497 1 allocator2000.txt THE ACACIA GROUP LOGO PROSPECTUS ALLOCATOR 2000 Acacia National Life Insurance Company A Flexible Premium Variable 7315 Wisconsin Avenue Universal Life Insurance Policy Bethesda, MD 20814 issued by Acacia National Life Insurance Company Allocator 2000 is a flexible premium variable universal life insurance Policy ("Policy"), issued by Acacia National Life Insurance Company ("ANLIC"). Like traditional life insurance policies, an Allocator 2000 Policy provides Death Benefits to Beneficiaries and gives you, the Policy Owner, the opportunity to increase the Policy's cash value. Unlike traditional policies, Allocator 2000 lets you vary the frequency and amount of premium payments, rather than follow a fixed premium payment schedule. It also lets you choose one of two Death Benefit options: (1) a level amount, which generally equals the Face Amount of the Policy; or (2) a variable amount that generally equals the Face Amount plus the Policy Account Value. While the Policy remains in force, the Death Benefit will not be less than the maximum of the current Face Amount of the Policy or the Policy Account Value multiplied by the applicable corridor percentage specified in the Policy. The minimum Face Amount is $25,000. An Allocator 2000 Policy is different from traditional life insurance policies in another important way: you select how Policy premiums will be invested. Although each Policy Owner is guaranteed a minimum Death Benefit, the cash value of the Policy, as well as the actual Death Benefit, will vary with the performance of investments you select. The Investment Options available through Allocator 2000 include investment Portfolios from The Alger American Fund, Calvert Variable Series, Inc., Deutsche Asset Management VIT Funds, Fidelity Variable Insurance Products Funds, Franklin Templeton Variable Insurance Products Trust, Neuberger Berman Advisers Management Trust, Oppenheimer Variable Account Funds, and Van Eck Worldwide Insurance Trust. Each of these Portfolios has its own investment objective and policies. These are described in the prospectuses for each investment Portfolio which must accompany this Allocator 2000 prospectus. You may also choose to allocate premium payments to the Fixed Account managed by ANLIC. An Allocator 2000 Policy will be issued after ANLIC accepts a prospective Policy Owner's application. Allocator 2000 Policies are available to cover individuals between the ages of 0 and 80 at the time of purchase. An Allocator 2000 Policy, once purchased, may generally be canceled until 20 days after the Owner receives the Policy or 45 days after completion of Part I of the application, if later. This Allocator 2000 prospectus is designed to assist you in understanding the opportunity and risks associated with the purchase of an Allocator 2000 Policy. Prospective Policy Owners are urged to read the prospectus carefully and retain it for future reference. This prospectus includes a summary of the most important features of the Allocator 2000 Policy, information about ANLIC, a list of the investment Portfolios to which you may allocate premium payments, and a detailed description of the Allocator 2000 Policy. The appendix to the prospectus includes tables designed to illustrate how cash values and Death Benefits may change with the investment experience of the Investment Options. This prospectus must be accompanied by a prospectus for each of the investment Portfolios available through Allocator 2000. Although the Allocator 2000 Policy is designed to provide life insurance, an Allocator 2000 Policy is considered to be a security. The purchase of an Allocator 2000 Policy involves investment risk, including the possible loss of principal. For this reason, Allocator 2000 may not be suitable for all individuals. It may not be advantageous to purchase an Allocator 2000 Policy as a replacement for another type of life insurance or as a way to obtain additional insurance protection if the purchaser already owns another flexible premium variable universal life insurance policy. This Policy may not be available in all states. The Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains other information regarding registrants that file electronically with the Securities and Exchange Commission. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AUTHORITY HAS APPROVED THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Date of This Prospectus is May 1, 2001. ALLOCATOR 2000 1 TABLE OF CONTENTS PAGE GLOSSARY OF DEFINED TERMS....................................................3 SUMMARY......................................................................5 QUESTIONS AND ANSWERS ABOUT YOUR POLICY......................................6 ANLIC AND THE VARIABLE ACCOUNT..............................................10 Acacia National Life Insurance Company.................................10 The Variable Account...................................................10 THE PORTFOLIOS..............................................................11 Resolving Material Conflicts...........................................12 Addition, Deletion, or Substitution of Investments.....................12 POLICY BENEFITS.............................................................13 Death Benefits.........................................................13 Change in Face Amount..................................................15 Duration of the Policy.................................................15 Payment of Policy Benefits.............................................15 PAYMENT AND ALLOCATION OF PREMIUMS..........................................16 Policy Issue........................................................16 Premiums............................................................16 Allocation of Premiums and Policy Account Value.....................17 Transfers...........................................................18 Policy Lapse and Reinstatement......................................18 CHARGES AND DEDUCTIONS......................................................19 Surrender Charge....................................................19 Partial Surrender Charge............................................20 Premium Expense Charges.............................................20 Policy Account Value Charges........................................20 Daily Charges Against the Variable Account..........................20 Investment Advisory Fee.............................................21 Reduction of Charges................................................21 POLICY RIGHTS...............................................................21 Loan Privileges.....................................................21 Surrender Privileges................................................22 Partial Surrender...................................................23 Coverage Beyond the Maturity Date...................................23 EXAMINATION OF THE POLICY PRIVILEGE ("FREE LOOK")...........................23 GENERAL ACCOUNT.............................................................23 General Description.................................................23 The Policy..........................................................23 General Account Value...............................................24 GENERAL POLICY PROVISIONS...................................................24 Postponement of Payments............................................24 The Contract........................................................24 Suicide.............................................................24 Incontestability....................................................24 Change of Owner or Beneficiary......................................24 Collateral Assignment...............................................25 Misstatement of Age or Sex..........................................25 Reports and Records.................................................25 Optional Insurance Benefits.........................................25 FEDERAL TAX MATTERS.........................................................26 VOTING RIGHTS...............................................................29 EXECUTIVE OFFICERS AND DIRECTORS OF ANLIC...................................30 DISTRIBUTION OF THE POLICIES................................................31 ADMINISTRATION..............................................................31 POLICY REPORTS..............................................................32 STATE REGULATION............................................................32 EXPERTS.....................................................................32 LEGAL MATTERS...............................................................32 ADDITIONAL INFORMATION......................................................33 FINANCIAL STATEMENTS........................................................33 Acacia National Variable Life Insurance Separate Account I Acacia National Life Insurance Company APPENDIX A - ILLUSTRATIONS APPENDIX B - AUTOMATIC REBALANCING, MODEL ASSET ALLOCATION AND DOLLAR COST AVERAGING PROGRAMS The Policy, certain Funds, and/or certain riders are not available in all states. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. ALLOCATOR 2000 2 GLOSSARY OF DEFINED TERMS ATTAINED AGE - The age of the Insured on the last Policy Anniversary. BENCHMARK PREMIUM - A monthly premium based on the original Face Amount and any increase made during the first sixty months that the Policy is in force. During the first sixty months that the Policy is in force, the Policy is guaranteed not to lapse provided the sum of the premiums paid equals or exceeds the sum of the scheduled Benchmark Premiums since the Policy Date and any Increase date. BENEFICIARY - The Beneficiary is designated by the Owner to receive the Death Benefit Proceeds. If changed, the Beneficiary is as shown in the latest change filed with ANLIC. If no Beneficiary survives the Insured, 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 Policy Account Value minus any applicable Surrender Charges, minus any outstanding Indebtedness and due charges. DEATH BENEFIT - The amount of insurance coverage provided under the selected Death Benefit option of the Policy. DEATH BENEFIT PROCEEDS - The proceeds payable to the Beneficiary upon receipt by ANLIC of Satisfactory Proof of Death of the Insured while the Policy is in force. It is equal to: 1. The Death Benefit; plus 2. Additional life insurance proceeds provided by any riders; minus 3. Any Indebtedness; minus 4. Any Accrued Expense Charges, including the Monthly Deduction for the month of the death of the Insured. DUE PROOF OF DEATH - One of the following: 1. Copy of a certified death certificate. 2. A copy of a certified decree of a court of competent jurisdiction as to the finding of death. 3. A written statement by a medical doctor who attended the Insured. 4. Any other proof satisfactory to ANLIC. FACE AMOUNT - The minimum Death Benefit payable under the Policy so long as the Policy remains in force. The Death Benefit Proceeds will be reduced by any Indebtedness and any due and unpaid charges. FIXED ACCOUNT - The portion of the Policy Account Value allocated to our General Account. FREE LOOK PERIOD - The period of time in which the Owner may cancel the Policy and receive a refund of the total premiums paid. The Owner may cancel the Policy within 20 days of receipt of the Policy and free look notice, or 45 days after completion of Part 1 of the application, whichever is later. This provision also applies in the event of an increase in coverage. GENERAL ACCOUNT - The assets of ANLIC other than those allocated to the Variable Account or any other separate account. GRACE PERIOD - The 62 days allowed from the mailing of the notice of the start of the Grace Period until the date the Policy will lapse for non payment of premium. GUARANTEED DEATH BENEFIT PREMIUM (GDBP) - An annual premium listed in the Policy, based on the Insured's age, sex, rate class and amount of insurance coverage at the time of issue. Provided GDBP is paid and the Owner does not elect to take any loans or partial surrenders, the Policy is guaranteed not to lapse before the Insured's age 65 or for ten years from the effective date of coverage, whichever is later. INDEBTEDNESS - The sum of all unpaid Policy loans and accrued interest on loans. ISSUE AGE - The Insured's age on the Policy Date. INSURED - The person upon whose life the Policy is issued. ALLOCATOR 2000 3 INVESTMENT OPTIONS - The Fixed Account and the Sub-Accounts that invest in Portfolios described in the Fund prospectuses. LOAN VALUE - The maximum amount that may be borrowed under the Policy. The Loan Value equals 90% of the Policy's Cash Surrender Value. MATURITY DATE - The Policy Anniversary following the Insured's 95th birthday. MONTHLY ANNIVERSARY - The same date in each succeeding month as the Policy Date. For purposes of the Variable Account, whenever the Monthly Anniversary falls on a date other than a Valuation Date, the Monthly Anniversary will be deemed the next Valuation Date. NET PREMIUM - Premium paid less the Premium Expense Charge. OWNER - The Policy Owner as defined below. PLANNED PERIODIC PREMIUM - A scheduled premium of a level amount at a fixed interval over a specified period of time. POLICY - The Flexible Premium Variable Life Insurance Policy offered by ANLIC and described in this Prospectus. POLICY ACCOUNT VALUE - The sum of the Policy's values in the Sub-Accounts and the General Account. POLICY DATE - The date set forth in the Policy that is used to determine Policy years and Policy Months. Policy anniversaries are measured from the Policy Date. POLICY MONTH - A month beginning on the Monthly Anniversary. POLICY OWNER (OWNER) - The person so 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. PORTFOLIO - A separate investment Portfolio of a mutual fund in which the Variable Account assets are invested. PREMIUM EXPENSE CHARGE - A charge to cover all premium taxes imposed by the states and any subdivision thereof, which does not necessarily relate to the premium taxes paid for a particular Policy. SUB-ACCOUNT - A subdivision of the Variable Account. Each Sub-Account invests exclusively in the shares of a specified Portfolio of a Fund. SURRENDER CHARGE - The amount deducted from the Policy Account Value upon lapse or surrender of the Policy during the first 9 years that the original Policy coverage is effective and during the first 9 years from the effective date of an increase. TARGET PREMIUM - An annual premium amount based upon the Face Amount and the Insured's age, sex and risk class that is used to calculate Surrender Charges and agent compensation. VALUATION DATE - Each regular business day that ANLIC and the New York Stock Exchange are open for business, excluding holidays, and any other day in which there is sufficient trading in the Fund's Portfolio securities to materially affect the value of the assets in the Variable Account. VALUATION PERIOD - The period between two successive Valuation Dates, commencing at the close of business of a Valuation Date and ending at the close of business on the next succeeding Valuation Date. VARIABLE ACCOUNT (OR "SEPARATE ACCOUNT") - Acacia National Variable Life Insurance Separate Account I, a separate investment account established by ANLIC to receive and invest the Net Premiums paid under the Policy. ALLOCATOR 2000 4 SUMMARY The following summary of prospectus information and diagram of the Policy should be read along with the detailed information found elsewhere in this prospectus. Unless stated otherwise, this prospectus assumes that the Policy is in force and that there is no Indebtedness. DIAGRAM OF POLICY ----------------------------------------------------------------------- PREMIUM PAYMENTS You can vary amount and frequency. ----------------------------------------------------------------------- ------------------------------------------------------------------------------- DEDUCTIONS FROM PREMIUMS Premium Expense Charge - 2.25% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NET PREMIUM The net premium may be invested in the Fixed Account or in the Separate Account, which offers 25 different Sub-accounts. The Sub-accounts invest in the corresponding portfolios of The Alger American Fund, Calvert Variable Series, Inc., Deutsche Asset Management VIT Funds, Fidelity Variable Insurance Products Funds, Franklin Templeton Variable Insurance Products Trust, Neuberger Berman Advisers Management Trust, Oppenheimer Variable Account Funds, and Van Eck Worldwide Insurance Trust (collectively, the "Funds"). -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DEDUCTIONS FROM POLICY ACCOUNT VALUE Monthly Charge for Cost of Insurance and cost of any riders. The charge varies by the face amount of the Policy, the Policy duration and the Issue Age, gender, smoker distinction and risk class of the Insured. (See the Policy Schedule for rates.) Monthly per Policy charge for administrative expenses: Policy Year Monthly Charge ----------- -------------- 1 $27.00 2+ $ 8.00 Daily charge from the Sub-accounts (not deducted from the Fixed Account): Mortality and Expense Risk Charge: Policy Year Annual Charge ----------- ------------- 1-15 0.90% 16-23 0.85% to 0.50% (reduced by 0.05% 24+ 0.45% annually) Fund expense charges, which ranged from 0.30% to 1.61% at the most recent fiscal year end, are also deducted. Surrender Charge (determined by multiplying the Surrender Charge factor by actual premiums paid up to the Target Premium, computed separately for the initial Face Amount of the Policy and for each increase in the Face Amount): Policy Year Surrender Charge Factor 1-7 30% 8 20% 9 10% 10+ 0% Partial Surrender Charge: During the Surrender Charge period for the Policy and for each increase in the Face Amount, the partial surrender charge will be the greater of 8% of the amount withdrawn or $25. -------------------------------------------------------------------------------- LIVING BENEFITS You may make partial surrenders, subject to certain restrictions. The Death Benefit will be reduced by the amount of the partial surrender. ANLIC allows free transfers between the Investment Options, subject to minimum and maximum transfer amounts. You may surrender the Policy at any time for its Cash Surrender Value. (See pages 20and 23.) RETIREMENT INCOME BENEFITS Loans may be available on a more favorable interest rate basis after the fifth Policy Year. Should the Policy lapse while loans are outstanding, the portion of the loan attributable to earnings will become a taxable distribution. (See page 23.) You may surrender the Policy or make a partial withdrawal and take values as payments under one or more of six different payment options. DEATH BENEFITS Generally, Death Benefit income is tax free to the Beneficiary. The Beneficiary may be paid a lump sum or may select any of the six payment methods available as retirement benefits. ALLOCATOR 2000 6 QUESTIONS AND ANSWERS ABOUT YOUR POLICY The following summary is intended to highlight the most important features of an Allocator 2000 Policy that you should consider. You will find more detailed information in the main portion of the prospectus; cross-references are provided for your convenience. As you review this Summary, take note of the capitalized terms that are defined in the Definitions Section of this prospectus. This summary and all other parts of this prospectus are qualified in their entirety by the terms of the Allocator 2000 Policy, which is available upon request from ANLIC. WHO IS THE ISSUER OF AN ALLOCATOR 2000 POLICY? ANLIC is the issuer of each Allocator 2000 Policy. ANLIC enjoys a rating of A (Excellent) from A.M. Best Company, a firm that analyzes insurance carriers. A stock life insurance company organized in Virginia, ANLIC is a wholly owned subsidiary of Acacia Life Insurance Company which is, in turn, a second tier subsidiary of Ameritas Acacia Mutual Holding Company. (See the section on Acacia National Life Insurance Company.) WHY SHOULD I CONSIDER PURCHASING AN ALLOCATOR 2000 POLICY? The primary purpose of an Allocator 2000 Policy is to provide life insurance protection on the Insured named in the Policy. This means that, so long as the Policy is in force, it will provide for: - Payment of a Death Benefit, which will never be less than the current Face Amount at the time of the Death of the Insured (See the section on Death Benefits.); - Policy loans (See the section on Loan Privileges.); - Partial surrender, and surrender features. (See the sections on Surrender Privileges and Partial Surrenders.) An Allocator 2000 Policy also includes an investment component. This means that, so long as the Policy is in force, you will be responsible for selecting the manner in which Net Premiums will be invested. Thus, the value of an Allocator 2000 Policy will reflect your investment choices over the life of the Policy. WHAT ARE THE CHARGES ASSOCIATED WITH OWNERSHIP OF AN ALLOCATOR 2000 POLICY? SURRENDER CHARGE - Because ANLIC incurs expenses immediately upon the issuance of an Allocator 2000 Policy that are recovered over a period of years, an Allocator 2000 Policy that is surrendered or lapses on or before its 9th Policy Anniversary is subject to a Surrender Charge. Additional Surrender Charges may apply if you increase the Face Amount of your Allocator 2000 Policy. Because the Surrender Charge may be significant upon early surrender, you should purchase an Allocator 2000 Policy only if you intend to maintain your Allocator 2000 Policy for a substantial period. (See the section on Surrender Charge.) PARTIAL SURRENDER CHARGE - During the Surrender Charge period for the Policy and any increase in Face Amount, there will be a charge for a partial surrender equal to 8% of the amount withdrawn or $25, whichever is greater. PREMIUM EXPENSE CHARGES - Certain states impose premium and other taxes in connection with insurance policies such as Allocator 2000. ANLIC deducts 2.25% of each premium to cover these charges. COST OF INSURANCE - Charges will be deducted monthly against the Policy Account Value to cover the cost of insurance under the Policy. Cost of insurance rates are based on the Insured's sex, Issue Age, Policy duration, Face Amount, and rate class. (See the section on Policy Account Value Charges.) ADMINISTRATIVE EXPENSE CHARGE - Charges are deducted to compensate ANLIC for administering each individual Allocator 2000 Policy. These charges equal $27 per month for the first Policy year and $8 each month thereafter. MORTALITY AND EXPENSE RISK CHARGE - As compensation for mortality and expense risks assumed in connection with the Policy, ANLIC will deduct a daily Mortality and Expense Risk Charge from the value of the net assets of the Variable Account. For the first 15 years of your Policy, this charge is at the rate of 0.90% annually. Beginning in the 16th Policy year, this charge is reduced by 0.05% annually until it reaches 0.45% annually in Policy year 24; the rate remains level thereafter. No mortality and expense risk charges will be deducted from the amounts in the Fixed Account. (See the section on Daily Charges Against the Variable Account.) ALLOCATOR 2000 6 FUND EXPENSE SUMMARY - In addition to the charges against the Variable Account described just above, management fees and expenses will be assessed by the Fund managers against the amounts invested in the various Portfolios. No Portfolio fees will be assessed against amounts placed in the Fixed Account. The following chart shows the expenses charged in the year 2000 by each Sub-Account underlying portfolio based on that portfolio's average daily net assets. We then deduct applicable Separate Account charges from the net asset value in calculating the unit value of the corresponding Sub-Account. The management fees and other expenses are more fully described in the prospectus for each underlying portfolio. Information relating to the underlying portfolios was provided by the underlying portfolios and was not independently verified by us.
