,512
High Income Portfolio -- 716,563.299 shares at $11.53
per share (cost $7,807,467)........................... 8,261,973
Overseas Portfolio -- 729,187.972 shares at $20.05 per
share (cost $11,215,340).............................. 14,620,219
VARIABLE INSURANCE PRODUCTS FUND II:
Asset Manager Portfolio -- 1,752,919.543 shares at
$18.16 per share (cost $24,869,155)................... 31,833,018
Investment Grade Bond Portfolio -- 343,207.716 shares
at $12.96 per share (cost $4,095,562)................. 4,447,972
Contrafund Portfolio -- 562,154.419 shares at $24.44
per share (cost $10,069,000).......................... 13,739,056
Index 500 Portfolio -- 140,383.148 shares at $141.25
per share (cost $14,386,677).......................... 19,829,119
Asset Manager Growth Portfolio -- 194,121.333 shares at
$17.03 per share (cost $2,789,533).................... 3,305,886
ALGER AMERICAN FUND:
Small Capitalization Portfolio -- 506,281.724 shares at
$43.97 per share (cost $17,693,318)................... 22,261,208
Growth Portfolio -- 438,715.956 shares at $53.22 per
share (cost $15,340,061).............................. 23,348,463
Income and Growth Portfolio -- 533,655.926 shares at
$13.12 per share (cost $5,605,420).................... 7,001,566
Midcap Growth Portfolio -- 390,902.572 shares at $28.87
per share (cost $7,966,295)........................... 11,285,358
Balanced Portfolio -- 210,014.615 shares at $12.98 per
share (cost $2,268,208)............................... 2,725,989
Leveraged Allcap Portfolio -- 158,890.232 shares at
$34.90 per share (cost $3,600,937).................... 5,545,268
MFS VARIABLE INSURANCE TRUST:
Emerging Growth Series Portfolio -- 568,954.541 shares
at $21.47 per share (cost $8,532,284)................. 12,215,454
World Governments Series Portfolio -- 51,660.465 shares
at $10.88 per share (cost $532,514)................... 562,066
Utilities Series Portfolio -- 166,350.240 shares at
$19.82 per share (cost $2,770,572).................... 3,297,063
Research Series Portfolio -- 156,106.437 shares at
$19.05 per share (cost $2,571,889).................... 2,973,827
Growth with Income Series Portfolio -- 175,680.697
shares at $20.11 per share (cost $3,038,764).......... 3,532,938
MORGAN STANLEY UNIVERSAL FUNDS:
Asian Equity Portfolio -- 63,862.444 shares at $5.23
per share (cost $388,097)............................. 334,000
Emerging Markets Equity Portfolio -- 115,841.118 shares
at $7.11 per share (cost $1,187,272).................. 823,632
Global Equity Portfolio -- 159,586.755 shares at $13.14
per share (cost $1,951,259)........................... 2,096,971
International Magnum Portfolio -- 83,104.465 shares at
$11.23 per share (cost $938,486)...................... 933,263
U.S. Real Estate Portfolio -- 87,708.290 shares at
$9.80 per share (cost $951,045)....................... 859,540
------------
NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS......... $282,653,074
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-I-2
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
1998
INVESTMENT INCOME:
Dividend distributions received.............. $ 3,349,781 $ 571,068 $ 350,608 $ 167,972
Mortality and expense risk charge............ (2,163,874) (100,578) (257,976) (354,109)
----------- --------- ---------- -----------
NET INVESTMENT INCOME (LOSS)................... 1,185,907 470,490 92,632 (186,137)
----------- --------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments...... 17,147,973 -- 1,247,753 4,393,780
Net change in unrealized appreciation
(depreciation)............................ 30,032,940 -- 1,327,445 8,556,162
----------- --------- ---------- -----------
NET GAIN (LOSS) ON INVESTMENTS................. 47,180,913 -- 2,575,198 12,949,942
----------- --------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. $48,366,820 $ 470,490 $2,667,830 $12,763,805
=========== ========= ========== ===========
1997
INVESTMENT INCOME:
Dividend distributions received.............. $ 2,670,710 $ 463,675 $ 290,414 $ 177,070
Mortality and expense risk charge............ (1,574,558) (84,611) (201,066) (278,073)
----------- --------- ---------- -----------
NET INVESTMENT INCOME (LOSS)................... 1,096,152 379,064 89,348 (101,003)
----------- --------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments...... 6,045,040 -- 1,460,138 792,600
Net change in unrealized appreciation
(depreciation)............................ 21,418,187 -- 3,371,385 5,089,744
----------- --------- ---------- -----------
NET GAIN (LOSS) ON INVESTMENTS................. 27,463,227 -- 4,831,523 5,882,344
----------- --------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. $28,559,379 $ 379,064 $4,920,871 $ 5,781,341
=========== ========= ========== ===========
1996
INVESTMENT INCOME:
Dividend distributions received.............. $ 1,837,028 $ 383,333 $ 19,764 $ 56,401
Mortality and expense risk charge............ (1,085,616) (71,053) (141,453) (223,387)
----------- --------- ---------- -----------
NET INVESTMENT INCOME (LOSS)................... 751,412 312,280 (121,689) (166,986)
----------- --------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments...... 4,152,296 -- 566,577 1,424,128
Net change in unrealized appreciation
(depreciation)............................ 7,185,902 -- 1,388,228 1,591,342
----------- --------- ---------- -----------
NET GAIN (LOSS) ON INVESTMENTS................. 11,338,198 -- 1,954,805 3,015,470
----------- --------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. $12,089,610 $ 312,280 $1,833,116 $ 2,848,484
=========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-I-3
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
------------------------ ---------------------------------------------------------------------
ASSET INVESTMENT ASSET MANAGER
HIGH INCOME OVERSEAS MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 558,849 $ 271,677 $ 882,316 $146,622 $ 56,896 $ 131,792 $ 49,741
(73,002) (128,820) (271,404) (39,733) (93,506) (135,441) (25,300)
----------- ---------- ---------- -------- ---------- ---------- --------
485,847 142,857 610,912 106,889 (36,610) (3,649) 24,441
----------- ---------- ---------- -------- ---------- ---------- --------
355,102 800,734 2,646,949 17,396 418,590 305,253 232,615
(1,057,850) 959,668 637,938 179,497 2,407,939 3,342,102 175,258
----------- ---------- ---------- -------- ---------- ---------- --------
(702,748) 1,760,402 3,284,887 196,893 2,826,529 3,647,355 407,873
----------- ---------- ---------- -------- ---------- ---------- --------
$ (216,901) $1,903,259 $3,895,799 $303,782 $2,789,919 $3,643,706 $432,314
=========== ========== ========== ======== ========== ========== ========
$ 456,382 $ 183,138 $ 782,791 $138,030 $ 28,971 $ 32,977 $ --
(65,009) (115,217) (232,839) (25,608) (50,896) (71,508) (14,685)
----------- ---------- ---------- -------- ---------- ---------- --------
391,373 67,921 549,952 112,422 (21,925) (38,531) (14,685)
----------- ---------- ---------- -------- ---------- ---------- --------
56,407 727,004 1,963,611 -- 76,565 66,916 1,179
585,776 646,688 1,992,988 89,590 991,738 1,946,609 322,064
----------- ---------- ---------- -------- ---------- ---------- --------
642,183 1,373,692 3,956,599 89,590 1,068,303 2,013,525 323,243
----------- ---------- ---------- -------- ---------- ---------- --------
$ 1,033,556 $1,441,613 $4,506,551 $202,012 $1,046,378 $1,974,994 $308,558
=========== ========== ========== ======== ========== ========== ========
$ 346,977 $ 95,857 $ 701,929 $110,640 $ -- $ 523 $ 8,340
(52,366) (87,506) (192,161) (22,366) (12,082) (6,403) (2,489)
----------- ---------- ---------- -------- ---------- ---------- --------
294,611 8,351 509,768 88,274 (12,082) (5,880) 5,851
----------- ---------- ---------- -------- ---------- ---------- --------
67,887 105,443 578,783 -- 1,845 1,346 14,028
303,796 931,213 1,567,972 (39,903) 270,650 153,497 19,517
----------- ---------- ---------- -------- ---------- ---------- --------
371,683 1,036,656 2,146,755 (39,903) 272,495 154,843 33,545
----------- ---------- ---------- -------- ---------- ---------- --------
$ 666,294 $1,045,007 $2,656,523 $ 48,371 $ 260,413 $ 148,963 $ 39,396
=========== ========== ========== ======== ========== ========== ========
</TABLE>
F-I-4
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
--------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1998
INVESTMENT INCOME:
Dividend distributions received............ $ -- $ 41,754 $ 17,735 $ --
Mortality and expense risk charge.......... (169,257) (155,688) (49,041) (81,791)
---------- ---------- ---------- ----------
NET INVESTMENT INCOME (LOSS)................. (169,257) (113,934) (31,306) (81,791)
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments.... 2,446,741 2,551,580 490,671 742,049
Net change in unrealized appreciation
(depreciation).......................... 623,620 4,267,982 1,071,043 1,766,399
---------- ---------- ---------- ----------
NET GAIN (LOSS) ON INVESTMENTS............... 3,070,361 6,819,562 1,561,714 2,508,448
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATION................... $2,901,104 $6,705,628 $1,530,408 $2,426,657
========== ========== ========== ==========
1997
INVESTMENT INCOME:
Dividend distributions received............ $ -- $ 32,883 $ 12,791 $ 3,623
Mortality and expense risk charge.......... (142,416) (98,937) (28,862) (62,763)
---------- ---------- ---------- ----------
NET INVESTMENT INCOME (LOSS)................. (142,416) (66,054) (16,071) (59,140)
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments.... 550,941 59,552 105,818 88,340
Net change in unrealized appreciation
(depreciation).......................... 1,210,960 2,142,136 755,171 768,190
---------- ---------- ---------- ----------
NET GAIN (LOSS) ON INVESTMENTS............... 1,761,901 2,201,688 860,989 856,530
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $1,619,485 $2,135,634 $ 844,918 $ 797,390
========== ========== ========== ==========
1996
INVESTMENT INCOME:
Dividend distributions received............ $ -- $ 3,908 $ 24,326 $ --
Mortality and expense risk charge.......... (118,508) (58,005) (13,912) (38,781)
---------- ---------- ---------- ----------
NET INVESTMENT INCOME (LOSS)................. (118,508) (54,097) 10,414 (38,781)
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments.... 51,224 165,191 813,188 74,978
Net change in unrealized appreciation
(depreciation).......................... 368,251 592,282 (557,847) 330,732
---------- ---------- ---------- ----------
NET GAIN (LOSS) ON INVESTMENTS............... 419,475 757,473 255,341 405,710
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $ 300,967 $ 703,376 $ 265,755 $ 366,929
========== ========== ========== ==========
</TABLE>
- ---------------
(1) Commenced business 04/08/97
(2) Commenced business 04/03/97
The accompanying notes are an integral part of these financial statements.
