Supplement to Prospectus
By Supplement to Prospectus ("sticker") dated March 13, 1996, Ameritas Variable
Life Insurance Company discloses the following:
On February 27, 1996, AVLIC determined to postpone the merger with Ameritas Life
Insurance Corp. ("Ameritas Life") indefinitely.
On March 11, 1996, Ameritas Life and American Mutual Life Insurance Company
("American Mutual"), an Iowa mutual life insurance company, announced an
Agreement of Joint Venture ("Agreement").
The terms of the Agreement, which has a closing date of March 29, 1996, require
a holding company (AMAL Corporation) to be formed. Also pursuant to the terms of
the Agreement, the stock of AVLIC and Ameritas Investment Corp. will be
transferred to AMAL Corporation on the closing date. AMAL Corporation will then
issue a controlling ownership of the stock to Ameritas Life and a minority
ownership of the stock to American Mutual.
As of May 1, 1996, The Dreyfus Stock Index Fund is no longer an investment
option under the contract. Funds allocated to the Dreyfus Stock Index Fund as of
April 30, 1996 may remain invested in that portfolio. If transferred out of the
Dreyfus Stock Index portfolio, however, reinvestment into that portfolio will
not be an option. AVLIC eventually intends to file an application with the
Securities and Exchange Commission to substitute the shares of another portfolio
for shares of the Dreyfus Stock Index Fund.
PROSPECTUS COMPANY LOGO
AMERITAS VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM One Ameritas Way / 5900 "O" Street
VARIABLE ANNUITY POLICY P.O. Box 81889/Lincoln, NE 68501
- --------------------------------------------------------------------------------
This Prospectus describes a Variable Annuity Policy ("Policy") offered by
Ameritas Variable Life Insurance Company ("AVLIC"). The Policy is a deferred
annuity, designed to aid individuals in long-term financial planning, and
provides for the accumulation of capital on a tax deferred basis for retirement
or other long-term purposes. The Policy is offered to individuals on either a
tax qualified or non-tax qualified basis. The minimum first year premium on a
non-tax qualified policy is $2000 or more and minimum subsequent premium
payments is $500 or more. Smaller premium payments may be accepted on
Bank-O-Matic or at AVLIC's discretion. The minimum initial and subsequent
premium for a tax qualified policy purchased in a periodic payment plan is $50
per month.
Prior to the annuity date of the policy the accumulation value varies according
to the value of the subaccounts and the Fixed Account. The owner will receive
annuity payments on a fixed basis based on the assets supporting the Policy and
the option chosen. The owner has significant flexibility in determining the
annuity date on which payments are scheduled to commence. Full withdrawals may
be made at any time, elective partial withdrawals may be made up to four times
annually, and, up to 12 systematic withdrawals may be made annually, subject to
certain restrictions, before the annuity date. Under certain circumstances
withdrawals are subject to a contingent deferred sales charge and tax penalty.
Any withdrawal amount may be paid in a lump sum or, if elected, all or part may
be paid out under an annuity income option. Policy loans are available from
policies purchased in 403(b) plans. The Policy provides the flexibility
necessary to permit an owner to devise an annuity that best fits his or her
needs.
Premium payments may be allocated to the Ameritas Variable Life Insurance
Company Separate Account VA-2 ("Account") or to the Fixed Account. The Account
has twenty Subaccounts, with the assets of each invested in corresponding
portfolios of the Variable Insurance Products Fund, the Variable Insurance
Products Fund II, the Alger American Fund, MFS Variable Insurance Trust and/or
the Dreyfus Stock Index Fund (collectively the "Funds"). The initial premium
payment will be allocated to the Money Market Subaccount, as of the effective
date, for 13 days. After the expiration of the 13-day period (see page 17) the
accumulation value will be allocated to the Subaccounts or to the Fixed Account
as selected by the Policyowner. The Variable Insurance Products Fund is a mutual
fund advised by Fidelity Management & Research Company ("FMR") with five
portfolios: the Money Market, the High Income, the Equity-Income, the Growth and
the Overseas Portfolios. The Variable Insurance Products Fund II is a mutual
fund with five portfolios the Asset Manager, the Investment Grade Bond, the
Index 500*, the Contrafund*, and the Asset Manager: Growth* Portfolios. It is
also advised by FMR. The Alger American Fund is a mutual fund with six
portfolios, Alger American Income and Growth, Alger American Small
Capitalization, Alger American MidCap Growth, Alger American Growth, Alger
American Leveraged AllCap*, and Alger American Balanced Portfolios. The Alger
American Fund is advised by Fred Alger Management, Inc. ("Alger Management").
MFS Variable Insurance Trust is a Massachusetts business trust. The Trust has
twelve separate portfolios or series, of which, MFS Emerging Growth Series*, MFS
Utilities Series*, and MFS World Governments Series* are offered. MFS Variable
Insurance Trust is advised by Massachusetts Financial Services Company ("MFS
Co."). The Dreyfus Stock Index Fund has one portfolio. It is advised by Wells
Fargo NIKKO Investment Advisors (WFNIA). The accompanying prospectuses of the
four funds describe the investment objectives, policies and risks of each of the
portfolios of the funds. The Policy accumulation value will vary in accordance
with the investment performance of the Subaccounts selected by the owner.
Therefore, the owner bears the entire investment risk of monies placed in the
Account under this Policy prior to the annuity date.
* New funds are only available under newly issued policies. Availability is
expected by May 1, 1996, for all policyholders.
This Prospectus sets forth the information that a prospective investor should
know before investing. A Statement of Additional Information about the Policy
and the Account is available free by writing AVLIC at the address above or by
calling 1-800-745-1112. The Statement of Additional Information, which has the
same date as this Prospectus, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The table of contents of the
Statement of Additional Information is included at the end of this Prospectus.
This Prospectus Must Be Accompanied Or Preceded By Current Prospectuses For
Variable Insurance Products Fund, Variable Insurance Products Fund II, Alger
American Fund, MFS Variable Insurance Trust, and Dreyfus Stock Index Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES REGULATORY AUTHORITY NOR HAS THE
COMMISSION OR ANY STATE SECURITIES REGULATORY AUTHORITY PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Please Read This Prospectus Carefully And Retain It For Future Reference.
The Date of This Prospectus is August 22, 1995.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Definitions............................................................... 3
Fee Table................................................................. 4
Questions and Answers About The Policy.................................... 7
Financial Statements...................................................... 10
Ameritas Variable Life insurance Company and the Account.................. 12
Ameritas Variable Life Insurance Company.............................. 12
Ameritas Variable Life Insurance Company Separate Account VA-2........ 12
The Funds............................................................. 12
Investment Policies and Objectives of the Funds' Portfolios........... 13
Addition, Deletion or Substitution of Investments..................... 16
Fixed Account............................................................. 16
The Policy................................................................ 16
Policy Application and Premium Payment................................ 17
Allocation of Premium................................................. 17
Accumulation Value.................................................... 17
Value of Accumulation Units........................................... 18
Transfers............................................................. 18
Owner Inquiries....................................................... 18
Refund Privilege...................................................... 18
Policy Loans.......................................................... 18
Charges and Deductions.................................................... 19
Administrative Charges................................................ 19
Mortality and Expense Risk Charge..................................... 19
Contingent Deferred Sales Charge...................................... 20
Taxes................................................................. 20
Fund Investment Advisory Fees and Expenses............................ 21
Distributions Under the Policy............................................ 21
Full and Partial Withdrawals.......................................... 21
Critical Needs Withdrawals............................................ 21
Annuity Date.......................................................... 22
Death of Annuitant Prior to Annuity Date.............................. 22
Election of Annuity Income Options.................................... 22
Annuity Income Options................................................ 23
Deferment of Payment.................................................. 23
General Provisions........................................................ 23
Control of Policy..................................................... 23
Beneficiary........................................................... 23
Change of Beneficiary................................................. 23
Contestability........................................................ 24
Misstatement of Age or Sex............................................ 24
Reports and Records................................................... 24
Federal Tax Matters....................................................... 24
Introduction.......................................................... 24
Taxation of Annuities in General...................................... 25
Distribution of the Policies.............................................. 26
Safekeeping of the Account's Assets....................................... 26
Voting Rights............................................................. 26
Legal Proceedings......................................................... 26
Statement of Additional Information....................................... 27
</TABLE>
The Policy, certain provisions, and certain portfolios are not available in all
States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, 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.
<PAGE>
DEFINITIONS
ACCOUNT - Ameritas Variable Life Insurance Company Separate Account VA-2, a
separate investment account established by AVLIC to receive and invest the
premium paid under the Policy. The investment performance of the Account is kept
separate from that of the general assets of AVLIC.
ACCUMULATION UNIT - A unit used to measure the value of the Policy prior to the
annuity date.
ACCUMULATION VALUE - The value of all amounts accumulated under the Policy prior
to the annuity date.
ANNUITANT - The person or persons upon whose life expectancy the Policy is
written. The annuitant may also be the owner of the Policy.
ANNUITY DATE - The date on which annuity payments begin.
ANNUITY INCOME OPTION - One of several ways in which annuity payments may be
made. Payments are based on the cash surrender value as of the annuity date,
less any applicable premium taxes. The dollar amount of each annuity payment
will not change over time, except in the case where the interest payment option
is selected.
ANNUITY PAYMENT - One of a series of payments made under an annuity income
option.
AVLIC ("We, Us, Our") - Ameritas Variable Life Insurance Company, a Nebraska
stock company.
BENEFICIARY - The person to whom any benefits due upon death of the annuitant
are paid. The beneficiary is designated by the owner in the application. If
changed, the beneficiary is as shown in the latest change filed and recorded
with AVLIC. If no beneficiary survives the annuitant, the owner or the owner's
estate will be the beneficiary. The interest of any beneficiary is subject to
that of any assignee.
CASH SURRENDER VALUE - The amount available for full or partial withdrawal,
which is the accumulation value less any withdrawal charge, and applicable
premium taxes and, in the case of a full withdrawal, less the annual
administrative charges.
CONTINGENT DEFERRED SALES CHARGES - The charge assessed upon certain withdrawals
and annuitizations to cover certain expenses relating to the sale of the
Policies.
DECLARED RATES - AVLIC guarantees that it will credit interest in the Fixed
Account at an effective annual rate of at least 3.5%. AVLIC may, at its sole
discretion declare higher interest rates for amounts allocated or transferred to
the Fixed Account.
DUE PROOF OF DEATH - All of the following must be submitted: (1) A certified
copy of the death certificate; (2) A Claimant Statement; (3) The Policy; and (4)
Any other information that AVLIC may require to establish the validity of the
claim.
EFFECTIVE DATE - The date that the premium payment is applied to purchase a
Policy for the owner.
FIXED ACCOUNT - An account that is a part of AVLIC's general account to which
all or a portion of premium payments may be allocated for accumulation at fixed
rates of interest.
FUNDS - Variable Insurance Products Fund ("Fidelity Fund"), Variable Insurance
Products Fund II ("Fidelity Fund II") (collectively the "Fidelity Funds"), the
Alger American Fund ("Alger American Fund"), MFS Variable Insurance Trust "MFS
Fund" or "MFS"), and the Dreyfus Stock Index Fund ("Dreyfus Index Fund or
Dreyfus Index") are the funds available for investment as of the date of this
prospectus. In the future, additional funds may be added or subtracted by AVLIC
as the available funding options. The Funds have one or more portfolios. There
is a portfolio that corresponds to each of the Subaccounts of the Account.
JOINT ANNUITANT - The person other than the annuitant who may be designated by
the owner and on whose life annuity payments may also be based.
NET CASH SURRENDER VALUE - The cash surrender value less premium tax, if any.
NET PREMIUM - The premium payment less a percent of premium charge equal to the
premium tax, if imposed by the state in which the policy is delivered.
NONQUALIFIED POLICIES - Policies that do not qualify for special federal income
tax treatment.
OWNER - 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 owner. A collateral assignee is not the owner.
<PAGE>
PAYEE - The owner, annuitant, beneficiary, or any other person, estate, or legal
entity to whom benefits are to be paid.
POLICY - The variable annuity policy offered by AVLIC and described in this
Prospectus.
POLICY DATE - The date set forth in the Policy that is the date used to
determine policy anniversary dates and policy years. Policy anniversaries are
measured from the policy date.
POLICY YEAR - The period from one policy anniversary date until the next policy
anniversary date.
PORTFOLIO - The separate investment portfolios of the Fidelity Fund, the
Fidelity Fund II, the Alger American Fund, the MFS Fund, and the Dreyfus Index
Fund. The Fidelity Fund currently has five portfolios: The Money Market, the
High Income, the Equity-Income, the Growth, and the Overseas Portfolios. The
Fidelity Fund II has five portfolios: Asset Manager, Investment Grade Bond,
Index 500, Contrafund, and Asset Manager: Growth Portfolios. The Alger American
Fund has six portfolios: the Alger American Income and Growth ("Income and
Growth"), the Alger American Small Capitalization ("Small-Cap"), Alger American
MidCap Growth ("MidCap"), Alger American Growth ("Alger American Growth"), Alger
American Leveraged AllCap ("Leveraged AllCap"), and Alger American Balanced
("Balanced") Portfolios. MFS Variable Insurance Trust, ("MFS Fund" or "MFS"), is
a Massachusetts business trust. The Trust has twelve separate portfolios or
series, of which, MFS Emerging Growth Series ("MFS Emerging Growth"), MFS
Utilities Series ("MFS Utilities"), and MFS World Governments Series ("MFS World
Governments") are offered. The Dreyfus Index Fund has one portfolio.
PREMIUM PAYMENT - The minimum first year premium on a non-tax qualified policy
is $2000 or more and minimum subsequent premium payments of $500 or more.
Smaller premium payments may be accepted on Bank-O-Matic or at AVLIC's
discretion. The minimum initial and subsequent premium for a tax qualified
policy purchased in a periodic payment plan is $50 per month.
QUALIFIED POLICIES - Policies purchased in connection with certain plans that
qualify for special federal income tax treatment.
SUBACCOUNT - A subdivision of the Account. Each Subaccount invests exclusively
in the shares of a specified portfolio of the Fund.
SUCCESSOR OWNER - The person who may be designated by the owner and to whom
Policy ownership passes upon the owner's death.
VALUATION DATE - A valuation date is each 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 trading on the New York Stock Exchange ("NYSE") on one valuation
date and ending at the close of trading on the NYSE on the next succeeding
valuation date.
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
This table is to assist the policyowner to understand the various costs and
expenses that the policyowner will bear, directly and indirectly at both the
Separate Account and portfolio level. The table does not include possible state
premium taxes.
Sales Load Imposed on Purchases...................................... 0%
Contingent Deferred Sales Charge - on premiums paid only (Maximum)... 6.0%
<TABLE>
<CAPTION>
Year % Year %
<S> <C> <C> <C>
1.................6 5..................4
2.................6 6..................3
3.................6 7..................2
4.................5 8+.................0
</TABLE>
Surrender Fees..................................................... 0%
Exchange Fee ...................................................... 0%
Transfer Fee (after 15 free transfers per policy year)............. $10
Annual Policy Fee (up to $50, currently $36, $30 in North Dakota).. $36
Annual Administration Fee and Expense.............................. .20%
Separate Account Annual Expenses (as a percentage of average account value)
Mortality and Expense Risk Fees.................................... 1.25%
(See "Charges and Deductions", page 19).
<PAGE>
<TABLE>
<CAPTION>
FIDELITY FUND ANNUAL EXPNESES
Money High Equity-
Market Income Income* Growth* Overseas
<S> <C> <C> <C> <C> <C>
Management...... .20% .61% .52% .62% .77%
Other........... .07% .10% .06% .07% .15%
------ ------ ------ ------ ------
Total........... .27% .71% .58% .69% .92%
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FUND II ANNUAL EXPENSES
Asset Investment Index Asset Manager:
Manager* Grade Bond 500** Contrafund*** Growth ***
<S> <C> <C> <C> <C> <C>
Management...... .72% .46% .28% .62% .72%
Other........... .08% .21% .00% .27% .21%
------ ------ ------ ------ ------
Total........... .80% .67% .28% .89% .93%
</TABLE>
* A portion of the brokerage commission the fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been for
Equity-Income - .60%; Growth - .70%; and for Asset Manager - .81%.
(See "The Funds", page 12 and Portfolios Prospectuses).
**Fund expenses were voluntarily reduced by the fund's investment adviser.
Without this reduction, total operating expenses would have been .81%.
*** Management fee and expenses estimated for 1995. Contrafund and Asset
Manager: Growth commenced operations January 3, 1995.
