As filed with the Securities and Exchange Commission on
January 21, 2000
Registration No._______
======================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form S-6
----------------
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
----------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
(EXACT NAME OF REGISTRANT)
----------------
AMERITAS VARIABLE LIFE INSURANCE COMPANY
(Depositor)
5900 "O" Street
Lincoln, Nebraska 68510
----------------
Donald R. Stading
Secretary and General Counsel
Ameritas Variable Life Insurance Company
5900 "O" Street
Lincoln, Nebraska 68510
-----------------
Title of Securities Being Registered: SECURITIES OF UNIT INVESTMENT TRUST
Approximate Date Of Proposed Public offering: As soon as practicable after the
effective date of the Registration Statement.
Flexible Premium Variable Life Insurance Policies--Registration of an indefinite
amount of securities pursuant to Rule 24f-2 under the Investment Company Act of
1940
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a) may determine.
<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS IN FORM N-8B-2
AND THE PROSPECTUS
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
------------ ----------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 Ameritas Variable Life Insurance Company - Separate Account V
6 Ameritas Variable Life Insurance Company - Separate Account V
7 Not Required
8 Not Required
9 Legal Proceedings
10 Summary; Addition, Deletion of Substitution of Investments;
Policy Benefits; Policy Rights; Payment and Allocation of
Premiums; General Provisions; Voting Rights
11 Summary; The Funds
12 Summary; The Funds
13 Summary; The Funds - Charges and Deductions
14 Summary; Payment and Allocation of Premiums
15 Summary; Payment and Allocation of Premiums
16 Summary; Calvert Variable Series, Inc. Ameritas Portfolios,
Variable Insurance Products Fund, Variable Insurance Products
Fund II, The Alger American Fund, MFS Variable Insurance
Trust, Morgan Stanley Dean Witter Universal Funds, Inc.
17 Summary, Policy Rights
18 Calvert Variable Series, Inc. Ameritas Portfolios , Variable
Insurance Products Fund, Variable Insurance Products Fund II,
The Alger American Fund, MFS Variable Insurance Trust, Morgan
Stanley Dean Witter Universal Funds, Inc.
19 General Provisions; Voting Rights
20 Not Applicable
21 Summary; Policy Rights, Loan Benefits; General Provisions
22 Not Applicable
23 Safekeeping of the Separate Account's Assets
24 General Provisions
25 Ameritas Variable Life Insurance Company
26 Not Applicable
27 Ameritas Variable Life Insurance Company
28 Executive Officers and Directors of AVLIC; Ameritas Variable
Life Insurance Company
29 Ameritas Variable Life Insurance Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Required
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41 Distribution of the Policies
<PAGE>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
------------ ----------------------
42 Not Applicable
43 Not Applicable
44 Accumulation Value, Payment and Allocation of Premiums
45 Not Applicable
46 The Funds; Accumulation Value
47 The Funds
48 State Regulation of AVLIC
49 Not Applicable
50 The Separate Account
51 Cover Page; Summary; Policy Benefits; Payment and Allocation
of Premiums, Charges and Deductions
52 Addition, Deletion or Substitution of Investments
53 Summary; Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Required
57 Not Required
58 Not Required
59 Financial Statements
<PAGE>
AMERITAS VARIABLE LIFE INSURANCE COMPANY LOGO
PROSPECTUS 5900 "O" Street
P.O. Box 82550/Lincoln, NE 68501
Corporate Benefit VUL--A Flexible Premium Variable Universal Life
Insurance Policy issued by Ameritas Variable Life Insurance Company
Corporate Benefit VUL is a flexible premium variable universal life insurance
Policy ("Policy") issued by Ameritas Variable Life Insurance Company ("AVLIC").
Corporate Benefit VUL is designed primarily for an employer who is seeking a
cost-effective and tax-efficient means of informally funding a non-qualified
deferred compensation plan for its key executives. Like traditional life
insurance policies, a Corporate Benefit VUL Policy provides Death Benefits to
Beneficiaries and gives you, the Policy Owner, the opportunity to increase the
Policy's value. Unlike traditional policies, Corporate Benefit VUL lets you vary
the frequency and amount of premium payments, rather than follow a fixed premium
payment schedule. It also lets you change the level of Death Benefits as often
as once each year.
A Corporate Benefit VUL Policy is different from traditional life insurance
policies in another important way: the Policy Owner selects how Policy premiums
will be invested. Although the Policy guarantees a minimum Death Benefit as long
as the Policy remains in force, 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 Corporate Benefit VUL 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 Corporate Benefit VUL prospectus. You may also choose to allocate premium
payments to the Fixed Account managed by AVLIC.
A Corporate Benefit VUL 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 Term Insurance Rider is attached to
the Policy). Corporate Benefit VUL Policies are available on individuals ages 18
to 65 at the time of purchase if guaranteed or simplified underwriting is used
and ages 18 to 85 with regular underwriting. A Corporate Benefit VUL Policy,
once purchased, may generally be canceled within 10 days after you receive it.
This Corporate Benefit VUL prospectus is designed to assist you in understanding
the opportunities and risks associated with the purchase of a Corporate Benefit
VUL 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
Corporate Benefit VUL Policy, information about AVLIC, a list of the investment
portfolios to which you may allocate premium payments, as well as a detailed
description of the Corporate Benefit VUL 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 this Policy.
Although the Corporate Benefit VUL Policy is designed to provide life insurance,
a Corporate Benefit VUL 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 a Corporate Benefit
VUL Policy involves investment risk, including the possible loss of principal.
For this reason, Corporate Benefit VUL may not be suitable for all businesses.
It may not be advantageous to purchase a Corporate Benefit VUL 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 on the Insured. In addition, the tax
consequences of continuing coverage beyond age 100 are uncertain, and the Policy
Owner should consult a tax adviser as to the potential consequences.
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.
May 1, 2000
CORPORATE BENEFIT VUL
1
<PAGE>
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............................................................ 18
Purposes of the Policy............................................. 18
Death Benefit Proceeds............................................. 18
Death Benefit Options.............................................. 18
Methods of Affecting Insurance Protection.......................... 20
Duration of Policy................................................. 20
Accumulation Value................................................. 21
Payment of Policy Benefits......................................... 21
POLICY RIGHTS.............................................................. 22
Loan Benefits...................................................... 22
Surrenders......................................................... 23
Partial Withdrawals................................................ 23
Transfers.......................................................... 24
Systematic Programs................................................ 24
Free Look Privilege................................................ 25
PAYMENT AND ALLOCATION OF PREMIUMS......................................... 25
Issuance of a Policy............................................... 25
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
Daily Charges Against the Separate Account......................... 29
Fund Expense Summary............................................... 30
GENERAL PROVISIONS......................................................... 32
DISTRIBUTION OF THE POLICIES............................................... 34
FEDERAL TAX MATTERS........................................................ 35
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS............................... 37
THIRD PARTY SERVICES....................................................... 37
VOTING RIGHTS.............................................................. 38
STATE REGULATION OF AVLIC.................................................. 38
EXECUTIVE OFFICERS AND DIRECTORS OF AVLIC.................................. 38
LEGAL MATTERS.............................................................. 40
LEGAL PROCEEDINGS.......................................................... 40
EXPERTS.................................................................... 40
ADDITIONAL INFORMATION..................................................... 40
FINANCIAL STATEMENTS....................................................... 40
AMERITAS VARIABLE LIFE INSURANCE COMPANY SEPARATE ACCOUNT V................