F-I-5
<PAGE>
<TABLE>
<CAPTION>
ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
----------------------- -------------------------------------------------------------------------------
LEVERAGED EMERGING WORLD UTILITIES RESEARCH GROWTH WITH
BALANCED ALLCAP GROWTH SERIES GOVERNMENTS SERIES SERIES INCOME SERIES
PORTFOLIO PORTFOLIO PORTFOLIO SERIES PORTFOLIO PORTFOLIO PORTFOLIO(1) PORTFOLIO(2)
--------- ---------- ------------- ---------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 24,247 $ -- $ -- $ 3,936 $ 24,469 $ 2,571 $ --
(16,462) (31,317) (83,222) (3,503) (20,971) (17,327) (19,348)
--------- ---------- ---------- ------- -------- -------- --------
7,785 (31,317) (83,222) 433 3,498 (14,756) (19,348)
--------- ---------- ---------- ------- -------- -------- --------
107,704 147,338 76,320 -- 111,249 33,714 --
417,950 1,626,709 2,714,274 29,642 262,317 383,697 490,661
--------- ---------- ---------- ------- -------- -------- --------
525,654 1,774,047 2,790,594 29,642 373,566 417,411 490,661
--------- ---------- ---------- ------- -------- -------- --------
$ 533,439 $1,742,730 $2,707,372 $30,075 $377,064 $402,655 $471,313
========= ========== ========== ======= ======== ======== ========
$ 12,338 $ -- $ -- $ 3,537 $ -- $ -- $ 6,744
(10,092) (17,451) (44,359) (1,978) (7,542) (2,824) (2,761)
--------- ---------- ---------- ------- -------- -------- --------
2,246 (17,451) (44,359) 1,559 (7,542) (2,824) 3,983
--------- ---------- ---------- ------- -------- -------- --------
16,729 -- -- 1,603 -- -- 31,548
162,920 298,847 937,800 (6,568) 255,610 18,241 3,513
--------- ---------- ---------- ------- -------- -------- --------
179,649 298,847 937,800 (4,965) 255,610 18,241 35,061
--------- ---------- ---------- ------- -------- -------- --------
$ 181,895 $ 281,396 $ 893,441 $(3,406) $248,068 $ 15,417 $ 39,044
========= ========== ========== ======= ======== ======== ========
$ 29,838 $ -- $ -- $ -- $ 9,070 $ -- $ --
(6,215) (5,432) (9,549) (913) (1,520) -- --
--------- ---------- ---------- ------- -------- -------- --------
23,623 (5,432) (9,549) (913) 7,550 -- --
--------- ---------- ---------- ------- -------- -------- --------
199,719 4,125 21,561 -- 23,532 -- --
(168,250) 17,914 32,735 7,363 9,810 -- --
--------- ---------- ---------- ------- -------- -------- --------
31,469 22,039 54,296 7,363 33,342 -- --
--------- ---------- ---------- ------- -------- -------- --------
$ 55,092 $ 16,607 $ 44,747 $ 6,450 $ 40,892 $ -- $ --
========= ========== ========== ======= ======== ======== ========
</TABLE>
F-I-6
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS
----------------------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3)
1998 ------------ -------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend distributions received........................ $ 2,129 $ 4,381 $ 14,013
Mortality and expense risk charge...................... (2,084) (7,282) (13,265)
-------- --------- ---------
NET INVESTMENT INCOME (LOSS)............................. 45 (2,901) 748
-------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments................ -- -- 12,591
Net change in unrealized appreciation (depreciation)... (2,798) (219,226) 143,561
-------- --------- ---------
NET GAIN (LOSS) ON INVESTMENTS........................... (2,798) (219,226) 156,152
-------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $ (2,753) $(222,127) $ 156,900
======== ========= =========
1997
INVESTMENT INCOME:
Dividend distributions received........................ $ 232 $ 4,896 $ 5,533
Mortality and expense risk charge...................... (495) (3,435) (2,294)
-------- --------- ---------
NET INVESTMENT INCOME (LOSS)............................. (263) 1,461 3,239
-------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments................ -- 21,661 11,816
Net change in unrealized appreciation (depreciation)... (51,298) (144,415) 2,150
-------- --------- ---------
NET GAIN (LOSS) ON INVESTMENTS........................... (51,298) (122,754) 13,966
-------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $(51,561) $(121,293) $ 17,205
======== ========= =========
1996
INVESTMENT INCOME:
Dividend distributions received........................ $ -- $ -- $ --
Mortality and expense risk charge...................... -- -- --
-------- --------- ---------
NET INVESTMENT INCOME (LOSS)............................. -- -- --
-------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments................ -- -- --
Net change in unrealized appreciation (depreciation)... -- -- --
-------- --------- ---------
NET GAIN (LOSS) ON INVESTMENTS........................... -- -- --
-------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $ -- $ -- $ --
======== ========= =========
</TABLE>
- ---------------
(1) Commenced business 04/22/97
(2) Commenced business 04/08/97
(3) Commenced business 04/17/97
(4) Commenced business 04/07/97
(5) Commenced business 04/28/97
The accompanying notes are an integral part of these financial statements.
F-I-7
<PAGE>
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS DREYFUS
---------------------------------- -----------
INTERNATIONAL U.S. REAL
MAGNUM ESTATE STOCK INDEX
PORTFOLIO(4) PORTFOLIO(5) PORTFOLIO
------------- ------------ -----------
<S> <C> <C> <C>
$ 2,795 $ 24,210 $ --
(6,689) (6,758) --
-------- --------- --------
(3,894) 17,452 --
-------- --------- --------
3,255 6,589 --
39,545 (110,595) --
-------- --------- --------
42,800 (104,006) --
-------- --------- --------
$ 38,906 $ (86,554) $ --
======== ========= ========
$ 15,852 $ 9,641 $ 9,192
(1,903) (1,584) (5,350)
-------- --------- --------
13,949 8,057 3,842
-------- --------- --------
1,056 11,556 --
(44,768) 19,091 54,025
-------- --------- --------
(43,712) 30,647 54,025
-------- --------- --------
$(29,763) $ 38,704 $ 57,867
======== ========= ========
$ -- $ -- $ 46,122
-- -- (21,515)
-------- --------- --------
-- -- 24,607
-------- --------- --------
-- -- 38,741
-- -- 366,600
-------- --------- --------
-- -- 405,341
-------- --------- --------
$ -- $ -- $429,948
======== ========= ========
</TABLE>
F-I-8
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
--------------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
1998
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss)........... $ 1,185,907 $ 470,490 $ 92,632 $ (186,137)
Net realized gain (loss) on
investments......................... 17,147,973 -- 1,247,753 4,393,780
Net change in unrealized appreciation
(depreciation)...................... 30,032,940 -- 1,327,445 8,556,162
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. 48,366,820 470,490 2,667,830 12,763,805
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS........................... 36,557,125 3,082,148 2,101,252 1,105,036
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS................................. 84,923,945 3,552,638 4,769,082 13,868,841
NET ASSETS AT JANUARY 1, 1998............ 197,729,129 7,552,486 24,722,507 32,353,671
------------ ----------- ----------- -----------
NET ASSETS AT DECEMBER 31, 1998.......... $282,653,074 $11,105,124 $29,491,589 $46,222,512
============ =========== =========== ===========
1997
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss)........... $ 1,096,152 $ 379,064 $ 89,348 $ (101,003)
Net realized gain (loss) on
investments......................... 6,045,040 -- 1,460,138 792,600
Net change in unrealized appreciation
(depreciation)...................... 21,418,187 -- 3,371,385 5,089,744
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. 28,559,379 379,064 4,920,871 5,781,341
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS........................... 33,090,017 (464,346) 2,617,832 382,227
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS................................. 61,649,396 (85,282) 7,538,703 6,163,568
NET ASSETS AT JANUARY 1, 1997............ 136,079,733 7,637,768 17,183,804 26,190,103
------------ ----------- ----------- -----------
NET ASSETS AT DECEMBER 31, 1997.......... $197,729,129 $ 7,552,486 $24,722,507 $32,353,671
============ =========== =========== ===========
1996
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss)........... $ 751,412 $ 312,280 $ (121,689) $ (166,986)
Net realized gain (loss) on
investments......................... 4,152,296 -- 566,577 1,424,128
Net change in unrealized appreciation
(depreciation)...................... 7,185,902 -- 1,388,228 1,591,342
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. 12,089,610 312,280 1,833,116 2,848,484
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS........................... 30,380,460 1,711,961 2,778,194 2,837,486
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS................................. 42,470,070 2,024,241 4,611,310 5,685,970
NET ASSETS AT JANUARY 1, 1996............ 93,609,663 5,613,527 12,572,494 20,504,133
------------ ----------- ----------- -----------
NET ASSETS AT DECEMBER 31, 1996.......... $136,079,733 $ 7,637,768 $17,183,804 $26,190,103
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-I-9
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
--------------------------------- --------------------------------------------------------------------
ASSET INVESTMENT ASSET MANAGER
HIGH INCOME OVERSEAS MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 485,847 $ 142,857 $ 610,912 $ 106,889 $ (36,610) $ (3,649) $ 24,441
355,102 800,734 2,646,949 17,396 418,590 305,253 232,615
(1,057,850) 959,668 637,938 179,497 2,407,939 3,342,102 175,258
----------- ----------- ----------- ---------- ----------- ----------- ----------
(216,901) 1,903,259 3,895,799 303,782 2,789,919 3,643,706 432,314
353,039 (628,523) 353,744 1,166,836 3,190,211 5,349,378 582,288
----------- ----------- ----------- ---------- ----------- ----------- ----------
136,138 1,274,736 4,249,543 1,470,618 5,980,130 8,993,084 1,014,602
8,125,835 13,345,483 27,583,475 2,977,354 7,758,926 10,836,035 2,291,284
----------- ----------- ----------- ---------- ----------- ----------- ----------
$ 8,261,973 $14,620,219 $31,833,018 $4,447,972 $13,739,056 $19,829,119 $3,305,886
=========== =========== =========== ========== =========== =========== ==========
$ 391,373 $ 67,921 $ 549,952 $ 112,422 $ (21,925) $ (38,531) $ (14,685)
56,407 727,004 1,963,611 -- 76,565 66,916 1,179
585,776 646,688 1,992,988 89,590 991,738 1,946,609 322,064
----------- ----------- ----------- ---------- ----------- ----------- ----------
1,033,556 1,441,613 4,506,551 202,012 1,046,378 1,974,994 308,558
104,745 1,242,175 614,816 422,976 3,787,942 6,930,829 1,426,686
----------- ----------- ----------- ---------- ----------- ----------- ----------
1,138,301 2,683,788 5,121,367 624,988 4,834,320 8,905,823 1,735,244
6,987,534 10,661,695 22,462,108 2,352,366 2,924,606 1,930,212 556,040
----------- ----------- ----------- ---------- ----------- ----------- ----------
$ 8,125,835 $13,345,483 $27,583,475 $2,977,354 $ 7,758,926 $10,836,035 $2,291,284
=========== =========== =========== ========== =========== =========== ==========
$ 294,611 $ 8,351 $ 509,768 $ 88,274 $ (12,082) $ (5,880) $ 5,851
67,887 105,443 578,783 -- 1,845 1,346 14,028
303,796 931,213 1,567,972 (39,903) 270,650 153,497 19,517
----------- ----------- ----------- ---------- ----------- ----------- ----------
666,294 1,045,007 2,656,523 48,371 260,413 148,963 39,396
1,995,433 2,133,197 518,914 167,556 2,534,900 1,776,610 503,059
----------- ----------- ----------- ---------- ----------- ----------- ----------
2,661,727 3,178,204 3,175,437 215,927 2,795,313 1,925,573 542,455
4,325,807 7,483,491 19,286,671 2,136,439 129,293 4,639 13,585
----------- ----------- ----------- ---------- ----------- ----------- ----------
$ 6,987,534 $10,661,695 $22,462,108 $2,352,366 $ 2,924,606 $ 1,930,212 $ 556,040
=========== =========== =========== ========== =========== =========== ==========
</TABLE>
F-I-10
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
----------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
1998
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss)................. $ (169,257) $ (113,934) $ (31,306) $ (81,791)
Net realized gain (loss) on investments...... 2,446,741 2,551,580 490,671 742,049
Net change in unrealized appreciation
(depreciation)............................. 623,620 4,267,982 1,071,043 1,766,399
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. 2,901,104 6,705,628 1,530,408 2,426,657
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS................................. 1,708,481 3,802,750 1,281,319 1,308,265
----------- ----------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 4,609,585 10,508,378 2,811,727 3,734,922
NET ASSETS AT JANUARY 1, 1998.................. 17,651,623 12,840,085 4,189,839 7,550,436
----------- ----------- ---------- -----------
NET ASSETS AT DECEMBER 31, 1998................ $22,261,208 $23,348,463 $7,001,566 $11,285,358
=========== =========== ========== ===========
1997
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss)................. $ (142,416) $ (66,054) $ (16,071) $ (59,140)
Net realized gain (loss) on investments...... 550,941 59,552 105,818 88,340
Net change in unrealized appreciation
(depreciation)............................. 1,210,960 2,142,136 755,171 768,190
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. 1,619,485 2,135,634 844,918 797,390
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS................................. 1,904,475 2,704,106 1,369,132 1,117,517
----------- ----------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 3,523,960 4,839,740 2,214,050 1,914,907
NET ASSETS AT JANUARY 1, 1997.................. 14,127,663 8,000,345 1,975,789 5,635,529
----------- ----------- ---------- -----------
NET ASSETS AT DECEMBER 31, 1997................ $17,651,623 $12,840,085 $4,189,839 $ 7,550,436
=========== =========== ========== ===========
1996
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income (loss)................. $ (118,508) $ (54,097) $ 10,414 $ (38,781)
Net realized gain (loss) on investments...... 51,224 165,191 813,188 74,978
Net change in unrealized appreciation
(depreciation)............................. 368,251 592,282 (557,847) 330,732
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. 300,967 703,376 265,755 366,929
NET INCREASE (DECREASE) FROM POLICYOWNER
TRANSACTIONS................................. 3,449,194 2,618,412 791,272 2,585,782
----------- ----------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 3,750,161 3,321,788 1,057,027 2,952,711
NET ASSETS AT JANUARY 1, 1996.................. 10,377,502 4,678,557 918,762 2,682,818
----------- ----------- ---------- -----------
NET ASSETS AT DECEMBER 31, 1996................ $14,127,663 $ 8,000,345 $1,975,789 $ 5,635,529
=========== =========== ========== ===========
</TABLE>
- ---------------
(1) Commenced business 04/08/97
(2) Commenced business 04/03/97
The accompanying notes are an integral part of these financial statements.