<TABLE>
<CAPTION>
ALGER AMERICAN FUND ANNUAL EXPNESES
Alger
Income and Small Mid American Leveraged
Growth Cap Cap Growth Balanced AllCap*
<S> <C> <C> <C> <C> <C> <C>
Management...... .625% .85% .80% .75% .75% .85%
Other........... .125% .11% .17% .11% .33% .94%
------- ------ ------ ------ ------ ------
Total........... 0.75% .96% .97% .86% 1.08% 1.79%
</TABLE>
*Management fee and expenses estimated for 1995. Inception date for Leveraged
AllCap was January 25, 1995.
<TABLE>
<CAPTION>
MFS FUND ANNUAL EXPENSES
MFS Emerging MFS Utilities MFS World Dreyfus Index Fund
Growth Series* Series* Governments Series** Annual Expenses***
<S> <C> <C> <C> <C>
Management...... .75% .75% .75% .30%
Other........... .25% .25% .25% .10%
------ ------ ------ ------
Total........... 1.00% 1.00% 1.00% .40%
</TABLE>
* MFS Co. has agreed to bear, subject to reimbursement, expenses for each of the
Emerging Growth Series and the Utilities Series such that each Series' aggregate
operating expenses shall not exceed, on an annualized basis, 1.00% of the
average daily net assets of the Series from November 2, 1994 through December
31, 1996 provided however, that this obligation may be terminated or revised at
any time. Absent this expense arrangement, "Other Expenses" and "Total Operating
Expenses" would be 1.00% and 1.75%, respectively, for the Emerging Growth Series
and 0.93% and 1.68%, respectively, for the Utilities Series, based upon
estimated expenses for the series' current fiscal year.
** MFS Co. has agreed to bear, subject to reimbursement, expenses of the World
Government Series such that the Series' aggregate operating expenses do not
exceed 1.00%, on an annualized basis, of its average daily net assets. Absent
this expense arrangement, "Other Expenses" and "Total Operating Expenses" for
the World Governments Series would be 0.63% and 1.38%, respectively.
*** For the period ended December 31, 1994, if these expenses for the period had
been incurred by the Dreyfus Index Fund Portfolio, the ratio of expenses to
average daily net assets would have been .56%.
<PAGE>
Fidelity Management & Research Company (FMR) has agreed to reimburse the various
portfolios if, and to the extent that, the portfolios' aggregate operating
expenses are in excess of, .80% (Investment Grade Bond Portfolio), 1.00% (High
Income, Contrafund and Asset Manager: Growth Portfolios), 1.25% (Asset Manager
Portfolio) or 1.50% (Equity-Income, Growth, and Overseas Portfolios) of the
respective Portfolios' average net assets. FMR has voluntarily agreed to
temporarily limit Index 500 Portfolio's total operating expenses to 0.28%. Alger
Management has agreed to reimburse the Portfolios if, and to the extent that,
the Portfolios' aggregate operating expenses (excluding interest, taxes, fees
for brokerage services and extraordinary expenses) are in excess of 1.25%
(Income and Growth, and Balanced Portfolios) and 1.50% (Small Cap, MidCap,
Leveraged AllCap and Growth Portfolios) of the respective Portfolio's average
net assets. WFNIA and Dreyfus Corporations have undertaken to reimburse the
Dreyfus Index Fund if, and to the extent that, its Portfolio's aggregate
operating expenses exceed .40% of the average net assets of the Fund. These
agreements are expected to continue in the future years. As long as this expense
limitation continues for a portfolio, if a reimbursement occurs, it has the
effect of lowering the portfolio's expense ratio and increasing its total
return.
EXAMPLE: If you surrender your contract at the end of the applicable time period
you would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Market.................... $79 $118 $140 $216
High Income..................... $83 $132 $163 $261
Equity-Income................... $82 $128 $156 $248
Growth.......................... $83 $131 $162 $259
Overseas........................ $85 $138 $173 $282
Asset Manager................... $84 $134 $167 $270
Investment Grade Bond........... $83 $131 $161 $257
Index 500....................... $79 $119 $141 $217
Contrafund...................... $85 $137 $172 $279
Asset Manager: Growth........... $86 $138 $174 $283
Income and Growth............... $84 $133 $165 $265
Balanced........................ $87 $143 $181 $298
Small Cap ...................... $86 $139 $175 $286
Midcap.......................... $86 $140 $176 $287
Alger American Growth........... $85 $136 $170 $276
Leveraged AllCap................ $94 $164 $216 $365
MFS Emerging Growth............. $86 $140 $177 $290
MFS Utilities................... $86 $140 $177 $290
MFS World Governments........... $86 $140 $177 $290
Dreyfus Index................... $80 $122 $147 $229
</TABLE>
EXAMPLE: If you annuitize at the end of the applicable time period you would pay
the following expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Market.................... $79 $ 58 $100 $216
High Income..................... $83 $ 72 $123 $261
Equity-Income................... $82 $ 68 $116 $248
Growth.......................... $83 $ 71 $122 $259
Overseas........................ $85 $ 78 $133 $282
Asset Manager................... $84 $ 74 $127 $270
Investment Grade Bond........... $83 $ 71 $121 $257
Index 500....................... $79 $ 59 $101 $217
Contrafund...................... $85 $ 77 $132 $279
Asset Manager: Growth........... $86 $ 78 $134 $283
Income and Growth............... $84 $ 73 $125 $265
Balanced........................ $87 $ 83 $141 $298
Small Cap ...................... $86 $ 79 $135 $286
Midcap.......................... $86 $ 80 $136 $287
Alger American Growth........... $85 $ 76 $130 $276
Leveraged AllCap................ $94 $104 $176 $365
MFS Emerging Growth............. $86 $ 80 $137 $290
MFS Utilities................... $86 $ 80 $137 $290
MFS World Governments........... $86 $ 80 $137 $290
Dreyfus Index................... $80 $ 62 $107 $229
</TABLE>
<PAGE>
EXAMPLE: If you do not surrender your contract you would pay the following
expenses on a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Market.................... $19 $ 58 $100 $216
High Income..................... $23 $ 72 $123 $261
Equity-Income................... $22 $ 68 $116 $248
Growth.......................... $23 $ 71 $122 $259
Overseas........................ $25 $ 78 $133 $282
Asset Manager................... $24 $ 74 $127 $270
Investment Grade Bond........... $23 $ 71 $121 $257
Index 500....................... $19 $ 59 $101 $217
Contrafund...................... $25 $ 77 $132 $279
Asset Manager: Growth........... $26 $ 78 $134 $283
Income and Growth............... $24 $ 73 $125 $265
Balanced........................ $27 $ 83 $141 $298
Small Cap ...................... $26 $ 79 $135 $286
Midcap.......................... $26 $ 80 $136 $287
Alger American Growth........... $25 $ 76 $130 $276
Leveraged AllCap................ $34 $104 $176 $365
MFS Emerging Growth............. $26 $ 80 $137 $290
MFS Utilities................... $26 $ 80 $137 $290
MFS World Governments........... $26 $ 80 $137 $290
Dreyfus Index................... $20 $ 62 $107 $229
</TABLE>
The examples assume an average $30,000 annuity investment. The examples should
not be considered a representation of past or future expenses. Actual expenses
may be greater or lesser than those shown and will vary according to the
portfolio(s) selected.
QUESTIONS AND ANSWERS ABOUT THE POLICY
NOTE: The following section contains brief questions and answers about the
Policy. Reference should be made to the body of this Prospectus for more
detailed information. With respect to qualified policies, it should be noted
that the requirements of a particular retirement plan, an endorsement of the
Policy, or limitations or penalties imposed by the Internal Revenue Code may
impose limits or restrictions on premiums, withdrawals, distributions, or
benefits, or on other provisions of the Policies, and this Prospectus does not
describe any such limitations or restrictions. See "Federal Tax Matters," page
24. Also "you" or "your" refers to the owner; "we" "us" or "our" refers to
Ameritas Variable Life Insurance Company.
1. WHAT IS THE PURPOSE OF THE POLICY?
The Policy seeks to allow you to accumulate funds based on the investment
experience of the assets underlying the Policy, in the Account or the Fixed
Account, on a tax-deferred basis and to receive annuity payments when
desired. Once payments commence under an annuity income option, the annuity
payments do not depend on the investment experience of the Policy's
underlying assets. Instead, the amount of the payments is set as of the
annuity date and does not change over the annuity payment period, unless an
interest payment option is selected. The Policy may be purchased on a
non-tax qualified basis ("nonqualified policy.") The Policy may also be
purchased in connection with certain plans qualifying for favorable federal
income tax treatment ("qualified policy"). The owner can allocate premium
payments to one or more Subaccounts of the Ameritas Variable Life Insurance
Company Separate Account VA-2 (the "Subaccounts"), each of which will
invest in a corresponding portfolio of the Funds, or to the Fixed Account.
Because the accumulation value depends on the investment experience of the
selected Subaccounts, the owner bears the investment risk under this Policy
for monies placed in Subaccounts prior to the annuity date.
<PAGE>
2. WHAT IS AN ANNUITY AND WHAT ANNUITY OPTIONS ARE AVAILABLE?
An annuity provides for a series of periodic payments beginning on the
annuity date, based on the net cash surrender value on the annuity date, to
be paid to the designated payee. The owner may select from a number of
annuity income options, including annuity payments for the life of an
annuitant (or an annuitant and another person, the joint annuitant) with or
without a guaranteed number of annuity payments, or for a designated
period, for a designated amount, or for an interest payment option. The
annuity payments remain the same throughout the payment period, unless an
interest payment option is selected.
The owner also has some flexibility in choosing the annuity date; however,
without AVLIC's prior approval, payments must begin no later than the
policy anniversary nearest the annuitant's 85th birthday (90th in Oregon).
(See "Annuity Date," page 22 and "Annuity Income Options," page 23).
3. WHAT TYPES OF INVESTMENTS UNDERLIE THE ACCOUNT?
Currently, the assets supporting the Policies prior to the annuity date are
invested exclusively in shares of the Funds or in the Fixed Account.
The Fidelity Fund currently has five portfolios: the Money Market,
High Income, Equity-Income, Growth, and Overseas Portfolios. The
Fidelity Fund II has five portfolios: the Asset Manager, Investment
Grade Bond, Index 500, Contrafund, and Asset Manager: Growth Portfolios.
The Alger American Fund has six portfolios: the Income and Growth; Small-
Cap; Midcap; Alger American Growth; Leveraged AllCap; and Balanced
Portfolios. The MFS Fund has twelve separate portfolios or series, of
which, MFS Emerging Growth, MFS Utilities, and MFS World Governments are
offered. The Dreyfus Index Fund has one portfolio. Each of the twenty
Subaccounts of the Account invests solely in the corresponding portfolio
of the Funds. The assets of each portfolio are held separately from the
other portfolios and each has distinct investment objectives and policies
which are described in the accompanying prospectuses for the Funds.
(See "The Funds," page 12).
4. INVESTMENTS IN THE FIXED ACCOUNT.
Net premium payments allocated to the Fixed Account are placed in the
general account of AVLIC which supports insurance and annuity obligations.
Policyowners are paid interest on the amounts placed in the Fixed Account
at guaranteed rates (3.5%) or at higher "declared rates". (See "Fixed
Account, page 16).
5. HOW DO I PURCHASE A POLICY?
You may purchase a Policy on a tax qualified or non-tax qualified basis.
The minimum first year premium on a non-tax qualified policy is $2000 or
more and minimum subsequent premium payments of $500 or more. Smaller
premium payments may be accepted on Bank-O-Matic or at AVLIC's discretion.
The minimum initial and subsequent premium for a tax qualified policy
purchased in a periodic payment plan is $50 per month. The total of all
premium payments made under AVLIC annuity contracts having the same
annuitant may not exceed $1,000,000 without AVLIC's prior approval. (See
"Policy Application and Premium Payment," page 17).
6. HOW MAY I ALLOCATE THE PREMIUM PAYMENT?
On the effective date of the Policy, the net premium paid is allocated to
the Money Market Subaccount. Thirteen days after the effective date, the
accumulation value is allocated among the Subaccounts or Fixed Account in
accordance with the allocation instructions designated by the owner in the
application. (See "Allocation of Premium," page 17).
7. CAN I TRANSFER AMOUNTS?
Transfers of the accumulation value among the Subaccounts of the Account
and/or the Fixed Account can be made 15 times each policy year without
charge. A transfer charge may be imposed each additional time amounts are
transferred between the Subaccounts and/or the Fixed Account and will be
deducted from the amount transferred. The maximum transfer charge is $10.00
per transfer. Transfers must be at least $250, or, if less, the entire
value of the Subaccount or the Fixed Account from which the transfer is
made. The minimum amount which can remain in a Subaccount or the Fixed
Account as a result of a transfer is $100.00. Any amount below this minimum
must be included in the amount transferred. Transfers of up to the greater
of: 25% of the accumulation value of the Fixed Account; the amount of any
transfer from the Fixed Account during the prior thirteen months; or $1,000
may be made out of the Fixed Account during the 30 day period following the
yearly anniversary date of the policy. (See "Transfers," page 18).
<PAGE>
8. CAN I GET TO MY MONEY IF I NEED IT?
All or part of the accumulation value of the Policy may be withdrawn before
the earlier of the annuitant's death or the annuity date. Policy loans are
available from policies purchased in 403(b) plans. The withdrawal right may
be restricted by Section 403(b)(11) of the IRS code, if the annuity is used
in connection with a Section 403(b) retirement plan; and is limited to four
elective partial and 12 systematic withdrawals per year. Amounts withdrawn
may also be subject to a contingent deferred sales charge depending upon the
size of the withdrawal, the Policy accumulation value, and the time since
the Policy premiums were deposited. A policyowner may, without a contingent
deferred sales charge, withdraw the greater of 10% of the policy
accumulation value or that portion of the policy accumulation value that
exceeds the total premiums deposited. Thereafter, unless waived, a
contingent deferred sales charge is assessed only on premiums paid based
upon the number of years since the premiums withdrawn were paid, on a first
paid, first withdrawn basis. The contingent deferred sales charge is a
maximum of 6% of the premium payment withdrawn and grades to 0% after the
seventh year after the withdrawn premiums were deposited. (See "Contingent
Deferred Sales Charge," page 20). WE GUARANTEE THAT THIS CHARGE WILL NOT BE
INCREASED. In addition, upon a full withdrawal, the owner will be assessed
the annual policy fee and administrative fees. (See Administrative Charges,"
page 19). Certain withdrawals may also be subject to a federal penalty tax
as well as federal income tax. (See, "Federal Tax Matters," page 24). Full
or partial withdrawals from the Fixed Account may be deferred for up to 6
months from the date of written request.
9. WHAT ARE THE CHARGES UNDER MY POLICY?
In order to permit investment of the net premium payment, we currently do
not deduct sales charges at the time of investment. However, unless waived,
a contingent deferred sales charge, as described above, is imposed on
certain full or partial withdrawals of the Policies and annuitization to
cover certain expenses relating to the sale of the Policies, including
commissions to registered representatives and other promotional expenses.
(See "Contingent Deferred Sales Charge," page 20). We will, when taxes,
including premium taxes, are imposed by state law upon the receipt of the
premium payment, deduct such taxes on receipt of the payment. If, instead,
premium taxes are imposed upon annuitization or withdrawals, such taxes will
be deducted at that time. (See "Taxes," page 20). In addition, an annual
administration fee of .20% of the year end balance of the accumulation value
is deducted to cover administrative expenses, and the policyowner may be
charged a $10.00 per transfer fee after the 15 free transfers each policy
year. (See"Annual Administration Fee," and "Transfers," pages 19 and 18).
Certain other charges are deducted under the Policy to cover administrative
expenses of operating the Policy and mortality and expense risks. These
charges include a daily charge at the annual rate of 1.25% of average daily
net assets of the Account plus an annual charge which is currently $36.00,
$30.00 in North Dakota (maximum of $50). Mortality and expense risk charges
are not charged against the Fixed Account. (See "Mortality and Expense Risk
Charge" and "Annual Policy Fee," page 19).
10. WHAT HAPPENS IF THE ANNUITANT DIES BEFORE THE ANNUITY DATE?
In the event that the annuitant dies prior to the annuity date, upon due
proof of death, the death benefit becomes payable. The death benefit may be
paid as either a lump sum cash benefit or under an annuity income option.
(See "Death of Annuitant Prior to Annuity Date," page 22).
11. WHAT HAPPENS IF THE OWNER DIES BEFORE THE ANNUITY DATE?
In the event that the owner (or joint owner) dies prior to the annuity date,
his or her entire interest in the Policy will be distributed within five
years after the date of death. If the person to whom ownership passes, the
owner's designated beneficiary, chooses to take his or her interest as an
annuity, to be paid to himself or herself or for his or her benefit, then
under certain circumstances, that portion is treated as distributed on the
date distributions begin. Special rules apply where the owner's designated
beneficiary is the surviving spouse of the deceased owner. (These provisions
are described in greater detail in the Statement of Additional Information -
see "IRS Required Distributions," page 7).