AMERITAS VARIABLE LIFE INSURANCE COMPANY...................................
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.
CORPORATE BENEFIT VUL
2
<PAGE>
DEFINITIONS
ACCRUED EXPENSE CHARGES - Any Monthly Deductions that are due and unpaid.
ACCUMULATION VALUE - The total amount that the Policy provides for investment at
any time. It is equal to the total of the Accumulation Value held in 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.)
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 gender (where applicable), Issue Age, Policy duration, 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 through 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.
INSURED - The person whose life is insured under the Policy.
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.
CORPORATE BENEFIT VUL
3
<PAGE>
MONTHLY ACTIVITY DATE - The same date in each succeeding month as the Policy
Date except should such Monthly Activity Date fall on a date other than a
Valuation Date, the Monthly Activity Date will be the next Valuation Date.
MONTHLY DEDUCTION - The deductions taken from the Accumulation Value on the
Monthly Activity Date. These deductions are equal to: (1) the current Cost of
Insurance; (2) the Administrative Expense Charge; and (3) rider charges, if any.
MORTALITY AND EXPENSE RISK CHARGE - A daily charge that is deducted from the
overall assets of 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 Outstanding
Policy Debt and any Accrued Expense Charges.
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 such as premium-based taxes, expressed as a percentage of
the premium. (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.
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.
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.
CORPORATE BENEFIT VUL
4
<PAGE>
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 during the Insured's life for the Net
Cash Surrender Value.
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.
CORPORATE BENEFIT VUL
5
<PAGE>
SUMMARY
The following summary of prospectus information and diagram of the Policy should
be read along with the detailed information found elsewhere in this prospectus.
Unless stated otherwise, this prospectus assumes that the Policy is in force and
that there is no Outstanding Policy Debt.
DIAGRAM OF POLICY
PREMIUM PAYMENTS
You can vary amount and frequency.
DEDUCTIONS FROM PREMIUMS
Percent of Premium Charge--currently 3.0% (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 per Policy charge for administrative expenses:
Current Maximum
Policy Year Monthly Charge Monthly Charge
----------- -------------- --------------
1 $15.00 $15.00
2 + $ 7.00 $12.00
Monthly per $1000 charge for administrative expenses:
The first ten Policy Years, there is a monthly charge per $1000 of initial
Specified Amount. In addition, there is a monthly charge per $1000 of each
increase in Specified Amount for ten years from the date of increase. The
per $1000 rates for both the initial Specified Amount and each increase
vary by Issue Age, gender, and risk class.
(See the Policy Schedule for rates.)
<TABLE>
<CAPTION>
Daily charge from the Subaccounts (not deducted from the Fixed Account):
Current Annual Charge Maximum Annual Charge
Policy Years Policy Years
1-15 16+ 1-15 16+
---- --- ---- ---
<S> <C> <C> <C> <C>
Mortality and Expense Risk Charge 0.75% 0.30% 0.95% 0.50%
Asset-Based Administrative Expense Charge 0.15% 0.15% 0.15% 0.15%
----- ----- ----- -----
Combined annual rate of Subaccount
daily charges 0.90% 0.45% 1.10% 0.65%
</TABLE>
Fund expense charges, which ranged from .28% to 1.95% at the most recent fiscal
year end, are also deducted.
There is no surrender charge.
LIVING BENEFITS You may make partial withdrawals, subject to certain
restrictions. The Death Benefit will be reduced by the amount of the partial
withdrawal. AVLIC guarantees up to 15 free transfers between the Investment
Options each Policy Year. After that, a $10 charge may be made for each
transfer. Under current practice, unlimited free transfers are permitted.
You may Surrender the Policy at any time for its Net Cash Surrender Value.
RETIREMENT INCOME
BENEFITS
Loans may be available on a more favorable interest rate basis after the tenth
Policy Year. Should the Policy lapse while loans are outstanding, the portion of
the loan attributable to earnings will become a taxable distribution. (See page
24.)
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.
CORPORATE BENEFIT VUL
6
<PAGE>
SUMMARY
The following summary is intended to highlight the most important features of a
Corporate Benefit VUL 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 that begins on page 3 of this
prospectus. This summary and all other parts of this prospectus are qualified in
their entirety by the terms of the Corporate Benefit VUL Policy, which is
available upon request from AVLIC.
WHO IS THE ISSUER OF A CORPORATE BENEFIT VUL POLICY?
AVLIC is the issuer of each Corporate Benefit VUL 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 Corporate
Benefit VUL Policy; taken together, these companies have aggregate assets of
over $____ billion as of December 31, 1999. (See the section on Ameritas
Variable Life Insurance Company.)
WHAT IS THE PRIMARY PURPOSE OF PURCHASING A CORPORATE BENEFIT VUL POLICY?
The primary purpose of a Corporate Benefit VUL Policy is to serve as an informal
funding vehicle for various executive benefit arrangements. These arrangements
typically focus on one or more financial objectives, which can be met by the
following characteristics of the Corporate Benefit VUL Policy:
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 accessability of Policy values through Policy loan, Surrender and
withdrawal features (See the section on Policy Rights.)
o ability to direct the manner in which the net premiums will be invested. So
long as the Policy is in force, the Policy Owner will be responsible for
selecting the manner in which Net Premiums will be invested. Thus, the
value of a Corporate Benefit VUL Policy will reflect your investment
choices over the life of the Policy.
HOW DOES THE INVESTMENT COMPONENT OF THE CORPORATE BENEFIT VUL 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
Corporate Benefit VUL 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 Corporate Benefit VUL. 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, the Fixed Account, and any amount held in the General
Account to secure Policy debt will represent the Accumulation Value of your
Corporate Benefit VUL Policy. (See the section on Accumulation Value.)
WHAT INVESTMENT OPTIONS ARE AVAILABLE THROUGH THE CORPORATE BENEFIT VUL POLICY?
The Investment Options available through Corporate Benefit VUL 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
CORPORATE BENEFIT VUL
7
<PAGE>
O FIDELITY MANAGEMENT & RESEARCH COMPANY:
VIP Equity-Income: Service Class
VIP Growth: Service Class
VIP High Income: Service Class
VIP Overseas: Service Class
VIP II Asset Manager: Service Class
VIP II Investment Grade Bond
VIP II Asset Manager: Growth: Service Class
VIP II Contrafund(R): Service Class
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 A CORPORATE BENEFIT VUL POLICY WORK?
A Corporate Benefit VUL 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 the Corporate Benefit
VUL Policy--is chosen by you at the time your Corporate Benefit VUL 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 Corporate Benefit VUL Policy, depending on which of the
two available coverage options you select.