F-I-11
<PAGE>
<TABLE>
<CAPTION>
ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
----------------------- ----------------------------------------------------------------------------
LEVERAGED EMERGING WORLD UTILITIES RESEARCH GROWTH WITH
BALANCED ALLCAP GROWTH SERIES GOVERNMENTS SERIES SERIES INCOME SERIES
PORTFOLIO PORTFOLIO PORTFOLIO SERIES PORTFOLIO PORTFOLIO PORTFOLIO(1) PORTFOLIO(2)
---------- ---------- ------------- ---------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 7,785 $ (31,317) $ (83,222) $ 433 $ 3,498 $ (14,756) $ (19,348)
107,704 147,338 76,320 -- 111,249 33,714 --
417,950 1,626,709 2,714,274 29,642 262,317 383,697 490,661
---------- ---------- ----------- -------- ---------- ---------- ----------
533,439 1,742,730 2,707,372 30,075 377,064 402,655 471,313
844,417 1,370,291 2,799,432 310,132 1,222,669 1,600,841 1,428,853
---------- ---------- ----------- -------- ---------- ---------- ----------
1,377,856 3,113,021 5,506,804 340,207 1,599,733 2,003,496 1,900,166
1,348,133 2,432,247 6,708,650 221,859 1,697,330 970,331 1,632,772
---------- ---------- ----------- -------- ---------- ---------- ----------
$2,725,989 $5,545,268 $12,215,454 $562,066 $3,297,063 $2,973,827 $3,532,938
========== ========== =========== ======== ========== ========== ==========
$ 2,246 $ (17,451) $ (44,359) $ 1,559 $ (7,542) $ (2,824) $ 3,983
16,729 -- -- 1,603 -- -- 31,548
162,920 298,847 937,800 (6,568) 255,610 18,241 3,513
---------- ---------- ----------- -------- ---------- ---------- ----------
181,895 281,396 893,441 (3,406) 248,068 15,417 39,044
253,322 962,301 3,250,610 41,843 1,057,600 954,914 1,593,728
---------- ---------- ----------- -------- ---------- ---------- ----------
435,217 1,243,697 4,144,051 38,437 1,305,668 970,331 1,632,772
912,916 1,188,550 2,564,599 183,422 391,662 -- --
---------- ---------- ----------- -------- ---------- ---------- ----------
$1,348,133 $2,432,247 $ 6,708,650 $221,859 $1,697,330 $ 970,331 $1,632,772
========== ========== =========== ======== ========== ========== ==========
$ 23,623 $ (5,432) $ (9,549) $ (913) $ 7,550 $ -- $ --
199,719 4,125 21,561 -- 23,532 -- --
(168,250) 17,914 32,735 7,363 9,810 -- --
---------- ---------- ----------- -------- ---------- ---------- ----------
55,092 16,607 44,747 6,450 40,892 -- --
421,333 1,071,187 2,401,694 161,157 332,223 -- --
---------- ---------- ----------- -------- ---------- ---------- ----------
476,425 1,087,794 2,446,441 167,607 373,115 -- --
436,491 100,756 118,158 15,815 18,547 -- --
---------- ---------- ----------- -------- ---------- ---------- ----------
$ 912,916 $1,188,550 $ 2,564,599 $183,422 $ 391,662 $ -- $ --
========== ========== =========== ======== ========== ========== ==========
</TABLE>
F-I-12
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS
----------------------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3)
1998 ------------ -------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss).......................... $ 45 $ (2,901) $ 748
Net realized gain (loss) on investments............... -- -- 12,591
Net change in unrealized appreciation(depreciation)... (2,798) (219,226) 143,561
-------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ (2,753) (222,127) 156,900
NET INCREASE (DECREASE) FROM POLICYOWNER TRANSACTIONS... 149,362 308,380 1,088,835
-------- --------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 146,609 86,253 1,245,735
NET ASSETS AT JANUARY 1, 1998........................... 187,391 737,379 851,236
-------- --------- ----------
NET ASSETS AT DECEMBER 31, 1998......................... $334,000 $ 823,632 $2,096,971
======== ========= ==========
1997
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss).......................... $ (263) $ 1,461 $ 3,239
Net realized gain (loss) on investments............... -- 21,661 11,816
Net change in unrealized appreciation
(depreciation)..................................... (51,298) (144,415) 2,150
-------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ (51,561) (121,293) 17,205
NET INCREASE (DECREASE) FROM POLICYOWNER TRANSACTIONS... 238,952 858,672 834,031
-------- --------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 187,391 737,379 851,236
NET ASSETS AT JANUARY 1, 1997........................... -- -- --
-------- --------- ----------
NET ASSETS AT DECEMBER 31, 1997......................... $187,391 $ 737,379 $ 851,236
======== ========= ==========
1996
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss).......................... $ -- $ -- $ --
Net realized gain (loss) on investments............... -- -- --
Net change in unrealized appreciation
(depreciation)..................................... -- -- --
-------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ -- -- --
NET INCREASE (DECREASE) FROM POLICYOWNER TRANSACTIONS... -- -- --
-------- --------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. -- -- --
NET ASSETS AT JANUARY 1, 1996........................... -- -- --
-------- --------- ----------
NET ASSETS AT DECEMBER 31, 1996......................... $ -- $ -- $ --
======== ========= ==========
</TABLE>
- ---------------
(1) Commenced business 04/22/97
(2) Commenced business 04/08/97
(3) Commenced business 04/17/97
(4) Commenced business 04/07/97
(5) Commenced business 04/28/97
The accompanying notes are an integral part of these financial statements.
F-I-13
<PAGE>
<TABLE>
<CAPTION>
MORGAN STANLEY
UNIVERSAL FUNDS DREYFUS
----------------------------- -----------
INTERNATIONAL U.S. REAL
MAGNUM ESTATE STOCK INDEX
PORTFOLIO(4) PORTFOLIO(5) PORTFOLIO
------------- ------------ -----------
<S> <C> <C> <C>
$ (3,894) $ 17,452 $ --
3,255 6,589 --
39,545 (110,595) --
-------- --------- -----------
38,906 (86,554) --
363,729 313,960 --
-------- --------- -----------
402,635 227,406 --
530,628 632,134 --
-------- --------- -----------
$933,263 $ 859,540 $ --
======== ========= ===========
$ 13,949 $ 8,057 $ 3,842
1,056 11,556 --
(44,768) 19,091 54,025
-------- --------- -----------
(29,763) 38,704 57,867
560,391 593,430 (2,270,889)
-------- --------- -----------
530,628 632,134 (2,213,022)
-- -- 2,213,022
-------- --------- -----------
$530,628 $ 632,134 $ --
======== ========= ===========
$ -- $ -- $ 24,607
-- -- 38,741
-- -- 366,600
-------- --------- -----------
-- -- 429,948
-- -- (409,104)
-------- --------- -----------
-- -- 20,844
-- -- 2,192,178
-------- --------- -----------
$ -- $ -- $ 2,213,022
======== ========= ===========
</TABLE>
F-I-14
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-I-15
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND ACCOUNTING POLICIES
Ameritas Variable Life Insurance Company Separate Account V (the Account) was
established on August 28, 1985, under Nebraska law by Ameritas Variable Life
Insurance Company (AVLIC), a wholly-owned subsidiary of AMAL Corporation, a
holding company 66% owned by Ameritas Life Insurance Corp (ALIC) and 34% owned
by AmerUs Life Insurance Company (AmerUs). The assets of the Account are
segregated from AVLIC's other assets and are used only to support variable life
products issued by AVLIC.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. At December 31, 1998, there are twenty-six
subaccounts within the Account. Five of the subaccounts invest only in a
corresponding Portfolio of Variable Insurance Products Fund and five invest only
in a corresponding Portfolio of Variable Insurance Products Fund II. Both funds
are diversified open-end management investment companies and are managed by
Fidelity Management and Research Company. Six of the subaccounts invest only in
a corresponding Portfolio of Alger American Fund which is a diversified open-end
management investment company managed by Fred Alger Management, Inc. Five of the
subaccounts invest only in a corresponding Portfolio of MFS Variable Insurance
Trust which is a diversified open-end management investment company managed by
Massachusetts Financial Services Company. Five of the subaccounts invest only in
a corresponding Portfolio of Morgan Stanley Universal Funds, Inc. which is a
diversified open-end management investment company managed by Morgan Stanley
Asset Management, Inc. All five funds are registered under the Investment
Company Act of 1940, as amended. Each Portfolio is registered under the
Investment Company Act of 1940, as amended. Each Portfolio pays the manager a
monthly fee for managing its investments and business affairs. The assets of the
Account are carried at the net asset value of the underlying Portfolios of the
Funds.
Pursuant to an order of the SEC allowing for the substitution, all policyowner
funds invested in a Portfolio of Dreyfus Stock Index Fund were transferred to
the Index 500 subaccount of the Fidelity Variable Insurance Products Fund II as
of March 31, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
VALUATION OF INVESTMENTS
The assets of the Account are carried at the net asset value of the underlying
Portfolios of the Funds. The value of the policyowners' units corresponds to the
Account's investment in the underlying subaccounts. The availability of
investment portfolio and subaccount options may vary between products. Share
transactions and security transactions are accounted for on a trade date basis.
FEDERAL AND STATE TAXES
The operations of the Account are included in the federal income tax return of
AVLIC, which is taxed as a life insurance company under the Internal Revenue
Code. AVLIC has the right to charge the Account any federal income taxes, or
provision for federal income taxes, attributable to the operations of the
Account or to the policies funded in the Account. Currently, AVLIC does not make
a charge for income or other taxes. Charges for state and local taxes, if any,
attributable to the Account may also be made.
2. POLICYOWNER CHARGES
AVLIC charges the Account for mortality and expense risks assumed. A daily
charge is made on the average daily value of the net assets representing equity
of policyowners held in each subaccount per each product's current policy
provisions. Additional charges are made at intervals and in amounts per each
product's current policy provisions. These charges are prorated against the
balance in each investment option of the policyowner, including the Fixed
Account option which is not reflected in this separate account.