12. CAN THE POLICY BE RETURNED AFTER IT IS DELIVERED?
The owner is granted a period of time to examine a Policy and return it for
a refund. The owner may cancel the Policy within the period specified on the
policy form, which is within 10 days after the owner receives the Policy,
unless the particular state in which the Policy is sold requires a longer
period. The refund will be the greater of the premiums paid or the premiums
paid adjusted by investment gains and losses. (See "Refund Privilege," page
18).
13. WHO DO I CALL IF I HAVE QUESTIONS ABOUT MY ANNUITY?
Any questions about procedures or your Policy will be answered by us at One
Ameritas Way, 5900 "O" Street, P.O. Box 81889, Lincoln, Nebraska, 68501, or
by calling 1-800-745-1112. All inquiries should include the policy number
and the owner's name. In addition, confirmations will be mailed to the owner
for any transactions that take place, and an annual report will be sent once
each policy year showing the accumulation value in each Subaccount, and any
charges, transfers or withdrawals during the year.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
The financial statements for AVLIC and the Account (as well as the auditors' report thereon) are in the Statement of Additional
Information.
ACCUMULATION UNIT VALUES
- ------------------------
Following are the accumulation unit values for the Subaccounts as of October 23, 1987, when the account commenced business; December
31, 1987, 1988, 1989, 1990, 1991, 1992, 1993 and 1994. The number of outstanding accumulation units in each Subaccount as of
December 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993 and 1994 are also shown:
ACCUMULATION UNIT
AS OF: 10-23-87 12-31-87 12-31-88 12-31-89 12-31-90 12-31-91 12-31-92 12-31-93 12-31-94
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market - - 1.020 1.099 1.173 1.000 1.262 1.286 1.325
High Income 9.500 9.742 10.750 10.167 9.797 9.550 15.910 18.938 18.414
Equity-Income - - 11.315 13.118 10.971 11.850 16.460 19.217 10.322
Growth 9.840 10.364 11.853 15.380 13.399 18.510 20.795 24.517 24.207
Overseas 9.240 9.457 10.099 12.597 12.216 13.100 11.507 15.601 15.674
Asset Manager* - - - - 10.523 12.550 14.076 16.830 15.609
Inv. Grade Bond** - - - - - 11.080 12.074 13.232 12.577
Index 500***** - - - - - - - - -
Contrafund***** - - - - - - - - -
Asset Manager:
Growth***** - - - - - - - - -
Income and
Growth*** - - - - - - 13.831 15.073 13.654
MidCap**** - - - - - - - 13.563 13.190
Small Cap*** - - - - - - 27.043 30.286 28.603
Balanced**** - - - - - - - 11.499 10.872
Alger American
Growth*** - - - - - - 20.017 24.209 24.259
Leveraged
AllCap***** - - - - - - - - -
MFS Emerging
Growth***** - - - - - - - - -
MFS Utilities***** - - - - - - - - -
MFS World
Governments***** - - - - - - - - -
Dreyfus Index*** - - - - - - 15.757 17.015 16.953
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF ACCUMULATION UNITS
OUTSTANDING
AS OF: 12-31-87 12-31-88 12-31-89 12-31-90 12-31-91 12-31-92 12-31-93 12-31-94
-------- ----------- ----------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market - 157,416.729 208,280.871 11,911,544.496 15,150,911.120 23,516,860.733 24,394,597.763 48,755,227.272
High Income 155.907 15,646.599 52,878.092 75,439.485 429,942.219 404,678.129 780,485.192 1,076,076.694
Equity-Income - 15,337.513 79,609.928 536,146.361 873,089.237 1,090,217.227 1,692,367.958 2,332,200.380
Growth 1,251.918 3,944.769 4,476.273 344,241.440 832,635.695 1,058,120.400 1,930,905.248 2,448,226.330
Overseas 109.209 2,271.707 72,009.171 214,204.062 261,859.646 452,257.534 1,680,013.325 2,050,429.513
Asset Manager* - - - 187,701.160 1,037,390.785 2,461,567.482 5,540,619.649 7,758,786.284
Inv. Grade Bond** - - - - 151,044.569 799,187.033 1,220,611.462 1,185,301.883
Index 500***** - - - - - - - -
Contrafund***** - - - - - - - -
Asset Manager:
Growth***** - - - - - - - -
Income and
Growth*** - - - - - 33,407.531 98,620.982 172,001.664
MidCap**** - - - - - - 91,504.219 268,394.026
Small Cap*** - - - - - 222,600.706 539,880.302 671,144.393
Balanced**** - - - - - - 34,686.690 94,786.818
Alger American
Growth*** - - - - - 61,910.658 166,606.094 641,126.689
Leveraged
AllCap***** - - - - - - - -
MFS Emerging
Growth***** - - - - - - - -
MFS Utilities***** - - - - - - - -
MFS World
Governments***** - - - - - - - -
Dreyfus Index*** - - - - - 50,585.228 176,454.414 229,756.110
* No activity prior to December 31, 1989.
** No activity prior to December 31, 1990.
*** No activity prior to December 31, 1991.
**** No activity prior to December 31, 1992.
*****No activity prior to December 31, 1994.
</TABLE>
<PAGE>
AVLIC AND THE ACCOUNT
AMERITAS VARIABLE LIFE INSURANCE COMPANY
Ameritas Variable Life Insurance Company ("AVLIC") is a stock life insurance
company organized in the State of Nebraska. AVLIC was incorporated on June 22,
1983 and commenced business December 29, 1983. AVLIC is currently licensed to
sell life insurance in 46 states and the District of Columbia. AVLIC's financial
statements may be found at page 11 of the Statement of Additional Information.
AVLIC is a wholly-owned subsidiary of Ameritas Life Insurance Corp. ("Ameritas
Life"). Ameritas Life is a mutual life insurance company domiciled in Nebraska
since 1887. AVLIC, as a wholly-owned subsidiary of Ameritas Life, has a rating
of A+ (Superior) from A.M. Best Company, a firm that analyzes insurance
carriers. Ameritas Life enjoys a long standing A+ (Superior) rating from A.M.
Best. Ameritas Life also has been rated A ("Excellent") by Weiss Research, Inc.,
and has an AA ("Excellent") rating from Standard & Poor's for claims paying
ability. The Home Offices of both AVLIC and Ameritas Life are at One Ameritas
Way, 5900 "O" Street, P.O. Box 81889, Lincoln, Nebraska 68501. Ameritas Life and
subsidiaries had total assets at December 31, 1994 of over $2.0 billion.
Ameritas Life guarantees 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 who has a financial rating equal to or greater than
Ameritas Life and who agrees to assume the guarantee.
AVLIC voted to approve a Merger Agreement with Ameritas Life ("Agreement") at
its December 5, 1994, board meeting. The merger was scheduled to occur on May 1,
1995, or such later date as the required regulatory approvals could be obtained.
On March 31, 1995, the company determined to postpone the merger to evaluate its
options in light of the present regulatory climate. The effective date of the
merger is currently postponed until May 1, 1996.
AVLIC may publish in advertisements and reports to the Policyowners, the ratings
and other information assigned it by one or more independent rating services.
The purpose of the ratings is to reflect the financial strength and/or
claims-paying ability of AVLIC. The ratings do not relate to the performance of
the separate account. Further, AVLIC may publish charts and other information
concerning dollar cost averaging, tax deference and other investment methods.
AMERITAS VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VA-2
AVLIC established the Ameritas Variable Life Insurance Company Separate Account
VA-2 (the "Account") on May 28, 1987, under Nebraska law as a separate
investment account. This Account holds assets that are segregated from all of
AVLIC's other assets and are not chargeable with liabilities arising out of any
other business AVLIC may conduct. Income, gains, or losses of the Account are
credited without regard to other income, gains, or losses of AVLIC. Although the
assets maintained in the Account 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 at all times maintain assets in the Account
with a total market value at least equal to the reserve and other contract
liabilities for the Account. The Account will at all times contain assets equal
to or greater than account values invested in the separate account.
Nevertheless, to the extent assets in the Account exceed AVLIC's liabilities in
the Account, AVLIC may, from time to time, withdraw the assets available to
cover general account obligations.
The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any SEC
supervision of the management or investment policies or practices of the
Account. For state law purposes, the Account is treated as a Division of AVLIC.
THE FUNDS
There are currently twenty Subaccounts within the Account which support the
Policies, and each invests only in a corresponding portfolio of the Fidelity
Fund, the Fidelity Fund II, the Alger American Fund, the MFS Fund and/or the
Dreyfus Index Fund, (collectively the "Funds").
The Funds are registered with the SEC under the 1940 Act as open-end diversified
management investment companies. The registrations do not involve SEC
supervision of the management or investment practices or policies of the Funds.
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 about the Funds, including a description
of risks, charges and expenses is in the prospectuses for the Funds, which must
accompany or precede this Prospectus. 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. The Alger American Leveraged AllCap
Portfolio may employ "leverage" by borrowing 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. The
High Income, Equity-Income, Asset Manager: Growth and Asset Manager Portfolios
may invest in non-investment grade, high risk debt securities. These
Prospectuses should be read carefully together with this Prospectus and
retained.
Since the Funds are designed to provide an investment vehicle for variable
annuity and variable life insurance contracts of various insurance companies and
will be sold to separate accounts of other insurance companies as
<PAGE>
investment vehicles for various types of variable life insurance policies and
variable annuity contracts, there is a possibility that a material conflict may
arise between the interests of the Account and one or more of the separate
accounts of another participating insurance company. In the event of a material
irreconcilable conflict, the affected insurance companies agree to take any
necessary steps, including removing its separate accounts from the Funds, to
resolve the matter. The risks of such mixed and shared funding are described
further in the prospectuses of the Funds.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS' PORTFOLIOS
FIDELITY FUNDS
PORTFOLIO INVESTMENT POLICY OBJECTIVES
- ------------------ --------------------------- -------------------------
Money Market1 High-quality U.S. dollar Seeks to obtain as high
denominated money market a level of current income
instruments of domestic and as is consistent with
foreign Issuers.(Commercial preserving capital and
Paper, Certificate of providing liquidity.
Deposit).
High Income1 At least 65% in income Seeks to obtain a high
producing debt securities level of current income
and preferred stocks, up to by investing in high
20% in common stocks and income producing lower-
other equity securities, rated debt securities
and up to 15% in securities (sometimes called "junk
subject to restriction on bonds"), preferred stocks
resale. including convertible
securities and restricted
securities.
Equity-Income1 At least 65% in income Seeks reasonable income
producing common or prefer- by investing primarily in
red stock. The remainder income producing equity
will normally be invested securities. The goal is
in convertible and non- to achieve a yield in
convertible debt obligations. excess of the composite
yield of the Standard &
Poor's 500 Composite
Stock Price Index.
Growth1 Portfolio purchases normally Seeks to achieve capital
will be common stocks of appreciation.
both well-known established
companies and smaller, less-
known companies, although
the investments are not
restricted to any one type
of security. Dividend
income will only be consid-
ered if it might have an
effect on stock values.
Overseas1 At least 65% invested in Seeks long-term growth
securities of issuers of capital primarily
outside of North America. through investments in
Most issuers will be foreign securities.
located in developed coun-
tries in the Americas, the
Far East and Pacific Basin,
Scandinavia and Western
Europe. While the primary
purchases will be common
stocks, all types of
securities may be purchased.
Asset Manager2 Equities (Growth, High Div- Seeks to obtain high
idends, Utility), bonds total return with
(Government, Agency, Mort- reduced risk over the
gage backed, Convertible long term by allocating
and Zero Coupon) and money its assets among domes-
market instruments. tic and foreign stocks,
bonds, and short-term
fixed-income securities.
Investment A portfolio of investment Seeks as high a level of
Grade Bond2 grade fixed-income secu- current income as is con-
rities with an average mat- sistent with the preser-
urity of ten years or less. vation of capital.
Index 500 2 At least 80% (65% if fund Seeks investment results
assets are below $20 that correspond to the
million) in equity secu- total return of common
rities of companies that stocks publicly traded in
compose the Standard & the United States, as
Poor's 500. Also purchases respresented by the
short-term debt securities Standard & Poor's 500.
for cash management pur-
poses and uses various in-
vestment techniques, such
as futures contracts, to
adjust its exposure to the
Standard & Poor's 500.
<PAGE>
Contrafund2 Portfolio purchases will Seeks long-term capital
normally be common stock or appreciation.
securities convertible into
common stock of companies
believed to be undervalued
due to an overly pessimis-
tic appraisal by the public.
Asset Manager: Focuses on stocks for high Seeks to maximize total
Growth2 potential return but also return by allocating its
purchases bonds and short- assets among stocks,
term instruments. bonds, short-term instru-
ments and other invest-
ments.
ALGER AMERICAN
FUNDS
PORTFOLIO INVESTMENT POLICY OBJECTIVES
- ------------------ --------------------------- -------------------------
Income and The Portfolio attempts to Seeks to provide a high
Growth invest 100% of its assets, level of dividend income
except during temporary to the extent consistent
defensive periods, and it with prudent investment
is a fundamental policy of management. Capital ap-
the Portfolio to invest at preciation is a secondary
least 65% of its total objective of the Port-
assets in dividend paying folio.
equity securities that are
listed on a national ex-
change or in securities
convertible into dividend
paying equity securities.
Balanced The Portfolio will invest Seeks current income and
its assets in common stocks long-term capital apprec-
and investment grade pre- iation by investing in
ferred stock and debt sec- common stocks and fixed
urities as well as sec- income securities, with
urities convertible into emphasis on income pro-
common stocks. Except dur- ducing securities which
ing defensive periods, it appear to have some
is anticipated that 25% of potential for capital
the portfolio assets will appreciation.
be invested in fixed income
senior securities.
Small-Cap The Portfolio will invest Seeks long-term capital
its assets in equity appreciation.
securities of companies
whose securities are traded
on domestic stock exchanges
or in the over-the-counter
market. These companies may
still be in the develop-
mental stage. The Portfolio
will invest at least 65% of
its total assets in the
securities of companies who
have total market capital-
ization of less than $1
billion. The Portfolio may
also purchase restricted
securities, lend its sec-
urities or sell securities
short. Investing in small,
newer issues generally
involves greater risk than
investing in larger, more
established issues. Accord-
ingly, an investment in the
Portfolio may not be appro-
priate for all investors.
MidCap The Portfolio will invest Seeks long-term capital
Growth its assets in equity sec- appreciation.
urities of companies whose
securities are traded on
domestic exchanges or in
the over-the-counter market.
These companies may still
be in the developmental
stage, they may also be
older companies that appear
to be entering a new stage
of growth. The Portfolio
will invest at least 85% of
its net assets in equity
securities and at least 65%
of its total assets in
securities of companies who
have total market capital-
ization of between $750
million and $3.5 billion.
<PAGE>
Growth The Portfolio will invest Seeks long-term capital
its assets in companies appreciation.
whose securities are traded
on domestic stock exchange
or in the over-the-counter
market. The Portfolio will
invest at least 85% of its
net assets in equity sec-
urities and at least 65%
of its total assets in the
securities of companies
that have a total market
capitalization of $1
billion or greater.
Leveraged Invests at least 85% of net Seeks long-term capital
All Cap assets in equity securities appreciation.
of companies of any size,
except during defensive
periods. May purchase put
and call options and sell
covered options to increase
gain and hedge. May enter
into futures contracts on
securities indexes and pur-
chase and sell options on
these futures contracts.
May also borrow money
for purchase of additional
securities.
.
MFS FUNDS
PORTFOLIO INVESTMENT POLICY OBJECTIVES
- ------------------ ---------------------------- -------------------------
Emerging Growth At least 80% normally will Seeks to provide long-
Series be invested in common term capital growth. Div-
stocks of small and medium idend and interest income
sized emerging growth com- is incidental.
panies. From 10% to 25% may
be invested in foreign
securities not including
ADR's.
Utilities Series At least 65%, but up to Seeks capital growth and
100%, normally will be in- current income (above
vested in equity and debt that available from a
securities of both domestic portfolio invested en-
and foreign companies in tirely in equity secur-
the utilities industry. ities).
Normally, not more than 35%
will be invested in equity
and debt securities of
issuers in other industries,
including foreign securi-
ties, emerging market sec-
urities and non-dollar den-
ominated securities.
World Governments At least 80% normally will Seeks capital preser-
Series be invested in debt secur- vation and growth with
ities. May invest up to moderate current income.