If you choose Option A, Death Benefit Proceeds payable under your Corporate
Benefit VUL Policy will be the Specified Amount of your Corporate Benefit VUL
Policy OR the applicable percentage of its Accumulation Value, whichever is
greater. If you choose Option B, Death Benefit Proceeds payable under your
Corporate Benefit VUL Policy will be the Specified Amount of your Corporate
Benefit VUL Policy PLUS the Accumulation Value of your Corporate Benefit VUL
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.)
ARE THERE ANY RISKS INVOLVED IN OWNING CORPORATE BENEFIT VUL POLICY?
Yes. Over the life of the Corporate Benefit VUL Policy, the Subaccounts to which
you allocate premiums will fluctuate with changes in the stock market and
overall economic factors. These fluctuations will be reflected in the
Accumulation Value of your Corporate Benefit VUL Policy and may result in loss
of principal. For this reason, the purchase of a Corporate Benefit VUL Policy
may not be suitable for all businesses. It may not be advantageous to purchase a
Corporate Benefit VUL Policy to replace or augment existing insurance
arrangements. Appendix A
CORPORATE BENEFIT VUL
8
<PAGE>
includes tables illustrating the impact that hypothetical market returns would
have on Accumulation Values under a Corporate Benefit VUL Policy.
WHAT IS THE PREMIUM THAT MUST BE PAID TO KEEP A CORPORATE BENEFIT VUL POLICY IN
FORCE?
Like traditional life insurance policies, a Corporate Benefit VUL 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 Corporate Benefit
VUL Policy becomes effective.
The distinction between traditional life policies and a Corporate Benefit VUL
Policy is that a Corporate Benefit VUL Policy will not lapse simply because
premium payments are not made according to that payment schedule. However, a
Corporate Benefit VUL Policy will lapse, even if scheduled premium payments are
made, if the Net Cash Surrender Value of your Corporate Benefit VUL Policy falls
below zero. (See the section on Premiums.)
HOW ARE PREMIUMS PAID, PROCESSED AND CREDITED? A Corporate Benefit VUL 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. The initial
premium Net Premium will be allocated on the Issue Date to the Subaccounts
and/or the Fixed Account according to the selections made in the application.
When state or other applicable law or regulation requires return of at least the
premium payments, should you return the Policy under the free-look privilege,
the initial Net Premium will be allocated to the Money Market Subaccount.
Thirteen days after the Issue Date, the Accumulation Value of the Policy will be
allocated among the Subaccounts and/or the Fixed Account according to the
instructions in the application. You have the right to examine the Corporate
Benefit VUL 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, 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 a 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, Corporate Benefit VUL provides 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 Cost
of Insurance needed to keep the Corporate Benefit VUL 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 the
Corporate Benefit VUL Policy. (See the section on Premiums.)
IS THE ACCUMULATION VALUE OF THE CORPORATE BENEFIT VUL POLICY AVAILABLE WITHOUT
SURRENDER? Yes. You may access the value of your Corporate Benefit VUL Policy in
one of two ways. First, you may obtain a loan, secured by the Accumulation Value
of your Corporate Benefit VUL Policy. The maximum interest rate on any such loan
is 6% annually; the current rate is 5.5% annually. After the tenth Policy
Anniversary, you may borrow against a limited amount of the Net Cash Surrender
Value of your Corporate Benefit VUL 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 Corporate Benefit VUL Policy by making a
partial withdrawal. A partial withdrawal 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 A CORPORATE BENEFIT VUL
POLICY?
Certain states impose premium and other taxes in connection with insurance
policies such as Corporate Benefit VUL. AVLIC may deduct up to 5.0% of each
premium as a Percent of Premium Charge. Currently, the charge is 3.0%.
Charges are deducted against the Accumulation Value to cover the Cost of
Insurance under the Policy and to compensate AVLIC for administering each
individual Corporate Benefit VUL Policy. These charges, which are part of the
Monthly Deduction, are calculated and deducted on each Monthly Activity Date.
The Cost of Insurance is
CORPORATE BENEFIT VUL
9
<PAGE>
calculated based on risk factors relating to the Insured as reflected in
relevant actuarial tables. The monthly deduction also includes an Administrative
Expense Charge based on the Specified Amount and the Policy duration. Currently,
the per Policy charge is $15 per month in the first Policy Year and $7 per month
thereafter. The per Policy portion of the Administrative Expense Charge is
levied throughout the life of the Policy and is guaranteed not to increase above
$15 per month in the first Policy Year and $12 per month thereafter. During the
first ten Policy Years, there is a monthly charge per $1000 of initial Specified
Amount. In addition, there is a monthly charge per $1000 of each increase in
Specified Amount for ten years from the date of increase. The per $1000 rates
for both the initial Specified Amount and each increase vary by Issue Age,
gender, and risk class. The current charge per $1000 is the same as the maximum
charge. (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 and deducted daily during
the first 15 Policy Years, at a combined current annual rate of 0.90% (maximum
1.10%) of the value of the net assets of Separate Account V. After the 15th
Policy Anniversary Date, the combined current annual rate is expected to
decrease to 0.45% (maximum 0.65%) of the daily net assets of Separate Account V.
These charges will not be deducted from the amounts in the Fixed Account. (See
the section on Daily Charges Against the Separate Account.)
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 THE CORPORATE BENEFIT VUL POLICY TERMINATE?
You may terminate the Corporate Benefit VUL Policy by Surrendering the Policy
during the lifetime of the Insured for its Net Cash Surrender Value. If you
surrender the Policy in the first two Policy Years, we will refund a portion of
the Percent of Premium Charge deducted in the first Policy Year. As noted above,
the Corporate Benefit VUL Policy will terminate if you fail to maintain
sufficient Net Cash Surrender Value to cover Policy charges. (See the sections
on Surrenders and Premiums.)
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 January 10, 2000, AVLIC has experienced no known Y2K problems. All of our
computer application and operating systems had been updated for the year 2000 by
December 31, 1998. Continuous testing and monitoring throughout 1999 helped
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.
CORPORATE BENEFIT VUL
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 47 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").
AVLIC's telephone number is 800-745-1112 and its website address is
www.OvertureLife.com.
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, 1999 of over
$___ billion. AmerUs Life had total assets as of December 31, 1999 of over $___
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, as part of the
Ameritas consolidated group, is rated AA (Very Strong) for insurer financial
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
CORPORATE BENEFIT VUL
11
<PAGE>
extent assets in 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.
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, gender, 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 and the Percent of Premium 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, a registered investment adviser under
the Investment Advisers Act of 1940, is an affiliate of AVLIC and is the
distributor for the Policies. 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: Service Class, VIP Growth:
Service Class, VIP High Income: Service Class and VIP Overseas: Service Class.
VIP II, also managed by Fidelity, offers the following portfolios: VIP II Asset
Manager: Service Class, VIP II Investment Grade Bond, VIP II Asset Manager:
Growth: Service Class, and VIP II Contrafund: Service Class. 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
CORPORATE BENEFIT VUL
12
<PAGE>
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 separately 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.