F-I-16
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
3. SHARES OWNED
The Account invests in shares of mutual funds. Share activity and total
shares were as follows:
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
-------------------------------------------------------------------------------------
MONEY MARKET EQUITY INCOME GROWTH HIGH INCOME OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Shares owned at January 1,
1998..................... 7,552,485.910 1,018,225.148 872,066.612 598,367.840 695,077.235
Shares acquired............ 96,112,872.130 590,346.286 801,025.403 2,095,006.665 2,333,977.875
Shares disposed of......... (92,560,233.730) (448,398.816) (642,949.131) (1,976,811.206) (2,299,867.138)
--------------- ------------- ------------- -------------- --------------
Shares owned at December
31, 1998................. 11,105,124.310 1,160,172.618 1,030,142.884 716,563.299 729,187.972
=============== ============= ============= ============== ==============
Shares owned at January 1,
1997..................... 7,637,767.850 817,109.096 841,043.772 558,109.727 565,907.403
Shares acquired............ 57,423,437.350 511,389.228 339,254.481 1,118,068.428 1,175,596.501
Shares disposed of......... (57,508,719.290) (310,273.176) (308,231.641) (1,077,810.315) (1,046,426.669)
--------------- ------------- ------------- -------------- --------------
Shares owned at December
31, 1997................. 7,552,485.910 1,018,225.148 872,066.612 598,367.840 695,077.235
=============== ============= ============= ============== ==============
Shares owned at January 1,
1996..................... 5,613,527.070 652,438.732 702,196.341 358,988.159 438,914.420
Shares acquired............ 47,496,829.850 398,549.753 641,337.814 1,195,240.651 726,524.452
Shares disposed of......... (45,472,589.070) (233,879.389) (502,490.383) (996,119.083) (599,531.469)
--------------- ------------- ------------- -------------- --------------
Shares owned at December
31, 1996................. 7,637,767.850 817,109.096 841,043.772 558,109.727 565,907.403
=============== ============= ============= ============== ==============
</TABLE>
F-I-17
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II ALGER AMERICAN FUND
- ------------------------------------------------------------------------- -----------------------------
INVESTMENT ASSET MANAGER SMALL
ASSET MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------- ------------ ------------ ----------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1,531,564.418 237,050.443 389,113.666 94,728.864 140,054.018 403,465.664 300,282.630
678,058.443 639,413.242 496,047.058 128,107.356 152,783.138 441,926.395 397,157.183
(456,703.318) (533,255.969) (323,006.305) (82,453.072) (98,715.823) (339,110.335) (258,723.857)
- ------------- ------------ ------------ ----------- ----------- ------------ ------------
1,752,919.543 343,207.716 562,154.419 140,383.148 194,121.333 506,281.724 438,715.956
============= ============ ============ =========== =========== ============ ============
1,326,763.623 192,186.776 176,606.628 21,656.138 42,445.800 345,335.196 233,042.387
598,138.814 120,594.995 358,431.197 129,171.432 137,282.584 311,521.638 204,589.158
(393,338.019) (75,731.328) (145,924.159) (56,098.706) (39,674.366) (253,391.170) (137,348.915)
- ------------- ------------ ------------ ----------- ----------- ------------ ------------
1,531,564.418 237,050.443 389,113.666 94,728.864 140,054.018 403,465.664 300,282.630
============= ============ ============ =========== =========== ============ ============
1,221,448.421 171,179.054 9,382.665 61.274 1,153.239 263,321.551 150,146.226
469,994.138 113,295.550 299,411.174 26,095.586 53,791.445 280,059.510 162,856.038
(364,678.936) (92,297.828) (132,187.211) (4,500.722) (12,498.884) (198,045.865) (79,959.877)
- ------------- ------------ ------------ ----------- ----------- ------------ ------------
1,326,763.623 192,176.776 176,606.628 21,656.138 42,445.800 345,335.196 233,042.387
============= ============ ============ =========== =========== ============ ============
</TABLE>
F-I-18
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
3. SHARES OWNED -- (CONTINUED)
The Account invests in shares of mutual funds. Share activity and total shares
were as follows:
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
-----------------------------------------------------------
INCOME AND MIDCAP LEVERAGED
GROWTH GROWTH BALANCED ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares owned at January 1, 1998........ 381,241.041 312,259.570 125,291.131 104,973.976
Shares acquired........................ 471,468.634 272,665.784 179,874.177 159,683.710
Shares disposed of..................... (319,053.749) (194,022.782) (95,150.693) (105,767.454)
------------ ------------ ----------- ------------
Shares owned at December 31, 1998...... 533,655.926 390,902.572 210,014.615 158,890.232
============ ============ =========== ============
Shares owned at January 1, 1997........ 234,654.249 263,959.188 98,800.487 61,392.043
Shares acquired........................ 389,297.914 245,052.311 64,650.229 108,499.936
Shares disposed of..................... (242,711.122) (196,751.929) (38,159.585) (64,918.003)
------------ ------------ ----------- ------------
Shares owned at December 31, 1997...... 381,241.041 312,259.570 125,291.131 104,973.976
============ ============ =========== ============
Shares owned at January 1, 1996........ 51,644.863 138,005.038 32,000.820 5,780.602
Shares acquired........................ 238,851.986 257,678.903 91,879.454 94,532.096
Shares disposed of..................... (55,842.600) (131,724.753) (25,079.787) (38,920.655)
------------ ------------ ----------- ------------
Shares owned at December 31, 1996...... 234,654.249 263,959.188 98,800.487 61,392.043
============ ============ =========== ============
</TABLE>
- ---------------
(1) Commenced business 04/08/97
(2) Commenced business 04/03/97
(3) Commenced business 04/22/97
(4) Commenced business 04/08/97
F-I-19
<PAGE>
<TABLE>
<CAPTION>
MFS VARIABLE INSURANCE TRUST MORGAN STANLEY UNIVERSAL FUNDS
------------------------------------------------------------------------------ -------------------------------
EMERGING WORLD UTILITIES RESEARCH GROWTH WITH ASIAN EMERGING MARKETS
GROWTH SERIES GOVERNMENTS SERIES SERIES INCOME SERIES EQUITY EQUITY
PORTFOLIO SERIES PORTFOLIO PORTFOLIO PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3) PORTFOLIO(4)
------------- ---------------- ------------ ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
415,653.648 21,729.618 94,348.503 61,452.261 99,317.062 33,225.337 78,194.995
513,918.012 88,429.719 186,751.323 173,038.858 226,820.471 99,976.563 334,441.671
(360,617.119) (58,498.872) (114,749.586) (78,384.682) (150,456.836) (69,339.456) (296,795.548)
------------ ----------- ------------ ----------- ------------ ----------- ------------
568,954.541 51,660.465 166,350.240 156,106.437 175,680.697 63,862.444 115,841.118
============ =========== ============ =========== ============ =========== ============
193,700.823 17,336.705 28,672.191 -- -- -- --
457,734.629 37,542.368 107,581.620 72,826.540 110,180.302 51,430.390 140,386.479
(235,781.804) (33,149.455) (41,905.308) (11,374.279) (10,863.240) (18,205.053) (62,191.484)
------------ ----------- ------------ ----------- ------------ ----------- ------------
415,653.648 21,729.618 94,348.503 61,452.261 99,317.062 33,225.337 78,194.995
============ =========== ============ =========== ============ =========== ============
10,355.688 1,555.043 1,475.513 -- -- -- --
232,976.138 34,612.233 35,187.917 -- -- -- --
(49,631.003) (18,830.571) (7,991.239) -- -- -- --
------------ ----------- ------------ ----------- ------------ ----------- ------------
193,700.823 17,336.705 28,672.191 -- -- -- --
============ =========== ============ =========== ============ =========== ============
</TABLE>
F-I-20
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
3. SHARES OWNED -- (CONTINUED)
The Account invests in shares of mutual funds. Share activity and total shares
were as follows:
<TABLE>
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS DREYFUS
--------------------------------------------- --------------
GLOBAL INTERNATIONAL U.S. REAL
EQUITY MAGNUM ESTATE STOCK INDEX
PORTFOLIO(1) PORTFOLIO(2) PORTFOLIO(3) FUND PORTFOLIO
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares owned at January 1, 1998......... 72,507.289 51,120.253 55,401.749 --
Shares acquired......................... 172,405.252 120,740.453 136,182.392 --
Shares disposed of...................... (85,325.786) (88,756.241) (103,875.851) --
----------- ----------- ------------ ------------
Shares owned at December 31, 1998....... 159,586.755 83,104.465 87,708.290 --
=========== =========== ============ ============
Shares owned at January 1, 1997......... -- -- -- 109,123.387
Shares acquired......................... 93,896.403 77,530.448 97,640.967 2,530.208
Shares disposed of...................... (21,389.114) (26,410.195) (42,239.218) (111,653.595)
----------- ----------- ------------ ------------
Shares owned at December 31, 1997....... 72,507.289 51,120.253 55,401.749 --
=========== =========== ============ ============
Shares owned at January 1, 1996......... -- -- -- 127,452.178
Shares acquired......................... -- -- -- 33,926.076
Shares disposed of...................... -- -- -- (52,254.867)
----------- ----------- ------------ ------------
Shares owned at December 31, 1996....... -- -- -- 109,123.387
=========== =========== ============ ============
</TABLE>
- ---------------
(1) Commenced business 04/17/97
(2) Commenced business 04/07/97
(3) Commenced business 04/28/97
F-I-21
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF NET ASSETS
JUNE 30, 1999
(UNAUDITED)
ASSETS
INVESTMENTS AT NET ASSET VALUE:
VARIABLE INSURANCE PRODUCTS FUND:
Money Market Portfolio--13,560,919.230 shares at $1.00 per
share (cost $13,560,919) $ 13,560,919
Equity Income Portfolio--1,208,468.678 shares at $27.25 per
share (cost $21,648,927) 32,930,771
Growth Portfolio--1,214,766.221 shares at $45.73 per share
(cost $32,585,209) 55,551,259
High Income Portfolio--600,230.495 shares at $11.29 per
share (cost $6,483,788) 6,776,602
Overseas Portfolio--755,971.484 shares at $20.80 per share
(cost $11,714,070) 15,724,207
VARIABLE INSURANCE PRODUCTS FUND II:
Asset Manager Portfolio--1,827,238.568 shares at $17.69 per
share (cost $26,108,017) 32,323,850
Investment Grade Bond Portfolio--337,505.281 shares at
$12.08 per share (cost $4,036,702) 4,077,064
Contrafund Portfolio--667,123.798 shares at $26.10 per share
(cost $12,663,670) 17,411,931
Index 500 Portfolio--169,927.201 shares at $155.65 per
share (cost $18,730,921) 26,449,169
Asset Manager Growth Portfolio--221,836.491 shares at
$17.15 per share (cost $3,242,324) 3,804,496
ALGER AMERICAN FUND:
Small Capitalization Portfolio--561,379.657 shares at $43.58
per share (cost $19,808,247) 24,464,925
Growth Portfolio--531,471.925 shares at $55.84 per share
(cost $20,332,642) 29,677,392
Income and Growth Portfolio--607,709.682 shares at $13.32
per share (cost $6,546,404) 8,094,693
Midcap Growth Portfolio--484,381.913 shares at $27.60 per
share (cost $10,409,836) 13,368,941
Balanced Portfolio--279,071.116 shares at $13.89 per share
(cost $3,197,943) 3,876,298
Leveraged Allcap Portfolio--266,230.450 shares at $40.87 per
share (cost $7,974,738) 10,880,838
MFS VARIABLE INSURANCE TRUST:
Emerging Growth Series Portfolio--597,879.552 shares at
$24.22 per share (cost $9,178,974) 14,480,643
World Governments Series Portfolio--38,588.793 shares at
$9.99 per share (cost $389,345) 385,502
Utilities Series Portfolio--206,496.262 shares at $20.23 per
share (cost $3,570,206) 4,177,419
Research Series Portfolio--188,175.865 shares at $20.48 per
share (cost $3,193,815) 3,853,842
Growth with Income Series Portfolio--171,500.632 shares at
$21.14 per share (cost $2,971,999) 3,625,523
MORGAN STANLEY UNIVERSAL FUNDS:
Asian Equity Portfolio--115,427.953 shares at $7.69 per share
(cost $724,722) 887,641
Emerging Markets Equity Portfolio--148,721.98 shares at $9.82
per share (cost $1,503,308) 1,460,450
Global Equity Portfolio--186,605.597 shares at $13.62 per
share (cost $2,304,695) 2,541,568
International Magnum Portfolio--96,117.145 shares at $11.90
per share (cost $1,082,389) 1,143,795
U.S. Real Estate Portfolio--90,242.886 shares at $10.63 per
share (cost $978,023) 959,283
------------
NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS $332,489,021
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-I(U)-1
<PAGE>
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
STATEMENT OF OPERATIONS:
VARIABLE INSURANCE PRODUCTS FUND
------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
------- --------- --------- ---------
<S> <C> <C> <C> <C>
1999
INVESTMENT INCOME:
Dividend distributions
received $ 3,627,121 $ 326,655 $ 438,682 $ 82,737
Mortality and expense
risk charge (1,368,013) (63,177) (140,442) (228,756)
---------- -------- -------- ----------
NET INVESTMENT INCOME (LOSS) 2,259,108 263,478 298,240 (146,019)
---------- -------- -------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments 17,482,085 -- 969,719 5,202,111
Net change in unrealized
appreciation (depreciation) 11,692,196 -- 2,289,886 1,367,711