100% of assets in foreign
securities, including
emerging markets secur-
ities.
DREYFUS FUND
PORTFOLIO INVESTMENT POLICY OBJECTIVES
- ------------------ ---------------------------- -------------------------
Dreyfus The Fund attempts to dupli- Seeks to provide invest-
Index Fund cate the investment results ment results that cor-
of the Standard & Poor's 500 respond to the price and
Composite Stock Price Index yield performance of
(the "Index"). The Fund publicly traded common
attempts to be fully invest- stocks in the aggregate,
ed at all times and, in any as represented by the
event, at least 80% of the Standard & Poor's 500
Fund's net assets will be Composite Stock Index.
invested, in stocks that
comprise the Index.
1 Variable Insurance Products Fund Portfolio.
2 Variable Insurance Products Fund II Portfolio.
<PAGE>
Each portfolio pays the Manager a monthly fee for managing its investments and
business affairs. In addition, each portfolio's total operating expenses will
include fees for shareholder services and other expenses, such as custodial,
legal, accounting, and other miscellaneous fees. (See "Fee Table" page 4). A
complete description of the expenses, fees, and charges of the portfolios is
found in the Funds' prospectuses and Statements of Additional Information.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
AVLIC reserves the right, subject to applicable law, and if necessary, after
notice to and prior approval from the SEC and/or state insurance authorities, to
make additions to, deletions from, or substitutions for the shares that are held
in the Account or that the Account may purchase. The Account may, to the extent
permitted by law, purchase other securities for other Policies or permit a
conversion between Policies upon request by the owners.
AVLIC also reserves the right, in its sole discretion, to establish additional
Subaccounts of the Account, each of which would invest in shares corresponding
to a new portfolio of the Fund or in shares of another investment company having
a specified investment objective. AVLIC may, in its sole discretion, establish
new Subaccounts or eliminate one or more Subaccounts if marketing needs, tax
considerations or investment conditions warrant. Any new Subaccounts may be made
available to existing owners on a basis to be determined by AVLIC.
If any of these substitutions or changes are made, AVLIC may by appropriate
endorsement change the Policy to reflect the substitution or change. If AVLIC
deems it to be in the best interest of owners, and subject to any approvals that
may be required under applicable law, the Account may be operated as a
management company under the 1940 Act, it may be deregistered under that Act if
registration is no longer required, or it may be combined with other AVLIC
separate accounts. To the extent permitted by applicable law, AVLIC may also
transfer the assets of the Account associated with the Policies to another
separate account. In addition, AVLIC may, when permitted by law, restrict or
eliminate any voting rights of owners or other persons who have voting rights as
to the Account. The owner will be notified of any material change in the
investment policy of any portfolio in which the owner has an interest.
FIXED ACCOUNT
Owners may elect to allocate all or a portion of their premium payments to the
Fixed Account and they may also transfer monies from the Separate Account to the
Fixed Account or from the Fixed Account to the Separate Account.
Payments allocated to the Fixed Account and transfers from the Separate Account
to the Fixed Account are placed in the general account of AVLIC, which supports
insurance and annuity obligations. The general account includes all of AVLIC's
assets, except those assets segregated in the 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 and interest credited thereto, less any
deduction for charges and expenses, whereas the owner bears the investment risk
that the declared rate described below, may fall to a lower rate after the
expiration of a declared rate period. Because of exemptive and exclusionary
provisions, interests in the general account have not been registered under the
Securities Act of 1933 (the "1933 Act") nor is the general account registered as
an investment company under the Investment Company Act of 1940 (the "1940 Act").
Accordingly, neither the general account nor any interest therein is generally
subject to the provisions of the 1933 or 1940 Act.
We understand that the staff of the SEC has not reviewed the disclosures in this
Prospectus relating to the Fixed Account portion of the Contract; however,
disclosures regarding the Fixed Account portion of the Contract may be subject
to generally applicable provisions of the federal securities laws regarding the
accuracy and completeness of statements made in prospectuses.
AVLIC guarantees that it will credit interest at an effective annual rate of at
least 3.5%. AVLIC may, at its discretion, declare higher interest rate(s) for
amounts allocated or transferred to the general account. ("Declared Rate(s)").
Each month AVLIC will establish the declared rate for the monies transferred or
allocated to the Fixed Account that month. The owner will earn interest for a
12-month period on the amount transferred or allocated at the rate declared
effective the month of transfer or allocation. After the end of the 12-month
period, the monies will earn interest at the rate established by AVLIC for each
month.
THE POLICY
The Policy is a variable annuity policy. The rights and benefits of the Policy
are described below and in the policy form; however, AVLIC reserves the right to
make any modification to conform the Policy to, or to give the owner the benefit
of, any federal or state statute or any rule or regulation thereunder.
The policy may be purchased on a non-tax qualified basis ("nonqualified
policy"). The Policy may also be purchased in connection with certain plans
qualifying for favorable federal income tax treatment ("qualified policy").
<PAGE>
POLICY APPLICATION AND PREMIUM PAYMENT
Individuals wishing to purchase a Policy must complete an application and submit
it to AVLIC's Home Office (One Ameritas Way, 5900 "O" Street, P.O. Box 81889,
Lincoln, Nebraska 68501). The application to purchase a non-qualified annuity
must be submitted with an initial premium payment of not less than $2,000 unless
other provisions for payment of the $2,000 premium are made. An application to
purchase an annuity in qualified plans may be submitted with initial monthly
premiums of as little as $50 in periodic payment plans providing for $600 in
premiums per year. Acceptance is subject to AVLIC's underwriting rules, and
AVLIC reserves the right to reject an application for any reason. After the
Policy is issued, an owner of a policy in a non-qualified plan may make
additional premium payments of $500 or more. Smaller premium payments may be
accepted on Bank-O-Matic in tax-qualified plans or at AVLIC's discretion. Also,
AVLIC has the right not to accept total premiums greater than $1,000,000, or a
premium payment where the total premium payments made under AVLIC annuity
contracts having the same annuitant exceed $1,000,000. If the application and
initial premium payment can be accepted in the form received, the initial
premium payment will be applied to the purchase of a Policy within two business
days after receipt by AVLIC at its Home Office. In those instances where other
provisions for the payment of the initial premium are made, the initial premium
will be applied after the application has been accepted and within two business
days after AVLIC has received the initial premium in its home office in Federal
Funds. The date that the initial premium is applied to the purchase of the
Policy is the effective date of the Policy.
If an incomplete application is received, AVLIC will request the information
necessary to complete the application. Once the application is completed and the
initial premium received, the initial premium payment will be applied to the
purchase of a Policy within two business days. If after five business days after
its receipt with the initial premium the application remains incomplete, AVLIC
will return the applicant's premium payment unless it obtains the applicant's
permission to retain the premium payment pending completion of the application.
The policy date for the Policy will be the same day as the effective date for
the Policy, unless it falls on the 29th, 30th or 31st of a month, in which case
the policy date will be set at the 28th day of that month. The policy date is
used to determine policy anniversary dates and policy years.
ALLOCATION OF PREMIUM
In the application for a Policy, the owner allocates the net premium to one or
more Subaccounts of the Account or to the Fixed Account. The minimum percentage
that may be allocated to any one Subaccount, or to the Fixed Account, is 10% of
the premium, and fractional percentages may not be used. The allocations must
total 100%.
The initial premium is allocated on the effective date of the Policy to the
Money Market Subaccount. The initial premium, less any applicable premium taxes,
will be used to purchase accumulation units of the Money Market Subaccount at
the price next computed on the effective date. Thirteen days after the effective
date, the accumulation value of the Policy will be allocated among the
Subaccounts, or to the Fixed Account, as selected by the owner in the
application.
The value of amounts allocated to Subaccounts of the Account will vary with the
investment performance of these Subaccounts and the owner bears the entire
investment risk. This will affect the Policy's cash surrender value which on the
annuity date affects the level of annuity payments payable. Owners should
periodically review their allocation of values in light of market conditions and
overall financial planning requirements.
ACCUMULATION VALUE
The accumulation value of the policy is equal to the total premiums received,
reduced by any applicable premium taxes, as affected by charges, withdrawals,
and the investment experience of the designated Subaccounts and the interest
earned in the Fixed Account.
On the effective date, the accumulation value of the Policy is equal to the
initial premium received, reduced by any applicable premium taxes. Thereafter,
the accumulation value of the Policy is determined as of the close of trading on
the New York Stock Exchange on each valuation date by multiplying the number of
accumulation units of each Subaccount credited to the Policy by the current
value of an accumulation unit for each Subaccount and by adding the amount in
the Fixed Account. The current value of an accumulation unit reflects the
increase or decrease in value due to investment results of the Subaccount and
certain charges, as described below. The number of accumulation units credited
to the Policy is decreased by any annual administrative fee and the annual
policy fee, any withdrawals, and any charges upon withdrawal and, upon
annuitization, any applicable premium taxes and charges.
The accumulation value is expected to change from valuation period to valuation
period, reflecting the net investment experience of the selected portfolios of
the Funds, interest earned in the Fixed Account, additional premium payments,
partial withdrawals as well as the deduction of any applicable charges under the
Policy.
<PAGE>
VALUE OF ACCUMULATION UNITS
The accumulation units of each Subaccount are valued separately. The value of an
accumulation unit may change each valuation period according to the net
investment performance of the shares purchased by each Subaccount and the daily
charge under the Policy for mortality and expense risks and, if applicable, any
federal and state income tax charges.
TRANSFERS
Accumulation value may be transferred among the Subaccounts and/or the Fixed
Account 15 times each policy year without charge. A transfer charge of $10.00
may be imposed each additional time amounts are transferred between Subaccounts
and/or the Fixed Account and will be deducted from the amount transferred. The
total amount transferred each time must be at least $250, or the balance of the
Subaccount, if less. Accumulation values may also be transferred from the
Subaccounts of the separate account to the Fixed Account without limitation.
Transfers of up to the greater of: 25% of the accumulation value of the Fixed
Account; the amount of any transfer from the Fixed Account during the prior
thirteen months; or $1,000 may be made from the Fixed Account to the various
Subaccounts during the 30 day period following the yearly anniversary date of
the policy. The minimum amount that may remain in a Subaccount or the Fixed
Account after a transfer is $100. AVLIC will effect transfers and determine all
values in connection with transfers on the later of the date designated in the
request or at the end of the valuation period during which the transfer request
is received at the Home Office.
The privilege to initiate transactions by telephone will be made available to
Policyowners automatically. 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 Policyowner to provide
the policy number at the time of giving transfer instructions; AVLIC's tape
recording of all telephone transfer instructions; and the provision, by AVLIC,
of written confirmation of telephone transactions.
Transfers may be subject to additional limitations at the fund level.
OWNER INQUIRIES
Inquiries should be addressed to Ameritas Variable Life Insurance Company, One
Ameritas Way, 5900 "O" Street, P.O. Box 81889, Lincoln, Nebraska 68501 or made
by calling 1-800-745-1112. All inquiries should include the policy number and
the owner's name.
REFUND PRIVILEGE
The owner is given a period of time to examine a Policy and return it for a
refund. The owner may cancel the Policy within the period of time stated on the
policy form, which is 10 days after receipt of the Policy, unless state law
requires a longer period of time. The refund is equal to the greater of the
premiums paid or the premiums adjusted by investment gains and losses. To cancel
the Policy, the owner should mail or deliver it to AVLIC at the Home Office. A
refund, if the premium was paid by check, may be delayed until the check has
cleared the owner's bank.
POLICY LOANS
After the first policy anniversary the policyowner of a policy purchased in a
403(b) qualified plan may borrow up to the lesser of: $50,000 (including all
loans outstanding during the preceding year); or 50% of the cash surrender value
of the policy; or 50% of the present value of the non-forfeitable accrued
benefits of the owner under the policy. One loan may be taken each year and the
minimum initial loan amount is $2,500. The loans usually are funded within 7
days of the receipt of a written request.
All loans must be repaid within five years with substantially level amortized
payments made at least quarterly. Repayment for loans to purchase a dwelling to
be used, within a reasonable time, as a residence may be made over a longer
period. If any repayment due under the loan is unpaid for ninety (90) days, the
balance will become due without notice. The loan will be repaid by deducting the
balance and any applicable charges and taxes from the accumulation value.
The current loan interest rate will be 7.5% and is guaranteed not to exceed 8%
per annum. When a loan is made, accumulation values equal to the amount of the
loan will be transferred from the Account and/or Fixed Account to the General
Account of AVLIC as security for the indebtedness. The policyowner is currently
earning 4.5% and is guaranteed to earn 3.5% on the amount securing the
indebtedness. The accumulation values transferred out of
<PAGE>
the Account will be allocated among the subaccounts or Fixed Account as
instructed by the policyowner when the loan is requested. If no instructions are
given, the amounts will be withdrawn in proportion to the various accumulation
values in the subaccounts or the Fixed Account. Upon repayment of the loan, the
transfers back into the Account or Fixed Account will be allocated in accordance
with the allocation instructions in effect when the payments are made.
The loans to policyowners of a policy purchased in 403(b) qualified plans will
be considered distributions from the policy and subject to taxation unless the
requirements of IRS Code Section 72(p), including repayment, are met. In
addition policies purchased in plans subject to ERISA may be subject to ERISA
requirements. AVLIC may refuse to make a loan which violates these requirements.
AVLIC may be required to report the loan as income to the policyowner if the
loan violates the IRS requirements or is not repaid according to the IRS
requirements and the loan terms. This provision is not available in all states.
CHARGES AND DEDUCTIONS
Charges will be deducted periodically from the accumulation value of the Policy
to compensate AVLIC for, among other things: (1) issuing and administering the
Policy; (2) assuming certain risks in connection with the Policy; and (3)
incurring expenses in distributing the Policy. The nature and amount of these
charges are described more fully below.
No deductions are made from the premium payments before they are allocated to
the Account or Fixed Account, unless taxes are imposed by state law upon the
receipt of a premium payment. In that case AVLIC will deduct the premium tax due
when the premiums are received. Other charges, such as transfer and contingent
deferred sales charges, may be levied upon, respectively transfers or
withdrawals or, in some cases, upon annuitization or withdrawals, as described
more fully below.
ADMINISTRATIVE CHARGES
ANNUAL POLICY FEE. An annual policy fee of up to $50.00 (currently $36.00,
$30.00 in North Dakota) is deducted from the accumulation value on the last
valuation date of each policy year. This charge, reimburses AVLIC for the
administrative costs of maintaining the Policy on AVLIC's system.
ANNUAL ADMINISTRATION FEE. A charge of .20% of the accumulation value is
calculated and deducted from the accumulation value on the last valuation date
of each policy year. This charge, which is guaranteed not to be increased, is
designed to reimburse AVLIC for administrative expenses incurred in connection
with issuing the Policies and ongoing administrative expenses incurred in
connection with servicing and maintaining the Policies. These expenses include
the cost of processing the application and premium payments, establishing policy
records, processing and servicing owner transactions and policy changes,
recordkeeping, preparing and mailing reports, processing death benefit claims
and overhead.
AVLIC does not expect to make a profit on the charges for the annual policy and
annual administrative fees.
MORTALITY AND EXPENSE RISK CHARGE
AVLIC imposes a charge to compensate it for bearing certain mortality and
expense risks under the Policies. For assuming these risks, AVLIC makes a daily
charge equal to an annual rate of 1.25% of the value of the average daily net
assets of the Account. Of that amount, approximately .55% is charged to cover
the mortality risks and .70% is charged to cover the expense risks assumed under
the Policies. This charge is subtracted when determining the daily accumulation
unit value. AVLIC guarantees that this charge will never increase. If this
charge is insufficient to cover assumed risks, the loss will fall on AVLIC.
Conversely, if the charge proves more than sufficient, any excess will be added
to AVLIC's surplus. No mortality and risk expense charge is imposed on the Fixed
Account.
The mortality risk borne by AVLIC under the Policies, assuming the selection of
one of the forms of life annuities, is to make monthly annuity payments
(determined in accordance with the annuity tables and other provisions contained
in the Policies) regardless of how long all annuitants may live. This
undertaking assures that neither an annuitant's own longevity, nor an
improvement in life expectancy greater than expected, will have any adverse
effect on the monthly annuity payments the annuitant will receive under the
Policy. It therefore relieves the annuitant from the risk that he will outlive
the funds accumulated for retirement. In addition, AVLIC bears a mortality risk
under the Policies, regardless of the annuity option selected, in that it
guarantees the purchase rates for the annuity income
<PAGE>
options available under the Policy and it guarantees the death benefit of the
Policy prior to the annuity date to be the greater of the accumulation value or
the premium payments made. These risks are AVLIC's. The expense risk undertaken
by AVLIC, with respect to the Account, is that the deductions for administrative
costs under the Policies may be insufficient to cover the actual future costs
incurred by AVLIC for providing policy administration services.