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: Service Class, VIP Equity-Income: Service Class, VIP II Asset
Manager: Growth: Service Class, VIP II Asset Manager: Service Class 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 Net Cash 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
CORPORATE BENEFIT VUL
13
<PAGE>
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.
<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 the Seeks investment results that
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
product lines, markets, financial resources and appreciation.
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 for appreciation.
capital appreciation.
Ameritas Small It focuses on small, fast-growing companies that Seeks long-term capital
Capitalization offer innovative products, services or technol- appreciation.
ogies to a rapidly expanding marketplace. Under
normal circumstances, the portfolio invests pri-
marily in the equity securities, such as common
or preferred stocks, of small capitalization com-
panies listed on 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 Invests in midsize companies with promising Seeks long-term capital
Growth growth potential. Under normal circumstances, appreciation.
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 Invests, under normal market conditions, at least Seeks long-term growth of capital.
Growth 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.
CORPORATE BENEFIT VUL
14
<PAGE>
Ameritas Research Invests, under normal market conditions, at least Seeks long-term growth of capital
80% of its total assets in common stocks and 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
portfolio's investments may include securities
traded on securities exchanges or in the over-the-
counter markets.
Ameritas Growth Invests, under normal market conditions, at least Seeks to provide reasonable current
With Income 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
Service Class 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.
Service Class 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
Service Class producing debt securities, preferred stocks and income while also considering
convertible securities, with an emphasis growth of capital.
on lower-quality debt securities.
VIP Overseas: Service Investing at least 65% of total assets in foreign Seeks long-term growth of capital.
Class securities. Investing primarily in common stocks.
VIPII Asset Manager: Allocating the Fund's assets among stocks, Seeks high total return with
Service Class bonds, and short-term and money market reduced risk over assets among
instruments. Maintaining a neutral mix over time the long term by allocating its
of 50% of assets in stocks, 40% of assets in stocks, bonds, and short-term
bonds, and 10% of assets in short-term and instruments.
money market instruments.
VIP II Investment Investing in U.S. dollar-denominated investment- Seeks as high a level of current
Grade Bond grade bonds. income as is consistent with the
preservation of capital.
VIP II Asset Manager: Allocating the Fund's assets among stocks, Seeks to maximize total return by
Growth: Service Class bonds, and short-term and money market allocating its assets among stocks,
instruments. Maintaining a neutral mix over time bonds, short-term instruments
of 70% of assets in stocks, 25% of assets in and other investments.
bonds, and 5% of assets in short-term and money
market instruments.
CORPORATE BENEFIT VUL
15
<PAGE>
VIP II Contrafund: Investing primarily in common stocks. Investing Seeks long-term capital appreciation.
Service Class 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
with growth potential and fixed income capital appreciation by investment
securities, with emphasis on income-producing in common stocks and fixed income
securities which appear to have some potential and convertible securities, with
for capital appreciation. Under normal emphasis on income producing
circumstances, it invests in common stocks and securities which appear to have
fixed income securities, which include potential for capital appreciation.
commercial paper and bonds rated within the 4
highest rating categories by an established rating
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 conditions, at least Will seek capital growth and current
65% of its total assets in equity and debt income (income above that available
securities of both domestic and foreign companies from a portfolio invested entirely
in the utilities industry. in equity securities).
Global Governments Invests, under normal market conditions, at least Will seek to provide income and
Series 65% of its total assets in debt obligations that capital appreciation.
are 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 Invests primarily in equity securities of emerging Long-term capital appreciation.
Equity 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
CORPORATE BENEFIT VUL
16
<PAGE>
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
companies primarily engaged in the U.S. real long-term capital appreciation
estate industry, including real estate investment
trusts.
</TABLE>
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 thereto, 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
Anniversary Date that month. Each month is assumed to have 30 days, and each
year to have 360 days for purposes
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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 on the life of the Insured 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 decreasing the Specified Amount. 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.
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 as subsequently changed. If
you do not choose a Beneficiary, the proceeds will be paid to you, as the Policy
Owner, or if individually owned, to your estate.
DEATH BENEFIT OPTIONS
The Policy provides two Death Benefit options. 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 for the base Policy is $50,000. 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.
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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 on 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 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 Attained Age 90 is 105%. The applicable percentage
will never be less than 101%. Accordingly, under Option A the Death Benefit will
remain level at the Specified Amount unless the applicable percentage of
Accumulation Value exceeds the current Specified Amount, in which case the
amount of the Death Benefit will vary as the Accumulation Value varies. 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. [GRAPHIC OMITTED]
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 is greater.
Under Option B, the Death Benefit is equal to the current Specified Amount plus
the Accumulation Value of the Policy or, if greater, the applicable percentage
of the Accumulation Value 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
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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. (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.)
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 may not be less than $100,000
($50,000 if the Term Insurance Rider is attached to the Policy). In addition, if
a decrease in the Specified Amount makes the Policy not comply with the maximum
premium limits required by federal tax law, the decrease may be limited or the
Accumulation Value may be returned to you, at your election, to the extent
necessary to meet the requirements. (See the section on Premiums.) The
Administrative Expense Charge will include a monthly charge per $1000 of
increase in Specified Amount for ten years from the date of the increase.
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. Generally an
increase cannot be made if the Insured's Attained Age is over the maximum age
for the Insured's risk class. The increase may be subject to guaranteed issue
guidelines, if applicable.
In states which require Cost of Insurance charges to cease at a stated Attained
Age, the Specified Amount will decrease to $1000 when that age is reached.
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. (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.)
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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.) Thereafter, on each Valuation Date, the Accumulation
Value of the Policy will equal:
(1) The aggregate values belonging to the Policy in each of the Subaccounts on
the Valuation Date, determined by multiplying each Subaccount's unit value
by the number of Subaccount units 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; minus
(5) Any partial withdrawal, and its charge, made on that Valuation Date; minus
(6) Any Monthly Deduction to be made on that Valuation Date.
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 0.95% (years 1-15) or 0.50% (years
16+) for mortality and expense risk; minus
(3) A charge not exceeding an annual rate of 0.15% for administrative service
expenses; minus
(4) Any taxes payable by Separate Account V; and
(5) Dividing the result by the total number of units held in the Subaccount on
the Valuation Date, before the purchase or redemption of any units on that
Valuation Date.
(See the section on Daily Charges Against the Separate Account.)
VALUATION DATE AND VALUATION PERIOD. A Valuation Date is each day on which the
New York Stock Exchange ("NYSE") is open for trading. The net asset value for
each Fund portfolio is determined as of the close of regular trading on the
NYSE. The net investment return for each Subaccount and all transactions and
calculations with respect to the Policies as of any Valuation Date are
determined as of that time. A Valuation Period is the period between two
successive Valuation Dates, commencing at the close of the NYSE on each
Valuation Date and ending at the close of the NYSE on the next succeeding
Valuation Date.
PAYMENT OF POLICY BENEFITS
Death Benefit Proceeds under the Policy will usually be paid within seven days
after AVLIC receives Satisfactory Proof of Death. 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 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
the Accumulation Value Benefit
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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.
(Also see the section on Surrenders.)