----------- --------- --------- ----------
NET GAIN (LOSS) ON INVESTMENTS 29,174,281 -- 3,259,605 6,569,822
----------- --------- ---------- ----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $31,433,389 $ 263,478 $ 3,557,845 $ 6,423,803
=========== ========= ========== ==========
STATEMENT OF CHANGES IN NET ASSETS:
VARIABLE INSURANCE PRODUCTS FUND
-------------------------------------
MONEY EQUITY
MARKET INCOME GROWTH
TOTAL PORTFOLIO PORTFOLIO PORTFOLIO
------- --------- --------- ---------
1999
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income
(loss) $ 2,259,108 $ 263,478 $ 298,240 $ (146,019)
Net realized gain
(loss) on investments 17,482,085 -- 969,719 5,202,111
Net change in unrealized
appreciation (depreciation) 11,692,196 -- 2,289,886 1,367,711
----------- ----------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 31,433,389 263,478 3,557,845 6,423,803
NET INCREASE (DECREASE) FROM
POLICYOWNER TRANSACTIONS 18,402,558 2,192,317 (118,663) 2,904,944
---------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN
NET ASSETS 49,835,947 2,455,795 3,439,182 9,328,747
NET ASSETS AT JANUARY 1, 1999 282,653,074 11,105,124 29,491,589 46,222,512
------------ ----------- ----------- -----------
NET ASSETS AT JUNE 30, 1999 $332,489,021 $13,560,919 $32,930,771 $55,551,259
============ =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
F-I(U)-2
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
- -------------------------------- --------------------------------------------------------------
ASSET
ASSET INVESTMENT MANAGER
HIGH INCOME OVERSEAS MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 792,857 $ 226,340 $ 1,054,568 $178,023 $ 68,862 $ 201,036 $ 80,579
(37,144) (64,778) (144,356) (21,258) (68,176) (100,822) (15,137)
---------- --------- ---------- -------- --------- --------- --------
755,713 161,562 910,212 156,765 686 100,214 65,442
--------- --------- ---------- -------- --------- --------- --------
29,640 365,064 1,335,786 55,850 504,989 136,417 133,643
(161,693) 605,258 (748,030) (312,048) 1,078,207 2,275,805 45,820
--------- --------- ---------- ---------- --------- --------- --------
(132,053) 970,322 587,756 (256,198) 1,583,196 2,412,222 179,463
--------- --------- ---------- ---------- --------- --------- --------
$ 623,660 $1,131,884 $1,497,968 $(99,433) $1,583,882 $2,512,436 $244,905
========= ========== ========== ========= ========== ========== ========
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
- -------------------------------- -------------------------------------------------------------
ASSET
ASSET INVESTMENT MANAGER
HIGH INCOME OVERSEAS MANAGER GRADE BOND CONTRAFUND INDEX 500 GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- --------- --------- ---------- --------- ---------
$ 755,713 $ 161,562 $ 910,212 $ 156,765 $ 686 $ 100,214 $ 65,442
29,640 365,064 1,335,786 55,850 504,989 136,417 133,643
(161,693) 605,258 (748,030) (312,048) 1,078,207 2,275,805 45,820
--------- -------- --------- --------- --------- --------- -------
623,660 1,131,884 1,497,968 (99,433) 1,583,882 2,512,436 244,905
(2,109,031) (27,896) (1,007,136) (271,475) 2,088,993 4,107,614 253,705
----------- -------- ----------- ----------- --------- ---------- -------
(1,485,371) 1,103,988 490,832 (370,908) 3,672,875 6,620,050 498,610
8,261,973 14,620,219 31,833,018 4,447,972 13,739,056 19,829,119 3,305,886
--------- ---------- ---------- --------- ---------- ---------- ---------
$ 6,776,602 $15,724,207 $32,323,850 $ 4,077,064 $17,411,931 $26,449,169 $3,804,496
=========== =========== =========== =========== =========== =========== ==========
F-I(U)-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
STATEMENT OF OPERATIONS:
ALGER AMERICAN FUND
-------------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- --------- ----------
<S> <C> <C> <C> <C>
1999
INVESTMENT INCOME:
Dividend distributions
received $ -- $ 37,125 $ 14,347 $ --
Mortality and expense
risk charge (99,001) (116,905) (33,317) (53,519)
---------- --------- --------- ----------
NET INVESTMENT INCOME (LOSS) (99,001) (79,780) (18,970) (53,519)
---------- --------- --------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments 2,786,842 2,534,821 426,544 1,862,002
Net change in unrealized
appreciation (depreciation) 88,789 1,336,348 152,144 (359,958)
---------- ---------- -------- ----------
NET GAIN (LOSS) ON INVESTMENTS 2,875,631 3,871,169 578,688 1,502,044
---------- ---------- -------- ----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATION $2,776,630 $3,791,389 $559,718 $1,448,525
========== ========== ======== ==========
STATEMENT OF CHANGES IN NET ASSETS:
ALGER AMERICAN FUND
-------------------------------------------------------------
SMALL INCOME AND MIDCAP
CAPITALIZATION GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- ----------
1999
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) $ (99,001) $ (79,780) $ (18,970) $ (53,519)
Net realized gain (loss)
on investments 2,786,842 2,534,821 426,544 1,862,002
Net change in unrealized
appreciation (depreciation) 88,789 1,336,348 152,144 (359,958)
----------- ---------- -------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 2,776,630 3,791,389 559,718 1,448,525
NET INCREASE (DECREASE) FROM
POLICYOWNER TRANSACTIONS (572,913) 2,537,540 533,409 635,058
----------- ---------- -------- ---------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 2,203,717 6,328,929 1,093,127 2,083,583
NET ASSETS AT JANUARY 1, 1999 22,261,208 23,348,463 7,001,566 11,285,358
----------- ----------- ---------- -----------
NET ASSETS AT JUNE 30, 1999 $24,464,925 $29,677,392 $8,094,693 $13,368,941
=========== =========== ========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
F-I(U)-4
<PAGE>
<TABLE>
<CAPTION>
ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
- ---------------------------- ------------------------------------------------------------
GROWTH
EMERGING WORLD WITH
LEVERAGED GROWTH GOVERNMENTS UTILITIES RESEARCH INCOME
BALANCED ALLCAP SERIES SERIES SERIES SERIES SERIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ----------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 39,415 $ -- $ -- $ 21,210 $ 45,844 $ 6,589 $ 12,252
(14,283) (37,791) (58,080) (1,849) (16,144) (13,748) (15,403)
--------- ---------- ---------- ------- -------- ------- -------
25,132 (37,791) (58,080) 19,361 29,700 (7,159) (3,151)
--------- ---------- ---------- ------- -------- ------- -------
199,925 658,702 -- -- 230,507 34,817 14,706
220,573 961,769 1,618,498 (33,395) 80,723 258,088 159,350
--------- ---------- --------- -------- -------- ------- -------
420,498 1,620,471 1,618,498 (33,395) 311,230 292,905 174,056
--------- ---------- --------- -------- -------- ------- -------
$ 445,630 $1,582,680 $1,560,418 $(14,034) $340,930 $285,746 $170,905
========= ========== ========== ========= ======== ======== ========
ALGER AMERICAN FUND MFS VARIABLE INSURANCE TRUST
- ---------------------------- ------------------------------------------------------------
GROWTH
EMERGING WORLD WITH
LEVERAGED GROWTH GOVERNMENTS UTILITIES RESEARCH INCOME
BALANCED ALLCAP SERIES SERIES SERIES SERIES SERIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ----------- --------- --------- --------- --------- ---------
$ 25,132 $ (37,791) $ (58,080) $ 19,361 $ 29,700 $ (7,159) $ (3,151)
199,925 658,702 -- -- 230,507 34,817 14,706
220,573 961,769 1,618,498 (33,395) 80,723 258,088 159,350
---------- ----------- ---------- --------- -------- -------- ---------
445,630 1,582,680 1,560,418 (14,034) 340,930 285,746 170,905
704,679 3,752,890 704,771 (162,530) 539,426 594,269 (78,320)
---------- ------------ ---------- ---------- --------- -------- --------
1,150,309 5,335,570 2,265,189 (176,564) 880,356 880,015 92,585
2,725,989 5,545,268 12,215,454 562,066 3,297,063 2,973,827 3,532,938
---------- ------------ ----------- -------- ---------- ---------- ----------
$3,876,298 $ 10,880,838 $ 14,480,643 $385,502 $4,177,419 $3,853,842 $3,625,523
========== ============ ============ ======== ========== ========== ==========
F-I(U)-5
</TABLE>
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
STATEMENT OF OPERATIONS:
MORGAN STANLEY UNIVERSAL FUNDS
-------------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ---------
1999
INVESTMENT INCOME:
Dividend distributions received $ -- $ -- $ --
Mortality and expense risk charge (2,001) (4,040) (9,688)
--------- --------- --------
NET INVESTMENT INCOME (LOSS) (2,001) (4,040) (9,688)
---------- -------- ---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss)
on investments -- -- -- --
Net change in unrealized
appreciation (depreciation) 217,015 320,783 91,162
--------- -------- --------
NET GAIN (LOSS) ON INVESTMENTS 217,015 320,783 91,162
--------- -------- --------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 215,014 $ 316,743 $ 81,474
========= ========= ========
STATEMENT OF CHANGES IN NET ASSETS:
MORGAN STANLEY UNIVERSAL FUNDS
--------------------------------
EMERGING GLOBAL
ASIAN EQUITY MARKETS EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
1999
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) $ (2,001) $ (4,040) $ (9,688)
Net realized gain (loss) on
investments -- -- --
Net change in unrealized
appreciation(depreciation) 217,015 320,783 91,162
-------- --------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 215,014 316,743 81,474
NET INCREASE (DECREASE) FROM
POLICYOWNER TRANSACTIONS 338,627 320,075 363,123
-------- -------- --------
TOTAL INCREASE (DECREASE) IN
NET ASSETS 553,641 636,818 444,597
NET ASSETS AT JANUARY 1, 1999 334,000 823,632 2,096,971
-------- -------- ----------
NET ASSETS AT JUNE 30, 1999 $ 887,641 $1,460,450 $2,541,568
========= ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-I(U)-6
<PAGE>
MORGAN STANLEY UNIVERSAL FUNDS
--------------------------------
INTERNATIONAL U.S. REAL
MAGNUM ESTATE
PORTFOLIO PORTFOLIO
$ -- $ --
(4,566) (3,632)
-------- ---------
(4,566) (3,632)
--------- ----------
-- --
66,628 72,763
--------- ---------
66,628 72,763
--------- ---------
$ 62,062 $ 69,131
========== =========
MORGAN STANLEY UNIVERSAL FUNDS
---------------------------------
INTERNATIONAL U.S. REAL
MAGNUM ESTATE
PORTFOLIO PORTFOLIO
$ (4,566) $ (3,632)
-- --
66,628 72,763
-------- ---------
62,062 69,131
148,470 30,612
-------- ---------
210,532 99,743
933,263 859,540
---------- ----------
$1,143,795 $ 959,283
========== ==========
F-I(U)-7
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ameritas Variable Life Insurance Company Separate Account V (the Account) was
established on August 28, 1985, under Nebraska law by Ameritas Variable Life
Insurance Company (AVLIC), a wholly-owned subsidiary of AMAL Corporation, a
majority-owned affiliate of Ameritas Life Insurance Corp. (ALIC) The assets of
the Account are segregated from AVLIC's other assets and are used only to
support variable life products issued by AVLIC.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. At June 30, 1999, there are twenty-six subaccounts
within the Account. Five of the subaccounts invest only in a corresponding
Portfolio of Variable Insurance Products Fund and five invest only in a
corresponding Portfolio of Variable Insurance Products Fund II. Both funds are
diversified open-end management investment companies and are managed by Fidelity
Management and Research Company. Six of the subaccounts invest only in a
corresponding Portfolio of Alger American Fund which is a diversified open-end
management investment company managed by Fred Alger Management, Inc. Five of the
subaccounts invest only in a corresponding Portfolio of MFS Variable Insurance
Trust which is a diversified open-end management investment company managed by
Massachusetts Financial Services Company. Five of the subaccounts invest only in
a corresponding Portfolio of Morgan Stanley Universal Funds, Inc. which is a
diversified open-end management investment company managed by Morgan Stanley
Asset Management, Inc. All five funds are registered under the Investment
Company Act of 1940, as amended. Each Portfolio pays the manager a monthly fee
for managing its investments and business affairs. The assets of the Account are
carried at the net asset value of the underlying Portfolios of the Funds. The
value of the policyowners' units corresponds to the Account's investment in the
underlying subaccounts. The availability of investment portfolio and subaccount
options may vary between products.
AVLIC currently does not expect to incur any federal income tax liability
attributable to the Account with respect to the sale of variable life insurance
policies. If, however, AVLIC determines that it may incur such taxes
attributable to the Account, it may assess a charge for such taxes against the
Account.
2. BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL STATEMENTS
Management believes that all adjustments, consisting of only normal recurring
accruals, considered necessary for a fair presentation of the unaudited interim
financial statements have been included. The results of operations for any
interim period are not necessarily indicative of results for the full year. The
unaudited interim financial statements should be read in conjunction with the
audited financial statements and notes thereto for the years ended December 31,
1998, 1997, and 1996.