If the contingent deferred sales charge on withdrawals is insufficient to cover
the distribution expenses, the deficiency will be met from AVLIC's general
account funds, including the amount derived from the charge levied for mortality
and expense risks.
CONTINGENT DEFERRED SALES CHARGE
Since no deduction for a sales charge is made from the premium payment, unless
waived, a contingent deferred sales charge is imposed on certain partial and
full withdrawals and upon certain annuitizations to cover certain expenses
relating to the distribution of the Policy, including commissions to registered
representatives and other promotional expenses. No charge is assessed for the
withdrawal of the greater of the 10% of the policy accumulation value or that
portion of the accumulation value that exceeds the total premiums deposited. The
contingent deferred sales charge is assessed only on premiums paid based upon
the number of years since premiums withdrawn, were paid, on a first paid, first
withdrawn basis. The contingent deferred sales charge is a maximum of 6% of the
premium payment withdrawn and grades to 0% after the seventh year after the
withdrawn premiums were deposited.
Those annuitants whose policies have been in force for at least one year and
meet certain conditions may make withdrawals without surrender charges. (See
"Critical Needs Withdrawals," page 21).
Where a partial or full withdrawal is taken or amounts are applied under an
annuity option, which are subject to a contingent deferred sales charge, the
contingent deferred sales charge will be expressed as a percentage of the
premium payments withdrawn or annuitized as follows:
<TABLE>
<CAPTION>
Year % Year %
<S> <C> <C> <C>
1..........6 5..........4
2..........6 6..........3
3..........6 7..........2
4..........5 8+.........0
</TABLE>
In the case of a partial withdrawal or annuitization, the contingent deferred
sales charge will be deducted from the amounts remaining under the Policy. The
charge will be allocated pro rata among the Subaccounts (or the Fixed Account)
based on the accumulation value in each prior to the withdrawal or annuitization
unless an owner requests a partial withdrawal or annuitization from particular
Subaccounts or the Fixed Account in which case the charge will be allocated
among those Subaccounts or the Fixed Account in the same manner as the
withdrawal. A contingent deferred sales charge will not be assessed on premium
payments withdrawn at least two years after deposit, if withdrawn and applied
under annuity income option c or d. (See "Annuity Income Options," page 23).
Full or partial withdrawals from the Fixed Account may be deferred for up to 6
months from the date of written request.
TAXES
AVLIC will, where such taxes are imposed by state law of the Policyowner's
residence as made known to AVLIC upon the receipt of a premium payment, deduct
premium taxes. If instead, premium taxes are imposed upon annuitization or
withdrawals by said state, AVLIC will deduct applicable premium taxes at that
time. Applicable premium tax rates depend upon such factors as the owner's
current state of residency, and the insurance laws and the status of AVLIC in
states where premium taxes are incurred. Currently, premium taxes range from 0%
to 3.5% of the premium paid. Applicable premium tax rates are subject to change
by legislation, administrative interpretations or judicial acts. The owner will
be notified of any applicable premium taxes. Owners are responsible for
informing AVLIC in writing of changes of residence.
Under present laws, AVLIC will incur state or local taxes (in addition to the
premium taxes described above) in several states. At present, these taxes are
not significant; thus, AVLIC is not currently making a charge. If they increase,
however, AVLIC may make charges for such taxes. Such charges would be deducted
from the accumulation unit value.
AVLIC does not expect to incur any federal income tax liability attributable to
investment income or capital gains retained as part of the reserves under the
Policies. (See "Federal Tax Matters," page 24). Based upon these
<PAGE>
expectations, no charge is being made currently to the Account for corporate
federal income taxes which may be attributable to the Account.
AVLIC will periodically review the question of a charge to the Account for
corporate federal income taxes related to the Account. Such a charge may be made
in future years for any federal income taxes incurred by AVLIC. This might
become necessary if the tax treatment of AVLIC is ultimately determined to be
other than what AVLIC currently believes it to be, if there are changes made in
the federal income tax treatment of annuities at the corporate level, or if
there is a change in AVLIC's tax status. In the event that AVLIC should incur
federal income taxes attributable to investment income or capital gains retained
as part of the reserves under the Policy, the accumulation unit value would be
correspondingly adjusted by any provision or charge for such taxes.
FUND INVESTMENT ADVISORY FEES AND EXPENSES
Because the Account purchases shares of the Funds, the net assets of the Account
will reflect the value of Funds' shares and, therefore, the investment advisory
fees and other expenses incurred by the Funds. A complete description of the
expenses and deductions from the Funds' portfolios is found in the Funds'
prospectuses and Statements Of Additional Information.
AVLIC may receive administrative fees from the investment advisers of certain
funds.
DISTRIBUTIONS UNDER THE POLICY
FULL AND PARTIAL WITHDRAWALS
The owner may make up to four elective partial withdrawals and, 12 systematic
withdrawals each policy year or a full withdrawal of the Policy to receive part
or all of the accumulation value (less any applicable charges), at any time
before the annuity date and while the annuitant is living, by sending a written
request to AVLIC. The withdrawal right may be restricted by Section 403(b)(11)
of the IRS Code and, should the withdrawal be an eligible rollover distribution
from a qualified plan or an annuity in a 403(b) plan, it will be subject to a
mandatory 20% withholding under the IRS Code unless the distribution is paid
directly by AVLIC into an eligible retirement plan in a direct rollover. (See
"Federal Tax Matters," page 24). No partial or full withdrawals may be made
after the annuity date except as permitted under the particular annuity option.
The amount available for full or partial withdrawal ("cash surrender value") is
the accumulation value at the end of the valuation period during which the
written request for withdrawal is received, less any contingent deferred sales
charge, any applicable premium taxes, and in the case of a full withdrawal, less
the annual policy and administrative fees that would be due on the last
valuation date of the policy year. The cash surrender value may be paid in a
lump sum to the owner, or, if elected, all or any part may be paid out under an
annuity income option. (See "Annuity Income Options," page 23).
CRITICAL NEEDS WITHDRAWALS. Annuitants whose policies have been in force for at
least one year may, under certain conditions, make withdrawals without surrender
charges. These conditions include: the annuitant must be 65 or younger when the
policy was issued; the policy accumulation value must exceed $5,000; the
annuitant must provide a medical doctor's verification of diagnosis of terminal
illness with less than 12 months to live; or verification of 90 consecutive days
of confinement in a medical facility for an approved medical reason; and no
additional premium payments are made during the waiver period. The waiver of
withdrawal charges during medical confinement will continue for 90 days after
release. This waiver of withdrawal charges is not available in all states.
In the absence of specific direction from the owner, amounts will be withdrawn
from the Subaccounts and the Fixed Account on a pro rata basis. Any partial
withdrawal that would reduce the cash surrender value to less than $100 will be
considered a request for full withdrawal. Any partial annuitization will be
allocated first to earnings and then to principal.
All withdrawals of amounts held in the Account will be paid within seven days of
receipt of written request, subject to postponement in certain circumstances.
(See "Deferment of Payment," page 23). Payments under the Policy of any amounts
derived from a premium paid by check may be delayed until such time as the check
has cleared the payor's bank. If, at the time the owner makes a partial or full
withdrawal request, he or she has not provided AVLIC with a written election not
to have federal income taxes withheld, AVLIC must by law withhold such taxes
from the taxable portion of any full or partial withdrawal and remit that amount
to the federal government. At the owner's request, AVLIC will provide a form to
request a withdrawal and to notify AVLIC of the owner's election whether to have
federal income taxes withheld. Moreover, the Internal Revenue Code provides that
a 10% penalty tax may be imposed on certain early withdrawals. (See "Federal Tax
Matters - Taxation of Annuities in General," page 25).
Since the owner assumes the investment risk with respect to amounts held in the
Account and because certain withdrawals are subject to a contingent deferred
sales charge, the total amount paid upon withdrawals under the Policy (taking
into account any prior withdrawals) may be more or less than the premium
payments made.
<PAGE>
ANNUITY DATE
The owner may specify an annuity date by written request, which can be no later
than the policy anniversary nearest annuitant's 85th birthday. The annuity date
may be extended up to the policy anniversary nearest the annuitant's 95th
birthday (90th birthday in Oregon) without AVLIC's prior approval. The 29th,
30th, or 31st day of any month may not be selected as the annuity date. If no
annuity date is specified, the annuity date will be the later of the fifth
policy anniversary date (Seventh policy anniversary date in Oregon) or the
policy anniversary which is nearest the annuitant's 85th birthday. The annuity
date is the date that annuity payments are scheduled to commence under the
Policy, unless the Policy has been surrendered or an amount has been paid as
proceeds to the designated beneficiary prior to that date. In selecting an
annuity date, the owner may wish to consider the applicability of a contingent
deferred sales charge, which is imposed upon an annuitization prior to the third
policy year following the premium payment where a life annuity is selected, and
prior to the eighth policy year if any other annuity option is selected.
The owner may advance or defer the annuity date; however, the annuity date may
not be advanced to a date prior to 30 days after the date a written request is
received, or, without AVLIC's prior approval, deferred to a date beyond the
policy anniversary date nearest the annuitant's 85th birthday. An annuity date
may only be changed by written request during the annuitant's or joint
annuitant's lifetime. Request must be received at AVLIC's Home Office at least
30 days before the then scheduled annuity date. The annuity date and annuity
income options available for qualified contracts may also be controlled by
endorsements, the plan or applicable law.
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the annuitant dies prior to the annuity date, an amount will be paid as
proceeds to the beneficiary. Upon receipt of due proof of death of the
annuitant, the death benefit becomes payable. The death benefit paid will equal
the greater of the accumulation value or total premiums paid less withdrawals,
on the date due proof of death is received by AVLIC at its Home Office. When the
annuitant commits suicide within two years of the policy date, the death benefit
is the cash surrender value. (See "Contestability," page 24). The death benefit
is payable as a lump sum cash benefit or under one of the annuity income
options. The owner may elect an annuity income option for the beneficiary, or if
no such election was made by the owner and a cash benefit has not been paid, the
beneficiary may make this election after the annuitant's death. Since "due proof
of death" includes a "Claimant's Statement," which specifies how the beneficiary
wishes to receive the benefit (unless the owner previously selected an option),
the amount of the death benefit will continue to reflect the investment
performance of the Account until that information is supplied to AVLIC. In order
to take advantage of the favorable tax treatment accorded to receiving the death
benefit as an annuity, the beneficiary must elect to receive the benefits under
an annuity option within 60 days "after the day on which such lump sum became
payable," as defined in the Internal Revenue Code. The death benefit will be
paid to the beneficiary within seven days of when it becomes payable.
ELECTION OF ANNUITY INCOME OPTIONS
The amounts of any annuity payments payable will be set on the annuity date
based on the net cash surrender value on that date that is applied under an
annuity income option. The net cash surrender value is equal to the cash
surrender value less any premium taxes, if applicable. Thereafter, the monthly
annuity payment will not change, except in the event option (ai), Interest
Payment, is elected in which case the payment will vary based on the rate of
interest determined by AVLIC. All or part of the net cash surrender value may be
placed under one or more annuity income options. If annuity payments are to be
paid under more than one option, AVLIC must be told what part of the net cash
surrender value is to be paid under each option.
The annuity income options are shown below. Election of an annuity income option
must be made by written request to AVLIC at least thirty (30) days in advance of
the annuity date. If no election is made, payments will be made beginning on the
annuity date as an annuity under option c, as shown below. Subject to AVLIC's
approval, the owner (or after the annuitant's death, the beneficiary) may select
any other annuity income option AVLIC then offers. Annuity income options are
not available to: (1) an assignee; or (2) any other than a natural person except
with AVLIC's consent. If an annuity option selected does not generate monthly
payments of at least $20, AVLIC reserves the right to pay the net cash surrender
value as a lump sum payment.
If an annuity income option is chosen which depends on the continuation of life
of the annuitant or of a joint annuitant, proof of birth date may be required
before annuity payments begin. For annuity income options involving life income,
the actual age of the annuitant or joint annuitant will affect the amount of
each payment. Since payments to older annuitants are expected to be fewer in
number, the amount of each annuity payment shall be greater. For annuity income
options that do not involve life income, the length of the payment period will
affect the amount of each payment, with the shorter the period, the greater the
amount of each annuity payment.
<PAGE>
ANNUITY INCOME OPTIONS
(ai) INTEREST PAYMENT. 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.
(aii) DESIGNATED AMOUNT ANNUITY. Monthly annuity payments will be for a
fixed amount. Payments continue until the amount AVLIC holds runs out.
(b) DESIGNATED PERIOD ANNUITY. Monthly annuity payments are paid for a
period certain, as the owner elects, up to 20 years.
(c) LIFE ANNUITY. Monthly annuity payments are paid for the life of an
annuitant, ceasing with the last annuity payment due prior to his or
her death. Variations provide for guaranteed payments for a period of
time.
(d) JOINT AND LAST SURVIVOR ANNUITY. Monthly annuity payments are paid
based on the lives of the two annuitants and thereafter for the life
of the survivor, ceasing with the last annuity payment due prior
to the survivor's death.
The rate of interest payable under options ai, aii or b will be guaranteed at 3%
compounded yearly. Payments under options c and d will be based on the 1983
Table "a" Annuity Table at 3 1/2% interest. AVLIC may, at any time of election
of an annuity income option, offer more favorable rates in lieu of the
guaranteed rates specified in the Annuity Tables. These rates may be based on
Annuity Tables which distinguish between males and females.
Under current administrative practice, AVLIC allows the beneficiary to transfer
amounts applied under options ai, aii, and b to either option c or d after the
annuity date. However, there is no guarantee that AVLIC will continue this
practice which can be changed at any time at AVLIC's discretion.
DEFERMENT OF PAYMENT
Payment of any cash withdrawal or lump sum death benefit due from the Account
will occur within seven days from the date the amount becomes payable, except
that AVLIC may be permitted to defer such payment if:
a) the New York Stock Exchange is closed other than customary weekend and
holiday closing or trading on the New York Stock Exchange is
restricted as determined by the SEC; or
b) the SEC by order permits the postponement for the protection of
owners; or
c) an emergency exists as determined by the SEC, as a result of which
disposal of securities is not reasonably practicable, or it is not
reasonably practicable to determine the value of the net assets of the
Account; or
d) surrenders or partial withdrawals from the Fixed Account may be
deferred for up to 6 months from the date of written request.
GENERAL PROVISIONS
CONTROL OF POLICY
The 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 owner, if living; otherwise to
any successor-owner or owners, if living; otherwise to the estate of the last
owner to die.
BENEFICIARY
The owner may name both primary and contingent beneficiaries. The
beneficiary(ies) and their designated class are specified in the application.
Payments will be shared equally among beneficiaries of the same class unless
otherwise stated. If a beneficiary dies before the annuitant, payments will be
made to any surviving beneficiaries of the same class; otherwise to any
beneficiary(ies) of the next class; otherwise to the owner; otherwise to the
estate of the owner.
CHANGE OF BENEFICIARY
The owner may change the beneficiary by written request on a Change of
Beneficiary form at any time during the annuitant's lifetime unless otherwise
provided in the previous designation of beneficiary. AVLIC, at its option, may
require that the Policy be returned to the Home Office for endorsement of any
change, or that other forms be completed. The change will take effect as of the
date of change is recorded at the Home Office. AVLIC will not
<PAGE>
be liable for any payment made or action taken before the change is recorded. No
limit is placed on the number of changes that may be made.
CONTESTABILITY
AVLIC cannot contest the validity of this Policy after the policy date, subject
to the "Misstatement of Age or Sex" provision. However, if the annuitant commits
suicide within two years of the policy date, in states where applicable, the
death benefit under the Policy will be limited to the Cash Surrender Value of
the policy.
MISSTATEMENT OF AGE OR SEX
AVLIC may require proof of age and sex before making annuity payments. If the
age or sex of the annuitant has been misstated, we will adjust the benefits and
amounts payable under this Policy.
If the misstatement of age or sex is not found until after the income payments
have started:
1. if we made any overpayments, we will add interest at the rate of 6% per
year compounded yearly and charge them against payments to be made in the
future.
2. if we made underpayments, the balance due plus interest at the rate of 6%
per year compounded yearly will be paid in a lump sum.