Total Sub-Account's underlying Total Waivers after waivers Portfolio Name Management 12b-1 Other Fund and and reductions, Fees Fees Fees Fees Reductions if any ALGER o Alger American Growth 0.75% - 0.04% 0.79% - 0.79% o Alger American MidCap 0.80% - 0.04% 0.84% - 0.84% o Alger American Small Capitalization 0.85% - 0.05% 0.90% - 0.90% CALVERT SOCIAL(1) o CVS Social Balanced 0.70% - 0.18% 0.88% - 0.88% o CVS Social International Equity 1.10% - 0.43% 1.53% - 1.53% o CVS Social Mid Cap Growth 0.90% - 0.22% 1.12% - 1.12% o CVS Social Money Market 0.50% - 0.16% 0.66% - 0.66% o CVS Social Small Cap Growth 1.00% - 0.61% 1.61% - 1.61% DEUTSCHE(2) o VIT Equity 500 Index 0.20% - 0.14% 0.34% 0.04% 0.30% o VIT Small Cap Index 0.35% - 0.34% 0.69% 0.24% 0.45% o VIT EAFE(R)Equity Index 0.45% - 0.47% 0.92% 0.27% 0.65% FIDELITY (SERVICE CLASS 2) o VIP Contrafund 0.57% 0.25% 0.10% 0.92% - 0.92%(3) o VIP Equity-Income 0.48% 0.25% 0.10% 0.83% - 0.83%(3) o VIP High Income 0.58% 0.25% 0.18% 1.01% - 1.01% NEUBERGER BERMAN o AMT Growth 0.82% - 0.08% 0.90% - 0.90% o AMT Limited Maturity Bond 0.65% - 0.11% 0.76% - 0.76% o AMT Partners 0.82% - 0.10% 0.92% - 0.92% OPPENHEIMER o Aggressive Growth /VA 0.62% - 0.02% 0.64% - 0.64% o Capital Appreciation /VA 0.64% - 0.03% 0.67% - 0.67% o High Income /VA 0.74% - 0.05% 0.79% - 0.79% o Main Street Growth & Income /VA 0.70% - 0.03% 0.73% - 0.73% o Strategic Bond /VA 0.74% - 0.05% 0.79% - 0.79% TEMPLETON (CLASS 2) o Asset Strategy 0.60% 0.25% 0.22% 1.07% - 1.07% o International Securities 0.67% 0.25% 0.20% 1.12% - 1.12% VAN ECK o Worldwide Hard Assets 1.00% - 0.16% 1.16% - 1.16%
(1) "Other Fees" reflect an indirect fee resulting from the portfolio's offset arrangement with the custodian bank whereby the custodian's and transfer agent's fees may be paid indirectly by credits earned on the portfolio's uninvested cash balances. These credits are used to reduce the Portfolio's expenses. Net operating expenses after reductions for fees paid indirectly would be as follows: CVS Social Balanced 0.86% CVS Social International Equity 1.36% CVS Social Mid Cap Growth 1.02% CVS Money Market 0.61% CVS Social Small Cap Growth 1.26% (2) The investment advisor receives a fee for its services that is a percentage of each fund's average daily net assets. The investment advisor has agreed to waive and/or reimburse operating expenses, including its fees, that exceed certain percentages of the funds' aggregate average daily net assets. Any differences in amounts are due to rounding. (3) A portion of the brokerage commissions that certain Funds pay was used to reduce Fund expenses. Also, through arrangements with certain Fund custodians, credits realized as a result of uninvested cash balances were used to reduce a portion of each applicable Fund's expenses. After reductions, total operating expenses would have been: VIP Contrafund: Service Class 2 0.65% VIP Equity-Income: Service Class 2 0.56% Expense reimbursement agreements are expected to continue in future years but may be terminated at any time. As long as the expense limitations continue for a portfolio, if a reimbursement occurs, it has the effect of lowering the portfolio's expense ratio and increasing its total return. ALLOCATOR 2000 7 ANLIC and its affiliates may receive administrative fees from the investment advisers of certain portfolios. We currently do not assess a separate charge against our Variable Account or Fixed Account for any income taxes. We may, however, make such a charge in the future if income or gains within the Variable Account will incur any income tax liability, or if tax treatment of us changes. HOW DOES THE INVESTMENT COMPONENT OF MY ALLOCATOR 2000 POLICY WORK? ANLIC has established the Variable Account, which is separate from all other assets of ANLIC, as a vehicle to receive and invest premiums received from Allocator 2000 Policy Owners. The Variable Account is divided into separate Sub-Accounts. Each Sub-Account invests exclusively in shares of one of the investment Portfolios available through Allocator 2000. Each Policy Owner may allocate Net Premiums to one or more Sub-Accounts or to the Fixed Account (which invests in ANLIC's General Account) in the initial application. These allocations may be changed, without charge, by notifying ANLIC's Service Office. The aggregate value of your interests in the Sub-Accounts, the Fixed Account and any amount held in the General Account to secure Indebtedness will represent the Policy Account Value of your Allocator 2000 Policy. (See the section on General Account.) WHAT INVESTMENT OPTIONS ARE AVAILABLE THROUGH THE ALLOCATOR 2000 POLICY? The Investment Options available through Allocator 2000 include 25 investment Portfolios, each of which is a separate series of a mutual fund from: The Alger American Fund ("Alger American"); Calvert Variable Series, Inc. ("Calvert Social"); Deutsche Asset Management VIT Funds ("Deutsche VIT"); Fidelity Variable Insurance Products Funds ("Fidelity"); Franklin Templeton Variable Insurance Products Trust ("Templeton"); Neuberger Berman Advisers Management Trust ("AMT"); Oppenheimer Variable Account Funds ("Oppenheimer Funds"); and Van Eck Worldwide Insurance Trust ("Van Eck"). These Portfolios are listed in the Fund Expense Summary above. Details about the investment objectives and policies of each of the available investment Portfolios, including management fees and expenses, appear in the section on "The Portfolios" of this prospectus. Each Portfolio holds its assets separately from the assets of the other Portfolios. In addition to the listed Portfolios, Policy Owners may also elect to allocate Net Premiums to the Fixed Account that is available in most states. (See the section on General Account.) HOW DOES THE LIFE INSURANCE COMPONENT OF AN ALLOCATOR 2000 POLICY WORK? An Allocator 2000 Policy provides for the payment of a minimum Death Benefit upon the death of the Insured. You choose the amount of the minimum Death Benefit at the time your Allocator 2000 Policy is established. However, the actual Death Benefit may vary over the life of your Allocator 2000 Policy, depending on which of the two available coverage options you select. If you choose Option A, the Death Benefit will be the current Face Amount of your Allocator 2000 Policy or the applicable percentage of Policy Account Value, whichever is greater. (See the section on Applicable Percentage Table.) If you choose Option B, the Death Benefit will be the current Face Amount of your Allocator 2000 Policy plus the Policy Account Value of your Allocator 2000 Policy, or if it is higher, the applicable percentage of the Policy Account Value on the date of death. In either case, the applicable percentage is established based on the Attained Age at the death of the Insured. ARE THERE ANY RISKS INVOLVED IN OWNING AN ALLOCATOR 2000 POLICY? Yes. Over the life of your Allocator 2000 Policy, the Sub-Accounts to which you allocate your premiums will fluctuate with changes in the stock market and overall economic factors. These fluctuations will be reflected in the Policy Account Value of your Allocator 2000 Policy and may result in loss of principal. For this reason, the purchase of an Allocator 2000 Policy may not be suitable for all individuals. It may not be advantageous to purchase an Allocator 2000 Policy to replace or augment your existing insurance arrangements. Appendix A includes tables illustrating the impact that hypothetical market returns would have on Policy Account Values under an Allocator 2000 Policy. WHAT IS THE PREMIUM THAT MUST BE PAID TO KEEP AN ALLOCATOR 2000 POLICY IN FORCE? Like a traditional life insurance policy, an Allocator 2000 Policy requires the payment of premiums in order to keep the Policy in force. You will be asked to establish a payment schedule before your Allocator 2000 Policy becomes effective. ALLOCATOR 2000 8 The distinction between a traditional life policy and an Allocator 2000 Policy is an Allocator 2000 Policy will not lapse simply because premium payments are not made according to that payment schedule. However, an Allocator 2000 Policy will lapse, even if scheduled premium payments are made, if the Cash Surrender Value of your Allocator 2000 Policy falls below zero or premiums paid do not, in the aggregate, equal the premium necessary to satisfy the Benchmark Premium or the Guaranteed Death Benefit requirements. (See the section on Premiums.) HOW ARE PREMIUMS PAID, PROCESSED AND CREDITED TO ME? Your Allocator 2000 Policy will be issued after a completed application is accepted, and the initial premium payment is received, by ANLIC at its Administrative Office. ANLIC has contracted with Ameritas Life Insurance Corp. ("ALIC"), having its principal place of business at 5900 "O" Street. Lincoln, Nebraska, for it to provide ANLIC with certain administrative services for the Flexible Premium Variable Life Policies. On the Policy Date or when the initial premium is received whichever is later, your initial Net Premium will be allocated to the Money Market Sub-Account. After a fifteen-day period, the Policy Account Value of the Policy will be allocated among the Investment Options according to the instructions in your application. You have the right to examine your Allocator 2000 Policy and return it for a refund for a limited time, even after the Policy Date. (See the section on Examination of the Policy Privilege, Free Look.) ANLIC will send premium payment notices to you according to any schedule you select. You may make subsequent premium payments according to the premium schedule you select, although you are not required to do so. When ANLIC receives your Premium Payment at its Administrative Office, the Net Premium will be allocated to the Investment Options according to your selections. (See the section on Allocation of Premiums and Policy Account Value.) As already noted, Allocator 2000 provides you considerable flexibility in determining the frequency and amount of premium payments. This flexibility is not, however, unlimited. You should keep certain factors in mind in determining the payment schedule that is best suited to your needs. These include the amount of the Benchmark Premium and/or Guaranteed Death Benefit Premium requirement needed to keep your Allocator 2000 Policy in force; maximum premium limitations established under the Federal tax laws; and the impact that reduced Premium Payments may have on the Cash Surrender Value of your Allocator 2000 Policy. (See the sections on Federal Tax Matters, Premiums, and Surrender Privileges.) IS THE POLICY ACCOUNT VALUE OF MY ALLOCATOR 2000 POLICY AVAILABLE WITHOUT SURRENDER CHARGES? Yes, you may obtain a loan, secured by the Policy Account Value of your Allocator 2000 Policy equal to 90% of the Cash Surrender Value. The Owner may obtain Policy loans at any time the Policy has Loan Value. The minimum loan request ANLIC allows is $1,000. There is an interest rate of 6.45% per year charged for loans when the Policy Account Value is less than the cumulative premiums paid. Otherwise, after the fifth Policy year the loan rate charged will be 4.5% per year for the amount of the loan that equals or is less than the amount that the Policy Account Value exceeds cumulative premiums paid. The interest is due and payable at the end of each Policy Month. Loans and interest may be repaid at any time prior to the Maturity Date. Loans may be taxable transactions. (See the section on Loan Privileges.) ARE THERE ANY RISKS INVOLVED IN OWNING AN ALLOCATOR 2000 POLICY? Yes. Over the life of your Allocator 2000 Policy, the Sub-Accounts to which you allocate your premiums will fluctuate with changes in the stock market and overall economic factors. These fluctuations will be reflected in the Policy Account Value of your Allocator 2000 Policy and may result in loss of principal. For this reason, the purchase of an Allocator 2000 Policy may not be suitable for all individuals. It may not be advantageous to purchase an Allocator 2000 Policy to replace or augment your existing insurance arrangements. Appendix A includes tables illustrating the impact that hypothetical market returns would have on Policy Account Values under an Allocator 2000 Policy. ALLOCATOR 2000 9 ANLIC AND THE VARIABLE ACCOUNT ACACIA NATIONAL LIFE INSURANCE COMPANY Acacia National Life Insurance Company ("ANLIC") is a stock life insurance company organized in the Commonwealth of Virginia. ANLIC was incorporated on December 9, 1974. ANLIC is currently licensed to sell life insurance in 46 states, and the District of Columbia. On March 29, 2001, the Board of Directors authorized ANLIC's management to take the necessary action to change ANLIC's domicile from the Commonwealth of Virginia to the District of Columbia. ANLIC is a wholly owned subsidiary of Acacia Life Insurance Company ("Acacia Life"), a District of Columbia stock company. Acacia Life is in turn a second tier subsidiary of Ameritas Acacia Mutual Holding Company, a Nebraska mutual insurance holding company. The Administrative Offices of both ANLIC and Acacia Life are at 5900 "O" Street, P.O. Box 81889, Lincoln, Nebraska 68501. ANLIC's telephone number is 888-837-6791 and its website address is www.acaciagroup.com. On January 1, 1999, Ameritas Mutual Insurance Holding Company ("Ameritas Mutual"), a Nebraska mutual insurance holding company and Acacia Mutual Holding Corporation ("Acacia Mutual"), a District of Columbia mutual holding corporation merged and became Ameritas Acacia Mutual Holding Company ("Ameritas Acacia") a Nebraska mutual insurance holding company. Both Ameritas Acacia and Ameritas Holding Company, an intermediate holding company, are organized under the Nebraska Mutual Insurance Holding Company Act. Acacia Life Insurance Company, a subsidiary of Ameritas Holding Company is regulated by the District of Columbia Insurance Department. Ameritas Acacia and its subsidiaries had total assets at December 31, 2000 of over $7.4 billion and Acacia and its subsidiaries had total statutory assets as of December 31, 2000 of over $2.4 billion. Acacia Life also owns all of the outstanding stock of the Acacia Financial Corporation, a holding company, which owns all of the stock of The Advisors Group, Inc. and the Calvert Group, Ltd. ("Calvert"), which in turn owns Calvert Asset Management Company, Inc., the investment adviser of Calvert Variable Series, Inc., a series of Funds available under the Policies. The Advisors Group, Inc. is the principal underwriter for the Policies described in this Prospectus. The Advisors Group, Inc. sells shares of other mutual funds and other securities, and may also sell variable annuity or variable life policies of other issuers. THE VARIABLE ACCOUNT Acacia National Variable Life Insurance Separate Account I ("Variable Account") was established by ANLIC as a separate account on January 31, 1995. The Variable Account will receive and invest the Net Premiums paid under this Policy. Net Premiums placed in the Variable Account constitute certain reserves for benefits payable under the Policies, and these are actuarial reserves for future benefits payable under the Policies. In addition, the Variable Account may receive and invest net premiums for other flexible premium variable life insurance policies issued by ANLIC. Although the assets of the Variable Account are the property of ANLIC, the Code of Virginia under which the Variable Account was established provides that the assets in the Variable Account attributable to the Policies are generally not chargeable with liabilities arising out of any other business which ANLIC may conduct. The assets of the Variable Account shall, however, be available to cover the liabilities of the General Account of ANLIC to the extent that the Variable Account's assets exceed its liabilities arising under the Policies supported by it. Thus while Owners neither hold legal title to, nor have any beneficial ownership interest in Variable Account assets, because the assets are legally segregated from other assets of ANLIC subject to the claims of creditors, Owners have preferential rights to the ANLIC Variable Account assets. The Variable Account is currently divided into 25 Sub-Accounts. Each Sub-Account invests exclusively in shares of a single Portfolio of a Fund. Income and both realized and unrealized gains or losses from the assets of each Sub-Account of the Variable Account are credited to or charged against that Sub-Account without regard to income, gains or losses from any other Sub-Account of the Variable Account or arising out of any other business ANLIC may conduct. Each Sub-Account reinvests all dividends and income and capital gain distributions declared by the Portfolio. The Variable Account has been registered as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"). Registration with the Securities and Exchange Commission ("SEC") does not involve supervision of the management or investment practices or policies of the Variable Account or ANLIC by the SEC. ALLOCATOR 2000 10 THE PORTFOLIOS The Variable Account Sub-account underlying portfolios listed below are designed primarily as investments for variable annuity and variable life insurance policies issued by insurance companies. They are not publicly traded mutual funds available for direct purchase by you. THERE IS NO ASSURANCE THE INVESTMENT OBJECTIVES WILL BE MET. This information is just a summary for each underlying portfolio. You should read the series fund prospectus for an underlying portfolio for more information about that portfolio.