F-I(U)-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ameritas Variable Life Insurance Company
Lincoln, Nebraska
We have audited the accompanying balance sheets of Ameritas Variable Life
Insurance Company as of December 31, 1998 and 1997, and the related statements
of operations, comprehensive income, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ameritas Variable Life Insurance Company as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Lincoln, Nebraska
February 5, 1999
F-II- 1
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, available for sale (amortized
cost $146,650 -- 1998 and $113,158 -- 1997)............ $ 150,462 $ 115,955
Equity securities, available for sale (amortized cost
$2,031 -- 1998 $4,061 -- 1997)......................... 2,020 4,135
Loans on insurance policies............................... 10,949 7,482
Other invested assets..................................... 10,020 2,206
---------- ----------
Total investments................................. 173,451 129,778
Cash and cash equivalents................................... 12,011 13,711
Accrued investment income................................... 2,425 1,801
Reinsurance recoverable -- affiliates....................... 455 514
Prepaid reinsurance premium -- affiliates................... 2,380 2,298
Deferred policy acquisition costs........................... 121,236 98,746
Other....................................................... 1,695 199
Separate Accounts........................................... 1,709,448 1,265,348
---------- ----------
$2,023,101 $1,512,395
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy and contract reserves.............................. $ 1,681 $ 941
Policy and contract claims................................ 625 925
Accumulated contract values............................... 213,874 154,281
Unearned policy charges................................... 1,814 1,498
Unearned reinsurance ceded allowance...................... 3,596 3,268
Federal income taxes --
Current................................................ 2,941 1,466
Deferred............................................... 8,348 9,326
Other..................................................... 8,086 10,200
Separate Accounts......................................... 1,709,448 1,265,348
---------- ----------
Total Liabilities................................. 1,950,413 1,447,253
---------- ----------
Commitments and contingencies
STOCKHOLDER'S EQUITY:
Common stock, par value $100 per share; authorized 50,000
shares, issued and outstanding 40,000 shares........... 4,000 4,000
Additional paid-in capital................................ 40,370 40,370
Retained earnings......................................... 27,434 20,180
Accumulated other comprehensive income.................... 884 592
---------- ----------
Total Stockholder's Equity........................ 72,688 65,142
---------- ----------
$2,023,101 $1,512,395
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-II- 2
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
INCOME:
Insurance revenues:
Contract charges.......................................... $42,775 $33,717 $26,345
Premium-reinsurance ceded................................. (7,836) (6,840) (5,895)
Reinsurance ceded allowance............................... 3,169 2,752 2,235
Investment revenues:
Investment income, net.................................... 14,052 8,277 3,603
Realized gains, net....................................... 79 368 19
Other....................................................... 2,269 980 567
------- ------- -------
54,508 39,254 26,874
------- ------- -------
BENEFITS AND EXPENSES:
Policy benefits:
Death benefits............................................ 2,200 1,356 716
Interest credited......................................... 13,400 7,258 2,736
Increase in policy and contract reserves.................. 740 192 140
Other..................................................... 222 92 52
Sales and operating expenses................................ 15,980 11,641 10,041
Amortization of deferred policy acquisition costs........... 11,847 9,584 5,531
------- ------- -------
44,389 30,123 19,216
------- ------- -------
INCOME BEFORE FEDERAL INCOME TAXES.......................... 10,119 9,131 7,658
------- ------- -------
Income taxes -- current..................................... 4,000 4,305 3,819
Income taxes -- deferred.................................... (1,135) (844) (811)
------- ------- -------
Total income taxes................................... 2,865 3,461 3,008
------- ------- -------
NET INCOME.................................................. $ 7,254 $ 5,670 $ 4,650
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-II- 3
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income.................................................. $7,254 $5,670 $4,650
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during the period (net
of deferred tax of $185, $378, and ($159) for 1998,
1997 and 1996, respectively).......................... 343 702 (295)
Reclassification adjustment for gains included in net
income (net of deferred tax of $28, $129 and $7 for
1998, 1997 and 1996, respectively).................... (51) (239) (12)
------ ------ ------
Other comprehensive income (loss)......................... 292 463 (307)
------ ------ ------
Comprehensive income........................................ $7,546 $6,133 $4,343
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-II- 4
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
---------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
------ ------ ---------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996................. 40,000 $4,000 $ 29,700 $ 9,860 $ 436 $ 43,996
Return of capital...................... -- -- (15,000) -- -- (15,000)
Capital contribution from AMAL
Corporation.......................... -- -- 25,670 -- -- 25,670
Net unrealized investment loss, net.... -- -- -- -- (307) (307)
Net income............................. -- -- -- 4,650 -- 4,650
------ ------ -------- ------- ----------- --------
BALANCE, December 31, 1996............... 40,000 4,000 40,370 14,510 129 59,009
Net unrealized investment gain, net.... -- -- -- -- 463 463
Net income............................. -- -- -- 5,670 -- 5,670
------ ------ -------- ------- ----------- --------
BALANCE, December 31, 1997............... 40,000 4,000 40,370 20,180 592 65,142
Net unrealized investment gain, net.... -- -- -- -- 292 292
Net income............................. -- -- -- 7,254 -- 7,254
------ ------ -------- ------- ----------- --------
BALANCE, December 31, 1998............... 40,000 $4,000 $ 40,370 $27,434 $ 884 $ 72,688
====== ====== ======== ======= =========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-II- 5
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income.................................................. $ 7,254 $ 5,670 $ 4,650
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred policy acquisition costs......... 11,847 9,584 5,531
Policy acquisition costs deferred......................... (34,820) (30,642) (26,596)
Interest credited to contract values...................... 13,400 7,258 2,736
Amortization of discounts or premiums..................... (28) (40) (83)
Net gains on other invested assets........................ (3,732) (631) --
Net realized gains on investment transactions............. (79) (368) (19)
Deferred income taxes..................................... (1,135) (844) (811)
Change in assets and liabilities:
Accrued investment income.............................. (624) (705) (306)
Reinsurance recoverable-affiliates..................... 59 (505) 48
Prepaid reinsurance premium-affiliates................. (82) (142) (650)
Other assets........................................... (1,496) 284 (377)
Policy and contract reserves........................... 740 192 140
Policy and contract claims............................. (300) 819 106
Unearned policy charges................................ 316 255 279
Federal income tax payable-current..................... 1,475 591 (310)
Unearned reinsurance ceded allowance................... 328 129 860
Other liabilities...................................... (2,114) 2,172 3,762
-------- -------- --------
Net cash from operating activities........................ (8,991) (6,923) (11,040)
-------- -------- --------
INVESTING ACTIVITIES
Purchase of fixed maturity securities available for sale.... (70,904) (92,291) (31,514)
Purchase of equity securities available for sale............ -- (4,311) --
Purchase of other invested assets........................... (7,760) (1,611) --
Proceeds from maturities or repayment of fixed maturity
securities available for sale............................. 23,124 25,168 5,307
Proceeds from sales of fixed maturity securities available
for sale.................................................. 14,447 16,419 3,014
Proceeds from the sale of equity securities available for
sale...................................................... 1,979 252 --
Proceeds from the sale of other invested assets............. 3,678 35 --
Net change in loans on insurance policies................... (3,467) (3,173) (1,670)
-------- -------- --------
Net cash from investing activities........................ (38,903) (59,512) (24,863)
-------- -------- --------
FINANCING ACTIVITIES
Return of capital........................................... -- -- (15,000)
Capital contribution........................................ -- -- 25,670
Net change in accumulated contract values................... 46,194 69,462 30,257
-------- -------- --------
Net cash from financing activities........................ 46,194 69,462 40,927
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (1,700) 3,027 5,024
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 13,711 10,684 5,660
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 12,011 $ 13,711 $ 10,684
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes.................................. $ 2,525 $ 3,714 $ 4,129
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-II- 6
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ameritas Variable Life Insurance Company (the Company), a stock life insurance
company domiciled in the State of Nebraska, was a wholly-owned subsidiary of
Ameritas Life Insurance Corp. (ALIC), until April of 1996 when it became a
wholly-owned subsidiary of AMAL Corporation, a holding company 66% owned by ALIC
and 34% owned by AmerUs Life Insurance Company (AmerUs). The Company began
issuing variable life insurance and variable annuity policies in 1987, fixed
premium annuities in 1996 and equity indexed annuities in 1997. The variable
life, variable annuity, fixed premium annuity and equity indexed annuity
policies are not participating with respect to dividends.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The principal accounting and reporting practices followed are:
INVESTMENTS
The Company classifies its securities into categories based upon the Company's
intent relative to the eventual disposition of the securities. The first
category, held to maturity securities, is comprised of fixed maturity securities
which the Company has the positive intent and ability to hold to maturity. These
securities are carried at amortized cost. The second category, available for
sale securities, may be sold to address the liquidity and other needs of the
Company. Securities classified as available for sale are carried at fair value
on the balance sheet with unrealized gains and losses excluded from operations
and reported as a separate component of stockholder's equity, net of related
deferred acquisition costs and income tax effects. The third category, trading
securities, is for debt and equity securities acquired for the purpose of
selling them in the near term. The Company has classified all of its securities
as available for sale. Realized investment gains and losses on sales of
securities are determined on the specific identification method.
Other Invested Assets consist of exchange and privately traded options tied to
the Standard and Poor's Index and are valued at fair value with changes in the
fair value of these investments and realized gains on these investments included
in net investment income.
The Company records write-offs or allowances for its investments based upon a
evaluation of specific problem investments. The Company reviews, on a continual
basis, all invested assets to identify investments where the Company may have
credit concerns. Investments with credit concerns include those the Company has
identified as experiencing a deterioration in financial condition. The Company
has no write-offs or allowances recorded as of December 31, 1998, 1997 and 1996.
CASH EQUIVALENTS
The Company considers all highly liquid debt securities purchased with remaining
maturity of less than three months to be cash equivalents.
SEPARATE ACCOUNTS
The Company operates separate accounts on which the earnings or losses accrue
exclusively to contractholders. The assets (mutual fund investments) and
liabilities of each account are clearly identifiable and distinguishable from
other assets and liabilities of the Company. Assets are reported at fair value.
F-II- 7
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYOWNERS
Universal life-type policies are insurance contracts with terms that are not
fixed and guaranteed. The terms that may be changed could include one or more of
the amounts assessed the policyowner, premiums paid by the policyowner or
interest accrued to policyowners balances. Amounts received as payments for such
contracts are reflected as deposits in accumulated contract values and are not
reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading, mortality risk expense, the
cost of insurance and policy administration. Policy benefits and claims that are
charged to expense include interest credited to contracts under the fixed
account investment option and benefit claims incurred in the period in excess of
related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYOWNERS
Contracts that do not subject the Company to risks arising from policyowner
mortality or morbidity are referred to as investment contracts. Certain deferred
annuities are considered investment contracts. Amounts received as payments for
such contracts are reflected as deposits in accumulated contract values and are
not reported as premium revenues.
Revenues for investment products consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are directly related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable from future premiums. Such costs include
commissions, certain costs of policy issuance and underwriting, and certain
variable distribution expenses.
Costs deferred related to universal life-type policies and investment-type
contracts are amortized generally over the lives of the policies, in relation to
the present value of estimated gross profits from mortality, investment and
expense margins. The estimated gross profits are reviewed periodically based on
actual experience and changes in assumptions.
F-II- 8
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
A roll-forward of the amounts reflected in the balance sheets as deferred
acquisition costs is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Beginning balance........................................... $ 98,746 $79,272 $57,664
Acquisition costs deferred.................................. 34,820 30,642 26,596
Amortization of deferred policy acquisition costs........... (11,847) (9,584) (5,531)
Adjustment for unrealized investment (gain)/loss............ (483) (1,584) 543
-------- ------- -------
Ending balance.............................................. $121,236 $98,746 $79,272
======== ======= =======
</TABLE>
To the extent that unrealized gains or losses on available for sale securities
would result in an adjustment of deferred policy acquisition costs had those
gains or losses actually been realized, the related unamortized deferred policy
acquisition costs are recorded as an adjustment of the unrealized investment
gains or losses included in stockholder's equity.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy and contract benefits left with the Company on
variable universal life and annuity-type contracts are based on the policy
account balance, and are shown as accumulated contract values. In addition the
Company carries as future policy benefits a liability for additional coverages
offered under policy riders.
INCOME TAXES
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the cumulative differences in assets and liabilities
determined on a tax return and financial statement basis at the current enacted
tax rates.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, entitled "Accounting for Derivative
Instruments and Hedging Activities" (SFAS no. 133). The statement requires that
all derivatives (including certain derivatives embedded in contracts) be
recorded on the balance sheet and measured at fair value. SFAS no. 133 requires
that changes in the fair value of derivatives be recognized currently in
operations unless specific hedge accounting criteria are met. If such criteria
are met, the derivative's gain or loss will offset related results of the hedged
item in the statement of operations. A company must formally document, designate
and assess the effectiveness of transactions to apply hedge accounting
treatment.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999, with
earlier implementation permitted. The statement must be implemented as of the
beginning of a quarter and retroactive application to financial statements of
prior periods is prohibited. The Company has not determined the financial
statement impact of adopting this statement.
RECLASSIFICATIONS
Certain items on the prior year financial statements have been restated to
conform to current year presentation.
F-II- 9
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $ 9,099 $6,622 $3,308
Equity Securities available for sale........................ 179 156 --
Loans on insurance policies................................. 590 370 214
Cash equivalents............................................ 659 642 618
Other invested assets....................................... 3,732 631 --
------- ------ ------
Gross investment income................................... 14,259 8,421 4,140
Investment expenses......................................... 207 144 537
------- ------ ------
Net investment income..................................... $14,052 $8,277 $3,603
======= ====== ======
</TABLE>
Net pretax realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net gains on disposals of fixed maturity securities
available for sale........................................ $131 $365 $19
Net gains (losses) on disposal of equity securities
available for sale........................................ (52) 3 --
---- ---- ---
Net gains on disposal of securities available for sale...... $ 79 $368 $19
==== ==== ===
</TABLE>
Proceeds from sales of securities available for sale and gross gains and losses
realized on those sales were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------
PROCEEDS GAINS LOSSES
-------- ----- ------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $22,282 $433 $302
Equity securities available for sale........................ 1,979 -- $ 52
------- ---- ----
Total securities available for sale....................... $24,261 $433 $354
======= ==== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------
PROCEEDS GAINS LOSSES
-------- ----- ------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $16,419 $161 $8
Equity securities available for sale........................ 252 2 --
------- ---- --
Total securities available for sale....................... $16,671 $163 $8
======= ==== ==
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------
PROCEEDS GAINS LOSSES
-------- ----- ------
<S> <C> <C> <C>
Fixed maturity securities available for sale................ $3,014 $30 $--
====== === ==
</TABLE>
F-II- 10
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS -- (CONTINUED)
The amortized cost and fair value of investments in securities by type of
investment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
--------- ------ ------ --------
<S> <C> <C> <C> <C>
U. S. Corporate................................... $ 98,658 $3,146 $159 $101,645
Mortgage-backed................................... 35,314 430 14 35,730
U.S. Treasury securities and obligations of U.S.
government agencies............................. 12,678 409 -- 13,087
-------- ------ ---- --------
Total fixed maturity securities available for
sale......................................... 146,650 3,985 173 150,462
-------- ------ ---- --------
Equity securities available for sale.............. 2,031 -- 11 2,020
-------- ------ ---- --------
Total securities available for sale............. $148,681 $3,985 $184 $152,482
======== ====== ==== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
--------- ------ ------ --------
<S> <C> <C> <C> <C>
U.S. Corporate................................... $ 75,705 $2,024 $16 $ 77,713
Mortgage-backed.................................. 25,518 592 -- 26,110
U.S. Treasury securities and obligations of
U.S. government agencies....................... 11,935 221 24 12,132
-------- ------ --- --------
Total fixed maturity securities available for
sale........................................ 113,158 2,837 40 115,955
-------- ------ --- --------
Equity securities available for sale............. 4,061 74 -- 4,135
-------- ------ --- --------
Total securities available for sale............ $117,219 $2,911 $40 $120,090
======== ====== === ========
</TABLE>
The amortized cost and fair value of fixed maturity securities available for
sale by contractual maturity at December 31, 1998 are shown below. Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
<S> <C> <C>
Due in one year or less..................................... $ 3,933 $ 3,964
Due after one year through five years....................... 39,120 40,029
Due after five years through ten years...................... 54,266 56,034
Due after ten years......................................... 14,017 14,705
Mortgage-backed securities.................................. 35,314 35,730
-------- --------
Total..................................................... $146,650 $150,462
======== ========
</TABLE>
The Company purchases exchange and privately traded options to support certain
equity index annuity policyowner liabilities. These derivatives, reflected as
other invested assets, are used to manage fluctuations in the equity market risk
granted to the policyowners of the equity advantage annuities. These derivatives
involve, to varying degrees, elements of credit risk and market risk. Credit
risk is the risk of loss from a private party failing to perform according to
the terms of the contract. Market risk is the possibility that future changes in
market prices may make the derivative less valuable, which offset guarantees
granted to policyowners. The options value on the balance sheet reflects the
risk of potential loss to the entity.