REPORTS AND RECORDS
AVLIC will maintain all records relating to the Account and will mail the owner,
at the last known address of record, within 30 days after each policy
anniversary, an annual report which shows the current accumulation value as
allocated among the Subaccounts or the Fixed Account, and charges made during
the policy year. The owner may ask for more frequent reports, but except for the
annual report, AVLIC reserves the right to charge a fee for each report. The
owner will also be sent confirmations of transactions under the Policy, such as
the purchase payment and transfers and withdrawals, and a periodic report for
the Fund and a list of the portfolio securities held in each portfolio of the
Fund and any other information required by the 1940 Act.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under a contract. Any person concerned about these tax implications
should consult a competent tax adviser before making a premium payment. This
discussion is based upon AVLIC's understanding of the present federal income tax
laws as they are currently interpreted by the Internal Revenue Service.
No representation is made as to the likelihood of the continuation of the
present federal income tax laws or of the current interpretation by the Internal
Revenue Service. Moreover, no attempt has been made to consider any applicable
state or other tax laws, other than premium taxes. (See "Taxes," page 20).
The qualified policies are designed for use by individuals in connection with
retirement plans which are intended to qualify as plans qualified for special
income tax treatment under Sections 401, 403(a), 403(b), 408 or 457 of the
Internal Revenue Code (the "Code"). The ultimate effect of federal income taxes
on the contributions, on the accumulation value, on annuity payments and on the
economic benefit to the owner, the annuitant or the beneficiary depends on the
type of retirement plan, on the tax and employment status of the individual
concerned and on AVLIC's tax status. In addition, certain requirements must be
satisfied in purchasing a qualified policy in connection with a tax qualified
plan in order to receive favorable tax treatment. With respect to qualified
policies an endorsement of the policy and/or limitations or penalties imposed by
the Code may impose limits on premiums, withdrawals, distributions or benefits,
or on other provisions of the policies. Therefore, purchasers of qualified
policies should seek competent legal and tax advice regarding the suitability of
the Policy for their situation, the applicable requirements and the tax
treatment of the rights and benefits of a Policy. Section 403(b)(11) of the Code
<PAGE>
requires that no distribution be made from a plan under Section 403(b) except
after age 59-1/2, separation from service, death or disability, or in the case
of hardship, except in a tax free exchange to another qualified contract. The
following discussion assumes the qualified policies are purchased in connection
with retirement plans that qualify for the special federal income tax treatment
described above.
TAXATION OF ANNUITIES IN GENERAL
Nonqualified Policies. The following discussion assumes that the Policy will
qualify as an annuity policy for federal income tax purposes. The Statement of
Additional Information discusses such qualifications.
Section 72 of the Code governs taxation of annuities in general. AVLIC believes
that an annuity owner generally is not taxed on increases in the value of a
Policy until distribution occurs either in the form of a lump sum received by
withdrawing all or part of the accumulation value (i.e."withdrawals") or as
annuity payments under the annuity income option elected. The exception to this
rule is the treatment afforded to owners that are not natural persons.
Generally, an owner of a Policy who is not a natural person must include in
income any increase in the excess of the owner's cash value over the owner's
"investment in the policy" during the taxable year, even if no distribution
occurs. There are, however, exceptions to this rule which you may wish to
discuss with your tax counsel. The following discussion applies to Policies
owned by natural persons.
The taxable portion of a distribution (in the form of an annuity or lump sum
payment) is taxed as ordinary income, subject to any income averaging rules
applicable to taxpayers generally. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the accumulation value generally
will be treated as a distribution.
Generally, in the case of a withdrawal under a nonqualified policy, amounts
received are first treated as taxable income to the extent that the accumulation
value immediately before the withdrawal exceeds the "investment in the policy"
at that time. Any additional amount is not taxable.
Although the tax consequences may vary depending on the annuity income option
elected under the Policy, in general, only the portion of the annuity payment
that represents the amount by which the accumulation value exceeds the
"investment in the policy" will be taxed. For fixed annuity payments, in
general, there is no tax on the amount of each payment which represents the same
ratio that the "investment in the policy" bears to the total expected value of
the annuity payment for the term of the payment; however, the remainder of each
annuity payment is taxable. Any distribution received subsequent to the
investment in the policy being recovered will be fully taxable.
In the case of a distribution pursuant to a nonqualified policy, there may be
imposed a federal penalty tax equal to 10% of the amount treated as taxable
income. In general, however, there is no penalty tax on distributions: (1) made
on or after the date on which the owner is actual age 59 1/2, (2) made as a
result of death or disability of the owner, or (3) received in substantially
equal payments as a life annuity subject to Internal Revenue Service
requirements, including special "recapture" rules.
QUALIFIED POLICIES. The rules governing the tax treatment of distributions under
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Generally, in the case of a distribution to a participant or
beneficiary under a Policy purchased in connection with these plans, only the
portion of the payment in excess of the "investment in the policy" allocated to
that payment is subject to tax. The "investment in the policy" equals the
portion of plan contributions invested in the Policy that was not excluded from
the participant's gross income, and may be zero. In general, for allowed
withdrawals, a ratable portion of the amount received is taxable, based on the
ratio of the investment in the policy to the total Policy value. The amount
excluded from a taxpayer's income will be limited to an aggregate cap equal to
the investment in the policy. The taxable portion of annuity payments is
generally determined under the same rules applicable to nonqualified policies.
However, special favorable tax treatment may be available for certain
distributions (including lump sum distributions). Adverse tax consequences may
result from distributions prior to age 59-1/2 (subject to certain exceptions),
distributions that do not conform to specified commencement and minimum
distribution rules, aggregate distributions in excess of a specified annual
amount, and in other certain circumstances.
Distributions from qualified plans are subject to specific tax withholding
rules. Eligible rollover distributions from a qualified plan or annuities used
in 403(b) plans are subject to income tax withholding at a rate of 20% unless
the policyowner elects to have the distribution paid directly by AVLIC to an
eligible retirement plan in a direct rollover. If the distribution is not an
eligible rollover distribution, it is generally subject to the same withholding
rules as distributions from non-qualified policies.
<PAGE>
DISTRIBUTION OF THE POLICIES
Ameritas Investment Corp. ("Investment Corp."), a wholly-owned subsidiary of
Ameritas Life Insurance Corp. and an affiliated company of AVLIC, will act as
the principal underwriter of the Policies pursuant to an Underwriting Agreement
between itself and AVLIC. Investment Corp. was organized under the laws of the
State of Nebraska on December 29, 1983, and is a broker/dealer registered
pursuant to the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. The Policies are sold by individuals who
are registered representatives of Investment Corp. and who are licensed as life
insurance agents for AVLIC. Investment Corp. and AVLIC may authorize registered
representatives of other registered broker/dealers to sell the Policies subject
to applicable law.
Registered Representatives who sell the Policy will receive commissions based
upon a commission schedule. After issuance of the Policy, commissions will
equal, at most, 5.5% of premiums paid. Further, Registered Representatives who
meet certain production standards may receive additional compensation, and
managers receive override commissions with respect to the policies.
SAFEKEEPING OF THE ACCOUNT'S ASSETS
AVLIC holds the assets of the Account. The assets are kept physically segregated
and held separate and apart from the general account assets. AVLIC maintains
records of all purchases and redemptions of the Funds' shares by each of the
Subaccounts.
VOTING RIGHTS
To the extent required by law, the portfolio shares held in the Account will be
voted by AVLIC at shareholder meetings of the Funds in accordance with
instructions received from persons having voting interests in the corresponding
Subaccount. The 1940 Act currently requires shareholder voting on matters such
as the election of the Board of Trustees of the Funds, the approval of the
investment advisory contract, changes in the fundamental investment policies of
the Funds, and approval of the independent accountants. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, and, as a result, AVLIC determines that it
is allowed to vote the portfolio shares in its own right, AVLIC may elect to do
so.
The number of votes which are available to an owner will be calculated
separately for each Subaccount of the Account. That number will be determined by
applying his or her percentage interest, if any, in a particular Subaccount to
the total number of votes attributable to the Subaccount.
Prior to the annuity date, the owner holds a voting interest in each Subaccount
to which the accumulation value is allocated.
The number of votes which are available to an owner will be determined by
dividing the accumulation value attributable to a Subaccount by the net asset
value per share of the applicable portfolio. In determining the number of votes,
fractional shares will be recognized.
The number of votes of the portfolio which are available will be determined as
of the date coincident with the date established by that portfolio for
determining shareholders eligible to vote at the meeting of the Funds. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by the Funds.
Shares of Funds as to which no timely instructions are received, or shares held
by AVLIC as to which owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Policies participating in that Subaccount.
Each person having a voting interest in a Subaccount will receive proxy
material, reports and other materials relating to the appropriate portfolio.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Account is a party or to which the
assets of the Account are subject. AVLIC is not involved in any litigation that
is of material importance in relation to its total assets or that relates to the
Account.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available that contains more details
concerning the subjects discussed in this Prospectus. This can be obtained by
writing to the address on the front page or by calling 1-800-745-1112. The
following is the Table of Contents for that Statement:
<TABLE>
<CAPTION>
Page
<S> <C>
GENERAL INFORMATION AND HISTORY...................................... 2
THE POLICY........................................................... 2
GENERAL MATTERS...................................................... 6
FEDERAL TAX MATTERS.................................................. 8
DISTRIBUTION OF THE POLICY........................................... 9
SAFEKEEPING OF ACCOUNT ASSETS ....................................... 9
AVLIC ............................................................... 9
STATE REGULATION..................................................... 10
LEGAL MATTERS........................................................ 10
EXPERTS.............................................................. 10
OTHER INFORMATION.................................................... 10
FINANCIAL STATEMENTS................................................. 10
</TABLE>
<PAGE>
APPENDIX A
LONG TERM MARKET TRENDS
The information below covering the period of 1926-1994 is an examination of the
basic relationship between risk and return among the different asset classes,
and between nominal and real (inflation adjusted) returns. The information is
provided because the Policyowners have varied investment portfolios available
which have different investment objectives and policies. The chart generally
demonstrates how different classes of investments have performed during the
period. The study of asset returns provides a period long enough to include most
of the major types of events that investors have experienced in the past and may
experience in the future. This is a historical record and is not intended as a
projection of future performance.
The graph depicts the growth of a dollar invested in common stocks, small
company stocks, long-term government bonds, Treasury bills, and a hypothetical
asset returning the inflation rate over the period from the end of 1925 to the
end of 1994. All results assume reinvestment of dividends on stocks or coupons
on bonds and no taxes. Transaction costs are not included, except in the small
stock index starting in 1982. Charges associated with a variable insurance
policy are not reflected in the chart.
Each of the cumulative index values is initiated at $1.00 at year-end 1925. The
graph illustrates that common stocks and small stocks gained the most over the
entire 69-year period: investments of one dollar would have grown to $810.54
and $2842.77 respectively, by year-end 1994. This growth, however, was earned
by taking substantial risk. In contrast, long-term government bonds (with an
approximate 20-year maturity), which exposed the holder to less risk, grew to
only $25.86.
The lowest risk strategy over the past 69 years was to buy U.S. Treasury bills.
Since Treasury bills tended to track inflation, the resulting real
(inflation-adjusted) returns were near zero for the entire 1926-1994 period.
(OMITTED GRAPH ILLUSTRATES LONG TERM MARKET TRENDS AS DESCRIBED IN THE NARRATIVE
ABOVE.)
YEAR END 1925 = $1.00
Source: Stocks, Bonds, Bills, and Inflation 1995 Yearbook
(C)Ibbotson Associates, Chicago. All Rights Reserved.
<PAGE>
APPENDIX B
STANDARD & POOR'S 500
The Standard and Poor's (S & P 500) is a weighted index of 500 widely held
stocks: 400 Industrials, 40 Financial Company Stocks, 40 Public Utilities, and
20 Transportation stocks, most of which are traded on the New York Stock
Exchange. This information is provided because the Policyowners have varied
investment options available. The investment options, except the Fixed Account
and the Money Market Account, involve investments in the stock market. The S & P
500 is generally regarded as an accurate composite of the overall stock market.
<TABLE>
<CAPTION>
PERCENT CHANGE OF
STANDARD & POOR'S 500 INDEX
%
Year Change
- ----------------------------------
<S> <C> <C>
1 1970 3.93
2 1971 14.56 (OMITTED GRAPH DEPICTS THE ACTIVITY
3 1972 18.90 OF THE S&P 500 INDEX FOR THE YEARS
4 1973 -14.77 1970-1994.)
5 1974 -26.39
6 1975 37.16
7 1976 23.57
8 1977 -7.42
9 1978 6.38
10 1979 18.20
11 1980 32.27
12 1981 -5.01
13 1982 21.44
14 1983 22.38
15 1984 6.10
16 1985 31.57
17 1986 18.56
18 1987 5.10
19 1988 16.61
20 1989 31.69
21 1990 -3.14
22 1991 30.45
23 1992 7.61
24 1993 10.08
25 1994 -1.32
</TABLE>
THE CHART ASSUMES THE RETURN EXPERIENCED BY THE STANDARD & POOR'S 500 INDEX FOR
THE LAST 25 YEARS. FUTURE 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. THE INFORMATION IN THE CHART IS NOT NECESSARILY INDICATIVE OF
FUTURE PERFORMANCE.
<PAGE>
APPENDIX C
QUALIFIED DISCLOSURES
* Information Statement For:
408(b) IRA Plans
408(k) SEP Plans
* Information Statement For:
403(b) TSA Plans
* Information Statement For:
401(a) Pension/Profit Sharing Plans
[GRAPHIC OMITTED]
<PAGE>
If this annuity is being purchased as a qualified plan as defined under
specified sections of the Internal Revenue Code, as purchaser (owner) or
fiduciary of an Employee Benefit Plan purchasing the annuity, you should
carefully review the Information Statement for your specific plan.
Depending on the type of plan, we are required to provide this disclosure to you
to meet the requirements of the Internal Revenue Service (IRS) and/or the
Employee Retirement Income Security Act of 1974 (ERISA).
Acknowledgement of your receipt of the required disclosure is included within
the application language above your signature.
Table of Contents
Information Statement
408(b) Individual Retirement Annuity (IRA) Plans
408(k) Simplified Employee Pension (SEP) Plans ..................... QD-1
Information Statement
403(b) Tax Sheltered Annuity (TSA) Plans....................... QD-6
Information Statement
401(a) Pension/Profit Sharing Plans............................ QD-7
<PAGE>
[GRAPHIC OMITTED]
INFORMATION STATEMENT
408(b) Individual Retirement Annuity (IRA) Plans
408(k) Simplified Employee Pension (SEP) Plans
- --------------------------------------------------------------------------------
For purchasers of a 408(b) Individual Retirement Annuity (IRA) Plan or 408(k)
Simplified Employee Pension (SEP) Plan, please review the following:
PART 1. PROCEDURE FOR REVOKING THE IRA PLAN:
After you establish an IRA Plan with Ameritas Variable Life Insurance Company
(AVLIC), you are able to revoke your IRA within a limited time and receive a
full refund of the initial premium paid, if any. The period for revocation will
not be less than the legal minimum of seven (7) days following the date you
execute an application for an IRA with AVLIC.
To revoke your IRA, you should send a signed and dated written notice to:
Ameritas Variable Life Insurance Company, Policyholder Service Department, One
Ameritas Way, P.O. Box 81889, Lincoln, NE 68501-2550.
If your IRA contract was delivered to you, the contract should accompany your
notice of revocation. Your notice of revocation will be considered mailed on the
date of the postmark (or certification or registration, if applicable), if sent
by United States mail, properly addressed and by first class postage prepaid.
To obtain further information about the revocation procedure, contact your AVLIC
Representative or call 1-800-745-1112.
PART II. PROVISIONS OF THE IRA LAW:
AVLIC's OVERTURE ANNUITY III (Form 4784), can be used for a Regular IRA, a
Rollover IRA, a Spousal IRA Arrangement, or for a Simplified Employee Pension
Plan (SEP). A separate policy must be purchased for each individual under each
plan.
While provisions of the IRA law are similar for all such plans, any major
differences are set forth under the appropriate topics below.
ELIGIBILITY:
REGULAR IRA PLAN: Any employee under age 70 1/2 and earning income from
personal services, is eligible to establish an IRA Plan although deductibility
of the contributions is determined by adjusted gross income and whether the
employee participates in a qualified employer-sponsored retirement plan.
ROLLOVER IRA: This is an IRA plan purchased with your distributions from
another IRA, a Section 401(a) Qualified Retirement Plan, or a Section 403(b)
Tax Sheltered Annuity (TSA).
Amounts transferred as Rollover Contributions are not taxable in the year of
distribution provided the rules for Rollover treatment are satisfied and may
or may not be subject to withholding. Rollover Contributions are not
deductible.