------------------------------ ----------------------------------- --------------------------- Variable Account Investment Strategy Investment Objective Portfolio ------------------------------ ---------------------------------------------------------------- ALGER Offered through THE ALGER AMERICAN FUND Advised by FRED ALGER MANAGEMENT, INC. ------------------------------ ---------------------------------------------------------------- ALGER AMERICAN GROWTH Common stock of companies with growth potential and Current Income and fixed-income securities. long-term capital growth ------------------------------ ----------------------------------- ---------------------------- ALGER AMERICAN MIDCAP GROWTH Common stocks of midsize U.S. companies with promising growth Long-term capital growth. potential. ------------------------------ ----------------------------------- ---------------------------- Common stocks of small, fast-growing U.S. companies that ALGER AMERICAN SMALL offer innovative products, CAPITALIZATION services or technologies to a Long-term capital growth. rapidly expanding marketplace. ------------------------------ ---------------------------------------------------------------- CALVERT SOCIAL Offered through CALVERT VARIABLE SERIES, INC. Advised by CALVERT ASSET MANAGEMENT COMPANY ("CAMCO") ------------------------------ ---------------------------------------------------------------- CVS SOCIAL BALANCED Mostly large-cap growth oriented common stock of U.S. companies, Income and capital growth with some bonds and money market through social criteria instruments. screened investments. ------------------------------ ----------------------------------- ---------------------------- CVS SOCIAL INTERNATIONAL Common stocks of mid to large High total return through EQUITY cap companies. social criteria screened investments. ------------------------------ ----------------------------------- ---------------------------- Common stocks of mid size Long-term capital growth CVS SOCIAL MID CAP GROWTH companies. through social criteria screened investments. ------------------------------ ----------------------------------- ---------------------------- CVS SOCIAL MONEY MARKET High quality money market Current Income through securities. social criteria screened investments. ------------------------------ ----------------------------------- ---------------------------- Common stocks of small cap Long-term capital growth CVS SOCIAL SMALL CAP GROWTH companies. through social criteria screened investments. ------------------------------ ---------------------------------------------------------------- DEUTSCHE VIT Offered through DEUTSCHE ASSET MANAGEMENT VIT FUNDS Advised by DEUTSCHE ASSET MANAGEMENT, INC. ------------------------------ ----------------------------------- ---------------------------- The fund invests in a statistically selected sample of securities found in the Morgan DEUTSCHE VIT EAFE(R)EQUITY Stanley Capital ("MSCI") Match as closely as INDEX International EAFE(R)Index which possible, before expenses, emphasizes stocks of companies the performance of the in major markets in Europe, MSCI EAFE(R)Index. Australia and the Far East. ------------------------------ ----------------------------------- ---------------------------- The fund invests in a statistically selected sample of securities found in the Standard Match as closely as DEUTSCHE VIT EQUITY 500 INDEX & Poor's 500 Composite Stock possible, before expenses, Price Index ("S&P Index"), which performance of the S&P 500 emphasizes stocks of large US Index. companies. ------------------------------ ----------------------------------- ---------------------------- The fund invests in a statistically selected sample of securities found in the Russell Match as closely as DEUTSCHE VIT SMALL CAP INDEX 2000 Small Stock Index, which possible, before expenses, emphasizes stocks of small US performance of the Russell companies. 2000 Index. ------------------------------ ----------------------------------- ---------------------------- FIDELITY (SERVICE CLASS 2) Offered through VARIABLE INSURANCE PRODUCTS FUNDS: SERVICE CLASS 2 Advised by FIDELITY MANAGEMENT AND RESEARCH COMPANY ------------------------------ ---------------------------------------------------------------- VIP CONTRAFUND(R) Common stocks of companies whose value is not fully recognized by Long-term capital growth. the public. ------------------------------ ----------------------------------- ---------------------------- VIP EQUITY-INCOME Income producing equity securities. Reasonable income. ------------------------------ ----------------------------------- ---------------------------- VIP HIGH INCOME High yielding fixed-income securities, while also High level of current considering growth of capital. income. ------------------------------ ----------------------------------- ---------------------------- ALLOCATOR 2000 11 ------------------------------ ----------------------------------- --------------------------- Variable Account Investment Strategy Investment Objective Portfolio ------------------------------ ---------------------------------------------------------------- NEUBERGER BERMAN Offered through NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST. Advised by NEUBERGER BERMAN MANAGEMENT INC. ------------------------------ ---------------------------------------------------------------- AMT GROWTH Common stocks, often of Long-term capital growth. companies that may be temporarily out of favor in the market. ------------------------------ --------------------------------- ------------------------------ AMT LIMITED MATURITY BOND Fixed and variable rate debt Current income; securities. secondarily, total return. ------------------------------ --------------------------------- ------------------------------ AMT PARTNERS Common stocks of mid- to Capital growth. large-cap companies. ------------------------------ ---------------------------------------------------------------- OPPENHEIMER Offered through OPPENHEIMER VARIABLE ACCOUNT FUNDS Advised by OPPENHEIMER FUNDS, INC. ------------------------------ ---------------------------------------------------------------- AGGRESSIVE GROWTH /VA Common stocks of "growth-type" Capital appreciation. companies. ------------------------------ --------------------------------- ------------------------------ CAPITAL APPRECIATION /VA Common stocks of well-known Capital appreciation. established companies. ------------------------------ --------------------------------- ------------------------------ High yield fixed-income securities, including foreign HIGH INCOME /VA government and corporate debt Current Income. securities, U.S. government securities, and "junk bonds." ------------------------------ --------------------------------- ------------------------------ Equity and debt securities, MAIN STREET GROWTH & INCOME including small to medium Capital appreciation and /VA capital issuers. current income. ------------------------------ --------------------------------- ------------------------------ STRATEGIC BOND /VA Diversified portfolio of high Current Income. yield fixed-income securities, including foreign government and corporate debt securities, U.S. government securities, and "junk bonds." ------------------------------ ---------------------------------------------------------------- Offered through FRANKLIN TEMPLETON VARIABLE INSURANCE TEMPLETON (Class 2) PRODUCTS TRUST Advised by TEMPLETON INVESTMENT COUNSEL, INC. ------------------------------ ---------------------------------------------------------------- ASSET STRATEGY Domestic and foreign equity securities of companies, debt securities of companies and governments, and money market instruments. High total return. ------------------------------ --------------------------------- ------------------------------ Equity securities of foreign INTERNATIONAL SECURITIES companies, including emerging markets. Long-term capital growth. ------------------------------ --------------------------------- ------------------------------ VAN ECK Offered through VAN ECK WORLDWIDE INSURANCE TRUST. Advised by VAN ECK ASSOCIATES. ------------------------------ ---------------------------------------------------------------- WORLDWIDE HARD ASSETS Investing globally, primarily Long-term capital in securities of companies appreciation. that derive most of revenue or profit from exploration, development, production or distribution of precious metals, natural resources, real estate or commodities. ------------------------------ --------------------------------- ------------------------------
RESOLVING MATERIAL CONFLICTS The Funds are used as the investment vehicle for variable life insurance policies issued by ANLIC. In addition, the Funds are also available to registered separate accounts of insurance companies other than ANLIC. As a result, there is a possibility that a material conflict may arise between the interest of Owners whose Policies are allocated to the Variable Account and the owners of life insurance policies and variable annuities issued by such other companies whose values are allocated to one or more other separate accounts investing in any one of the Funds. In addition, one or more of the Funds may sell shares to certain retirement plans qualifying under Section 401 of the Code (including cash or deferred arrangements under Section 401(k) of the Code). As a result, there is a possibility that a material conflict may arise between the interests of Owners of policies generally, or certain classes of Owners, and such retirement plans or participants in such retirement plans. In the event of a material conflict, ANLIC will take any necessary steps, including removing the Variable Account from that Fund, to resolve the matter. The Board of Directors or Trustees of the Funds intend to monitor events in order to identify any material conflicts that may possibly arise and to determine what action, if any, should be taken in response to those events or conflicts. (See the individual Fund prospectuses for more information.) ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS ANLIC cannot guarantee that shares of the Portfolios will always be available for investment of premium or for transfers. ANLIC reserves the right, subject to compliance with applicable law, to make additions to, deletions from, or substitutions for the shares that are held by the Variable Account or that the Variable Account may purchase. ANLIC reserves the right to eliminate the shares of any of the Portfolios of the Funds and to substitute ALLOCATOR 2000 12 shares of another Portfolio of the Funds or of another open-end registered investment company, if the shares of a Portfolio are no longer available for investment, or if in its judgment further investment in any Portfolio should become inappropriate in view of the purposes of the Variable Account. ANLIC will not substitute any shares attributable to an Owner's interest in a Sub-Account of the Variable Account without notice and prior approval of the SEC, to the extent required by the 1940 Act or other applicable law. Nothing contained herein shall prevent the Variable Account from purchasing other securities for other Portfolios or classes of Policies, or from permitting a conversion between Portfolios or classes of Policies on the basis of requests made by Owners. ANLIC also reserves the right to establish additional Sub-Accounts of the Variable Account, each of which would invest in a new series or Portfolio of the Funds, or in shares of another investment company, with a specified investment objective. New Sub-Accounts may be established when, in the sole discretion of ANLIC, marketing needs or investment conditions warrant, and any new Sub-Accounts will be made available to existing Owners on a basis to be determined by ANLIC. ANLIC may also eliminate one or more Sub-Accounts if, in its sole discretion, marketing, tax, or investment conditions warrant. In the event of any such substitution or change, ANLIC may, by appropriate endorsement, make such changes in this and other policies as may be necessary or appropriate to reflect such substitution or change. If deemed by ANLIC to be in the best interest of persons having voting rights under the Policies, the Variable Account may be operated as a management company under the 1940 Act, it may be deregistered under that Act in the event such registration is no longer required, or it may be combined with other ANLIC separate accounts. POLICY BENEFITS DEATH BENEFITS As long as the Policy remains in force (See the section on Policy Lapse and Reinstatement, Lapse.), ANLIC will, upon proof of the Insured's death, pay the Death Benefit Proceeds of a Policy to the named Beneficiary in accordance with the designated Death Benefit option. The Death Benefit will be determined as of the end of the Valuation Period on the date of death, and will not reflect subsequent Variable Account investment performance. The proceeds may be paid in a lump sum or under one or more of the settlement options set forth in the Policy. The Death Benefit Proceeds will be reduced by any Indebtedness and any due and unpaid charges. These proceeds will be increased by any additional insurance provided by rider and by the monthly deduction for the month in which death occurred. The Policy provides two Death Benefit options: Death Benefit Option A ("Option A") and Death Benefit Option B ("Option B"). The Owner designates the Death Benefit option in the application. ANLIC guarantees that as long as the Policy remains in force (See the section on Policy Lapse and Reinstatement, Lapse.), under either option, the Death Benefit will never be less than the current Face Amount of the Policy. These proceeds will be reduced by any Indebtedness and any due and unpaid charges. The net amount at risk for Option A will generally be less than the net amount at risk for Option B. If you choose Option A, your Cost of Insurance deduction will generally be lower than if you choose Option B. (See the section on Charges and Deductions.) The following graphs illustrate the differences in the two Death Benefit options. OPTION A. OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION A, SPECIFICALLY BY SHOWING THE RELATIONSHIPS OVER TIME, BETWEEN THE SPECIFIED AMOUNT AND THE ACCUMULATION VALUE. Death Benefit Option A. Pays a Death Benefit equal to the Face Amount (Specified Amount) or the Policy Account Value (Accumulation Value) multiplied by the Death Benefit percentage (as illustrated at Point A) whichever is greater. Under Option A, the Death Benefit is the current Face Amount of the Policy or, if greater, the applicable percentage of Policy Account Value at the date of death. The applicable percentage is 250% for Insureds with an Attained Age 40 or younger on the Policy Anniversary Date prior to the date of death. For Insureds with an Attained ALLOCATOR 2000 13 Age over 40 on that Policy Anniversary Date, the percentage declines. For example, the percentage at Attained Age 40 is 250%, at Attained Age 50 is 185%, at Attained Age 60 is 130%, at Attained Age 70 is 115%, at Attained Age 80 is 105%, and at Attained Age 95 is 100%. Accordingly, under Option A the Death Benefit will remain level at the Face Amount unless the applicable percentage of Policy Account Value exceeds the current Face Amount, in which case the amount of the Death Benefit will vary as the Policy Account Value varies. Policy Owners who prefer to have favorable investment performance, if any, reflected in higher Policy Account Value, rather than increased insurance coverage, generally should select Option A. OPTION B. OMITTED GRAPH ILLUSTRATES PAYOUT UNDER DEATH BENEFIT OPTION B, SPECIFICALLY BY SHOWING THE RELATIONSHIPS OVER TIME, BETWEEN THE SPECIFIED AMOUNT AND THE ACCUMULATION VALUE. Death Benefit Option B. Pays a Death Benefit equal to the Face Amount (Specified Amount) plus the Policy Account Value (Accumulation Value) or the Policy Account Value multiplied by the Death Benefit percentage, whichever is greater. Under Option B, the Death Benefit is equal to the current Face Amount plus the Policy Account Value of the Policy or, if greater, the applicable percentage of the Policy Account Value on the date of death. The applicable percentage is the same as under Option A: 250% for Insureds with an Attained Age 40 or younger on the Policy Anniversary Date prior to the date of death. For Insureds with an Attained Age over 40 on that Policy Anniversary Date the percentage declines. Accordingly, under Option B the amount of the Death Benefit will always vary as the Policy Account Value varies (but will never be less than the Face Amount). Policy Owners who prefer to have favorable investment performance, if any, reflected in increased insurance coverage, rather than higher Policy Account Values, generally should select Option B. CHANGE IN DEATH BENEFIT OPTION. Generally, the Death Benefit option in effect may be changed at any time by sending ANLIC a written request for change. If the Death Benefit option is changed from Option B to Option A, the Face Amount will be increased by an amount equal to the Policy Account Value on the effective date of change. Changing from Option B to Option A does not require evidence of insurability. The effective date of such a change will be the Monthly Anniversary on or following receipt of the request. A change in the Death Benefit option may affect whether the Policy will be treated as a "modified endowment contract" for federal tax purposes. (See the section on Federal Tax Matters.) If the Death Benefit option is changed from Option A to Option B, the Face Amount will be decreased by an amount equal to the Policy Account Value on the effective date of the change. This change may not be made if it would result in a Face Amount less than $25,000. Changing from Option A to Option B may require evidence of insurability satisfactory to ANLIC. The effective date of such a change will be the Monthly Anniversary on or following the date the change is approved by ANLIC. No charges will be imposed upon a change in Death Benefit option, nor will such a change in and of itself result in an immediate change in the amount of the Policy Account Value. If, however, prior to or accompanying a change in the Death Benefit option there has been an increase in the Face Amount, the method of calculating the insurance charge may change. (See the section on Charges and Deductions, Cost of Insurance.) HOW DEATH BENEFITS MAY VARY IN AMOUNT. As long as the Policy remains in force, ANLIC guarantees that the Death Benefit will never be less than the current Face Amount of the Policy. These proceeds will be reduced by any Indebtedness and any due and unpaid charges. The Death Benefit may, however, vary with the Policy Account Value. Under Option A, the Death Benefit will only vary whenever the Policy Account Value multiplied by the applicable percentage exceeds the Face Amount of the Policy. The Death Benefit under Option B will always vary with the Policy Account Value because the Death Benefit equals either the Face Amount plus the Policy Account Value or the applicable percentage of Policy Account Value. ALLOCATOR 2000 14 CHANGE IN FACE AMOUNT Subject to certain limitations, an Owner may increase or decrease the Face Amount of a Policy. A change in Face Amount may affect the cost of insurance rate and the net amount at risk, both of which may affect an Owner's cost of insurance charge. (See the section on Charges and Deductions, Cost of Insurance.) A change in Face Amount may affect whether the Policy is a "modified endowment contract" for federal income tax purposes. (See the section on Federal Tax Matters.) DECREASES. Any decrease in the Face Amount will become effective on the Monthly Anniversary date on or following receipt by ANLIC of a written request. Generally, no decrease in the Face Amount will be permitted during the first Policy year (other than a decrease indirectly resulting from a partial surrender) but ANLIC may waive this restriction. The Face Amount remaining in force after any requested decrease may not be less than $25,000. If, following the decrease in Face Amount, the Policy would not comply with the maximum premium limitations required by federal tax law. (See the section on Premiums, Premium Limitations.), the decrease may be limited (or, if the Policy Owner so elects, the Policy Account Value may be returned to the Owner) to the extent necessary to meet these requirements. For purposes of determining the cost of insurance charge, a decrease in the Face Amount will reduce the Face Amount in the following order: 1. The Face Amount provided by the most recent increase; 2. The next most recent increase successively; and 3. The Face Amount when the Policy was issued. (See the section on Charges and Deductions, Cost of Insurance.) INCREASES. Increases in the Face Amount will be allowed after the first Policy year. For an increase in the Face Amount, you must submit a written supplemental application. ANLIC may also require additional evidence of insurability. Although an increase need not necessarily be accompanied by an additional premium, in certain cases an additional premium will be required to put the requested increase in effect. The minimum amount of any increase is $25,000. An increase in the Face Amount will also increase Surrender Charges. An increase in the Face Amount during the time either the Benchmark Premium or the Guaranteed Death Benefit Premium is in effect will increase the respective premium requirements. (See the section on Charges and Deductions.) DURATION OF THE POLICY The duration of the Policy depends upon the Policy's Cash Surrender Value. The Policy will remain in force so long as the Cash Surrender Value is sufficient to pay the monthly deduction. (See the section on Charges and Deductions, Policy Account Value Charges.) Where, however, the Cash Surrender Value is insufficient to pay the monthly deduction or Indebtedness exceeds Policy Account Value, and a Grace Period expires without an adequate payment by the Owner, the Policy will lapse and terminate without value. Special provisions apply if the Owner has paid either the GDBP or Benchmark Premiums. (See the section on Policy Lapse and Reinstatement, Lapse.) PAYMENT OF POLICY BENEFITS Death Benefit Proceeds under the Policy will ordinarily be paid within seven days after ANLIC receives Due Proof of Death. Policy Account Value benefits will ordinarily be paid within seven days of receipt of a written request. Payments may be postponed in certain circumstances. (See the section on Postponement of Payments.) The Owner may decide the form in which the benefits will be paid. During the Insured's lifetime, the Owner may arrange for the Death Benefit Proceeds to be