F-II- 11
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
2. INVESTMENTS -- (CONTINUED)
The Company's outstanding positions, which expire over various terms ranging
from 1 to 7 years, shown in notional or contract amounts, along with their cost
and estimated fair values, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------
NOTIONAL FAIR
AMOUNT COST VALUE
-------- ---- -----
<S> <C> <C> <C>
Options..................................................... $18,655 $7,096 $10,020
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------
NOTIONAL FAIR
AMOUNT COST VALUE
-------- ---- -----
<S> <C> <C> <C>
Options..................................................... $1,340 $1,544 $2,206
====== ====== ======
</TABLE>
3. INCOME TAXES
The items that give rise to deferred tax assets and liabilities relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
-----------------
1998 1997
---- ----
<S> <C> <C>
Net unrealized investment gains on securities available for
sale...................................................... $ 1,365 $ 1,080
Deferred policy acquisition costs........................... 36,031 29,271
Prepaid expenses............................................ 833 804
------- -------
Gross deferred tax liability................................ 38,229 31,155
------- -------
Future policy and contract benefits......................... 27,810 20,014
Deferred future revenues.................................... 1,894 1,668
Other....................................................... 177 147
------- -------
Gross deferred tax asset.................................... 29,881 21,829
------- -------
Net deferred tax liability................................ $ 8,348 $ 9,326
======= =======
</TABLE>
The difference between the U.S. federal income tax rate and the consolidated tax
provision rate is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate.................................. 35.0% 35.0% 35.0%
Other....................................................... (6.7) 2.9 4.3
---- ---- ----
Effective tax rate........................................ 28.3% 37.9% 39.3%
==== ==== ====
</TABLE>
The Company's federal income tax returns have been examined by the Internal
Revenue Service (IRS) through 1995. The Company is currently appealing certain
adjustments proposed by the IRS for tax years 1993 through 1995. Management
believes adequate provisions have been made for any additional taxes which may
become due with respect to the adjustments proposed by the IRS.
F-II- 12
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
4. RELATED PARTY TRANSACTIONS
Affiliates provide technical, financial, legal, marketing and investment
advisory support to the Company under administrative service agreements. The
cost of these services to the Company for years ended December 31, 1998, 1997
and 1996 was $11,737, $12,082 and $10,922, respectively.
The Company entered into reinsurance agreements (yearly renewable term) with
affiliates. Under this agreement, these affiliates assume life insurance risk in
excess of the Company's retention limit. These reinsurance contracts do not
relieve the Company of its obligations to its policyowners. The Company paid
$4,104, $3,810 and $3,301 of net reinsurance premiums to affiliates for the
years ended December 31, 1998, 1997 and 1996, respectively. The Company has
received reinsurance recoveries from affiliates of $3,310, $2,260 and $659 for
the years ended December 31, 1998, 1997 and 1996, respectively.
The Company has entered into guarantee agreements with ALIC, AmerUs and AMAL
Corporation whereby, they guarantee the full, complete and absolute performance
of all duties and obligations of the Company.
The Company's variable life and annuity products are distributed through
Ameritas Investment Corp., a wholly-owned subsidiary of AMAL Corporation. The
Company received $93 and $54 for the years ended December 31, 1997 and 1996,
respectively, from this affiliate to partially defray the costs of materials and
prospectuses. The Company received no recovery to defray these cost for the year
ended December 31, 1998. Policies placed by this affiliate generated commission
expense of $28,353, $23,232 and $20,373 for the years ended December 31, 1998,
1997 and 1996, respectively.
Transactions with related parties are not necessarily indicative of revenues and
expenses which would have occurred had the parties not been related.
5. BENEFIT PLANS
The Company provides retirement and postretirement medical benefits to
qualifying employees. Prior to August 1, 1997 these benefits were provided under
plans which covered substantially all employees of Ameritas Life Insurance Corp.
and its subsidiaries. Concurrent with the transfer of a significant number of
employees to the Company, effective August 1, 1997, AMAL Corporation assumed the
benefit obligations associated with these plans.
The Company is included in a multiple employer noncontributory defined benefit
plan that covers substantially all full-time employees of Ameritas Life
Insurance Corp. and its subsidiaries and AMAL Corporation and its subsidiaries.
Pension costs include current service costs, which are accrued and funded on a
current basis, and post service costs, which are amortized over the average
remaining service life of all employees on the adoption date. Total Company
contributions for the years ended December 31, 1998 and 1997 were $163 and $29,
respectively. The Company had no full time employees during 1996.
The Company's employees also participate in a defined contribution thrift plan
that covers substantially all full time employees of Ameritas Life Insurance
Corp. and its subsidiaries. Company matching contributions under the plan range
from 1% to 3% of the participant's compensation. Total Company contributions for
the years ended December 31, 1998 and 1997 were $47 and $24, respectively. The
Company had no full time employees during 1996.
The Company is also included in the postretirement benefit plan providing group
medical coverage to retired employees of AMAL Corporation and its subsidiaries.
Prior to August 1, 1997 these benefits were provided under a plan with Ameritas
Life Insurance Corp. These benefits are a specified percentage of premium until
age 65 and a flat dollar amount thereafter. Employees become eligible for these
benefits upon the attainment of age 55, 15 years of service and participation in
the plan for the immediately preceding 5 years. Benefit costs include the
expected cost of postretirement benefits for newly eligible
F-II- 13
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
5. BENEFIT PLANS -- (CONTINUED)
employees, interest cost, and gains and losses arising from differences between
actuarial assumptions and actual experience. Total Company contributions for the
years ended December 31, 1998 and 1997 were $12 and $5, respectively. The
Company had no full time employees during 1996.
Expenses for the defined benefit plan and postretirement group medical plan are
allocated to the Company based on the number of associates in AMAL Corporation
and its subsidiaries.
6. INSURANCE REGULATORY MATTERS
Net income (loss), as determined in accordance with statutory accounting
practices, was $321, $2,048 and $855 for 1998, 1997 and 1996, respectively. The
Company's statutory surplus was $44,589, $45,265 and $44,100 at December 31,
1998, 1997 and 1996, respectively. Effective January 1, 1996 the Company changed
reserving methods used for most existing products resulting in an increase in
statutory surplus of approximately $20,601. The Company is required to maintain
a certain level of surplus to be in compliance with state laws and regulations.
Company surplus is monitored by state regulators to ensure compliance with risk
based capital requirements.
Under statutes of the Insurance Department of the State of Nebraska, the Company
is limited in the amount of dividends it can pay to its stockholder. On February
28, 1996 the Board of Directors declared a return of paid-in-capital of $15,000
payable by way of a note due on or before August 15, 1996. The note was retired
on August 15, 1996. This action was approved by the State of Nebraska Insurance
Department and any additional distributions of capital or surplus will require
approval of the Insurance Department.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made regarding fair value information about
certain financial instruments for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates, in many cases, may not be realized in immediate settlement
of the instrument. All nonfinancial instruments are excluded from disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1998 and 1997. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for each class of financial instrument for which it is
practicable to estimate a value:
FIXED MATURITY SECURITIES AVAILABLE FOR SALE -- For publicly traded
securities, fair value is determined using an independent pricing source.
For securities without a readily ascertainable fair value, the value has
been determined using an interest rate spread matrix based upon quality,
weighted average maturity and Treasury yields.
EQUITY SECURITIES AVAILABLE FOR SALE -- Fair value is determined using
an independent pricing source.
LOANS ON INSURANCE POLICIES -- Fair values for loans on insurance
policies are estimated using a discounted cash flow analysis at interest
rates currently offered for similar loans with similar remaining
F-II- 14
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 -- (CONTINUED)
(IN THOUSANDS)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
terms. Loans on insurance policies with similar characteristics are
aggregated for purposes of the calculations.
OTHER INVESTED ASSETS -- Fair value is determined using an independent
pricing source.
CASH AND CASH EQUIVALENTS, ACCRUED INVESTMENT INCOME AND REINSURANCE
RECOVERABLE -- The carrying amounts equal fair value.
ACCUMULATED CONTRACT VALUES -- Funds on deposit which do not have
fixed maturities are carried at the amount payable on demand at the
reporting date, which approximates fair value.
Estimated fair values are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------
1998 1997
---------------------- ----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturity securities, available for sale..... $150,462 $150,462 $115,955 $115,955
Equity securities, available for sale............. 2,020 2,020 4,135 4,135
Loans on insurance policies....................... 10,949 10,286 7,482 6,657
Other invested assets............................. 10,020 10,020 2,206 2,206
Cash and cash equivalents......................... 12,011 12,011 13,711 13,711
Accrued investment income......................... 2,425 2,425 1,801 1,801
Reinsurance recoverable -- affiliates............. 455 455 514 514
Financial liabilities:
Accumulated contract values excluding amounts held
under insurance contracts...................... 199,585 199,585 144,109 144,109
</TABLE>
8. SEPARATE ACCOUNTS
The Company is currently marketing variable life and variable annuity products
which have separate accounts as an investment option. Separate Account V
(Account V) was formed to receive and invest premium receipts from variable life
insurance policies issued by the Company. Separate Account VA-2 (Account VA-2)
was formed to receive and invest premium receipts from variable annuity policies
issued by the Company. Both Separate Accounts are registered under the
Investment Company Act of 1940, as amended, as unit investment trusts. Account V
and VA-2's assets and liabilities are segregated from the other assets and
liabilities of the Company.
Amounts in the Separate Accounts are:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1998 1997
---------- ----------
<S> <C> <C>
Separate Account V.......................................... $ 282,653 $ 197,729
Separate Account VA-2....................................... 1,426,795 1,067,619
---------- ----------
$1,709,448 $1,265,348
========== ==========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company has a $15,000 unsecured line of credit entered into in September,