PAYMENT OPTIONS FOR DEATH BENEFIT 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, Death Benefit 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.
If the beneficiary is a natural person, the following payment options are also
currently available:
Option c--LIFETIME PAYMENT OPTION. Equal monthly payments are based on the
life of a named person. Payments will continue for the lifetime of that
person. Variations provide for guaranteed payments for a period of time.
Option d--JOINT LIFETIME PAYMENT OPTION. Equal monthly payments are based
on the lives of two named persons. While both are living, one payment will
be made each month. When one dies, the same payment will continue for the
lifetime of the other.
As an alternative to the above payment options, Death Benefits Proceeds may be
paid in any other manner approved by 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. 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. Policy Owners in certain states may borrow
100% of the Net Cash Surrender Value after deducting Monthly Deductions and any
interest on Policy loans that will be due for the remainder of the Policy Year.
Loans may have tax consequences. (See the section on Federal Tax Matters.)
LOAN 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:
(1) The Accumulation Value; minus
(2) Total premiums paid minus any partial withdrawals previously taken, and
minus
(3) Any Outstanding Policy Debt held at a reduced loan rate.
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However, this amount may not exceed the maximum loan amount described above.
(See the section on Loan Privileges.) If unpaid when due, interest will be added
to the amount of the loan and bear interest at the same rate. The Policy Owner
earns 3.5% interest on the Accumulation Values held in the General Account
securing the loans.
EFFECT OF POLICY LOANS. When a loan is made, Accumulation Value equal to the
amount of the loan will be transferred from the Investment Options to the
General Account as security for the loan. The Accumulation Value transferred
will be allocated from the Investment Options according to the instructions you
give when you request the loan. The minimum amount which can remain in a
Subaccount or the Fixed Account as a result of a loan is $100. If no
instructions are given, the amounts will be withdrawn in proportion to the
various Accumulation Values in the Investment Options. In any Policy Year that
loan interest is not paid when due, 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.
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 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 debt 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, the Policy Owner may 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.)
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
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. After a partial withdrawal, the Net Cash Surrender Value, not
including any percent of premium refund, 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
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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.
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.)
TRANSFERS
Accumulation Value may be transferred among the Subaccounts of Separate Account
V and to the Fixed Account as often as desired. However, you may make only one
transfer out of the Fixed Account per Policy Year. 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. Currently, no charge is imposed for additional transfers. This
charge will be deducted pro rata from each Subaccount (and if applicable, the
Fixed Account) in which the Policy Owner is invested. (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 will not be subject to a transfer charge
and will not be counted towards the guaranteed 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, are limited to one per 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 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 any
transfer fee applies. Lower minimum amounts may be allowed to transfer as part
of a
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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.)
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). With guaranteed or simplified underwriting, a Policy will be issued to
individuals ages 18 to 65 on their nearest birthday. With regular underwriting,
a Policy will generally be issued only to individuals age 18 to 85 on their
nearest birthday who supply satisfactory evidence of insurability to AVLIC.
Preferred class regular issue Policies are available only for ages 18 to 75.
Acceptance of a regular underwriting application 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
CORPORATE BENEFIT VUL
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<PAGE>
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. The
initial Net Premium will be allocated on the Issue Date to the Subaccounts
and/or the Fixed Account according to the selections made in the application.
When state or other applicable law or regulation requires return of at least the
premium payments if you return the Policy under the free-look privilege, the
initial Net Premium will be allocated to the Money Market Subaccount. Then,
thirteen days after the Issue Date, the Accumulation Value of the Policy will be
allocated among the Subaccounts and/or Fixed Account according to the
instructions in the application.
Subject to approval, a Policy may be backdated, but the Policy Date may not be
more than six months prior to the date of the application. Backdating can be
advantageous if 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.
Conditional receipt coverage may be available 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 maximum
total amount of insurance which will be payable pursuant to all conditional
receipts received by the applicant as a result of pending applications with
AVLIC and its affiliates is limited to the smaller of:
(1) the total amount of insurance applied for with AVLIC and its affiliates; or
(2) $250,000 minus the total amount of insurance in force with AVLIC and its
affiliates, but not less than zero.
As used above, total amount of insurance includes any amounts payable
under any Accidental Death Benefit provision.
PREMIUMS
No insurance will take effect before the minimum initial premium payment is
received by AVLIC in federal funds. 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. (See the section on Policy Benefits, Purposes of
the Policy.)
PLANNED PERIODIC PREMIUMS. At the time the Policy is issued you may determine a
Planned Periodic Premium schedule that provides for the payment of level
premiums at selected intervals. You 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. Instead, the duration of the Policy depends upon the
Policy's Net Cash Surrender Value. (See the section on Duration of the Policy.)
Even if Planned Periodic Premiums are paid, the Policy will lapse any time the
Net Cash Surrender Value is insufficient to pay the Monthly Deduction, and the
Grace Period expires without a sufficient payment. (See the section on Policy
Lapse and Reinstatement.)
PREMIUM LIMITS. 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 limits 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
limits established by federal tax laws. (See the section on Tax Status of the
Policy.)
If at any time a premium is paid which would result in total premiums exceeding
the current maximum premium limits, 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 limits 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.
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<PAGE>
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.
The initial Net Premium will be allocated on the Issue Date to the Subaccounts
and/or the Fixed Account according to the selections made in the application.
When state or other applicable law or regulation requires return of at least the
premium payments if you return the Policy under the free-look privilege, the
initial Net Premium will be allocated to the Money Market Subaccount. Then,
thirteen days after the Issue Date, the Accumulation Value of the Policy will be
allocated among the Subaccounts and/or Fixed Account according to the
instructions in the application. 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. 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 amount necessary to cover the Monthly Deductions
and Percent of Premium Charges for the three Policy Months after commencement of
the Grace Period. 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.)
REINSTATEMENT. A lapsed Policy may be reinstated any time within three years
(five years in Missouri) after the beginning of the Grace Period. We will
reinstate your Policy based on the Insured's risk 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:
(a) the amount necessary to raise the Net Cash Surrender Value as of
the date of reinstatement to equal to or greater than zero; plus
(b) three times the current Monthly Deduction.
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<PAGE>
The amount of Accumulation Value on the date of reinstatement will equal:
(1) The amount of the Net Cash Surrender Value on the date of lapse,
increased by
(2) The premium paid at reinstatement, less
(3) The Percent of Premium Charge.
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. The charges are determined by us
according to our expectations of future experience for mortality, lapse,
interest and expenses. If our expectations of future experience for mortality,
lapse, interest and expenses change, we may increase or decrease charges where
permitted by the Policy, but we will never charge more than the maximum amount
specified in the Policy. Any change in the charges will apply to all Insureds of
the same age, gender, and risk class and whose Policies have been in effect for
the same length of time.