paid in a lump sum or under one or more of the settlement options described below. These choices are also available if the Policy is surrendered or matures. If no election is made, ANLIC will pay the benefits in a lump sum upon submission of Due Proof of Death. When Death Benefit Proceeds are payable in a lump sum, the Beneficiary may select one or more of the settlement options. If Death Benefit Proceeds become payable under a settlement option and the Beneficiary has the right to withdraw the entire amount, the Beneficiary may name and change contingent Beneficiaries. SETTLEMENT OPTIONS. Owners and Beneficiaries may elect to have benefits paid in a lump sum or in accordance with a wide variety of settlement options offered under the Policy. Once a settlement option is in effect, there will no longer be value in the Variable Account. ANLIC may make other settlement options available in the future. For additional information concerning these options, see the Policy itself. ALLOCATOR 2000 15 INTEREST FOR LIFE. Interest on the amount retained will be paid during the lifetime of the payee. When the payee dies, the amount held by ANLIC will be paid as agreed. INTEREST FOR A FIXED PERIOD. Interest or compound interest will be paid for a fixed period. The fixed period cannot exceed 30 years. At the end of the period the principal amount will be paid as agreed. PAYMENTS FOR A FIXED PERIOD. The amount retained plus interest will be paid in equal monthly installments for the period chosen. The period chosen may not exceed 30 years. PAYMENTS OF A FIXED AMOUNT. The amount retained plus interest will be paid in equal monthly installments until the fund has been paid in full. The total payments in any year must be at least 5% of the amount retained. LIFE INCOME. The amount retained plus interest will be paid in equal installments for the guaranteed payment period elected and continue for the life of the person on whose life the option is based. Guaranteed payment periods may be elected for 10 or 20 years, or the period in which the total payments will equal the amount retained. JOINT AND SURVIVOR LIFE INCOME. The amount retained plus interest will be paid during the joint lifetime of two persons and continue during the lifetime of the survivor. Payments are guaranteed for 10 years. ADDITIONAL SETTLEMENTS. At the request of the Owner, ANLIC will pay the amount retained in any manner acceptable to the Company. PAYMENT AND ALLOCATION OF PREMIUMS POLICY ISSUE Premiums are payable at ANLIC's Administrative Office (See the section on Acacia National Life Insurance Company.) or to one of ANLIC's authorized agents. A properly completed application must precede or accompany the initial premium. No coverage will take effect unless: 1. The application is approved; 2. The first Planned Periodic Premium is paid; and 3. The Policy is accepted by the Applicant. This must be during the lifetime of all persons proposed for insurance. Also, their eligibility and health must remain as described in the application. The minimum Face Amount to issue a Policy is $100,000, under ANLIC's current rules. ANLIC reserves the right to revise its rules from time to time to specify a different minimum Face Amount at issue. A Policy will generally be issued only to Insureds 80 years of age or under who supply satisfactory evidence of insurability sufficient to ANLIC. ANLIC may, however, at its sole discretion, issue a Policy to an individual above the age of 80. Acceptance is subject to ANLIC's underwriting rules and ANLIC reserves the right to reject an application for any reason. The Policy Date is the date used to determine Policy years and Policy Months. If a premium is submitted with the application, insurance coverage will begin as of the Policy Date. If a premium is not paid with the application, the Policy Date will ordinarily be approximately 15 days after underwriting approval. Insurance coverage will begin on the later of the Policy Date or the date the premium is received. A Policy Date may also be any other date mutually agreeable to ANLIC and the Owner. ANLIC will allocate Net Premiums on the later of the Policy Date or the date the premium is received. (See the section on Allocation of Premiums and Policy Account Value.) PREMIUMS Subject to certain limitations, an Owner has flexibility in determining the frequency and amount of premiums. PREMIUM FLEXIBILITY. Unlike conventional insurance policies, this Policy frees the Owner from the requirement that premiums be paid in accordance with a rigid and inflexible premium schedule. You must pay the first Planned Periodic Premium for coverage to take effect. Thereafter, subject to the minimum and maximum premium limitations described below, an Owner may make unscheduled premium payments at any time in any ALLOCATOR 2000 16 amount. The Policy, therefore, provides the Owner with the flexibility to vary the frequency and amount of premium payments to reflect changing financial conditions. The level of premium payments is an important factor in determining whether the Policy will be treated as a "modified endowment contract" for federal tax purposes. (See the section on Federal Tax Matters.) PLANNED PERIODIC PREMIUMS. Each Owner will determine a Planned Periodic Premium schedule that provides for the payment of a level premium at a fixed interval over a specified period of time. The Owner is not required to pay premiums according to this schedule. Furthermore, the Owner has considerable flexibility to alter the amount, frequency, and the time period over which Planned Periodic Premiums are paid. The payment of a Planned Periodic Premium will not guarantee that the Policy remains in force. Instead, the duration of the Policy depends upon the Policy Account Value. Thus, even if the Owner pays Planned Periodic Premiums, the Policy nonetheless will lapse at any time Indebtedness exceeds Policy Account Value or the Cash Surrender Value is insufficient to pay certain monthly charges, and a Grace Period expires without a sufficient payment. (See the section on Policy Lapse and Reinstatement, Lapse.) Exceptions may occur if the Owner pays an amount equal to or greater than either the scheduled Benchmark Premiums or Guaranteed Death Benefit Premiums. BENCHMARK PREMIUMS. When the Owner pays the monthly Benchmark Premiums as stated in the Policy and if the sum of the premiums paid equals or exceeds the sum of the scheduled Benchmark Premiums for the Face Amount and any increase, then the Policy is guaranteed not to lapse during the first five years that the Policy is in force. Payment of only the Benchmark Premium may reduce the flexibility of premium payments. GUARANTEED DEATH BENEFIT PREMIUM ("GDBP"). The Owner may also elect to pay a GDBP for the Policy or any increase in coverage. The GDBP stated in the Policy is calculated based on the Face Amount and the Insured's age, sex and rate class at the time coverage is applied for. Provided GDBP is paid and the Owner makes no loans or partial surrenders, the Policy is guaranteed not to lapse before the Insured reaches age 65 or for ten years from the effective date of coverage, whichever is later. For all Policies sold in the State of Maryland, all references to the phrases "the Guaranteed Death Benefit" and the "Guaranteed Death Benefit Premium" are replaced with the phrases "Extended No Lapse Guarantee" and "Extended No Lapse Guarantee Premium." For all Policies sold in the Commonwealth of Massachusetts, the Guaranteed Death Benefit Premium does not apply. PREMIUM LIMITATIONS. In no event may the total amount of all premiums paid, both scheduled and unscheduled, exceed the current maximum premium limitations that are required by federal tax laws. If at any time a premium is paid which would result in total premiums exceeding the current maximum premium limitation, ANLIC will only accept that portion of the premium which will make total premiums equal the maximum limitation. Any part of the premium in excess of that amount will be returned and no further premiums will be accepted until allowed by the current maximum premium limitations set forth in the Policy. Every premium payment, whether scheduled or unscheduled, must be at least $25. Premium payments less than this minimum amount will be returned to the Owner. PAYMENT OF PREMIUMS. Payments made by the Owner will be treated first as payment of premium, not Indebtedness unless the Owner indicates that the payment should be treated otherwise. Charges will be deducted from each premium payment as stated in the Policy. (See the section on Charges and Deductions, Premium Expense Charges.) ALLOCATION OF PREMIUMS AND POLICY ACCOUNT VALUE NET PREMIUM. The Net Premium equals the premium paid less the Premium Expense Charge. (See the section on Charges and Deductions, Premium Expense Charges.) ALLOCATION OF NET PREMIUMS. In the application for a Policy, the Owner may allocate Net Premiums or portions thereof to the Investment Options. The portion of the Net Premium allocated to Sub-Accounts will be allocated initially to the Money Market Portfolio on the Policy Date or the date the first premium is received by ANLIC, whichever is later. After 15 days, the Policy Account Value will be allocated among the Investment Options according to the instructions in your application. ALLOCATOR 2000 17 Net Premiums paid after the expiration of the initial fifteen-day period will be allocated in accordance with the Owner's instructions in the application as of the end of the Valuation Date in which they are received. The minimum percentage of each premium that may be allocated to the Fixed Account or any Sub-Account is 5%; percentages must be in whole numbers. The allocation for future Net Premiums may be changed without charge at any time by providing ANLIC with written notification. No charge is imposed for any reallocations. No more than ten different Sub-Accounts may be chosen to receive premium payments. The value of amounts allocated to Sub-Accounts will vary with the investment experience of these Sub-Accounts and the Owner bears the entire investment risk. Owners should periodically review their allocations of premiums and values in light of market conditions and overall estate planning requirements. TRANSFERS TRANSFERS FROM THE GENERAL ACCOUNT. The Owner may ask to transfer value from the General Account, up to a maximum each Policy year of 25% of the General Account value as of the last Policy anniversary date. The minimum amount each that may be transferred is $100. During the first Policy year, the Owner may transfer a maximum of 25% of the General Account value on the transfer date. TRANSFERS FROM SUB-ACCOUNTS. The Owner may ask ANLIC to transfer all or part of the amount in one of the Sub-Accounts to another Sub-Account or to the General Account. The minimum amount for such transfer is $50. The transfer will be made as of the date ANLIC receives the written request. AUTOMATIC REBALANCING AND DOLLAR COST AVERAGING PROGRAMS. The Owner may also elect from either the Automatic Rebalancing Program or the Dollar Cost Averaging Program by filing a written authorization with ANLIC. ANLIC reserves the right to alter, including the right to assess a charge, or terminate these administrative programs upon 30 days advance written notice. Under the Automatic Rebalancing Program, the Owner may have automatic transfers on either a monthly, quarterly, semi-annual or annual basis, to adjust the values among the Sub-Accounts and the General Account to meet the Owner's designated percentage account value proportions the Owner has on file with ANLIC. The allocations are subject to a minimum 5% designated percentage proportion per account. Under the Dollar Cost Averaging Program, the Owner may elect to have a specific dollar amount automatically transferred from the Money Market Sub-Account to designated Sub-Accounts on either a monthly, quarterly, semi-annual, or annual basis. The specific dollar amount is subject to a $50 minimum transfer amount pursuant to the Owner's election with a minimum 5% designated percentage proportion per Sub-Account. If the periodic transfer would reduce the value in the Money Market Sub-Account below the specific dollar amount, ANLIC reserves the right to include the entire remaining value to meet the transfer election. ANLIC also reserves the right to establish a minimum Money Market Sub-Account balance before we allow you to elect the program. Transfers and adjustments pursuant to these Programs will occur on the Policy's Monthly Anniversary date in the month in which the transaction is to take place or the next succeeding business day if the Monthly Anniversary date falls on a day other than a Valuation Date. TELEPHONE AND ELECTRONIC TRANSFER REQUESTS. At the time an application for a Policy is completed, or at any subsequent time, an Owner may request a telephone transfer authorization form. If the form is properly completed and on file with ANLIC, transfers may be made pursuant to telephone instructions, subject to the above terms and the terms of the authorization form. Otherwise, transfer requests must be in writing in a form acceptable to ANLIC. Transfer requests made by telephone are processed upon the date of receipt, if received prior to 4:00 p.m. Eastern Time. ANLIC may, at any time, revoke or modify the transfer privilege. Procedures for making transfers through our website can be accessed at the Internet address stated in the Acacia National Life Insurance Company section of this prospectus. POLICY LAPSE AND REINSTATEMENT LAPSE. Unlike conventional life insurance policies the failure to make a Planned Periodic Premium payment will not itself cause the Policy to lapse. Lapse will occur when the Cash Surrender Value is insufficient to cover the monthly deduction and a Grace Period expires without a sufficient payment, unless the Benchmark Premium or Guaranteed Death Benefit provision is in effect. The Grace Period is 62 days from the date ANLIC ALLOCATOR 2000 18 mails you a notice that the Grace Period has begun. ANLIC will notify you at the beginning of the Grace Period by mail addressed to your last known address on file with ANLIC. The notice will specify the premium required to keep the Policy in force. The required premium will equal the lesser of 1) monthly deductions plus Premium Expense Charges for the three Policy Months after commencement of the Grace Period, plus projected loan interest that would accrue over that period, or 2) the premium required under the Benchmark Premium or Guaranteed Death Benefit provisions, if applicable, to keep the Policy in effect for three months from the commencement of the Grace Period. Failure to pay the required premium within the Grace Period will result in lapse of the Policy. If the Insured dies during the Grace Period, any Indebtedness and past due charges will be deducted from the Death Benefit Proceeds. REINSTATEMENT. A lapsed Policy may be reinstated any time within 5 years after the date of lapse and before the Maturity Date by submitting the following items to ANLIC: 1. A written application for reinstatement; 2. Evidence of insurability satisfactory to ANLIC; and 3. A premium that, after the deduction of Premium Expense Charges, is large enough to cover the monthly deductions for at least three Policy Months commencing with the effective date of reinstatement for the Policy and any rider benefits. Any Indebtedness on the date of lapse must be paid at the time of reinstatement. Upon approval of the application for reinstatement, the effective date of reinstatement will be the Monthly Anniversary on or prior to the date of approval. To the extent permitted under state law, ANLIC may contest the reinstatement of the Policy, and any rider attached, for any statements made in the application for reinstatement, until it has been in force during the lifetime of the Insured for two years from the effective date of reinstatement. CHARGES AND DEDUCTIONS Charges will be deducted in connection with the Policy and any optional insurance benefits added by rider to compensate ANLIC for: 1. Providing the insurance benefits set forth in the Policy and any riders; 2. Administering the Policy; 3. Assuming certain risks in connection with the Policy; and 4. Incurring expenses in distributing the Policy and any riders. The nature and amount of these charges are described more fully below. SURRENDER CHARGE Surrender Charges will not exceed the maximum charges as specified in the Policy. The Surrender Charge for the original Face Amount is determined by multiplying a Surrender Charge factor by the actual premiums paid up to Target Premium. The Surrender Charge factor depends on the number of years the Policy has been in force, as follows: POLICY YEAR SURRENDER CHARGE FACTOR ----------- ------------------------ 1-7 30% 8 20% 9 10% 10 + 0% Paying less premium may reduce the Surrender Charge but will increase the cost of insurance for the Policy and may cause the Policy to lapse. Surrender Charges for any increase in Face Amount will be based solely on the Target Premium associated with the increase as stated in the Policy. The maximum Surrender Charge for an increase in Face Amount is 30% of the Target Premium for the increase during the seven years following the increase, and then declines by 10% per year until it reaches 0% in the tenth year following the increase. Surrender Charges are computed separately for the original Face Amount and each increase in Face Amount, and then combined. ALLOCATOR 2000 19 PARTIAL SURRENDER CHARGE During the Surrender Charge period for the Policy and any increase, there will be a charge for a partial surrender equal to 8% of the amount withdrawn or $25, whichever is greater. Partial Surrender Charges will reduce the remaining Surrender Charge. PREMIUM EXPENSE CHARGES ANLIC will deduct 2.25% from each premium before allocation to the Investment Options. The deduction represents an amount ANLIC considers necessary to pay all premium taxes imposed by the states and any subdivisions thereof and does not necessarily equal the premium taxes paid by ANLIC for a particular Policy. POLICY ACCOUNT VALUE CHARGES MONTHLY DEDUCTION. On each Monthly Anniversary, a charge will be deducted from the Policy Account Value to compensate ANLIC for administrative expenses and insurance provided. The monthly deduction consists of the cost of insurance, the administrative expense charge, and charges for any optional insurance benefits added by riders. The monthly deduction will be allocated pro-rata among the Investment Options. COST OF INSURANCE. Because the cost of insurance depends upon a number of variables, the cost for each Policy Month can vary from month to month. ANLIC will determine the monthly cost of insurance charge by multiplying the applicable cost of insurance rate or rates by the net amount at risk for each Policy Month. The net amount at risk for a Policy Month is based on the difference between the Death Benefit and the Policy Account Value on the Monthly Anniversary. COST OF INSURANCE RATE. Cost of insurance rates will be based on the Face Amount and the Insured's sex, Issue Age, Policy duration, and rate class. The rates reflect ANLIC's expectations of future experience with regard to mortality, interest, persistency, and expenses, but will not exceed the Schedule of Guaranteed Annual Cost of Insurance Rates shown in the Policy. For standard risks, these guaranteed rates are based on the 1980 Commissioners Standard Ordinary Mortality Table with smoker and non-smoker distinction and the Insured's sex, unless sex-neutral (unisex) rates are required by law. The cost of insurance rates, and payment options for policies issued in Montana and certain other states, or issued in connection with certain employer sponsored arrangements are on a unisex basis. The unisex rates may be higher than those applicable to females and lower than those applicable to males. Any change in the cost of insurance rates will apply to all Insureds of the same Issue Age, sex, rate class, and whose Policies have been in force for the same length of time. The cost of insurance rate will also depend on the Face Amount of the Policy. At ANLIC's discretion, a Policy with a Face Amount in excess of $500,000 may incur a lower cost for each thousand dollars of net amount at risk than an otherwise identical Policy with a Face Amount less than that amount. ANLIC may, at its sole discretion, reduce the cost of insurance for other Face Amounts. Because the cost of insurance rate varies with the Face Amount, any increase or decrease in Face Amount, including those resulting from a change in the Death Benefit option and those resulting from partial surrenders, may affect the cost of insurance. RATE CLASS. The rate class of an Insured will affect the cost of insurance rate. ANLIC currently places Insureds into standard rate classes or substandard rate classes involving higher mortality risk. In an otherwise identical Policy, an Insured in the standard rate class will have a lower cost of insurance rate than an Insured in a substandard rate class. ADMINISTRATIVE EXPENSE CHARGE. As reimbursement for administrative expenses related to the maintenance of each Policy and the Variable Account, ANLIC assesses a charge of $27 per Policy Month during the first Policy Year and $8 per Policy Month thereafter. ANLIC does not anticipate that it will make any profit on this charge. OPTIONAL INSURANCE BENEFITS CHARGES. The monthly deduction will include charges for any optional insurance benefits added to the Policy by rider. (See the section on Optional Insurance Benefits.) DAILY CHARGES AGAINST THE VARIABLE ACCOUNT MORTALITY AND EXPENSE RISK CHARGE. ANLIC has developed a new method of calculating mortality and expense charges that it believes is more favorable to Policy Owners. As compensation for mortality and expense risks assumed in connection with the Policy, ANLIC will deduct a daily mortality and expense risk charge from the value of the net assets of the Variable Account. For the first 15 years of your Policy, this charge is at the rate of ALLOCATOR 2000 20 0.90% annually (0.0024590% daily). Beginning in the 16th Policy year, this charge is reduced by 0.05% annually until it reaches 0.45% annually (0.0012295% daily) in Policy year 24; the rate remains level thereafter. The daily charge will be deducted from the net asset value of the Variable Account, and therefore the Sub-Accounts, on each Valuation Date. Where the previous day or days was not a Valuation Date, the deduction on the Valuation Date will be the applicable daily rate multiplied by the number of days since the last Valuation Date. No mortality and expense risk charges will be deducted from the amounts in the Fixed Account. The mortality risk assumed by ANLIC is that Insureds may