1998. No balance was outstanding at any time during 1998.
F-II- 15
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
ASSETS
JUNE 30, 1999
-------------
Investments:
Fixed maturity securities, available for sale
(amortized cost $167,459) $ 164,317
Equity securities, available for sale (amortized
cost $2,031) 1,813
Loans on insurance policies 13,136
Other invested assets 12,939
----------
Total investments 192,205
Cash and cash equivalents 6,921
Accrued investment income 2,709
Prepaid reinsurance premium--affiliates 2,482
Deferred policy acquisition costs 139,467
Other 1,938
Separate Accounts 2,035,317
----------
$2,381,039
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy and contract reserves $ 2,033
Policy and contract claims 446
Accumulated contract values 244,218
Unearned policy charges 1,898
Unearned reinsurance ceded allowance 3,700
Federal income taxes--
Current 1,596
Deferred 6,622
Other 9,767
Separate Accounts 2,035,317
----------
Total Liabilities 2,305,597
----------
Commitments and contingencies
STOCKHOLDER'S EQUITY:
Common stock, par value $100 per share;
authorized 50,000 shares, issued and
outstanding 40,000 shares 4,000
Additional paid-in capital 41,870
Retained earnings 30,551
Accumulated other comprehensive income (979)
----------
Total Stockholder's Equity 75,442
----------
$2,381,039
==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-II(U)-1
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
INCOME:
Insurance revenues:
Contract charges $24,413
Premium-reinsurance ceded (4,232)
Reinsurance ceded allowance 1,801
Investment revenues:
Investment income, net 8,765
Realized gain(loss), net (51)
Other 1,620
-------
32,316
-------
BENEFITS AND EXPENSES:
Policy benefits:
Death benefits 1,061
Interest credited 7,651
Increase in policy and contract reserves 352
Other 118
Sales and operating expenses 10,827
Amortization of deferred policy
acquisition costs 7,492
-------
27,501
-------
INCOME BEFORE FEDERAL INCOME TAXES 4,815
-------
Income taxes--current 2,422
Income taxes--deferred (724)
-------
Total income taxes 1,698
-------
NET INCOME $ 3,117
=======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-II(U)-2
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
Net income $3,117
Other comprehensive income, net of tax:
Unrealized gain(loss) on securities:
Unrealized holding gains arising
during the period (net of deferred
tax of $1,021) (1,897)
Reclassification adjustment for gain(loss)
included in net income (net of deferred
tax of $18) 34
-------
Other comprehensive income (loss) (1,863)
-------
Comprehensive income $1,254
=======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-II(U)-3
<PAGE>
<TABLE>
<CAPTION>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
------ ------ ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 40,000 $4,000 $ 40,370 $ 27,434 $ 884 $ 72,688
Capital contribution from
AMAL Corporation -- -- 1,500 -- -- 1,500
Net unrealized investment
loss, net -- -- -- -- (1,863) (1,863)
Net income -- -- - 3,117 -- 3,117
------ ------ ------- -------- -------- --------
BALANCE, June 30, 1999 40,000 $4,000 $ 41,870 $ 30,551 $ (979) $ 75,442
------ ------ -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
F-II(U)-4
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
OPERATING ACTIVITIES
Net Income $ 3,117
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred policy acquisition
costs 7,492
Policy acquisition costs deferred (21,428)
Interest credited to contract values 7,651
Amortization of discounts or premiums 51
Net gains on other invested assets (2,817)
Net realized loss on investment transactions 51
Deferred income taxes (724)
Change in assets and liabilities:
Accrued investment income (284)
Reinsurance recoverable-affiliates 455
Prepaid reinsurance premium-affiliates (102)
Other assets (244)
Policy and contract reserves 352
Policy and contract claims (179)
Unearned policy charges 84
Federal income tax payable-current (1,345)
Unearned reinsurance ceded allowance 104
Other liabilities 1,685
-------
Net cash from operating activities (6,081)
-------
INVESTING ACTIVITIES
Purchase of fixed maturity securities
available for sale (27,822)
Purchase of other invested assets (1,253)
Proceeds from maturities or repayment of
fixed maturity securities available for sale 4,472
Proceeds from sales of fixed maturity securities
available for sale 2,439
Proceeds from the sale of other invested assets 1,150
Net change in loans on insurance policies (2,187)
--------
Net cash from investing activities (23,201)
-------
FINANCING ACTIVITIES
Capital contribution 1,500
Net change in accumulated contract values 22,692
-------
Net cash from financing activities 24,192
-------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,090)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 12,011
-------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,921
=======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 3,767
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-II(U)-5
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ameritas Variable Life Insurance Company (the Company), a stock life insurance
company domiciled in the State of Nebraska, is a wholly-owned subsidiary of AMAL
Corporation, a holding company 66% owned by Ameritas Life Insurance Corporation
(ALIC) and 34% owned by AmerUs Life Insurance Company (AmerUs). The Company
began issuing variable life insurance and variable annuity policies in 1987,
fixed premium annuities in 1996 and equity indexed annuities in 1997. The
variable life, variable annuity, fixed premium annuity and equity indexed
annuity policies are not participating with respect to dividends.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL STATEMENTS:
Management believes that all adjustments, consisting of only normal recurring
accruals, considered necessary for a fair presentation of the unaudited interim
financial statements have been included. The results of operations for any
interim period are not necessarily indicative of results for the full year. The
unaudited interim financial statements should be read in conjunction with the
audited financial statements and notes thereto for the years ended December 31,
1998, 1997 and 1996.
F-II(U)-6
<PAGE>
Appendix A
ILLUSTRATIONS OF DEATH BENEFITS AND VALUES
The following tables illustrate how the values and Death Benefits of a Policy
may change with the investment experience of the Fund. The tables show how the
values and Death Benefits of a Policy issued to an Insured of a given age and
specified underwriting risk classifications who pays 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 A-3 through A-6 illustrate a Policy issued to a
male, age 45, under a preferred rate non-tobacco underwriting risk
classification. This Policy provides for a standard tobacco use and non-tobacco
use, and preferred non-tobacco classification and different rates for certain
Specified Amounts. The 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 Insured 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 values for uniform
hypothetical rates of return shown in these tables. The tables on pages A-3 and
A-5 are based on the current Cost of Insurance Rates, current expense deductions
and the maximum percent of premium loads. These reflect the basis on which AVLIC
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 AVLIC are at this time equal to the
maximum Cost of Insurance Rates for many ages. AVLIC anticipates reflecting
future improvements in actual mortality experience through adjustments in the
current Cost of Insurance Rates actually applied. AVLIC 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 values shown in the tables on pages A-4 and A-6 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 at an equivalent annual rate of .89% (which
is in excess of the current equivalent annual rate of .87% of the aggregate
average daily net assets of the Funds) and the daily charge by AVLIC to each
Subaccount for assuming mortality and expense risks and administrative expenses
(which is equivalent to a charge at an annual rate of 0.70% for Policy Years
1-20 and 0.45% thereafter on pages A-3 and A-5 and at an annual rate of 1.15% on
pages A-4 and A-6 of the average net assets of the Subaccounts). A portion of
the brokerage commissions that certain Fidelity Funds pay was used to reduce
Funds expenses. In addition, certain Fidelity Funds have entered into
arrangements with their custodian whereby interest earned on uninvested cash
balances was used to reduce custodian expenses. Without these reductions,
expenses would have been higher. The Investment Advisor or other affiliates of
the various Funds have agreed to reimburse the portfolios to the extent that the
aggregate operating expenses (certain portfolios may exclude certain items) were
in excess of an annual rate of .30% for the Ameritas Money Market portfolio,
.28% for the Ameritas Index 500 Portfolio, .79% for the Ameritas Growth
portfolio; .70% for the Ameritas Income & Growth portfolio, .89% for the
Ameritas Small Capitalization portfolio, .84% for the Ameritas MidCap Growth
portfolio, .85% for the Ameritas Emerging Growth portfolio, .86% for the
Ameritas Research portfolio, .88% for the Ameritas Growth With Income portfolio,
1.25% for the Alger American Balanced portfolio; 1.50% for the Alger American
Leveraged AllCap portfolio, 1.20% for the MSDW Asian Equity, 1.15% for the MSDW
Global Equity and MSDW International Magnum, 1.10% for the MSDW U.S. Real Estate
Portfolios of daily net assets. MFS Co. has agreed to bear expenses for the
Global Governments Series and New Discovery Series, subject to reimbursement by
the series, such that each series "Other Expenses" shall not exceed .25% of the
average daily net assets of the series during the current fiscal year. These
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. The illustrated gross annual investment
rates of return of 0%, 6%, and 12% were computed after deducting fund expenses
and correspond to approximate net annual rates of -1.60%, 4.40%, and 10.40%
respectively, for Policy Years 1-20 and -1.35%, 4.65%, and 10.65% for the Policy
Years thereafter respectively, on pages A-3 and A-5 and -2.05%, 3.95%, and 9.95%
respectively, on pages A-4 and A-6.
A-1
<PAGE>
The hypothetical values shown in the tables do not reflect any charges for
Federal Income tax burden attributable to Separate Account V, since AVLIC 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 Separate Account V, and if no Policy loans
have been made. The tables are also based on the assumptions that the Policy
Owner 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 Insured were
female, a tobacco user, in substandard risk classification, or were another age,
or if a higher or lower premium was illustrated.
Upon request, AVLIC will provide comparable illustrations based upon the
proposed Insured's age, sex and underwriting classification, 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.
A-2
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 100
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $2500
INITIAL SPECIFIED AMOLNT: $150000
DEATH BENEFIT OPTION: A
USING CURRENT SCHEDULE OP COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.89% Net) (4.11% Net) (10.11% 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 2625 1789 0 150000 1951 0 150000 2041 0 150000
2 5381 3597 1276 150000 3964 1643 150000 4347 2025 150000
3 8275 5364 3139 150000 6091 3866 150000 6880 4655 150000
4 11314 7084 4956 150000 8293 6165 150000 9658 7530 150000
S 14504 8752 6745 150000 10567 8560 150000 12702 10695 150000
6 17855 10366 8552 150000 12915 11101 150000 16036 14222 150000
7 21372 11920 10300 150000 15333 13713 150000 19685 18065 150000
8 25066 13412 12009 150000 17821 16419 150000 23682 22279 150000
9 28944 14838 13629 150000 20380 19171 150000 28059 26850 150000
10 33016 16197 15181 150000 23010 21994 150000 32857 31841 150000
15 56643 21885 21885 150000 37270 37270 150000 64934 64934 150000
20 86798 25552 25552 150000 53676 53676 150000 117461 117461 150000
Ages
60 56643 21885 21885 150000 37270 37270 150000 64934 64934 150000
65 86798 25552 25552 150000 53676 53676 150000 117461 117461 150000
70 125283 26590 26590 150000 73609 73609 150000 206658 206658 239724
75 174401 21509 21509 150000 96606 96606 150000 351495 351495 376100
</TABLE>
1) Assumes an annual $2500 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 cash 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 CASH
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 AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-3
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 100
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $2500
INITIAL SPECIFIED AMOUNT: $150000
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
(-2.14% Net) (3.86% Net) (9.86% 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 2625 1789 0 150000 1915 0 150000 2041 0 150000
2 5381 3384 1063 150000 3741 1420 150000 4115 1793 150000
3 8275 4915 2690 150000 5608 3383 150000 6362 4137 150000
4 11314 6375 4247 150000 7509 5381 150000 8795 6667 150000
S 14504 7761 5754 150000 9442 7435 150000 11428 9421 150000
6 17855 9072 7258 150000 11407 9593 150000 14281 12467 150000
7 21372 10300 8680 150000 13395 11775 150000 17368 15748 150000
8 25066 11440 10037 150000 15402 14000 150000 20710 19307 150000
9 28944 12484 11275 150000 17422 16213 150000 24325 23116 150000
10 33016 13425 12409 150000 19446 18430 150000 28239 27223 150000
15 56643 16325 16325 150000 29398 29398 150000 53426 53426 150000
20 86798 15155 15155 150000 38139 38139 150000 92704 92704 150000
Ages
60 56643 16325 16325 150000 29398 29398 150000 53426 53426 150000
65 86798 15155 15155 150000 38139 38139 150000 92704 92704 150000
70 125283 6975 6975 150000 43190 43190 150000 157707 157707 182940
75 174401 0* 0* 0* 39566 39566 150000 261272 261272 279561
</TABLE>
* In the absence of an additional premium
1) Assumes an annual $2500 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 cash 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 CASH
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 AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-4
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 100
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $150000
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
(-1.89% Net) (4.11% Net) (10.11% 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 6300 5096 2678 155096 5424 3006 155096 5752 3334 155752
2 12915 10142 7821 160142 11120 8798 160142 12137 9816 162137
3 19860 15081 12856 165081 17036 14811 165081 19153 16928 169153
4 27153 19905 17777 169905 23174 21046 169905 26856 24729 176856
S 34811 24611 22604 174611 29537 27530 174611 35310 33303 185310
6 42852 29197 27384 179197 36129 34316 179197 44586 42772 194586
7 51294 33659 32039 183659 42953 41333 183659 54758 53138 204758
8 60159 37993 36591 187993 50013 48611 187993 65914 64511 215914
9 69467 42196 40987 192196 57313 56104 192196 78145 76936 228145
10 79240 46267 45252 196267 64858 63843 196267 91557 90541 241557
15 135944 64542 64542 214542 106435 106435 214542 180730 180730 330730
20 208315 79175 79175 229175 155004 155004 229175 322441 322441 472441
Ages
60 135944 64542 64542 214542 106435 106435 214542 180730 180730 330730
65 208315 79175 79175 229175 155004 155004 229175 322441 322441 472441
70 300680 90454 90454 240454 213864 213864 240454 557322 557322 707322
75 418564 93770 93770 243770 278910 278910 243770 944570 944570 1094570
</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 cash 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 CASH
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 AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-5
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES AMERITAS VARIABLE LIFE INSURANCE COMPANY
ENDOWMENT AT AGE 100
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $150000
DEATH BENEFIT OPTION: B
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
(-2.14% Net) (3.86% Net) (9.86% 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 6300 5082 2664 155082 5410 2992 155410 5739 3321 155739
2 12915 9767 7446 159767 10726 8404 160725 11723 9402 161723
3 19860 14309 12084 164309 16201 13976 166201 18252 16027 168252
4 27153 18708 16580 168708 21841 19713 171840 25375 23248 175375
S 34811 22961 20954 172961 27645 25638 177645 33147 31140 183147
6 42852 27068 25255 177069 33616 31803 183617 41627 39813 191626
7 51294 31024 29404 181024 39752 38132 189752 50872 49252 200872
8 60159 34818 33416 184819 46046 44644 196046 60951 59548 210950
9 69467 38448 37239 188448 52497 51288 202497 71933 70724 221933
10 79240 41902 40887 191903 59096 58081 209096 83895 82879 233894
15 135944 56318 56318 206318 94135 94135 244135 161698 161698 311698
20 208315 64951 64951 214951 131541 131541 281541 280560 280560 430560
Ages
60 135944 56318 56318 206318 94135 94135 244135 161698 161698 311698
65 208315 64951 64951 214951 131541 131541 281541 280560 280560 430560
70 300680 65294 65294 215294 168240 168240 318240 461061 461061 611061
75 418564 53430 53430 203430 198664 198664 348664 734152 734152 884152
</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 cash 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 CASH
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 AVLIC OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-6