DEDUCTIONS FROM PREMIUM PAYMENTS
PERCENT OF PREMIUM CHARGE. A deduction of up to 5.0% of the premium is made from
each premium payment; currently the charge is 3.0%. The deduction is intended to
partially offset the premium taxes imposed by the states and their subdivisions,
and to help defray the tax cost due to capitalizing certain Policy acquisition
expenses as required under applicable federal tax laws. (See the section on
Federal Tax Matters.) AVLIC does not expect to derive a profit from the Percent
of Premium Charge. If you surrender the Policy in the first two Policy Years, we
will refund a portion of the Percent of Premium Charge deducted in the first
Policy Year. The applicable portion is 100% in the first Policy Year and 50% in
the second Policy Year.
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 provided. These
charges will be allocated from the Investment Options according to your
instructions. If no instructions are given, the charges will be allocated pro
rata among the Investment Options. 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, we
deduct an Administrative Expense Charge based on the Specified Amount and the
Policy duration. Currently, the per Policy charge is $15 per month in the first
Policy Year and $7 per month thereafter. The per Policy portion of the
Administrative Expense Charge is levied throughout the life of the Policy and is
guaranteed not to increase above $15 per month in the first Policy Year and $12
per month thereafter. During the first ten Policy Years, there is a monthly
charge per $1000 of initial Specified Amount. In addition, there is a monthly
charge per $1000 of each increase in Specified Amount for ten years from the
date of increase. The per $1000 rates for both the initial Specified Amount and
each increase vary by Issue Age, gender, and risk class. The current charge per
$1000 is the same as the maximum charge. (See the Policy Schedule for rates.)
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.
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<PAGE>
Cost of Insurance Rate. The Annual Cost of Insurance Rates are based on the
Insured's gender, Issue Age, Policy duration and risk class. The rates will vary
depending upon tobacco use and other risk factors. For the initial Specified
Amount, the Cost of Insurance Rates 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 Male and Female
Mortality Tables without smoker distinction. The maximum rates for the
table-rated substandard Insureds are based on a multiple (shown in the schedule
pages of the Policy) of the above rates. We may add flat extra ratings to an
Insured to reflect higher mortality risk. Any change in the Cost of Insurance
Rates will apply to all Insureds of the same age, gender, risk class and whose
Policies have been in effect for the same length of time.
The Cost of Insurance Rates, Policy charges, and payment options for Policies
issued in Montana, and perhaps other states or in connection with certain
employee benefit arrangements, are issued on a gender-neutral (unisex) basis.
The unisex rates will be higher than those applicable to females and lower than
those applicable to males.
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 the 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, Insureds in the standard rating class will have a lower Cost
of Insurance Rate than Insureds in a rating class with higher mortality risks.
Transfer Charge. Currently there is no charge for transfers among the Investment
Options in excess of 15 per Policy Year. A charge of $10 (guaranteed not to
increase) for each transfer in excess of 15 may be imposed 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.
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). A
partial withdrawal charge is not assessed when a Policy is Surrendered.
Daily Charges Against The Separate Account
A daily Mortality and Expense Risk Charge will be deducted from the value of the
net assets of 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 0.002050% (equivalent to an annual rate of
0.75%) for Policy Years 1-15 and will not exceed 0.95% annually. After the
fifteenth Policy Year the daily charge will be applied at the rate of 0.000820%
(equivalent to an annual rate of 0.30%) and will not exceed 0.50% annually. 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.
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<PAGE>
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 applied at a rate of 0.000409% (equivalent to 0.15% annually). The
rate of this charge will never exceed 0.15% annually. No Asset-Based
Administrative Expense Charge will be deducted from the amounts in the Fixed
Account.
FUND EXPENSE SUMMARY
In addition to the charges against 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>
PORTFOLIO INVESTMENT 12B-1 OTHER TOTAL WAIVERS TOTAL
ADVISORY & EXPENSE EXPENSES AND/OR (REFLECTING
MANAGEMENT REIMBURSEMENTS WAIVERS AND/OR
EIMBURSEMENTS,
IF ANY)
<S> <C> <C> <C> <C> <C>
AMERITAS PORTFOLIOS(1)
Ameritas Money Market .21% - .14% .35% .05% .30%
Ameritas Index 500 .24% - .17% .41% .13% .28%
Ameritas Growth .75% - .14% .89% .10% .79%
Ameritas Income & Growth .63% - .19% .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
VIP Equity-Income:
Service Class .49% .10% .09% .68% - .68%(2)
VIP Growth:
Service Class .59% .10% .11% .80% - .80%(2)
VIP High Income:
Service Class .58% .10% .14% .82% - .82%
VIP Overseas:
Service Class .74% .10% .17% 1.01% - 1.01%(2)
VIP II Asset Manager:
Service Class .54% .10% .14% .78% - .78%(2)
VIP II Investment Grade Bond .43% - .14% .57% - .57%
VIP II Asset Manager: Growth:
Service Class .59% .10% .20% .89% - .89%(2)
VIP II Contrafund:
Service Class .59% .10% .11% .80% - .80%(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)
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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)" until October 29, 2000. Following this 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: Service Class .67%
VIP Growth: Service Class .75%
VIP Overseas: Service Class .97%
VIP II Asset Manager: Service Class .77%
VIP II Asset Manager: Growth: Service Class .88%
VIP II Contrafund: Service Class .75%
(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, 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 country 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.
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<PAGE>
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 the Policy Owner is a natural person, upon the death of the Policy
Owner, all rights, options, and privileges pass 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 Beneficiaries 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, if a natural person.
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 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 the Policy Owner is a natural person and is no longer living, the
Death Benefit Proceeds shall be paid to any successor-owner, if living;
otherwise to the Policy Owner's estate. Any proceeds payable upon Surrender
shall be paid in one sum unless an Optional Method of Payment is elected.
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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 GENDER. If the age or gender 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 gender. 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, 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 Policy Owner, 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.)
TERM INSURANCE RIDER. You may increase the total coverage by adding a term
insurance rider, at issue, on the Insured person's life. The death benefit
provided by the rider adjusts over time.
If you purchase this rider, the total specified amount is the total of the
specified amount for the base Policy plus the specified amount for this
rider. We generally restrict the total specified amount at issue to an
amount not more than ten times the base Policy specified amount. For
example, if the base Policy specified amount is $100,000, then the maximum
total specified amount we allow is $1,000,000.
The death benefit for the term insurance rider is the difference between
the total death benefit and the base Policy death benefit. (See the section
on Death Benefit Options.) The total death benefit depends upon which Death
Benefit option is in effect. If Option A is in effect, the total death
benefit is the greater of (1) the total specified amount, or (2) the
Accumulation Value multiplied by the appropriate Death Benefit
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percentage. If Option B is in effect, the total death benefit is the
greater of (1) the total specified amount plus the Accumulation Value, or
(2) the Accumulation Value multiplied by the appropriate Death Benefit
percentage.
Over time, it is possible that the base Policy Death Benefit could grow and
cause a corresponding reduction in the term rider death benefit. If the
base Policy Death Benefit becomes equal to the total death benefit, the
term rider death benefit will drop to zero, but it will never be less than
zero. Even if the death benefit for the rider is reduced to zero, the rider
remains in effect until you remove it from the Policy. Therefore, if later
the base Policy death benefit is reduced below the total death benefit, the
rider death benefit reappears to maintain the total death benefit.