live for a shorter time than projected, and that an aggregate amount of Death Benefit Proceeds greater than that projected will be payable. The expense risk assumed is that expenses incurred in issuing and administering the Policies will exceed the limits on administrative charges set in the Policies, which are in excess of the amount necessary to meet expenses currently. If the expenses do not increase to an amount in excess of the limits, ANLIC may profit from this charge. Any shortfall in meeting the distribution expenses will be met from ANLIC's general corporate funds that may include profit from the mortality and expense risk charge. ANLIC also assumes risks with respect to other contingencies, including the pattern of transfers between the Variable Account and the General Account that may cause ANLIC to incur greater costs than anticipated. TAXES. Currently no charge is made to the Variable Account for federal income taxes that may be attributable to the Variable Account. ANLIC may, however, make such a charge in the future. Charges for other taxes, if any, attributable to the Variable Account may also be made. (See the section on Federal Tax Matters.) INVESTMENT ADVISORY FEE Policy Owners who choose to allocate Net Premiums to one or more of the Sub-Accounts will also bear a pro rata share of the investment advisory fee paid by each of the investment Portfolios in which the various Sub-Accounts invest. (See the Summary section on Fund Expense Summary.) No such fees are assessed against Net Premiums allocated to the Fixed Account. (See the section on General Account.) Expense reimbursement agreements are expected to continue in future years but may be terminated at any time. As long as the expense limitations continue for a Portfolio, if a reimbursement occurs, it has the effect of lowering the Portfolio's expense ratio and increasing its total return. ANLIC and its affiliates may receive administrative fees from the investment advisers of certain Funds. REDUCTION OF CHARGES ANLIC may reduce monthly administration charges, other charges, and the minimum initial Face Amount in special circumstances that result in lower sales, administrative or mortality expenses. For example, special circumstances may exist in connection with group or sponsored arrangements, sales to Policy Owners of ANLIC or its affiliates, or sales to employees or clients of subsidiaries and affiliates of Ameritas Acacia Mutual Holding Corporation. Group arrangements include those in which a trustee or an employer, for example, purchases contracts covering a group of individuals on a group basis. Sponsored arrangements include those in which an employer allows us to sell contracts to its employees on an individual basis. The amounts of any reductions will reflect the reduced sales effort and administrative costs resulting from, or the different mortality experience expected as a result of, the special circumstances. Reductions will not be unfairly discriminatory against any person, including the affected Owners and Owners of all other policies funded by the Variable Account. POLICY RIGHTS LOAN PRIVILEGES POLICY LOAN. The Owner may borrow money from ANLIC using the Policy as the only security for the loan. The maximum amount that may be borrowed at any time is the Loan Value. The Loan Value equals 90% of the Cash Surrender Value. The minimum loan request ANLIC allows is $1,000. Loans usually are paid within seven days after ANLIC receives a written request. Loans have priority over the claims of any assignee or other person. The loan may be repaid all or in part at any time while the Insured is living. Loans from certain Policies may be taxed as Distributions. (See the section on Federal Tax Matters.) INTEREST. ANLIC charges interest on Policy loans at regular and reduced rates. Regular loans will accrue interest at the daily equivalent of 6.45% per year. After the fifth Policy year, you may borrow a limited amount of ALLOCATOR 2000 21 the Cash Surrender Value at a reduced rate. Reduced rate loans will accrue interest at the daily equivalent of 4.50% per year. The amount available at the reduced loan rate is (1) the Policy Account Value, minus (2) total premiums paid minus any partial surrenders previously taken, and minus (3) any Indebtedness held at a reduced rate. However, this amount may not exceed the maximum loan amount described above. If unpaid when due, interest will be added to the amount of the loan and bear interest at the same rate. EFFECT OF POLICY LOANS. When a loan is made, Policy Account Value equal to the amount of the loan will be transferred from the Investment Options to the General Account as security for the loan. The Policy Account Value transferred will be allocated from the Investment Options according to the instructions you give when you request the loan. If no instructions are given, the amounts will be transferred first from the Fixed Account. Any excess amount will be transferred from the Sub-Accounts in the same proportion that the Policy Account Value in each Sub-Account bears to the Variable Account Value. Value in the General Account held as security for the loan will be credited with interest at 4.5% per year. NO ADDITIONAL INTEREST WILL BE CREDITED TO THIS VALUE. The interest earned will be credited once each Policy Month. Upon partial repayment of Indebtedness, value in the General Account equal to the amount of repayment will be released as security for the loan, and may be reallocated by the Owner among the Investment Options. Upon full repayment of Indebtedness, the Owner may reallocate all collateral in the General Account to the Investment Options. Interest earned on amounts held in the General Account will be allocated to the Investment Options on each Policy anniversary in the same proportion that Net Premiums are being allocated to the Investment Options at the time. INDEBTEDNESS. Indebtedness equals the total of all Policy Loans and accrued interest on Policy loans. If Indebtedness exceeds Policy Account Value less Surrender Charges, ANLIC will notify the Owner and any assignee of record. If a sufficient payment equal to excess Indebtedness is not made to ANLIC within 62 days from the date notice is sent, the Policy will lapse and terminate without value. The Policy, however, may later be reinstated. (See the section on Policy Lapse and Reinstatement.) REPAYMENT OF INDEBTEDNESS. Indebtedness may be repaid any time before the Maturity Date. (See the section on Payment of Policy Benefits.) ANLIC will deduct Indebtedness from any amount payable under the Policy. Payments made by the Owner will be treated first as payment of premium and not as repayment of any Indebtedness unless the Owner indicates that the payment should be treated otherwise. Loan repayments are not subject to the Premium Expense Charge. SURRENDER PRIVILEGES The Owner may surrender the Policy for its Cash Surrender Value on any Valuation Date during the lifetime of the Insured by sending a written request to ANLIC. The amount available for surrender is the Cash Surrender Value at the end of the Valuation Period during which the surrender request is received at ANLIC's principal office. The Cash Surrender Value equals the Policy Account Value less the Surrender Charge and Indebtedness. Surrenders from the Variable Account will generally be paid within seven days of receipt of the written request. Postponement of payments may, however, occur in certain circumstances. (See the section on Postponement of Payments.) Surrenders may have adverse tax consequences. (See the section on Federal Tax Matters.) A Surrender Charge is imposed if the Policy is surrendered either partially or totally. For partial surrenders, the charge is 8% of the amount withdrawn or $25, whichever is greater, but will never exceed the charges for a total surrender. Decreases do not affect Surrender Charges, since Surrender Charges for coverage associated with the decrease will be taken at the time of Policy lapse or surrender. The Policy Surrender Charge is a product of a Surrender Charge factor multiplied by the actual premium paid up to the Target Premium from the Policy Date or the date of any increase in Face Amount, as applicable. The factor varies by the year of surrender measured from the Policy Date or increase date, as applicable. (The Surrender Charge will never exceed the Policy Account Value.) Any charge assessed for a partial surrender will reduce the remaining Surrender Charge dollar for dollar. ALLOCATOR 2000 22 PARTIAL SURRENDER After the first Policy year, you may partially surrender the Policy on any Valuation Date during the lifetime of the Insured by sending us a written request. The amount of the partial surrender must not exceed the Cash Surrender Value. You may place on file with us a written request for systematic partial surrenders. The partial surrenders may be monthly, quarterly or annually in amounts of no less than $100. Unless you request otherwise, the partial surrender will be allocated among the Investment Options in the same proportion that the Policy's value in each Investment Option bears to the total Policy Account Value in the Investment Options on the Valuation Date we receive the request. Any partial surrender will reduce the Policy Account Value by the amount of the partial surrender. The amount of reduction in the Face Amount will be 100% of the amount of the partial surrender for Death Benefit Option A, and no reduction for Death Benefit Option B. The Face Amount remaining in force after a partial surrender may not be less than the minimum Face Amount ANLIC allows. Each partial surrender will reduce the Face Amount in the following order: 1. Each increase, in order, starting with the last increase; and 2. The Face Amount when the Policy was issued. For a partial surrender, the amount paid will be deducted from the Policy Account Value at the end of the Valuation Period during which the request is received. EXAMINATION OF THE POLICY PRIVILEGE ("FREE LOOK") You may cancel the Policy within 20 days after you receive it or within 45 days of completing Part I of the application, whichever is later. You should mail or deliver the Policy to either our Administrative Service Office (See the section on Acacia National Life Insurance Company.) or the registered representative who sold the Policy. If the Policy is canceled within the Free Look Period, ANLIC will refund the total premium paid. A refund of premium paid by check may be delayed until the check has cleared the Owner's bank. This privilege also applies to an increase for coverage under the Policy. (See the section on Postponement of Payments.) GENERAL ACCOUNT You may allocate Net Premiums and transfer value to the General Account of ANLIC via an allocation to the Fixed Account. Because of exemptive and exclusionary provisions, interests in the General Account have not been registered as securities under the Securities Act of 1933, as amended (the "1933 Act") and the General Account has not been registered as an investment company under the 1940 Act. Accordingly, neither the General Account nor any interests therein are subject to the provisions of these Acts and, as a result, the staff of the SEC has not reviewed the disclosures in this Prospectus relating to the General Account. GENERAL DESCRIPTION The General Account consists of all assets owned by ANLIC other than those in the Variable Account and other separate accounts. Subject to applicable law, ANLIC has sole discretion over the investment of the assets in the General Account. You may elect to allocate Net Premiums to the Fixed Account, the Variable Account, or both. You may also transfer value from the Sub-Accounts to the Fixed Account, or from the Fixed Account to the Sub-Accounts. The allocation or transfer of funds to the Fixed Account does not entitle an Owner to share in the investment experience of the General Account. Instead, ANLIC guarantees that value in the Fixed Account will accrue interest at an effective annual rate of at least 4.5%, independent of the actual investment experience of the General Account. Any excess interest rate when declared will remain in effect at least one year. THE POLICY This Prospectus describes a Flexible Premium Variable Life Insurance Policy. This Prospectus is generally intended to serve as a disclosure document for the aspects of the Policy involving the Variable Account. For complete details regarding the General Account, see the Policy itself. ALLOCATOR 2000 23 GENERAL ACCOUNT VALUE Net Premiums allocated to the General Account via the Fixed Account are credited to the Policy. ANLIC bears the full investment risk for these amounts. ANLIC guarantees that interest credited to the Fixed Account will not be less than 4.5% per year. ANLIC MAY, AT ITS SOLE DISCRETION, CREDIT A HIGHER RATE OF INTEREST, although it is not obligated to credit interest in excess of 4.5% per year, and might not do so. ANY INTEREST CREDITED TO THE FIXED ACCOUNT IN EXCESS OF THE GUARANTEED RATE OF 4.5% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF ANLIC. THE OWNER ASSUMES THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4.5% PER YEAR. The value in the Fixed Account will be calculated on each Monthly Anniversary. ANLIC guarantees that, at any time prior to the Maturity Date, the value in the Fixed Account will not be less than the amount of the Net Premiums allocated or value transferred to the Fixed Account, plus interest at the rate of 4.5% per year, plus any excess interest which ANLIC credits and any amounts transferred into the Fixed Account, less the sum of all charges allocable to the Fixed Account and any amounts deducted from the Fixed Account in connection with partial surrenders or transfers to the Variable Account. GENERAL POLICY PROVISIONS POSTPONEMENT OF PAYMENTS GENERAL. Payment of any amount upon complete or partial surrender, Policy loan, or benefits payable at death or Maturity may be postponed whenever: 1. ANLIC or the New York Stock Exchange is closed such as customary weekend and holiday closings, or trading on the New York Stock Exchange is restricted as determined by the SEC; 2. The SEC by order permits postponement for the protection of Owners; or 3. An emergency exists, as determined by the SEC, as a result of which disposal of securities is not reasonably practicable or it is not reasonably practicable to determine the value of the Variable Account's net assets. Transfers may also be postponed under these circumstances. PAYMENT BY CHECK. Payments under the Policy of any amounts derived from premiums paid by check may be delayed until such time as the check has cleared the Owner's bank. THE CONTRACT The Policy, riders and attached copy of the application and any supplemental applications are the entire contract. Only statements in the application and any supplemental applications can be used to void the Policy or defend a claim. The statements are considered representations and not warranties. Only Officers of ANLIC can agree to change or waive any provisions of the Policy. The change or waiver must be in writing and signed by an officer of ANLIC. SUICIDE In most states, if the Insured, while sane or insane, commits suicide within two years after the Policy Date, ANLIC will pay only the premium received, less any partial surrenders and outstanding Indebtedness. If the Insured, while sane or insane, commits suicide within two years after the effective date of any increase in Face Amount requiring evidence of insurability, ANLIC will not pay the increase but will pay only an amount equal to the monthly deductions previously made for the increase. INCONTESTABILITY ANLIC cannot contest this Policy or any attached rider after it has been in force for two years from its effective date. It cannot contest an increase in Face Amount or in rider face amount after it has been in force for two years from its effective date. Reinstatement of a Policy, and any rider attached to the Policy, may be contested by ANLIC for any statements made in the application for reinstatement any time within two years of the effective date of reinstatement. CHANGE OF OWNER OR BENEFICIARY Generally, as long as the Policy is in force, the Owner or Beneficiary may be changed by written request in a form acceptable to ANLIC. The Policy need not be returned unless requested by ANLIC. The change will take effect as of the date the request is signed, whether or not the Insured is living when the request is received by ANLIC. ANLIC will not, however, be liable for any payment made or action taken before acknowledgment of the request. A change of Owner or Beneficiary may have tax consequences. (See the section on Federal Tax Matters.) ALLOCATOR 2000 24 COLLATERAL ASSIGNMENT The Policy may be assigned as collateral. ANLIC will not be bound by the assignment until a copy has been received by ANLIC and it assumes no responsibility for determining whether an assignment is valid or the extent of the assignee's interest. An Assignment may have tax consequences. (See the section on Federal Tax Matters.) MISSTATEMENT OF AGE OR SEX If the age or sex of the Insured has been misstated, the benefits will be those which the monthly deductions would have provided for the correct age and sex. If the age of the Insured has been misstated on Policies issued with unisex rates, the benefits will be those which the monthly deductions would have provided for the correct age. REPORTS AND RECORDS ANLIC will maintain all records relating to the Variable Account. ANLIC will mail to Owners, at their last known address of record, any reports required by applicable law or regulation. Each Owner will also be sent an annual and semi-annual report for Portfolios of the Funds that hold or have held Policy value during the reporting period and a list of the portfolio securities held in each Portfolio of the Funds, as required by the 1940 Act. OPTIONAL INSURANCE BENEFITS Subject to certain requirements, you may add one or more of the following optional insurance benefits to your Policy by rider. The cost of any optional insurance benefits will be deducted as part of the monthly deduction. (See the section on Charges and Deductions, Monthly Administration Charge.) ACCELERATED DEATH BENEFIT RIDER. Subject to certain terms and conditions, and when available in your state, a reduced Death Benefit will be paid in advance to the Owner of the Policy if the Insured suffers from a terminal illness or injury. There is no charge for this rider but it will be subject to ANLIC's underwriting requirements. If certain requirements are satisfied, however, accelerated Death Benefit Proceeds paid under the Accelerated Death Benefit Rider to a terminally or chronically ill insured individual, as defined in the Code, may not be subject to tax. A qualified tax advisor should be consulted before adding such a rider to a Policy. OTHER INSURED RIDER. Provides for level renewable term insurance on the life of any family member. Under the terms of this rider, ANLIC will pay the face amount of the rider to the Beneficiary upon receipt of proof of the other Insured's death. Subject to certain restrictions, the face amount of the rider may be increased or decreased. This rider may also be converted to a new Policy on the family member within 31 days after the Insured's death. Generally, the new Policy must meet the minimum Face Amount requirement, but ANLIC, in its sole discretion, may waive this provision. Additional evidence of insurability will not be required for conversion. CHILDREN'S INSURANCE RIDER. Provides for level term insurance on the Insured's children, as defined in the rider. Under the terms of the rider, the Death Benefit will be payable to the named Beneficiary upon the death of any Insured child. Upon receipt of proof of the Insured's death, the rider will continue in force without additional monthly charges. GUARANTEED INSURABILITY RIDER. Provides that the Owner can purchase additional insurance at certain future dates without evidence of insurability. Under the terms of the rider the Owner may only increase the Face Amount of the Policy on an option date. An option date falls on the Policy Anniversary following certain birthdates and the Monthly Anniversary following the occurrence of certain events such as marriage of the Insured. Each increase in Face Amount will be subject to the maximum stated in the Policy. No evidence of insurability is required for any increase made under this rider. Increases may have tax consequences. (See the section on Federal Tax Matters.) ACCIDENTAL DEATH BENEFIT RIDER. Provides additional insurance if the Insured's death results from accidental bodily injury, as defined in the rider. Under the terms of the rider, the additional benefits provided in a Policy will be paid upon receipt of proof by ANLIC that death resulted directly and independently of all other causes from accidental bodily injury; occurred while the rider was in force; and occurred on or after the rider anniversary following the Insured's 5th birthday. The rider will terminate on the earliest of either the date of lapse, the rider anniversary following the Insured's 70th birthday or the Maturity Date of the Policy. ALLOCATOR 2000 25 LEVEL RENEWABLE TERM RIDER. Provides for level renewable term insurance coverage to increase the Face Amount of the Policy. The Owner may purchase additional insurance on a renewable term basis without evidence of insurability up to Insured's age 70. The rider will terminate on the earliest of either the date of lapse, the rider anniversary following the Insured's 70th birthday, or the Maturity Date of the Policy. TOTAL DISABILITY RIDER. Provides for the payment of the total disability amount by ANLIC as premiums while the Owner is disabled. Under the terms of the rider, the total disability amount will be paid as a premium upon receipt of proof adequate to ANLIC that: 1. The Insured is totally disabled as defined in the rider; 2. The disability commenced while the rider was in force; 3. The disability began on or after the rider anniversary following the Insured's 15th birthday; and 4. Total disability continued without interruption for four months. The total disability amount is set forth in the Policy. The amount may, under certain circumstances, be increased. Evidence of insurability will generally be required for any increase. Because the total disability amount is a fixed dollar amount while the monthly deduction varies from month to month, the fixed dollar amount may be more or less than the amount necessary to keep the Policy in force. Upon approval of the claim, ANLIC will begin crediting total disability amounts, less Premium Expense Charges, on the Monthly Anniversary after the date disability began. No amount will be credited for a period of more than 12 months before notice of disability is received by ANLIC unless it is shown that notice was given as soon as reasonably possible. ANLIC will continue to credit the net total disability amount while the Insured is totally disabled and the Policy is in force. However, if the disability begins on or after the rider Anniversary after the Insured's 60th birthday, payment will be credited only for the later of two years or until the rider Anniversary after the Insured's 65th birthday. FEDERAL TAX MATTERS The following discussion provides a general description of the federal income tax considerations associated with the Policy and does not purport to be complete or cover all situations. This discussion is not intended as tax advice. No attempt has been made to consider in detail any applicable state or other tax laws except premium taxes. (See discussion in the section on Premium Charge for Taxes.) This discussion is based upon ANLIC's understanding of the relevant laws at the time of filing. You should consult with your counsel or tax advisor for more complete information before a Policy is purchased. ANLIC makes no representation as to the likelihood of the continuation of present federal income tax laws nor of the interpretations by the Internal Revenue Service. Federal tax laws are subject to change and thus tax consequences to the Insured, Policy Owner or Beneficiary may be altered. 