SPOUSAL IRA ARRANGEMENT: A Spousal IRA, consisting of a contract for each
spouse, may be set up provided a joint return is filed, the "nonworking
spouse" has no earned income for the taxable year (or elects to be treated as
having no compensation for the year), does not make a contribution to an IRA,
and is under age 70 1/2 at the end of the tax year.
SIMPLIFIED EMPLOYEE PENSION PLAN: An employee is eligible to participate in a
SEP Plan based on eligibility requirements set forth in form 5305-SEP or the
plan document provided by the employer.
Divorced spouses can continue a spousal IRA or start a Regular IRA based on
the standard IRA eligibility rules. All taxable alimony received by the
divorced spouse under a decree of divorce or separate maintenance is treated
as compensation for purposes of the IRA deduction limit.
NONTRANSFERABILITY: You may not transfer, assign or sell your IRA Plan to
anyone (except in the case of transfer incident to divorce).
NONFORFEITABILITY: The value of your IRA Plan belongs to you at all times,
without risk of forfeiture.
PREMIUM: The annual premium (if applicable) of your IRA Plan may not exceed
the lesser of $2,000, or 100% of compensation for the year. Any premium in
excess of or in addition to $2,000 will be permitted only as a "Rollover
Contribution." Your contribution must be made in cash. For IRA's established
under Simplified Employee Pension Plans (SEP's), premiums are limited to the
lesser of $30,000 or 15% of the first $150,000 of compensation (adjusted for
cost of living increases). In addition, if the IRA is under a salary reduction
Simplified Employee Pension (SARSEP), premiums made by salary reduction are
limited to $7,000 (adjusted for cost of living increases); and for 1995, the
limit is $9,240.
MAXIMUM CONTRIBUTIONS:
REGULAR IRA PLAN: In any year that your annuity is maintained under the rules
for a Regular IRA Plan, your maximum contribution is limited to 100% of your
earned income or $2,000, whichever is less. The amount of permissible
contributions to your IRA may or may not be deductible. Whether IRA
contributions (other than Rollovers) are deductible depends on whether you (or
your spouse, if married) are an active participant in an employer-sponsored
plan and whether your adjusted gross income is above the "phase-out level."
SEE DEDUCTIBLE CONTRIBUTIONS, Part III.
ROLLOVER IRA: A Plan to Plan Rollover is a method for accomplishing continued
tax deferral on otherwise taxable distributions from certain plans. Rollover
contributions are not subject to the contribution limits on regular IRA
contributions, but are not deductible.
<PAGE>
There are two ways to make a rollover to an IRA:
(1) PARTICIPANT ROLLOVERS are available to participants, surviving spouses or
former spouses who receive eligible rollover distributions from 401(a)
Qualified Retirement Plans, TSAs or IRAs. Participant Rollovers are
accomplished by contributing part or all of the eligible amounts (which
includes amounts withheld for federal income tax purposes) to your new IRA
within 60 days following receipt of the distribution. IRA to IRA Rollovers
are limited to one per distribution plan per year, while direct IRA to IRA
Transfers are not subject to this limitation.
(2) DIRECT ROLLOVERS are available to participants, surviving spouses and
former spouses who receive eligible rollover distributions from 401(a)
Qualified Retirement Plans or TSAs. Direct Rollovers are made by
instructing the plan trustee, custodian or issuer to pay the eligible
portion of your distribution directly to the trustee, custodian or issuer
of the receiving IRA. Direct Rollover amounts are not subject to mandatory
federal income tax withholding.
Certain distributions are NOT considered to be eligible for Rollover and
include: (1) distributions which are part of a series of substantially equal
periodic payments for 10 years or more; (2) distributions attributable to
after-tax employee contributions to a 401(a) Qualified Retirement Plan or TSA;
(3) required minimum distributions made during or after the year you reach age
70 1/2; (4) amounts in excess of the cash (except for certain loan offset
amounts) or in excess of the proceeds from the sale of property distributed; and
(5) the portion of a distribution eligible for the death benefit exclusion.
At the time of a Rollover, you must irrevocably designate in writing that the
transfer is to be treated as a Rollover Contribution. Eligible amounts which are
not rolled over are normally taxed as ordinary income in the year of
distribution. If a Rollover Contribution is made to an IRA from a Qualified
Retirement Plan, you may later roll the value of the IRA into a new employer's
plan provided you made no contributions to the IRA from other than the first
employer's plan. This is known as "Conduit IRA," and you should designate your
annuity as such when you complete your application.
SPOUSAL IRA ARRANGEMENT: In any year that your annuity is maintained under the
rules for a Spousal IRA, the combined maximum contribution to both spouses' IRAs
is the lesser of 100% of your compensation or $2,250. The contributions need not
be equally divided, provided no more than $2,000 is contributed to either
spouse's IRA. Whether the contribution is deductible or non-deductible depends
on whether either spouse is an active participant in an employer-sponsored plan
for the year, and whether the adjusted gross income of the couple is above the
phase out level.
The contribution limit for divorced spouses is the lesser of $2,000 or the total
of the taxpayer's earned income and alimony received for the year.
SEP PLAN: In any year that your annuity is maintained under the rules for a
Simplified Employee Pension Plan, the employer's maximum contribution is the
lesser of $30,000 or 15% of your first $150,000 of compensation (adjusted for
cost-of-living increases) or as changed under Section 415 of the Code. In 1995,
the maximum SEP contribution on behalf of an employee is $22,500 (15% x
$150,000). You may also be able to make contributions to your SEP-IRA the same
as you do to a Regular IRA, however, you will be considered an active
participant for purposes of determining your deduction limit. In addition to the
above limits, if your annuity is maintained under the rules for a salary
reduction Simplified Employee Pension Plan (SARSEP), the maximum amount of
employee pre-tax contributions which can be made is $7,000, adjusted for cost of
living increases; and for 1995 the maximum employee pre-tax contribution amount
has been increased to $9,240.
DISTRIBUTIONS: Payment to you from your IRA Plan must begin no later than the
April 1 following the close of the calendar year in which you attain age 70 1/2,
the Required Beginning Date (RBD). If you have not withdrawn your entire balance
by this date, you may receive the entire value of your IRA Plan in one lump sum;
arrange for an income to be paid over your lifetime, your expected lifetime, or
over the lifetimes or expected lifetimes of you and your beneficiary.
RATE OF DISTRIBUTION: If you arrange for the value of your IRA Plan to be paid
to you as retirement income rather than as one lump sum, then you must abide by
IRS rules governing how quickly the value of your IRA plan must be paid out to
you. Generally, it is acceptable to have an insurance company annuity pay income
to you as long as you live, or as long as you and your beneficiary live.
MINIMUM DISTRIBUTION REQUIREMENTS: Once you reach your RBD, you must withdraw a
minimum amount each year or be subject to a 50% non-deductible excise tax on the
difference between the minimum required distribution and the amount distributed.
To determine the required minimum distribution, divide your entire interest in
your IRA (as of December 31 of your age 70 1/2 year) by your life expectancy or
the joint life expectancies of you and your beneficiary. Your single or joint
life expectancy is determined by using IRS life expectancy tables. See IRS
Publications 575 and 590.
Your life expectancy (and that of your spousal beneficiary, if applicable) will
be recalculated annually, unless you irrevocably elect otherwise. The life
expectancy of a non-spouse beneficiary cannot be recalculated. Where life
expectancy is not recalculated, it is reduced by one year for each year after
your 70 1/2 year to determine the applicable remaining life expectancy. Also, if
your benefit is payable in the form of a joint and survivor annuity, a larger
minimum distribution amount may be required under IRS regulations, unless your
spouse is the designated beneficiary.
If you die after the RBD, amounts undistributed at your death must be
distributed at least as rapidly as under the method being used at the time of
your death. If you die before the RBD, your entire interest must be distributed
within 5 years of your death if no beneficiary is designated; or if a
beneficiary is designated, over the life expectancy of the beneficiary if the
beneficiary so elects by December 31 of the year following the year of your
death. If the beneficiary fails to make an election, the benefit will be paid in
equal or substantially equal installments over his/her life or life expectancy.
Also, if a designated beneficiary is the spouse, the distribution must begin by
December 31 of the year in which you would have attained age 70 1/2, or if not
your spouse, December 31 of the year following your death.
PART III. RESTRICTIONS AND TAX CONSIDERATIONS:
TIMING OF CONTRIBUTIONS: Once you establish an IRA, contributions (deductible or
non-deductible) must be made by the due date, not including extensions, for
filing your tax return. (Participant Rollovers must be made within 60 days of
your receipt of the distribution.) A contribution made between January 1 and the
filing due date for your return, must be submitted with written direction that
it is being made for the prior plan year or it will be treated as made for the
current year.
<PAGE>
DEDUCTIBLE CONTRIBUTIONS: The amount of permissible contributions to your IRA
may or may not be deductible. If you or your spouse are an active participant in
an employer-sponsored retirement plan, the size of your deduction if any, will
depend on your combined adjusted gross income (AGI). If your combined AGI is
less than $40,000, you can deduct your entire contribution. If you are single
and your AGI is less than $25,000, you may also take a full deduction. For
married couples filing joint returns, the deduction is phased out between
$40,000 and $50,000. For single individuals, the deduction is phased out between
$25,000 and $35,000. If you are married and covered by an employer plan, but
file separate tax returns, your deduction is phased out between $0 and $10,000
of AGI. If your AGI is not above the applicable phase out level, a minimum
contribution of $200 is permitted regardless of whether the phase out rules
provide for a lesser amount. You can elect to treat deductible contributions as
non-deductible.
NON-DEDUCTIBLE CONTRIBUTIONS: It is possible for you to make non-deductible
contributions to your IRA even if you are not eligible to make deductible
contributions for the year. The amount of non-deductible contributions you can
make depends on the amount of deductible contributions you make. The sum of your
non-deductible and deductible contributions for a year may not exceed the lesser
of (1) $2,000 ($2,250 when a spousal IRA is also involved), or (2) 100% of your
compensation. IF YOU WISH TO MAKE A NON-DEDUCTIBLE CONTRIBUTION, YOU MUST REPORT
THIS ON YOUR TAX RETURN BY FILING FORM 8606 (NON-DEDUCTIBLE IRA CONTRIBUTIONS,
IRA BASIS, AND NONTAXABLE IRS DISTRIBUTIONS). REMEMBER, YOU ARE REQUIRED TO KEEP
TRACK OF YOUR NON-DEDUCTIBLE CONTRIBUTIONS AS AVLIC DOES NOT KEEP A RECORD OF
THESE FOR YOU. THIS INFORMATION WILL BE NECESSARY TO DOCUMENT THAT THE
CONTRIBUTIONS WERE MADE ON A NON-DEDUCTIBLE BASIS AND THEREFORE, ARE NOT TAXABLE
UPON DISTRIBUTION.
EXCESS CONTRIBUTIONS: There is a 6% IRS penalty tax on IRA contributions in
excess of permissible contributions. However, excess contributions made in one
year may be applied against the contribution limits in a later year if the
contributions in the later year are less than the limit. This penalty tax can be
avoided if the excess amount, together with any earnings on it, is returned to
you before the due date of your tax return for the year for which the excess
amount was contributed. The penalty tax will apply to each year the excess
amount remains in the IRA Plan, until it is removed either by having it returned
to you or by making a reduced contribution in a subsequent year. To the extent
an excess contribution is absorbed in a subsequent year by contributing less
than the maximum deduction allowable for that year, the amount absorbed will be
deductible in the year applied (provided you are eligible to take a deduction).
LOANS AND PROHIBITED TRANSACTIONS: You may not borrow from your IRA Plan or
pledge it as security for a loan. This would disqualify your entire IRA Plan,
and its full value would be included in your taxable income in the year of
violation. This amount would also be subject to the 10% penalty tax on premature
distributions. Your IRA Plan will similarly be disqualified if you or your
beneficiary engage in any transaction prohibited by Section 4975 of the Internal
Revenue Code.
TAXABILITY OF DISTRIBUTIONS: Any cash distribution from your IRA Plan is
normally taxable as ordinary income. All IRAs of an individual are treated as
one contract. All distributions during a taxable year are treated as one
distribution; and the value of the contract, income on the contract, and
investment on the contract is computed as of the close of the calendar year with
or within which the taxable year ends. If an individual withdraws an amount from
an IRA during a taxable year and the individual has previously made both
deductible and non-deductible IRA contributions, the amount includable in income
for the taxable year is the portion of the amount withdrawn which bears the same
ratio to the amount withdrawn for the taxable year as the individual's aggregate
non-deductible IRA contributions bear to the balance of all IRAs of the
individual, including rollover IRAs and SEPs.
LUMP SUM DISTRIBUTION: If you decide to receive the entire value of your IRA
Plan in one lump sum, the full amount is taxable when received (except as to
non-deductible contributions), and is not eligible for the special tax rules on
lump sum distributions which are used with other types of Qualified Retirement
Plans.
PREMATURE DISTRIBUTION: There is a 10% penalty tax on amounts distributed prior
to the attainment of age 59 1/2, except for distributions made to a beneficiary
on or after the owner's death, distributions attributable to the owner's being
disabled, or distributions that are part of a series of substantially equal
periodic payments for the life of the owner or the joint lives of the owner and
his beneficiary. The part of a distribution attributable to non-deductible
contributions is not includable in income and is not subject to the 10% penalty.
MINIMUM REQUIRED DISTRIBUTION: SEE PART II, MINIMUM DISTRIBUTION REQUIREMENTS.
An IRA Plan which is not totally distributed to you by April 1 of the year
following the year in which you attain age 70 1/2, must be distributed over one
of the following periods: 1) the entire life of the owner, 2) the lives of the
owner and his beneficiary, 3) a period certain not extending beyond the life
expectancy of the owner or the joint life and last survivor expectancy of the
owner and his beneficiary. If the minimum distribution is not made, the excess,
in any taxable year, of the amount that should have been distributed over the
amount that was actually distributed is subject to an excise tax of 50%.
MAXIMUM DISTRIBUTION: Generally, an excess distribution is an annual
distribution in excess of the annual ceiling (currently $150,000). If you made a
grandfather election pursuant to IRC 4980 A, your annual ceiling is $150,000
(for 1995), as indexed annually. Excess distributions are subject to a 15%
excise tax. The tax is reduced by any payment of the 10% excise tax on early
withdrawals. Excluded from the excise tax are distributions after the death of
the participant, distributions payable to an alternate payee under a qualified
domestic relations order, distributions attributable to after-tax employee
contributions, and distributions not includable in income by reason of a
Rollover Contribution. Also, a 15% excise tax is imposed on your excess
retirement accumulation at the time of your death. This amount is the excess of
the value of all accrued benefits under all your IRAs, Qualified Retirement
Plans, and TSAs, over the present value of a single life annuity with payments
equal to the annual ceiling (currently $150,000), payable over your life
expectancy prior to death.
TAX FILING: You are not required to file a special IRA tax form for any taxable
year (1) for which no penalty tax is imposed with respect to the IRA Plan, and
(2) in which the only activities engaged in, with respect to the IRA Plan, are
making deductible contributions and receiving permissible distributions.
Information regarding such contributions or distributions will be included on
the regular Form 1040. For further information, consult the instructions for
Form 5329 (Return for Individual Retirement Savings Arrangements), Form 8606 and
IRS Publication 590.
TAX ADVICE: AVLIC is providing this general information as required by the
Internal Revenue Code and assumes no responsibility for its application to your
particular tax situation. Please consult your personal tax advisor regarding
specific questions you may have.
<PAGE>
ADDITIONAL INFORMATION: You may obtain more information about IRA Plans from any
district office of the IRS and IRS Publication 590.
PART IV. STATUS OF AVLIC IRA PLAN:
INTERNAL REVENUE SERVICE APPROVAL LETTER: AVLIC has applied for and received
approval from the Internal Revenue Service as to the form of OVERTURE ANNUITY
III (Form 4784) for use in funding IRA plans. Such approval, is a determination
only as to the form of the Annuity Contract, and does not represent a
determination of the merits of the annuity.
PART V. FINANCIAL DISCLOSURE:
The following is a general description and required financial disclosure
information for the variable annuity product, OVERTURE ANNUITY III (Form 4784)
offered by AVLIC, hereafter referred to as the policy.
In order for you to achieve your retirement objectives, you should be prepared
to make your IRA Plan a long term savings program. An IRA is not suited to
short-term savings, nor was it intended to be by Congress, as indicated by the
penalties on withdrawal before age 59 1/2 (except for death or disability).
However, you should be aware of the values in your IRA Plan during the early
years as well as at retirement.