There is no defined premium for a given amount of term insurance coverage.
Instead, we deduct a monthly cost of insurance charge from the Accumulation
Value. The cost of insurance for this rider is calculated as the monthly
cost of insurance rate for the rider coverage multiplied by the term death
benefit in effect that month. The cost of insurance rates will be
determined by us from time to time. They will be based on the Insured's
gender, Issue Age, Policy duration ,and risk class. The monthly maximum
cost of insurance rates for this rider will be in the Policy.
Subject to certain limitations, after the first Policy Year you may
decrease the specified amount for this rider. The specified amount
remaining in force for this rider after any requested decrease may not be
less than $50,000. You may terminate all coverage under this rider at any
time after the first Policy Year. You may not increase the specified amount
of this rider nor add this rider to your Policy after issue. Coverage under
this rider is not convertible.
You may select only one of the following riders:
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.
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.
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
1999, AIC received gross variable universal life compensation of $____ , and
retained $____ in underwriting fees, and $____ 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 products.
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. The commission may equal an amount up to 30% of premium in the first
Policy Year and up to 12% of premium in renewal years. Broker-dealers may also
receive a service fee up to an
Corporate Benefit VUL
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annualized rate of .50% of the Accumulation Value beginning in the sixth 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 Percent of Premium
Charge). 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 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 withdrawal, a change in Death Benefit option, or any other such
change that reduces future benefits under the Policy during the first 15
years after a Policy is issued and that results in a cash distribution to
the Policy Owners in order for the Policy to continue complying with the
Section 7702 defined limits on premiums and Accumulation Values, such
distributions may be taxable in whole or in part 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.
CORPORATE BENEFIT VUL
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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 you deposit excessive
premiums during a Policy Year, that portion that is returned by AVLIC
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. If the Policy is not treated as life insurance because it fails
the diversification requirements, the Policy Owner is then subject to
federal income tax on gain in the Policy as it is earned. 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.
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 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 may 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. In addition, certain
exceptions apply to the general rule that death benefit proceeds are
non-taxable. Federal, state, and local tax consequences of ownership or
receipt of Policy proceeds depends on the circumstances of each Policy
Owner and Beneficiary.
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
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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 repealed 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 included 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 occurred 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). Any material change in a policy (including a material
increase in the death benefit) may cause the policy to be treated as a new
policy for purposes of this rule. 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.
BUSINESSES CONTEMPLATING THE PURCHASE OF A NEW POLICY OR A CHANGE TO AN
EXISTING POLICY SHOULD CONSULT A QUALIFIED TAX ADVISOR REGARDING THE TAX
IMPLICATIONS OF THESE RULES FOR THEIR PARTICULAR SITUATIONS.
The right to change Policy Owners (See the section on General Provisions.)
and the provision for partial withdrawals (See the section on Partial
Withdrawals.) may have tax consequences depending on the circumstances of
such exchange, change, or partial withdrawal. Upon complete Surrender, if
the amount received plus any Outstanding Policy Debt exceeds the total
premiums paid (the "basis") that are not treated as previously withdrawn by
the Policy Owner, the excess generally will be taxed as ordinary income.
Federal, state and local 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, the tax consequences of using the
Policy in non-qualified deferred compensation, salary continuance,
split-dollar insurance, and executive bonus plans may vary depending on the
particular facts and circumstances of the arrangement. Further, 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 qualified tax counsel should be sought in
connection with use of life insurance in non-qualified or qualified plans.
YOU SHOULD CONSULT QUALIFIED TAX AND/OR LEGAL ADVISORS TO OBTAIN COMPLETE
INFORMATION ON FEDERAL, STATE AND LOCAL TAX CONSIDERATIONS APPLICABLE TO
YOUR PARTICULAR SITUATION
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
AVLIC holds the assets of Separate Account V. The assets are kept physically
segregated and held separately 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.
CORPORATE BENEFIT VUL
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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.
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.
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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.
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).
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39
<PAGE>
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
Actuarial matters included in this prospectus have been examined by
____________________ of Ameritas Life Insurance Corp., as stated in the opinion
filed as an exhibit to the registration statement.
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 ________ 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.
CORPORATE BENEFIT VUL
40
<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 classification 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. 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, without smoker distinction.
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 premium charges 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, Net Cash 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 .90%
(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 0.90% for Policy
Years 1-15 and 0.45% thereafter on pages A-3 and A-5 and at an annual rate of
1.10% for Policy Years 1-15 and .65% thereafter 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 -1.80%, 4.20%, and 10.20% respectively, for Policy Years
1-15 and -1.35%, 4.65%, and 10.65% for the Policy Years thereafter
A-1
<PAGE>
respectively, on pages A-3 and A-5 and -2.00%, 4.00%, and 10.00% respectively,
for years 1-15, -1.55%, 4.45%, and 10.45 % thereafter on pages A-4 and A-6.
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 Accumulation 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 fifteen
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, gender and risk class, 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
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $500000
DEATH BENEFIT OPTION: A
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.80% Net) ( 4.20% Net) (10.20% Net)
------------------------- -------------------------- -------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
6
70
75
</TABLE>
1) Assumes an annual $6000 premium is paid at the beginning of each policy year.
Values would be different if premiums with a different frequency or in different
amounts.
2) Assumes that no policy loan has been made. Excessive loans or withdrawals may
cause this policy to lapse because of insufficient 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
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $6000
INITIAL SPECIFIED AMOUNT: $500000
DEATH BENEFIT OPTION: A
USING MAXIMUM ALLOWABLE SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-2.00% Net) ( 4.00% Net) ( 10.00% Net)
------------------------- ------------------------- -------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
65
70
75
</TABLE>
* In the absence of an additional premium
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-4
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
AMERITAS VARIABLE LIFE INSURANCE COMPANY
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $20000
INITIAL SPECIFIED AMOUNT: $500000
DEATH BENEFIT OPTION: B
USING CURRENT SCHEDULE OF COST OF INSURANCE RATES
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Annual Investment Return Annual Investment Return Annual Investment Return
(-1.80% Net) ( 4.20% Net) (10.20% Net)
------------------------- ------------------------ --------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
65
70
75
</TABLE>
1) Assumes an annual $20000 premium is paid at the beginning of each policy
year. Values would be different if premiums with a different frequency or in
different amounts.
2) Assumes that no policy loan has been made. Excessive loans or withdrawals may
cause this policy to lapse because of insufficient 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
Male Issue Age: 45 Nontobacco Preferred Underwriting Class
PLANNED PERIODIC ANNUAL PREMIUM: $20000
INITIAL SPECIFIED AMOUNT: $500000
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
(-2.00% Net) ( 4.00% Net) ( 10.00% Net)
------------------------- ------------------------- --------------------------
Accumulated
End Of Premiums At Accumu- Cash Accumu- Cash Accumu- Cash
Policy 5% Interest lation Surrender Death lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20
Ages
60
65
70
75
</TABLE>
1) Assumes an annual $20000 premium is paid at the beginning of each policy
year. Values would be different if premiums with a different frequency or in
different amounts.