1. TAXATION OF ANLIC. ANLIC is taxed as a life insurance company under Part I of Subchapter L of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). At this time, since the Separate Account is not a separate entity from ANLIC, and its operations form a part of ANLIC, it will not be taxed separately as a "regulated investment company" under Subchapter M of the Code. Net investment income and realized net capital gains on the assets of the Separate Account are reinvested and automatically retained as a part of the reserves of the Policy and are taken into account in determining the Death Benefit and Policy Account Value of the Policy. ANLIC believes that the Separate Account net investment income and realized net capital gains will not be taxable to the extent that such income and gains are retained as reserves under the Policy. ANLIC does not currently expect to incur any federal income tax liability attributable to the Separate Account with respect to the sale of the Policies. Accordingly, no charge is being made currently to the Separate Account for federal income taxes. If, however, ANLIC determines that it may incur such taxes attributable to the Separate Account, it may assess a charge for such taxes against the Separate Account. ANLIC may also incur state and local taxes (in addition to premium taxes for which a deduction from premiums is currently made). At present, they are not charges against the Separate Account. If there is a material change in state or local tax laws, charges for such taxes attributable to the Separate Account, if any, may be assessed against the Separate Account. ALLOCATOR 2000 26 2. TAX STATUS OF THE POLICY. The Code Section 7702 includes a definition of a life insurance contract for federal tax purposes, which places limitations on the amount of premiums that may be paid for the Policy and the relationship of the Policy Account Value to the Death Benefit. ANLIC believes that the Policy meets the statutory definition of a life insurance contract. The Code Section 7702A also defines a "modified endowment contract" for federal tax purposes. If a life insurance policy is classified as a modified endowment contract, distributions from it (including loans) are taxed as ordinary income to the extent of any gain. This Policy will become a "modified endowment contract" if the premiums paid into the Policy fail to meet a 7-pay premium test as outlined in Section 7702A of the Code. Certain benefits the Policy Owner may elect under this Policy may be material changes affecting the 7-pay premium test. These include, but are not limited to, changes in Death Benefits and changes in the Face Amount. Should the Policy become a "modified endowment contract" partial withdrawals, full Surrenders, assignments, pledges, and loans (including loans to pay loan interest) under the Policy will be taxable to the extent of any gain under the Policy. A 10% penalty tax also applies to the taxable portion of any distribution made prior to the taxpayer attaining age 59 1/2. The 10% penalty tax does not apply if the distribution is made because the taxpayer becomes disabled as defined under the Code or if the distribution is paid out in the form of a life annuity on the life of the taxpayer or the joint lives of the taxpayer and Beneficiary. One may avoid a Policy becoming a modified endowment contract by, among other things, not making excessive payments or reducing benefits. Should one deposit excessive premiums during a Policy Year, that portion that is returned by the insurance company within 60 days after the policy anniversary date will reduce the premiums paid to avoid the policy becoming a modified endowment contract. All modified endowment policies issued by ANLIC to the same Policy Owner in any 12 month period are treated as one modified endowment contract for purposes of determining taxable gain under Section 72(e) of the Internal Revenue Code. Any life insurance policy received in exchange for a modified endowment contract will also be treated as a modified endowment contract. You should contact a competent tax professional before paying additional premiums or making other changes to the Policy to determine whether such payments or changes would cause the Policy to become a modified endowment contract. The Code Section 817(h) also authorizes the Secretary of the Treasury (the "Treasury") to set standards by regulation or otherwise for the investments of the Separate Account to be "adequately diversified" in order for the Policy to be treated as a life insurance contract for federal tax purposes. If the Policy is not treated as life insurance because it fails the diversification requirements, the Policy Owner is then subject to federal income tax on gain in the Policy as it is earned. The Separate Account, through the Funds, intends to comply with the diversification requirements prescribed by the Treasury in regulations published in the Federal Register on March 2, 1989, which affect how the Fund's assets may be invested. While CAMCO, an ANLIC affiliate, is the adviser to certain of the portfolios, ANLIC does not have control over any of the Funds or their investments. However, ANLIC believes that the Funds will be operated in compliance with the diversification requirements of the Code. Thus, ANLIC believes that the Policy will be treated as a life insurance contract for federal tax purposes. In connection with the issuance of regulations relating to the diversification requirements, the Treasury announced that such regulations do not provide guidance concerning the extent to which policy owners may direct their investments to particular divisions of a separate account. Regulations in this regard may be issued in the future. It is possible that when regulations are issued, the Policy may need to be modified to comply with such regulations. For these reasons, ANLIC reserves the right to modify the Policy as necessary to prevent the Policy Owner from being considered the owner of the assets of Separate Account V or otherwise to qualify the Policy for favorable tax treatment. The following discussion assumes that the Policy qualifies as a life insurance contract for federal tax purposes. 3. TAX TREATMENT OF POLICY PROCEEDS. ANLIC believes that the Policy will be treated in a manner consistent with a fixed benefit life insurance policy for federal income tax purposes. Thus, ANLIC believes ALLOCATOR 2000 27 that the Death Benefit payable prior to the original Maturity Date will generally be excludable from the gross income of the Beneficiary under Section 101(a)(1) of the Code and the Policy Owner will not be deemed to be in constructive receipt of the Policy Account Value under the Policy until its actual Surrender. However there are certain exceptions to the general rule that death benefit proceeds are non-taxable. Federal, state and local tax consequences of ownership or receipt of proceeds under a Policy depends on the circumstances of each Policy Owner and Beneficiary. Distributions From Policies That Are Not "Modified Endowment Contracts." Distributions (while the Insured is still alive) from a Policy that is not a modified endowment contract are generally treated as first a recovery of the investment in the Policy and then only after the return of all such investment, as disbursing taxable income. However, in the case of a decrease in the Death Benefit, a partial withdrawal, a change in Death Benefit option, or any other such change that reduces future benefits under the Policy during the first 15 years after a Policy is issued an that results in a cash distribution to the Policy Owner in order for the Policy to continue complying with the Section 7702 defined limits on premiums and Policy Account Values, such distributions may be taxable in whole or in part as ordinary income to the Policy Owner (to the extent of any gain in the Policy) as prescribed in Section 7702. In addition, upon a complete Surrender or lapse of a Policy that is not a "modified endowment contract," if the amount received plus the amount of any Indebtedness exceeds the total investment in the Policy, the excess will generally be treated as ordinary income for tax purposes. Investment in the Policy means (1) the total amount of any premiums paid for the Policy plus the amount of any loan received under the Policy to the extent the loan is included in gross income of the Policy Owner minus (2) the total amount received under the Policy by the Policy Owner that was excludable from gross income, excluding any non-taxable loan received under the Policy. ANLIC also believes that loans received under a Policy will be treated as debt of the Policy Owner and that no part of any loan under a Policy will constitute income to the Policy Owner so long as the Policy remains in force. Should the Policy lapse while Policy loans are outstanding, the portion of the loans attributable to earnings will become taxable. Generally, interest paid on any loan under a Policy owned by an individual will not be tax-deductible. Except for policies with respect to a limited number of key persons of an employer (both terms are as defined in the Internal Revenue Code), and subject to applicable interest rate caps and debt limits, the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") generally repeals the deduction for interest paid or accrued after October 13, 1995 on loans from corporate owned life insurance policies on the lives of officers, employees or persons financially interested in the taxpayer's trade or business. Certain transitional rules for then existing debt are included in HIPAA. The transitional rules include a phase-out of the deduction for debt incurred (1) before January 1, 1996, or (2) before January 1, 1997, for policies entered into in 1994 or 1995. The phase-out of the interest expense deduction occurs over a transition period between October 13, 1995 and January 1, 1999. There is also a special rule for pre-June 21, 1986 policies. The Taxpayer Relief Act of 1997 ("TRA '97"), further expanded the interest deduction disallowance for businesses by providing, with respect to policies issued after June 8, 1997, that no deduction is allowed for interest paid or accrued on any debt with respect to life insurance covering the life of any individual (except as noted above under pre-'97 law with respect to key persons and pre-June 21, 1986 policies). Any material change in a policy (including a material increase in the death benefit) may cause the policy to be treated as a new policy for purposes of this rule. TRA '97 also provides that no deduction is permissible for premiums paid on a life insurance policy if the taxpayer is directly or indirectly a beneficiary under the policy. Also under TRA '97 and subject to certain exceptions, for policies issued after June 8, 1997, no deduction is allowed for that portion of a taxpayer's interest expense that is allocable to unborrowed policy cash values. This disallowance generally does not apply to policies owned by natural persons. Policy Owners should consult a competent tax advisor concerning the tax implications of these changes for their Policies. Distributions From Policies That Are "Modified Endowment Contracts." Should the Policy become a "modified endowment contract" partial withdrawals, full Surrenders, assignments, pledges, and loans (including loans to pay loan interest) under the Policy will be taxable to the extent of any gain under the Policy. A 10% penalty tax also applies to the taxable portion of any distribution made prior to the taxpayer attaining age 59 1/2. The 10% penalty does not apply if the distribution is made because the taxpayer is ALLOCATOR 2000 28 disabled as defined under the Code or if the distribution is paid out in the form of a life annuity on the life of the taxpayer or the joint lives of the taxpayer and Beneficiary. The right to exchange the Policy for a flexible premium adjustable life insurance policy (See the section on Exchange Privilege.), the right to change Policy Owners (See the section on General Provisions.), and the provision for partial withdrawals (See the section on Surrenders.) may have tax consequences depending on the circumstances of such exchange, change, or withdrawal. Upon complete Surrender or when Maturity Benefits are paid, if the amount received plus any Indebtedness exceeds the total premiums paid (the "basis") that are not treated as previously withdrawn by the Policy Owner, the excess generally will be taxed as ordinary income. Federal estate and state and local estate, inheritance, and other tax consequences of ownership or receipt of Death Benefit Proceeds depend on applicable law and the circumstances of each Policy Owner or Beneficiary. In addition, if the Policy is used in connection with tax-qualified retirement plans, certain limitations prescribed by the Internal Revenue Service on, and rules with respect to the taxation of, life insurance protection provided through such plans may apply. Further, the tax consequences of using the Policy in nonqualified plan arrangements may vary depending on the particular facts and circumstances of the arrangement. The advice of competent counsel should be sought in connection with use of life insurance in a qualified or nonqualified plan. YOU SHOULD CONSULT A QUALIFIED TAX AND/OR LEGAL ADVISOR TO OBTAIN COMPLETE INFORMATION ON HOW FEDERAL, STATE AND LOCAL TAX CONSIDERATIONS MAY APPLY TO YOUR TAX SITUATION. VOTING RIGHTS All of the assets held in the Sub-Accounts of the Variable Account will be invested in shares of corresponding Portfolios of the Funds. The Funds do not hold routine annual shareholders' meetings. Shareholders' meetings will be called whenever each Fund believes that it is necessary to vote to elect the Board of Directors of the Fund and to vote upon certain other matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund. ANLIC is the legal owner of Fund shares and as such has the right to vote upon any matter that may be voted upon at a shareholder meeting. However, in accordance with its view of present applicable law, ANLIC will vote the shares of the Funds at meetings of the shareholders of the appropriate Fund or Owner in accordance with instructions received from Owners. Fund shares held in each Sub-Account for which no timely instructions from Owners are received will be voted by ANLIC in the same proportion as those shares in that Sub-Account for which instructions are received. Each Owner having a voting interest will be sent proxy material and a form for giving voting instructions. Owners may vote, by proxy or in person, only as to the Portfolios that correspond to the Sub-Accounts in which their Policy values are allocated. The number of shares held in each Sub-Account attributable to a Policy for which the Owner may provide voting instructions will be determined by dividing the Policy's value in that account by the net asset value of one share of the corresponding Owner as of the record date for the shareholder meeting. Fractional shares will be counted. For each share of an Owner for which Owners have no interest, ANLIC will cast votes, for or against any matter, in the same proportion as Owners vote. If required by state insurance officials, ANLIC may disregard voting instructions if such instructions would require shares to be voted so as to cause a change in the investment objectives or policies of one or more of the Owners, or to approve or disapprove an investment Policy or investment advice of one or more of the Owners. In addition, ANLIC may disregard voting instructions in favor of changes initiated by an Owner or a Fund's Board of Directors provided that ANLIC's disapproval of the change is reasonable and is based on a good faith determination that the change would be contrary to state law or otherwise inappropriate, considering the Portfolio's objectives and purposes, and the effect the change would have on ANLIC. If ANLIC does disregard voting instructions, it will advise Owners of that action and its reasons for such action in the next semi-annual report to Owners. Shares of the Portfolios may be offered to variable life insurance and variable annuity separate accounts of life insurance companies other than ANLIC that are not affiliated with ANLIC. ANLIC understands that shares of these Portfolios also will be voted by such other life insurance companies in accordance with instructions from their Owners invested in such separate accounts. This will dilute the effect of voting instructions of Owners of the Policies. ALLOCATOR 2000 29 EXECUTIVE OFFICERS AND DIRECTORS OF ANLIC This list shows name and position(s) with ANLIC followed by the principal occupations for the last five years. Where an individual has held more than one position with an organization during the last 5-year period, the last position held has been given. CHARLES T. NASON, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER* Vice Chairman of Board and President, Director: Ameritas Acacia Mutual Holding Company Vice Chairman of Board and President, Director: Ameritas Holding Company Chairman of the Board and Chief Executive Officer: Acacia Life Insurance Company Also serves as a Director of direct and indirect subsidiaries of Acacia Life Insurance Company. ROBERT W. CLYDE, PRESIDENT AND CHIEF OPERATING OFFICER* Executive Vice President, Director: Ameritas Acacia Mutual Holding Company Executive Vice President, Director: Ameritas Holding Company President and Chief Operating Officer: Acacia Life Insurance Company Also serves as a Director of direct and indirect subsidiaries of Acacia Life Insurance Company. HALUK ARITURK, SENIOR VICE PRESIDENT, PRODUCT MANAGEMENT AND ADMINISTRATION** Senior Vice President, Product Management and Administration: Acacia Life Insurance Company Executive Vice President, Ameritas Acacia Shared Services Center: Ameritas Life Insurance Corp. Formerly: Senior Vice President, Operations and Chief Actuary: Acacia Life Insurance Company. JOANN M. MARTIN, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, DIRECTOR** Senior Vice President, Chief Financial Officer and Corporate Treasurer: Ameritas Acacia Mutual Holding Company and Ameritas Holding Company Senior Vice President and Chief Financial Officer: Acacia Life Insurance Company Senior Vice President and Chief Financial Officer: Ameritas Life Insurance Corp. Also serves as officer and /or director of subsidiaries and/or affiliates of Ameritas Life Insurance Corp. BRIAN J. OWENS, SENIOR VICE PRESIDENT, CAREER DISTRIBUTION* Senior Vice President, Career Distribution: Acacia Life Insurance Company; Director: The Advisors Group, Inc. BARRY C. RITTER, SENIOR VICE PRESIDENT AND CHIEF INFORMATION OFFICER** Senior Vice President and Chief Information Officer, Acacia Life Insurance Company Senior Vice President - Information Services: Ameritas Life Insurance Corp. ROBERT-JOHN H. SANDS, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY* Senior Vice President and General Counsel: Ameritas Acacia Mutual Holding Company Senior Vice President and General Counsel: Ameritas Holding Company Senior Vice President, General Counsel and Corporate Secretary: Acacia Life Insurance Company Also serves as a Director of direct and indirect subsidiaries of Acacia Life Insurance Company. JANET L. SCHMIDT, SENIOR VICE PRESIDENT, HUMAN RESOURCES* Senior Vice President and Director of Human Resources: Ameritas Acacia Mutual Holding Company Senior Vice President and Director of Human Resources: Ameritas Holding Company Senior Vice President, Human Resources: Acacia Life Insurance Company RICHARD W. VAUTRAVERS, SENIOR VICE PRESIDENT AND CORPORATE ACTUARY** Senior Vice President and Corporate Actuary: Ameritas Life Insurance Corp. Senior Vice President and Corporate Actuary: Acacia Life Insurance Company WILLIAM W. LESTER, VICE PRESIDENT AND TREASURER** Treasurer: Ameritas Life Insurance Corp. Also serves as officer of subsidiaries of Ameritas Life Insurance Corp. Vice President and Treasurer, Acacia Life Insurance Company ALLOCATOR 2000 30 RENO J. MARTINI, DIRECTOR*** Senior Vice President, Calvert Group, Ltd. * The principal business address of each person is: Acacia National Life Insurance Company 7315 Wisconsin Avenue Bethesda, Maryland 20814. ** The principal business address of each person is: Ameritas Life Insurance Corp. 5900 "O" Street Lincoln, Nebraska 68510. *** The principal business address of each person is: Calvert Group, Ltd. 4550 Montgomery Avenue Bethesda, Maryland 20814. DISTRIBUTION OF THE POLICIES Applications for the Policies are solicited by agents who are licensed by state insurance authorities to sell ANLIC's variable life insurance policies, and who are also registered representatives of The Advisors Group, Inc. ("TAG") or registered representatives of broker-dealers who have Selling Agreements with TAG or registered representatives of broker-dealers who have Selling Agreements with such broker-dealers. TAG, whose address is 7315 Wisconsin Avenue, Bethesda, Maryland 20814, is a registered broker-dealer under the Securities Exchange Act of 1934 ("1934 Act") and a member of the National Association of Securities Dealers, Inc. ("NASD"). TAG is a second tier wholly owned subsidiary of Acacia Life Insurance Company of Washington, D.C. TAG acts as the principal underwriter, as defined in the 1940 Act, of the Policies (as well as other variable life policies and variable annuities) pursuant