Prior to the annuity date, the policy allows you to accumulate funds based on
the investment experience of the assets underlying the policy in the Separate
Account or the Fixed Account. Currently, the assets which underlie the Separate
Account are invested exclusively in shares of mutual funds, the "Funds", managed
or administered by several fund managers. Each of the Subaccounts of the
Separate Account invest solely in the corresponding portfolio of the Funds. The
assets of each portfolio are held separately from the other portfolios and each
has distinct investment objectives which are described in the accompanying
prospectus for the Funds which you would have received when making an
application for your annuity. The accumulation value of your IRA Plan allocated
to the Separate Account will vary in accordance with the investment performance
of the Subaccounts you selected. Therefore, for assets in the Separate Account,
you bear the entire investment risk prior to the annuity date.
Premium payments and subsequent allocations to the Fixed Account are placed in
the general account of AVLIC which supports insurance and annuity obligations.
Policyowners are paid interest on the amounts placed in the Fixed Account at
guaranteed rates (3.5%) or at higher rates declared by AVLIC.
ACCUMULATION VALUE: On the effective date, the accumulation value of the policy
is equal to the premium received, reduced by any applicable premium taxes.
Thereafter, the accumulation value of the policy is determined as of the close
of trading on the New York Stock Exchange on each valuation date by multiplying
the number of accumulation units for each Subaccount credited to the policy by
the current value of an accumulation unit for each Subaccount, and by adding the
amount deposited in the Fixed Account, plus interest. The current value of an
accumulation unit reflects the increase or decrease in value due to investment
results of the Subaccount and certain charges, as described below. The number of
accumulation units credited to the policy is decreased by any annual
administrative fee and the annual policy fee, any withdrawals and any charges
upon withdrawal and, upon annuitization, any applicable premium taxes and
charges.
A valuation period is the period between successive valuation dates. It begins
at the close of trading on the New York Stock Exchange on each valuation date
and ends at the close of trading on the next succeeding valuation date. A
valuation date is each day that the New York Stock Exchange is open for
business.
The accumulation value is expected to change from valuation period to valuation
period, reflecting the net investment experience of the selected portfolios of
the Funds, interest earned in the Fixed Account, additional premium payments,
partial withdrawals, as well as the deduction of any applicable charges under
the policy. GROWTH IN THE ACCUMULATION VALUE BASED ON INVESTMENTS IN THE ACCOUNT
IS NEITHER GUARANTEED NOR PROJECTED.
VALUE OF ACCUMULATION UNITS: The accumulation units of each Subaccount are
valued separately. The value of an accumulation unit may change each valuation
period according to the net investment performance of the shares purchased by
each Subaccount and the daily charge under the policy for mortality and expense
risks, and if applicable, any federal and state income tax charges.
CASH SURRENDER VALUE: The amount available for full or partial withdrawal, which
is the accumulation value less any contingent deferred sales charge, any
applicable premium taxes, and, in the case of a full withdrawal, the annual
policy and administrative fees.
ANNUAL POLICY FEE: An annual policy fee of $36, $30 in North Dakota is deducted
from the accumulation value on the last valuation date of each policy year and
on a full withdrawal if between policy anniversaries. This charge reimburses
AVLIC for the administrative costs of maintaining the policy on AVLIC's system.
This charge may be increased to a maximum of $50.
ANNUAL ADMINISTRATIVE FEE: A charge of .20% of the accumulation value is
calculated and deducted from the accumulation value on the last valuation date
of each policy year or on a full withdrawal if between policy anniversaries.
This charge, which is guaranteed not to be increased, is designed to reimburse
AVLIC for administrative expenses incurred in connection with issuing the policy
and ongoing administrative expenses incurred in connection with servicing and
maintaining the policies. These expenses include the cost of processing the
application and premium payment, establishing policy records, processing and
servicing owner transactions and policy changes, recordkeeping, preparing and
mailing reports, processing death benefit claims, and overhead costs.
MORTALITY AND EXPENSE RISK CHARGE: AVLIC imposes a charge to compensate it for
bearing certain mortality and expense risks under the policies. For assuming
these risks, AVLIC makes a daily charge equal to an annual rate of 1.25% of the
value of the average daily net assets of the Account. Of that amount,
approximately .55% is charged to cover the mortality risks and .70% is charged
to cover the expense risks assumed under the policies. This charge is subtracted
when determining the daily accumulation unit value. AVLIC guarantees that this
charge will never increase. If this charge is insufficient to cover assumed
risks, the loss will fall on AVLIC. Conversely, if the charge proves more than
sufficient, any excess will be added to AVLIC's surplus. No mortality and
expense risk charge is imposed on the Fixed Account.
<PAGE>
TAXES: AVLIC will, where such taxes are imposed by state law upon the receipt of
a premium payment, deduct premium taxes. If premium taxes are imposed upon
annuitization, AVLIC will deduct applicable premium taxes at that time.
Applicable premium tax rates depend upon such factors as the policyowner's
current state of residency, and the insurance laws and the status of AVLIC in
states where premium taxes are incurred. Currently, premium taxes range from 0%
to 3.5% of the premium paid. Applicable premium tax rates are subject to change
by legislation, administrative interpretations, or judicial acts. The owner will
be notified of any applicable premium taxes.
PARTIAL AND FULL WITHDRAWALS: The owner may make a partial or a full withdrawal
of the policy to receive part or all of the accumulation value (less any
applicable charges), at any time before the annuity date and while the annuitant
is living, by sending a written request to AVLIC. Partial withdrawals may be
either systematic or elective. Systematic withdrawals provide for an automatic
withdrawal, whereas, each elective withdrawal must be elected by the owner.
Systematic partial withdrawals are available on a monthly, quarterly,
semi-annual or annual mode. In addition to systematic withdrawals, the owner is
permitted to make up to four elective partial withdrawals in one policy year.
This withdrawal right may be restricted by Section 403(b)(11) of the Internal
Revenue Code if the annuity is used in connection with a Section 403(b)
retirement plan. No partial or full withdrawals may be made after the annuity
date except as permitted under the particular annuity option. The amount
available for a full or partial withdrawal (cash surrender value) is the
accumulation value at the end of the valuation period during which the written
request for withdrawal is received, less any contingent deferred sales charge,
any applicable premium taxes, and in the case of a full withdrawal, less the
annual policy and administrative fees that would be due on the last valuation
date of the policy year. The cash surrender value may be paid in a lump sum to
the owner, or, if elected, all or any part may be paid out under an annuity
income option.
CONTINGENT DEFERRED SALES CHARGE: Since no deduction for a sales charge is made
from the premium payment, a contingent deferred sales charge is imposed on
certain partial and full withdrawals, and upon certain annuitizations to cover
certain expenses relating to the distribution of the policies, including
commissions to registered representatives and other promotional expenses.
Total withdrawals in a policy year which exceed the greater of: 1) 10% of the
accumulation value at the time of the withdrawal, or 2) any portion of the
accumulation value which exceeds the total premium deposit will be subject to a
contingent deferred sales charge (withdrawal charge). Contingent deferred sales
charges are assessed only on premiums paid based upon the number of years since
the policy year in which the premiums withdrawn were paid, on a first-paid,
first-withdrawn basis.
Where a partial or full withdrawal is taken or amounts are applied under an
annuity option, the amount withdrawn or annuitized (less any amount entitled to
the free withdrawal) will be subject to a contingent deferred sales charge
expressed in the following manner:
The charge will be a percentage of the premium payments withdrawn or annuitized.
<TABLE>
<CAPTION>
CHARGE AS A % OF EACH YEARS SINCE RECEIPT OF
PREMIUM PAYMENT EACH PREMIUM PAYMENT
<S> <C>
6 1
6 2
6 3
5 4
4 5
3 6
2 7
0 8+
</TABLE>
In the case of a partial withdrawal or annuitization, the contingent deferred
sales charge will be deducted from the amounts remaining under the policy. The
charge will be allocated pro rata among the Subaccounts or the Fixed Account
based on the accumulation value in each prior to the withdrawal or annuitization
unless an owner requests a partial withdrawal or annuitization from particular
Subaccounts or the Fixed Account, in which case the charge will be allocated
among those Subaccounts or the Fixed Account in the same manner as the
withdrawal. In the case of a full withdrawal or annuitization, the contingent
deferred sales charge is deducted from the amount paid to the owner. Contingent
deferred sales charges will not be imposed on certain withdrawals if the amounts
withdrawn are applied under annuity income option c or d.
SALES COMMISSIONS: No deductions are made from the premium payments for sales
charges. Compensation to the sales force is a maximum 5.5% based on premiums
paid. To offset the costs of compensation and distribution expenses, a
contingent deferred sales charge as described above is imposed on certain
partial and full withdrawals.
<PAGE>
[GRAPHIC OMITTED]
EMPLOYEE BENEFIT PLAN
INFORMATION STATEMENT
403(b) TAX SHELTERED ANNUITY (TSA) PLANS
- --------------------------------------------------------------------------------
For purchasers of a 403(b) Tax Sheltered Annuity (TSA) Plan, the purpose of this
statement is to inform you, as the purchaser of the annuity or as the Fiduciary
of an Employee Benefit Plan purchasing the annuity, of the following
distribution limitations, notwithstanding policy language to the contrary. If
this policy is purchased by the policyowner or his/her employer as part of a
retirement plan under Internal Revenue Code (IRC)Section 403(b), distributions
under the policy are limited as follows:
1. Distributions attributable to contributions made and interest accruing after
December 3l, 1988, pursuant to a salary reduction agreement within the
meaning of IRC Section 402(g)(3)(c) may be paid only:
(A) when the employee attains age 59 1/2, separates from service, dies, or
becomes disabled within the meaning of IRC Section 72(m)(7); or
(B) in the case of hardship. (Hardship distributions may not be made from
any income earned after December 31, 1988, which is attributable to
salary reduction contributions regardless of when the salary reduction
contributions were made).
2. Distributions attributable to funds transferred from IRC Section 403(b)(7)
custodial account may be paid or made available only:
(A) When the employee attains age 59 1/2, separates from service, dies or
becomes disabled within the meaning of IRC Section 72(m)(7); or
(B) in the case of financial hardship. Distributions on account of
financial hardship will be permitted only with respect to the following
amounts:
(i) benefits accrued as of December 31, 1988, but not earnings on
those amounts subsequent to that date.
(ii) contributions made pursuant to a salary reduction agreement within
the meaning of IRC Section 3121(a)(1)(D) after December 31, 1988,
but not as to earnings on those contributions.
<PAGE>
[GRAPHIC OMITTED]
EMPLOYEE BENEFIT PLAN
INFORMATION STATEMENT
401(a) PENSION/PROFIT SHARING PLANS
- --------------------------------------------------------------------------------
For purchasers of a 401(a) Pension/Profit Sharing Plan, the purpose of this
statement is to inform you as an independent Fiduciary of the Employee Benefit
Plan, of the Sales Representative's relationship to and compensation from
Ameritas Variable Life Insurance Company (AVLIC), as well as to describe certain
fees and charges under the OVERTURE ANNUITY III Policy being purchased from the
Sales Representative.
The Sales Representative is appointed with AVLIC as its Sales Representative and
is a Securities Registered Representative. In this position, the Sales
Representative is employed to procure and submit to AVLIC applications for
contracts, including applications for OVERTURE ANNUITY III.
COMMISSIONS, FEES AND CHARGES
The following commissions, fees and charges apply to OVERTURE ANNUITY III
(policy):
SALES COMMISSION: No deductions are made from the premium payments for sales
charges. Compensation to the Sales Representative's Broker/Dealer is a maximum
of up to 5.5% based on premiums paid. To offset the costs of compensation and
distribution expenses, a contingent deferred sales charge as described below is
imposed on certain partial and full withdrawals.
ANNUAL POLICY AND ADMINISTRATIVE FEES: An annual policy fee of $36, $30 in North
Dakota, is deducted from the accumulation value in the policy on the last
valuation date of each policy year or on a full withdrawal if between policy
anniversaries. This charge reimburses AVLIC for the administrative costs of
maintaining the policy on AVLIC's system. This charge may be increased to a
maximum of $50. The annual administrative fee is a charge of .20% of the
accumulation value calculated and deducted from the accumulation value on the
last valuation date of each policy year or on a full withdrawal if between
policy anniversaries. This charge is guaranteed not to increase and is designed
to reimburse AVLIC for administrative expenses of issuing, servicing and
maintaining the policies. AVLIC does not expect to make a profit on either of
these fees.
MORTALITY AND EXPENSE RISK CHARGE: AVLIC imposes a charge to compensate it for
bearing certain mortality and expense risks under the policies. AVLIC makes a
daily charge equal to an annual rate of 1.25% of the value of the average daily
net assets of the Account under the policies. Of that amount, approximately .55%
is charged to cover the mortality risks and .70% is charged to cover the expense
risks assumed under the policies. This charge is subtracted when determining the
daily accumulation unit value. AVLIC guarantees that this charge will never
increase. If this charge is insufficient to cover assumed risks, the loss will
fall on AVLIC. Conversely, if the charge proves more than sufficient, any excess
will be added to AVLIC's surplus. No mortality and expense risk charge is
imposed on the Fixed Account.
PARTIAL AND FULL WITHDRAWALS: The policyowner may make a partial or a full
withdrawal of the policy to receive part or all of the accumulation value (less
any applicable charges), at any time before the annuity date and while the
annuitant is living by sending a written request to AVLIC. Partial withdrawals
may be either systematic or elective. Systematic withdrawals provide for an
automatic withdrawal, whereas, each elective withdrawal must be elected by the
owner. Systematic partial withdrawals are available on a monthly, quarterly,
semi-annual or annual mode. In addition to systematic withdrawals, the owner is
permitted to request up to four elective partial withdrawals each policy year.
No partial or full withdrawals may be made after the annuity date except as
permitted under the particular annuity option. The amount available for partial
or full withdrawal (cash surrender value) is the accumulation value at the end
of the valuation period during which the written request for withdrawal is
received, less any contingent deferred sales charge, any applicable premium
taxes, and in the case of a full withdrawal, the annual policy and
administrative fees that would be due on the last valuation date of the policy
year. The cash surrender value may be paid in a lump sum to the owner, or if
elected, all or any part may be paid out under an annuity income option.
CONTINGENT DEFERRED SALES CHARGE: Since no deduction for a sales charge is made
from the premium payment(s), a contingent deferred sales charge is imposed
unless waived on certain partial and full withdrawals, and upon certain
annuitizations to cover expenses relating to Registered Representatives and
promotional expenses.
<PAGE>
Total withdrawals in a policy year which exceed the greater of: (1) 10% of the
accumulation value at the time of the withdrawal, or (2) any portion of the
accumulation value which exceeds the total premium deposit will be subject to a
contingent deferred sales charge. Contingent deferred sales charges are assessed
only on premiums paid based upon the number of years since the policy year in
which the premiums withdrawn were paid, on a first-paid, first-withdrawn basis.
Where a partial or full withdrawal is taken or amounts are applied under an
annuity option, the amount withdrawn or annuitized (less any amount entitled to
the free withdrawal) will be subject to a contingent deferred sales charge
expressed as a percentage of the premium payments withdrawn or annuitized as
follows:
<TABLE>
<CAPTION>
CHARGE AS A % OF EACH YEARS SINCE RECEIPT OF
PREMIUM PAYMENT EACH PREMIUM PAYMENT
<S> <C>
6 1
6 2
6 3
5 4
4 5
3 6
2 7
0 8 +
</TABLE>
In the case of a partial withdrawal or annuitization, the contingent deferred
sales charge will be deducted from the amounts remaining under the policy. The
charge will be allocated pro rata among the Subaccounts or the Fixed Account
based on the accumulation value in each prior to the withdrawal or annuitization
unless an owner requests a partial withdrawal or annuitization from particular
Subaccounts or the Fixed Account, in which case the charge will be allocated
among those Subaccounts or the Fixed Account in the same manner as the
withdrawal. In the case of a full withdrawal or annuitization, the contingent
deferred sales charge is deducted from the amount paid to the owner. Contingent
deferred sales charges will not be imposed on certain withdrawals if the amounts
withdrawn are applied under annuity income option c or d.
TAXES: AVLIC will deduct premium taxes upon receipt of a premium payment or upon
annuitization depending upon the requirements of the law of the state of the
policyowner's residence. Currently, premium taxes range from 0% to 3.5% of the
premium paid, but are subject to change by legislation, administrative
interpretations, or judicial act.
FUND INVESTMENT ADVISORY FEES AND EXPENSES: At the direction of the policyowner,
the Separate Account VA-2 purchases shares of Funds which are available for
investment under this policy. The net assets of the Separate Account VA-2 will
reflect the value of the Fund shares and therefore, investment advisory fees and
other expenses of the Funds. A complete description of these fees and expenses
is contained in the Funds' Prospectuses.