2) Assumes that no policy loan has been made. Excessive loans or withdrawals may
cause this policy to lapse because of insufficient 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
<PAGE>
INCORPORATION BY REFERENCE
The Registrant, Separate Account V, purchases or will purchase units from the
portfolios of these Funds at the direction of its Policy Owners. The
prospectuses of these Funds will be distributed with this prospectus and are
hereby incorporated by reference. The prospectuses incorporated by reference are
as follows:
Calvert Variable Series, Inc.
Ameritas Portfolios
Registration No. 2-80154
Variable Insurance Products Fund
Registration No. 2-75010
Variable Insurance Products Fund II
Registration No. 33-20773
The Alger American Fund
Registration No. 33-21722
MFS Variable Insurance Trust
Registration No. 333-74668
Morgan Stanley Dean Witter Universal Funds, Inc.
Registration No. 333-3013
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
Registrant makes the following representation pursuant to the National
Securities Markets Improvements Act of 1996:
Ameritas Variable Life Insurance Company represents that the fees and charges
deducted under the contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
RULE 484 UNDERTAKING
AVLIC'S By-laws provide as follows:
The Company shall indemnify any person who was, or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, or employee of the Company or
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding to the full extent authorized by the laws of
Nebraska.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and wil be governed by the final
adjudication of such issue.
REPRESENTATION PURSUANT TO RULE 6E-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Ameritas Variable Life Insurance Company Separate Account V, certifies that it
has caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Lincoln, County of
Lancaster, State of Nebraska on this 20th day of January, 2000.
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V, Registrant
AMERITAS VARIABLE LIFE INSURANCE COMPANY, Depositor
Attest: /s/ Donald R. Stading By:/s/ Lawrence J. Arth
----------------------- -------------------------
Secretary Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the Directors and Principal Officers of Ameritas
Variable Life Insurance Company on the dates indicated.
SIGNATURE TITLE DATE
---------- ------ -----
/s/ Lawrence J. Arth Director, Chairman of the Board January 20, 2000
- --------------------- and Chief Executive Officer
Lawrence J. Arth
/s/ William J. Atherton Director, President and January 20, 2000
- ----------------------- Chief Operating Officer
William J. Atherton
/s/ Kenneth C. Louis Director, Executive Vice President January 20, 2000
- ----------------------
Kenneth C. Louis
/s/ Gary R. McPhail Director, Executive Vice President January 20, 2000
- -----------------------
Gary R. McPhail
/s/ Thomas C. Godlasky Director, Senior Vice President January 20, 2000
- ----------------------- and Chief Investment Officer
Thomas C. Godlasky
/s/ JoAnn M. Martin Director, Controller January 20, 2000
- -----------------------
JoAnn M. Martin
<PAGE>
SIGNATURE TITLE DATE
---------- ------ -----
/s/ Michael G. Fraizer Director January 20, 2000
- -----------------------
Michael G. Fraizer
/s/ William W. Lester Treasurer January 20, 2000
- -----------------------
William W. Lester
/s/ Donald R. Stading Secretary and General Counsel January 20, 2000
- -----------------------
Donald R. Stading
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of 40 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484. Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following:
(a) (actuary)
(b) Donald R. Stading
(c) (auditors)
The Following Exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N- 8B-2.
(1) Resolution of the Board of Directors of AVLIC Authorizing
Establishment of the Account.*
(2) Not applicable.
(3)(a) Principal Underwriting Agreement.*
(b) Proposed Form of Selling Agreement.*
(c) Commission Schedule - To be filed by later amendment.
(4) Not Applicable.
(5)(a) Form of Policy - To be filed by later amendment.
(b) Form of Policy Riders - To be filed by later amendment.
(6)(a) Articles of incorporation of Ameritas Variable Life Insurance
Company.**
(b) Bylaws of Ameritas Variable Life Insurance Company.***
(7) Not applicable.
(8)(a) Participation Agreement in the Calvert Variable Series, Inc.****
(b) Participation Agreement in the Variable Insurance Products
Fund.**
(c) Participation Agreement in the Alger American Fund.**
(d) Participation Agreement in the MFS Variable Insurance Trust.*
(e) Participation Agreement in the Morgan Stanley Universal Funds,
Inc.*
(9) Not Applicable.
(10) Form of Application for Policy - To be filed by later amendment
2. (a)(b) Opinion and Consent of Donald R. Stading, Secretary and General
Counsel
3. No financial statements will be omitted from the final Prospectus pursuant
to Instruction 1(b) or (c) or Part I.
4. Not applicable.
5. Not applicable.
6. (a)(b) Opinion and Consent of actuary - To be filed by later amendment.
7. Consent of Independent Auditors - To be filed by later amendment.
8. Form of Notice of Withdrawal Right and Refund pursuant to Rule
6e-3(T)(b)(13)(viii) under the Investment Company Act of 1940.**
* Incorporated by reference to the initial Registration Statement for
Ameritas Variable Life Insurance Company Separate Account V, File No.
333-15585, filed November 5, 1996.
** Incorporated by reference to the Pre-Effective Amendment to the
Registration Statement for Ameritas Variable Life Insurance Company
Separate Account V, File No. 333-15585, filed January 17, 1997.
*** Incorporated by Reference to Pre-Effective Amendment No. 1 to the
Registration Statement for Ameritas Variable Life Insurance Company
Separate Account VA-2, File No. 333-36507, filed February 20, 1998.
**** Incorporated by reference to Post-Effective Amendment No. 5 to the initial
Registration Statement for Ameritas Variable Life Insurance Company
Separate Account V, File No. 333-15585, filed August 30, 1999.
<PAGE>
EXHIBIT INDEX
EXHIBIT
2.(a)(b) Opinion and Consent of Donald R. Stading
EXHIBIT 2. (a)(b)
Opinion and Consent of Donald R. Stading
<PAGE>
January 21, 2000
Ameritas Variable Life Insurance Company
5900 "O" Street
Lincoln, Nebraska 68510
Gentlemen:
With reference to the Form S-6 filed by Ameritas Variable Life Insurance Company
and Ameritas Variable Life Insurance Company Separate Account V with the
Securities & Exchange Commission covering flexible premium life insurance
policies, I have examined such documents and such laws as I considered necessary
and appropriate, and on the basis of such examination, it is my opinion that:
1. Ameritas Variable Life Insurance Company is duly organized and validly
existing under the laws of the State of Nebraska and has been duly
authorized by the Insurance Department of the State of Nebraska to issue
variable life policies.
2. Ameritas Variable Life Insurance Company Separate Account V is a duly
authorized and existing separate account established pursuant to the
provisions of Section 44-402.01 of the Statutes of the State of
Nebraska.
3. The flexible premium variable life policies, when issued as contemplated
by said Form S-6 Registration Statement, will constitute legal, validly
issued and binding obligations of Ameritas Variable Life Insurance
Company.
I hereby consent to the filing of this opinion as an exhibit to said Form S-6
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Sincerely,
/s/ Donald R. Stading
Donald R. Stading
Secretary and General Counsel