to an Underwriting Agreement with ANLIC. In 2000, TAG received gross variable universal life compensation of $4,944,156 and retained $7,200 in underwriting fees and $0 in brokerage commissions on ANLIC's variable universal life policies. The insurance underwriting and the determination of a proposed Insured's Rate Class and whether to accept or reject an application for a Policy is done by ANLIC. ANLIC will refund any premiums paid if a Policy ultimately is not issued or will refund the applicable amount if the Policy is returned under the Free Look provision. The Policies are offered and sold only in those states where their sale is lawful. Under these selling agreements, ANLIC pays commission to the broker-dealers, which in turn pay commissions to the Registered Representative who sells this Policy. The commission may equal an amount up to 95% of the first year premium paid, up to 20% of premium paid in years 2-4, up to 4.5% of premium paid in years 5-10, and up to 2% of premium paid in years 11 or later. Broker-dealers may also receive a service fee up to an annualized rate of 0.25% of the Accumulation Value beginning in the fifth Policy Year. Compensation arrangements may vary among broker-dealers. In addition, ANLIC may also pay override payments, expense allowances, bonuses, wholesaler fees, and training allowances. Registered Representatives who meet certain production standards may receive additional compensation. ANLIC may reduce or waive the sales charge and/or other charges on any Policy sold to directors, officers or employees of ANLIC or any of its affiliates, employees and registered representatives of any broker-dealer that has entered into a sales agreement with ANLIC or TAG and the spouses or children of the above persons. In no event will any such reduction or waiver be permitted where it would be unfairly discriminatory to any person. ADMINISTRATION ANLIC has contracted with Ameritas Life Insurance Corp. ("ALIC"), having its principal place of business at 5900 "O" Street, Lincoln, Nebraska for it to provide ANLIC with certain administrative services for the Flexible Premium Variable Life Policies. Pursuant to the terms of a Service Agreement, ALIC will act as Record-keeping Service Agent for the policies and riders for an initial term of three years and any subsequent renewals thereof. ALIC, under the guidance and direction of ANLIC, will perform administration functions, including: issuance of policies for reinstatement, term conversion, plan changes and guaranteed insurability options, generation of billing and posting of premium, computation of valuations, calculation of benefits payable, maintenance of administrative controls over all activities, correspondence, and data, and providing management reports to ANLIC. ALLOCATOR 2000 31 POLICY REPORTS At least once each Policy year a statement will be sent to the Owner describing the status of the Policy, including setting forth the Face Amount, the current Death Benefit, any Policy loans and accrued interest, the current Policy Account Value, the General Account Value, Indebtedness, the value in each Sub-Account, premiums paid since the last report, charges deducted since the last report, any partial surrenders since the last report, and the current Cash Surrender Value. At the present time, ANLIC plans to send these Policy Statements on a quarterly basis. In addition, a statement will be sent to the Owner showing the status of the Policy following the transfer of amounts from one Sub-Account to another, the taking out of a loan, a repayment of a loan, a partial surrender and the payment of any premiums (excluding those paid by bank draft which has not cleared). The Policy Owner should review the information in these statements carefully. An Owner may request that a similar report be prepared at other times. ANLIC may charge a reasonable fee for such requested reports and may limit the scope and frequency of such requested reports. An Owner will be sent a semi-annual report containing the financial statements of the Funds as required by the 1940 Act. STATE REGULATION ANLIC is subject to regulation and supervision by the Bureau of Insurance, State Corporation Commission of the Commonwealth of Virginia, which periodically examines its affairs. It is also subject to the insurance laws and regulations of all jurisdictions where it is authorized to do business. A copy of the Policy form has been filed with and, where required, approved by insurance officials in each jurisdiction where the Policies are sold. ANLIC is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for the purposes of determining solvency and compliance with local insurance laws and regulations. EXPERTS The statutory basis financial statements of ANLIC as of December 31, 2000 and 1999, and for the years then ended, and the financial statements of the Sub-Accounts of the Variable Account as of December 31, 2000 ,and for each of the two years in the period then ended, included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein, and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The financial statements of the Sub-Accounts of the Variable Account for the year ended December 31, 1998, included in this prospectus, have been audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. Actuarial matters included in the prospectus have been examined by Russell J. Wiltgen, Vice President - Individual Product Management of Ameritas Life Insurance Corp., as stated in his opinion filed as an exhibit to the Registration Statement. LEGAL MATTERS Matters of the State of Virginia law pertaining to the Policies, including ANLIC's right to issue the Policies and its qualification to do so under applicable laws and regulations issued thereunder, have been passed upon by Robert-John H. Sands, Senior Vice President and General Counsel of ANLIC. ALLOCATOR 2000 32 ADDITIONAL INFORMATION A registration statement has been filed with the SEC, under the 1933 Act with respect to the Policy offered hereby. This prospectus does not contain all the information set forth in the registration statement and the amendments and exhibits to the registration statement, to all of which reference is made for further information concerning the Variable Account, ANLIC and the Policy offered hereby. Statements contained in this prospectus as to the contents of the Policy and other legal instruments are summaries. For a complete statement of the terms thereof, reference is made to such instruments as filed. FINANCIAL STATEMENTS The financial statements of ANLIC which are included in this prospectus should be considered only as bearing on the ability of ANLIC to meet its obligations under the Policies. They should not be considered as bearing on the investment performance of the assets held in the Separate Account. ALLOCATOR 2000 33 INDEPENDENT AUDITORS' REPORT To the Board of Directors Acacia National Life Insurance Company Bethesda, Maryland We have audited the accompanying statement of net assets of each of the subaccounts of Acacia National Variable Life Insurance Separate Account I (comprising, respectively, the Social Money Market Portfolio, Social Balanced Portfolio, Social Small Cap Growth Portfolio, Social Mid Cap Growth Portfolio, and Social International Equity Portfolio of the Calvert Variable Series, Inc.; the Growth Portfolio, MidCap Growth Portfolio, and Small Capitalization Portfolio of the Alger American Fund; the EAFE Equity Index Portfolio, Equity 500 Index Portfolio, and Small Cap Index Portfolio of the Deutsche Asset Management (all commenced May 1, 2000); the Stock Index Portfolio of the Dreyfus Family of Funds; the Equity-Income Portfolio Service Class 2 (commenced May 1, 2000), High Income Portfolio Service Class 2 (commenced June 1, 2000), and Contrafund Portfolio Service Class 2 (commenced May 1, 2000) of the Fidelity Variable Insurance Products; the Templeton Asset Strategy Fund Portfolio (commenced May 1, 2000), and Templeton International Securities Fund Portfolio (commenced May 1, 2000) of the Franklin Templeton Variable Insurance Products Trust; the Limited Maturity Bond Portfolio, Growth Portfolio, and the Partners Portfolio (commenced May 1, 2000) of the Neuberger Berman Advisers Management Trust; the International Stock Fund II Portfolio, and Discovery Fund II Portfolio of the Strong Variable Insurance Funds, Inc.; the Worldwide Hard Assets Fund Portfolio of the Van Eck Worldwide Insurance Trust; and the Capital Appreciation Fund Portfolio, Aggressive Growth Fund Portfolio, Main Street Growth & Income Fund Portfolio, High Income Fund Portfolio, and Strategic Bond Fund Portfolio of the Oppenheimer Variable Accounts Fund) as of December 31, 2000, and the related statements of operations and changes in net assets for each of the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 2000. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, such 2000 and 1999 financial statements present fairly, in all material respects, the financial position of each of the subaccounts constituting Acacia National Variable Life Insurance Separate Account I as of December 31, 2000, and the results of their operations and changes in net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Lincoln, Nebraska February 16, 2001 F-I-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Acacia National Life Insurance Company and Contract Owners of Acacia National Variable Life Insurance Separate Account I In our opinion, the accompanying statements of operations and changes in net assets present fairly, in all material respects, the results of their operations and changes in their net assets of each of the following sub-accounts comprising the Acacia National Variable Life Insurance Separate Account I (the Account): the Social Money Market Portfolio, Social Balanced Portfolio, Social Small Cap Growth Portfolio, Social Mid Cap Growth Portfolio, and Social International Equity Portfolio of the Calvert Variable Series, Inc.; the Growth Portfolio, MidCap Growth Portfolio, and Small Capitalization Portfolio of The Alger American Fund; the Stock Index Portfolio of the Dreyfus Family of Funds; the Limited Maturity Bond Portfolio, and Growth Portfolio of the Neuberger Berman Advisers Management Trust; International Stock Fund II Portfolio, and Discovery Fund II Portfolio of the Strong Variable Insurance Funds, Inc.; the Worldwide Hard Assets Portfolio of the Van Eck Worldwide Insurance Trust; and the Capital Appreciation Portfolio, Aggressive Growth Portfolio, Growth and Income Portfolio, High Income Portfolio, and Strategic Bond Portfolio of the Oppenheimer Variable Accounts Fund for the year ended December 31, 1998, in conformity with accounting principles generally accepted in the United States of America. The financial statements are the responsibility of the Account's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Washington, D.C. April 30, 1999 F-I-2 ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENT OF NET ASSETS DECEMBER 31, 2000 ASSETS INVESTMENTS AT NET ASSET VALUE: Calvert Variable Series, Inc.: ------------------------------ Social Money Market Portfolio (Money Market) - 4,814,644.020 shares at $1.00 per share (cost $4,814,644) $ 4,814,644 Social Balanced Portfolio (Balanced) - 129,245.024 shares at $2.002 per share (cost $272,788) 258,749 Social Small Cap Growth Portfolio (Small Cap Growth) - 19,093.612 shares at $13.58 per share (cost $241,835) 259,291 Social Mid Cap Growth Portfolio (Mid Cap Growth) - 6,979.022 shares at $31.03 per share (cost $208,139) 216,559 Social International Equity Portfolio (International Equity) - 69,688.409 shares at $19.37 per share (cost $1,556,949) 1,349,865 The Alger American Fund: ------------------------ Growth Portfolio (Growth) - 141,135.916 shares at $47.27 per share (cost $7,327,356) 6,671,494 MidCap Growth Portfolio (MidCap Growth) - 97,457.171 shares at $30.62 per share (cost $2,777,683) 2,984,138 Small Capitalization Portfolio (Small Capitalization) - 162,104.964 shares at $23.49 per share (cost $5,537,245) 3,807,846 Deutsche Asset Management: EAFE Equity Index Portfolio (EAFE Equity Index) - 336,030.598 shares at $11.14 per share (cost $4,191,991) 3,743,382 Equity 500 Index Portfolio (Equity 500 Index) - 690,615.745 shares at $13.77 per share (cost $10,350,073) 9,509,779 Small Cap Index Portfolio (Small Cap Index) - 120,512.510 shares at $11.10 per share (cost $1,399,740) 1,337,689 Dreyfus Family of Funds: ------------------------ Stock Index Portfolio (Stock Index) - 102,415.429 shares at $34.00 per share (cost $1,315,707) 3,482,126 Fidelity Variable Insurance Products: ------------------------------------- Equity-Income Portfolio Service Class 2 (Equity-Income S-Class 2) - 59,696.953 shares at $25.41 per share (cost $1,395,102) 1,516,899 High Income Portfolio Service Class 2 (High Income S-Class 2) - 394.386 shares at $8.13 per share (cost $3,475) 3,206 Contrafund Portfolio Service Class 2 (Contrafund S-Class 2) - 12,409.153 shares at $23.64 per share (cost $303,033) 293,352 Franklin Templeton Variable Insurance Products Trust: Templeton Asset Strategy Fund Portfolio (Asset Strategy) - 749.517 shares at $19.13 per share (cost $14,568) 14,339 Templeton International Securities Fund Portfolio (International Securities) - 48,193.895 shares at $18.67 per share (cost $890,711) 899,780 F-I-3 ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENT OF NET ASSETS DECEMBER 31, 2000 ASSETS, CONTINUED Neuberger Berman Advisers Management Trust: Limited Maturity Bond Portfolio (Limited Maturity Bond) - 233,306.179 shares at $13.19 per share (cost $3,117,004) 3,077,311 Growth Portfolio (Growth) - 42,128.350 shares at $30.65 per share (cost $577,876) 1,291,235 Partners Portfolio (Partners) - 146,050.499 shares at $16.17 per share (cost $2,343,134) 2,361,637 Strong Variable Insurance Funds, Inc.: International Stock Fund II Portfolio (International Stock) - 52,898.458 shares at $9.90 per share (cost $(899,830)) 523,694 Discovery Fund II Portfolio (Discovery) - 17,228.366 shares at $11.88 per share (cost $165,588) 204,673 Van Eck Worldwide Insurance Trust: Worldwide Hard Assets Fund Portfolio (Hard Assets) - 116,760.143 shares at $12.07 per share (cost $1,259,257) 1,409,295 Oppenheimer Variable Accounts Fund: Capital Appreciation Fund Portfolio (Capital Appreciation) - 66,314.045 shares at $46.63 per share (cost $2,390,292) 3,092,225 Aggressive Growth Fund Portfolio (Aggressive Growth) - 48,810.852 shares at $70.77 per share (cost $2,675,347) 3,454,343 Main Street Growth & Income Fund Portfolio (Growth & Income) - 188,910.923 shares at $21.26 per share (cost $4,280,666) 4,016,247 High Income Fund Portfolio (High Income) - 70,294.427 shares at $9.27 per share (cost $757,707) 651,629 Strategic Bond Fund Portfolio (Strategic Bond) - 123,454.363 shares at $4.69 per share (cost $608,594) 579,001 ----------- NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS $ 61,824,428 =========== The accompanying notes are an integral part of these financial statements. F-I-4
ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 CALVERT VARIABLE SERIES, INC. --------------------------------- MONEY SMALL CAP TOTAL MARKET BALANCED GROWTH --------- ----------- -------- ---------- 2000 ---- INVESTMENT INCOME: Dividend distributions received $ 634,777 $ 198,385 $ 4,483 $ ----- Mortality and expense risk charge 499,409 28,772 2,480 1,858 --------- ----------- ---------- ---------- NET INVESTMENT INCOME(LOSS) 135,368 169,613 2,003 (1,858) --------- ----------- ---------- ---------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain distributions 3,737,390 ----- 7,915 9,726 Net change in unrealized appreciation(depreciation) (9,305,962) ----- (17,187) (2,839) --------- ----------- ---------- ---------- NET GAIN(LOSS) ON INVESTMENTS (5,568,572) ----- (9,272) 6,887 --------- ----------- ---------- ---------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,433,204) $ 169,613 $ (7,269) $ 5,029 =========== =========== ========== ========== 1999 ---- INVESTMENT INCOME: Dividend distributions received $ 400,978 $ 43,128 $ 7,030 $ 52 Mortality and expense risk charge 272,201 7,218 1,511 839 --------- ----------- ---------- ---------- NET INVESTMENT INCOME(LOSS) 128,777 35,910 5,519 (787) --------- ----------- ---------- ---------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain distributions 1,183,273 ----- 24,085 ----- Net change in unrealized appreciation(depreciation) 9,549,077 12,253 1,900 23,977 --------- ----------- ---------- ---------- NET GAIN(LOSS) ON INVESTMENTS 10,732,350 12,253 25,985 23,977 --------- ----------- ---------- ---------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 10,861,127 $ 48,163 $ 31,504 $ 23,190 ========= =========== ========== ========== 1998 ---- INVESTMENT INCOME: Dividend and capital gains distributions received $ 1,113,600 $ 21,621 $ 3,409 $ 1,105 Mortality and expense risk charge 148,773 4,679 308 588 --------- ----------- ---------- ---------- NET INVESTMENT INCOME(LOSS) 964,827 16,942 3,101 517 --------- ----------- ---------- ---------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain(loss) from redemptions of fund shares 72,743 99 611 (2,513) Net change in unrealized appreciation(depreciation) 1,452,308 3,000 1,900 (1,616) --------- ----------- ---------- ---------- NET GAIN(LOSS) ON INVESTMENTS 1,525,051 3,099 2,511 (4,129) --------- ----------- ---------- ---------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,489,878 $ 20,041 $ 5,612 $ (3,612) ========= =========== ========== ========== (1) Commenced business May 1, 2000.
The accompanying notes are an integral part of these financial statements. F-I-5
CALVERT VARIABLE SERIES, INC. THE ALGER AMERICAN FUND DEUTSCHE ASSET MANAGEMENT ----------------------------- -------------------------------------------------------------------- EAFE EQUITY SMALL MID CAP INTERNATIONAL MIDCAP SMALL EQUITY 500 CAP GROWTH EQUITY GROWTH GROWTH CAPITALIZATION INDEX (1) INDEX (1) INDEX (1) --------------- ------------ --------- --------- ----------- ---------- ---------- ---------- $ ----- $ ----- $ ----- $ -----$ ----- $ ----- $ 137 $ ----- 1,880 9,876 55,136 21,643 35,162 16,347 41,661 5,739 ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- (1,880) (9,876) (55,136) (21,643) (35,162) (16,347) (41,524) (5,739) ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- 16,355 115,860 826,168 298,549 1,539,921 61,997 5,339 6,903 7,068 (312,798) (1,947,041) (168,074) (2,769,891) (448,610) (840,294) (62,051) ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- 23,423 (196,938) (1,120,873) 130,475 (1,229,970) (386,613) (834,955) (55,148) ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- $ 21,543 $ (206,814) $(1,176,009)$ 108,832 $(1,265,132) $ (402,960) $ (876,479) $(60,887) =========== ============ ========= ========= =========== ========== ========== ========== $ ----- $ 380 $ 4,285 $ -----$ ----- $ ----- $ ----- $ ----- 1,517 3,400 28,150 9,224 21,737 ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- (1,517) (3,020) (23,865) (9,224) (21,737) ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- 20,944 52,658 292,559 152,575 303,027 ----- ----- ----- 2,980 113,538 882,734 257,406 903,837 ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- 23,924 166,196 1,175,293 409,981 1,206,864 ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- $ 22,407 $ 163,176 $1,151,428 $ 400,757 $1,185,127 $ ----- $ ----- $ ----- =========== ============ ========= ========= =========== ========== ========== ========== $ 13,549 $ 15,115 $ 232,531 $ 40,068 $ 173,190 $ ----- $ ----- $ ----- 594 990 14,481 5,140 12,562 ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- 12,955 14,125 218,050 34,928 160,628 ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- 2,455 1,263 98,690 13,059 4,107 ----- ----- ----- (1,025) (5,285) 297,960 98,503 62,991 ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- 1,430 (4,022) 396,650 111,562 67,098 ----- ----- ----- ----------- ------------ --------- --------- ----------- ---------- ---------- ---------- $ 14,385 $ 10,103 $614,700 $ 146,490 $ 227,726 $ ----- $ ----- $ ----- =========== ============ ========= ========= =========== ========== ========== ==========
F-I-6
ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 DREYFUS FAMILY OF FIDELITY VARIABLE INSURANCE FUNDS PRODUCTS ---------- ------------------------------------ HIGH STOCK EQUITY-INCOME INCOME CONTRAFUND S-CLASS 2 S-CLASS 2 S-CLASS 2 INDEX (1) (2) (1) ---------- ----------- ----------- ----------- 2000 ---- INVESTMENT INCOME: Dividend distributions received $ 68,362 $ ----- $ ----- $ ----- Mortality and expense risk charge 72,604 6,750 7 1,131 ---------- ----------- ----------- ----------- NET INVESTMENT INCOME(LOSS) (4,242) (6,750) (7) (1,131) ---------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain distributions 69,255 ----- ----- ----- Net change in unrealized appreciation(depreciation) (574,460) 121,797 (269) (9,681) ---------- ----------- ----------- ----------- NET GAIN(LOSS) ON INVESTMENTS (505,205) 121,797 (269) (9,681) ---------- ----------- ----------- ----------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (509,447) $ 115,047 $ (276) $ (10,812) ========== =========== =========== =========== 1999 ---- INVESTMENT INCOME: Dividend distributions received $ 111,343 $ ----- $ ----- $ ----- Mortality and expense risk charge 75,772 ----- ----- ----- ---------- ----------- ----------- ----------- NET INVESTMENT INCOME(LOSS) 35,571 ----- ----- ----- ---------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain distributions 98,876 ----- ----- ----- Net change in unrealized appreciation(depreciation) 1,835,918 ----- ----- ----- ---------- ----------- ----------- ----------- NET GAIN(LOSS) ON INVESTMENTS 1,934,794 ----- ----- ----- ---------- ----------- ----------- ----------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,970,365 $ ----- $ ----- $ ----- ========== =========== =========== =========== 1998 ---- INVESTMENT INCOME: Dividend and capital gains distributions received $ 130,875 $ ----- $ ----- $ ----- Mortality and expense risk charge 38,276 ----- ----- ----- ---------- ----------- ----------- ----------- NET INVESTMENT INCOME(LOSS) 92,599 ----- ----- ----- ---------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain(loss) from redemptions of fund shares 184,713 ----- ----- ----- Net change in unrealized appreciation(depreciation) 729,209 ----- ----- ----- ---------- ----------- ----------- ----------- NET GAIN(LOSS) ON INVESTMENTS 913,922 ----- ----- ----- ---------- ----------- ----------- ----------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,006,521 $ ----- $ ----- $ ----- ========== =========== =========== =========== (1) Commenced business May 1, 2000. (2) Commenced business June 1, 2000.
The accompanying notes are an integral part of these financial statements. F-I-7
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS NEUBERGER BERMAN STRONG VARIABLE TRUST ADVISORS MANAGEMENT TRUST INSURANCE FUNDS, INC. ------------------------------ --------------------------------------- ----------------------- LIMITED ASSET INTERNATIONAL MATURITY PARTNERS INTERNATIONAL STRATEGY (1) SECURITIES (1) BOND GROWTH (1) STOCK DISCOVERY ------------- ---------------- ------------------------- ------------ ----------------------- $ ----- $ ----- $ 238,208 $ ----- $ ----- $ ----- $ ----- 55 3,385 28,363 17,949 10,338 23,251 2,658 ------------- ---------------- ------------------------- ------------ ----------------------- (55) (3,385) 209,845 (17,949) (10,338) (23,251) (2,658) ------------- ---------------- ------------------------- ------------ ----------------------- ----- ----- ----- 229,405 ----- ----- ----- (229) 9,069 (26,053) (235,262) 18,503 (803,050) 31,174 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- (229) 9,069 (26,053) (5,857) 18,503 (803,050) 31,174 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- $ (284) $ 5,684 $ 183,792 $ (23,806) $ 8,165 $ (826,301) $ 28,516 ============= ================ ============ =========== ============ ============ ========== $ ----- $ ----- $ 132,944 $ ----- $ ----- $ 11,187 $ ----- ----- ----- 20,050 14,860 ----- 25,477 2,621 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- ----- ----- 112,894 (14,860) ----- (14,290) (2,621) ------------- ---------------- ------------ ----------- ------------ ------------ ---------- ----- ----- ----- 88,404 ----- ----- 44,830 ----- ----- (30,899) 857,225 ----- 2,395,242 (15,057) ------------- ---------------- ------------ ----------- ------------ ------------ ---------- ----- ----- (30,899) 945,629 ----- 2,395,242 29,773 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- $ ----- $ ----- $ 81,995 $ 930,769 $ ----- $ 2,380,952 $ 27,152 ============= ================ ============ =========== ============ ============ ========== $ ----- $ ----- $ 58,873 $ 188,569 $ ----- $ 61,955 $ 3,760 ----- ----- 12,750 9,585 ----- 16,284 2,398 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- ----- ----- 46,123 178,984 ----- 45,671 1,362 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- ----- ----- 1,107 (18,723) ----- (206,240) 5,905 ----- ----- (2,543) 22,943 ----- 59,071 8,186 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- ----- ----- (1,436) 4,220 ----- (147,169) 14,091 ------------- ---------------- ------------ ----------- ------------ ------------ ---------- $ ----- $ ----- $ 44,687 $ 183,204 $ ----- $ (101,498) $ 15,453 ============= ================ ============ =========== ============ ============ ==========
F-I-8
ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 VAN ECK WORLDWIDE INSURANCE OPPENHEIMER VARIABLE TRUST ACCOUNTS FUND -------------- -------------------------- CAPITAL AGGRESSIVE HARD ASSETS APPRECIATION GROWTH -------------- ------------ ------------ 2000 ---- INVESTMENT INCOME: Dividend distributions received $ 12,083 $ 6,267 $ ----- Mortality and expense risk charge 10,805 34,180 32,688 -------------- ------------ ------------ NET INVESTMENT INCOME(LOSS) 1,278 (27,913) (32,688) -------------- ------------ ------------ REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain distributions ----- 334,438 133,915 Net change in unrealized appreciation(depreciation) 140,443 (178,824) (664,818) -------------- ------------ ------------ NET GAIN(LOSS) ON INVESTMENTS 140,443 155,614 (530,903) -------------- ------------ ------------ NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 141,721 $ 127,701 $ (563,591) ============== ============ ============ 1999 ---- INVESTMENT INCOME: Dividend distributions received $ 9,610 $ 9,060 $ ----- Mortality and expense risk charge 6,153 20,639 17,873 -------------- ------------ ------------ NET INVESTMENT INCOME(LOSS) 3,457 (11,579) (17,873) -------------- ------------ ------------ REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain distributions ----- 99,521 ----- Net change in unrealized appreciation(depreciation) 164,247 634,969 1,323,874 -------------- ------------ ------------ NET GAIN(LOSS) ON INVESTMENTS 164,247 734,490 1,323,874 -------------- ------------ ------------ NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 167,704 $ 722,911 $ 1,306,001 ============== ============ ============ 1998 ---- INVESTMENT INCOME: Dividend and capital gains distributions received $ 41,873 $ 82,136 $ 13,351 Mortality and expense risk charge 3,681 12,581 7,499 -------------- ------------ ------------ NET INVESTMENT INCOME(LOSS) 38,192 69,555 5,852 -------------- ------------ ------------ REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS: Net realized gain(loss) from redemptions of fund shares (41,446) 24,932 10,354 Net change in unrealized appreciation(depreciation) (148,313) 224,336 118,634 -------------- ------------ ------------ NET GAIN(LOSS) ON INVESTMENTS (189,759) 249,268 128,988 -------------- ------------ ------------ NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (151,567) $ 318,823 $ 134,840 ============== ============ ============
The accompanying notes are an integral part of these financial statements. F-I-9 OPPENHEIMER VARIABLE ACCOUNTS FUND ----------------------------------------------- GROWTH & STRATEGIC INCOME HIGH INCOME BOND -------------- ------------ -------------- $ 6,184 $ 75,725 $ 24,943 24,825 5,709 4,157 -------------- ------------ -------------- (18,641) 70,016 20,786 -------------- ------------ -------------- 81,644 ----- ----- (460,734) (102,622) (9,229) -------------- ------------ -------------- (379,090) (102,622) (9,229) -------------- ------------ -------------- $ (397,731) $ (32,606) $ 11,557 ============== ============ ============== $ 3,439 $ 30,951 $ 37,569 7,399 4,163 3,598 -------------- ------------ -------------- (3,960) 26,788 33,971 -------------- ------------ -------------- 5,794 ----- ----- 197,475 6,886 (19,428) -------------- ------------ -------------- 203,269 6,886 (19,428) -------------- ------------ -------------- $ 199,309 $ 33,674 $ 14,543 ============== ============ ============== $ 10,963 $ 6,494 $ 14,163 3,138 1,942 1,297 -------------- ------------ -------------- 7,825 4,552 12,866 -------------- ------------ -------------- 1,441 (1,436) (5,635) (4,187) (10,716) (740) -------------- ------------ -------------- (2,746) (12,152) (6,375) -------------- ------------ -------------- $ 5,079 $ (7,600) $ 6,491 ============== ============ ============== F-I-10
ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 CALVERT VARIABLE SERIES, INC. -------------------------------- SMALL MONEY CAP TOTAL MARKET BALANCED GROWTH ---------- ----------- --------- --------- 2000 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 135,368 $ 169,613 $ 2,003 $ (1,858) Net realized gain distributions 3,737,390 ----- 7,915 9,726 Net change in unrealized appreciation(depreciation) (9,305,962) ----- (17,187) (2,839) ---------- ----------- --------- --------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING (5,433,204) 169,613 (7,269) 5,029 FROM OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 17,138,728 3,040,212 (64,631) 114,077 ---------- ----------- --------- --------- TOTAL INCREASE(DECREASE) IN NET ASSETS 11,705,524 3,209,825 (71,900) 119,106 ---------- ----------- --------- --------- NET ASSETS AT JANUARY 1, 2000 50,118,904 1,604,819 330,649 140,185 ---------- ----------- --------- --------- NET ASSETS AT DECEMBER 31, 2000 $ 61,824,428$ 4,814,644 $ 258,749 $259,291 ========== =========== ========= ========= 1999 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 128,777 $ 35,910 $ 5,519 $ (787) Net realized gain distributions 1,183,273 ----- 24,085 ----- Net change in unrealized appreciation(depreciation) 9,549,077 12,253 1,900 23,977 ---------- ----------- --------- --------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING 10,861,127 48,163 31,504 23,190 FROM OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 14,333,239 860,441 251,997 29,588 ---------- ----------- --------- --------- TOTAL INCREASE(DECREASE) IN NET ASSETS 25,194,366 908,604 283,501 52,778 ---------- ----------- --------- --------- NET ASSETS AT JANUARY 1, 1999 24,924,538 696,215 47,148 87,407 ---------- ----------- --------- --------- NET ASSETS AT DECEMBER 31, 1999 $ 50,118,904 $ 1,604,819 $ 330,649 $140,185 ========== =========== ========= ========= 1998 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 964,827 $ 16,942 $ 3,101 $ 517 Net realized gain(loss) from redemption of fund shares 72,743 99 611 (2,513) Net change in unrealized appreciation(depreciation) 1,452,308 3,000 1,900 (1,616) ---------- ----------- --------- --------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING 2,489,878 20,041 5,612 (3,612) FROM OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 13,558,555 309,331 18,777 44,873 ---------- ----------- --------- --------- TOTAL INCREASE(DECREASE) IN NET ASSETS 16,048,433 329,372 24,389 41,261 ---------- ----------- --------- --------- NET ASSETS AT JANUARY 1, 1998 8,876,105 366,843 22,759 46,146 ---------- ----------- --------- --------- NET ASSETS AT DECEMBER 31, 1998 $ 24,924,538 $ 696,215 $ 47,148 $ 87,407 ========== =========== ========= ========= (1) Commenced business May 1, 2000.
The accompanying notes are an integral part of these financial statements. F-I-11
CALVERT VARIABLE SERIES, INC. THE ALGER AMERICAN FUND DEUTSCHE ASSET MANAGEMENT ----------------------- ----------------------------------- --------------------------------- EAFE EQUITY EQUITY SMALL MID CAP INTERNATIONAL MIDCAP SMALL INDEX 500 CAP GROWTH EQUITY GROWTH GROWTH CAPITALIZATION (1) INDEX (1) INDEX (1) ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- $ (1,880)$ (9,876)$ (55,136)$ (21,643) $ (35,162) $ (16,347)$ (41,524)$ (5,739) 16,355 115,860 826,168 298,549 1,539,921 61,997 5,339 6,903 7,068 (312,798) (1,947,041) (168,074) (2,769,891) (448,610) (840,294) (62,051) ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 21,543 (206,814) (1,176,009) 108,832 (1,265,132) (402,960) (876,479) (60,887) (76,325) 806,068 2,541,667 1,103,621 1,018,350 4,146,342 10,386,258 1,398,576 ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- (54,782) 599,254 1,365,658 1,212,453 (246,782) 3,743,382 9,509,779 1,337,689 ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 271,341 750,611 5,305,836 1,771,685 4,054,628 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- $ 216,559 $ 1,349,865 $ 6,671,494 $ 2,984,138 $ 3,807,846 $ 3,743,382 $ 9,509,779 $1,337,689 =========== ========== ========== ========== ============ ========= ========== ========== $ (1,517)$ (3,020)$ (23,865)$ (9,224) $ (21,737) $ ----- $ ----- $ ----- 20,944 52,658 292,559 152,575 303,027 ----- ----- ----- 2,980 113,538 882,734 257,406 903,837 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 22,407 163,176 1,151,428 400,757 1,185,127 ----- ----- ----- 125,068 382,269 1,752,646 519,905 823,820 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 147,475 545,445 2,904,074 920,662 2,008,947 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 123,866 205,166 2,401,762 851,023 2,045,681 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- $ 271,341 $ 750,611 $ 5,305,836 $ 1,771,685 $4,054,628 $ ----- $ ----- $ ----- =========== ========== ========== ========== ============ ========= ========== ========== $ 12,955 $ 14,125 $ 218,050 $ 34,928 $ 160,628 $ ----- $ ----- $ ----- 2,455 1,263 98,690 13,059 4,107 ----- ----- ----- (1,025) (5,285) 297,960 98,503 62,991 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 14,385 10,103 614,700 146,490 227,726 ----- ----- ----- 98,279 175,356 898,671 387,686 1,009,524 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 112,664 185,459 1,513,371 534,176 1,237,250 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- 11,202 19,707 888,391 316,847 808,431 ----- ----- ----- ----------- ---------- ---------- ---------- ------------ --------- ---------- ---------- $ 123,866 $ 205,166 $ 2,401,762 $ 851,023 $2,045,681 $ ----- $ ----- $ ----- =========== ========== ========== ========== ============ ========= ========== ==========
F-I-12
ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 DREYFUS FAMILY OF FIDELITY VARIABLE INSURANCE FUNDS PRODUCTS ---------- ------------------------------------ HIGH STOCK EQUITY-INCOME INCOME CONTRAFUND S-CLASS 2 S-CLASS S-CLASS 2 INDEX (1) 2 (2) (1) ---------- ----------- ---------- ----------- 2000 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ (4,242) $ (6,750) $ (7) $ (1,131) Net realized gain distributions 69,255 ----- ----- ----- Net change in unrealized appreciation(depreciation) (574,460) 121,797 (269) (9,681) ---------- ----------- ---------- ----------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING (509,447) 115,047 (276) (10,812) FROM OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS (9,358,386) 1,401,852 3,482 304,164 ---------- ----------- ---------- ----------- TOTAL INCREASE(DECREASE) IN NET ASSETS (9,867,833) 1,516,899 3,206 293,352 ---------- ----------- ---------- ----------- NET ASSETS AT JANUARY 1, 2000 13,349,959 ----- ----- ----- ---------- ----------- ---------- ----------- NET ASSETS AT DECEMBER 31, 2000 $ 3,482,126 $ 1,516,899 $ 3,206 $ 293,352 ========== =========== ========== =========== 1999 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 35,571 $ ----- $ ----- $ ----- Net realized gain distributions 98,876 ----- ----- ----- Net change in unrealized appreciation(depreciation) 1,835,918 ----- ----- ----- ---------- ----------- ---------- ----------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING 1,970,365 ----- ----- ----- FROM OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 4,711,735 ----- ----- ----- ---------- ----------- ---------- ----------- TOTAL INCREASE(DECREASE) IN NET ASSETS 6,682,100 ----- ----- ----- ---------- ----------- ---------- ----------- NET ASSETS AT JANUARY 1, 1999 6,667,859 ----- ----- ----- ---------- ----------- ---------- ----------- NET ASSETS AT DECEMBER 31, 1999 $13,349,959 $ ----- $ ----- $ ----- ========== =========== ========== =========== 1998 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 92,599 $ ----- $ ----- $ ----- Net realized gain(loss) from redemption of fund shares 184,713 ----- ----- ----- Net change in unrealized appreciation(depreciation) 729,209 ----- ----- ----- ---------- ----------- ---------- ----------- NET INCREASE(DECREASE) IN NET ASSETS RESULTING 1,006,521 ----- ----- ----- FROM OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 3,632,941 ----- ----- ----- ---------- ----------- ---------- ----------- TOTAL INCREASE(DECREASE) IN NET ASSETS 4,639,462 ----- ----- ----- ---------- ----------- ---------- ----------- NET ASSETS AT JANUARY 1, 1998 2,028,397 ----- ----- ----- ---------- ----------- ---------- ----------- NET ASSETS AT DECEMBER 31, 1998 $6,667,859 $ ----- $ ----- $ ----- ========== =========== ========== =========== (1) Commenced business May 1, 2000. (2) Commenced business June 1, 2000.
The accompanying notes are an integral part of these financial statements. F-I-13
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS NEUBERGER BERMAN STRONG VARIABLE TRUST ADVISORS MANAGEMENT TRUST INSURANCE FUNDS, INC. ----------------------------- ----------------------------------------- -------------------------- ASSET INTERNATIONAL LIMITED SECURITIES MATURITY INTERNATIONAL STRATEGY (1) (1) BOND GROWTH PARTNERS (1) STOCK DISCOVERY -------------- ------------- ------------- ------------ ------------- ------------ ------------ $ (55)$ (3,385) $ 209,845 $ (17,949) $ (10,338) $ (23,251) $ (2,658) ----- ----- ----- 229,405 ----- ----- ----- (229) 9,069 (26,053) (235,262) 18,503 (803,050) 31,174 -------------- ------------- ------------- ------------ ------------- ------------ ------------ (284) 5,684 183,792 (23,806) 8,165 (826,301) 28,516 14,623 894,096 (247,233) (1,407,105) 2,353,472 (3,749,727) (241,954) -------------- ------------- ------------- ------------ ------------- ------------ ------------ 14,339 899,780 (63,441) (1,430,911) 2,361,637 (4,576,028) (213,438) -------------- ------------- ------------- ------------ ------------- ------------ ------------ ----- ----- 3,140,752 2,722,146 ----- 5,099,722 418,111 -------------- ------------- ------------- ------------ ------------- ------------ ------------ $ 14,339 $ 899,780 $ 3,077,311 $1,291,235 $ 2,361,637 $ 523,694 $ 204,673 ============== ============= ============= ============ ============= ============ ============ $ ----- $ ----- $ 112,894 $ (14,860) $ ----- $ (14,290) $ (2,621) ----- ----- ----- 88,404 ----- ----- 44,830 ----- ----- (30,899) 857,225 ----- 2,395,242 (15,057) -------------- ------------- ------------- ------------ ------------- ------------ ------------ ----- ----- 81,995 930,769 ----- 2,380,952 27,152 ----- ----- 1,025,930 243,298 ----- 305,865 54,601 -------------- ------------- ------------- ------------ ------------- ------------ ------------ ----- ----- 1,107,925 1,174,067 ----- 2,686,817 81,753 -------------- ------------- ------------- ------------ ------------- ------------ ------------ ----- ----- 2,032,827 1,548,079 ----- 2,412,905 336,358 -------------- ------------- ------------- ------------ ------------- ------------ ------------ $ ----- $ ----- $ 3,140,752 $2,722,146 $ ----- $5,099,722 $ 418,111 ============== ============= ============= ============ ============= ============ ============ $ ----- $ ----- $ 46,123 $ 178,984 $ ----- $ 45,671 $ 1,362 ----- ----- 1,107 (18,723) ----- (206,240) 5,905 ----- ----- (2,543) 22,943 ----- 59,071 8,186 -------------- ------------- ------------- ------------ ------------- ------------ ------------ ----- ----- 44,687 183,204 ----- (101,498) 15,453 ----- ----- 1,124,307 735,204 ----- 1,227,685 112,491 -------------- ------------- ------------- ------------ ------------- ------------ ------------ ----- ----- 1,168,994 918,408 ----- 1,126,187 127,944 -------------- ------------- ------------- ------------ ------------- ------------ ------------ ----- ----- 863,833 629,671 ----- 1,286,718 208,414 -------------- ------------- ------------- ------------ ------------- ------------ ------------ $ ----- $ ----- $ 2,032,827 $1,548,079 $ ----- $2,412,905 $ 336,358 ============== ============= ============= ============ ============= ============ ============
F-I-14
ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 VAN ECK WORLDWIDE OPPENHEIMER VARIABLE INSURANCE TRUST ACCOUNTS FUND ------------- --------------------------- HARD CAPITAL AGGRESSIVE ASSETS APPRECIATION GROWTH ----------- ------------- ------------ 2000 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 1,278 $ (27,913) $ (32,688) Net realized gain distributions ----- 334,438 133,915 Net change in unrealized appreciation(depreciation) 140,443 (178,824) (664,818) ----------- ------------- ------------ NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM 141,721 127,701 (563,591) OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 233,421 (1,357,813) 781,839 ----------- ------------- ------------ TOTAL INCREASE(DECREASE) IN NET ASSETS 375,142 (1,230,112) 218,248 ----------- ------------- ------------ NET ASSETS AT JANUARY 1, 2000 1,034,153 4,322,337 3,236,095 ----------- ------------- ------------ NET ASSETS AT DECEMBER 31, 2000 $ 1,409,295 $ 3,092,225 $ 3,454,343 =========== ============= ============ 1999 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 3,457 $ (11,579) $ (17,873) Net realized gain distributions ----- 99,521 ----- Net change in unrealized appreciation(depreciation) 164,247 634,969 1,323,874 ----------- ------------- ------------ NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM 167,704 722,911 1,306,001 OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 284,172 1,345,599 582,546 ----------- ------------- ------------ TOTAL INCREASE(DECREASE) IN NET ASSETS 451,876 2,068,510 1,888,547 ----------- ------------- ------------ NET ASSETS AT JANUARY 1, 1999 582,277 2,253,827 1,347,548 ----------- ------------- ------------ NET ASSETS AT DECEMBER 31, 1999 $ 1,034,153 $ 4,322,337 $ 3,236,095 =========== ============= ============ 1998 ---- INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS: Net Investment income(loss) $ 38,192 $ 69,555 $ 5,852 Net realized gain(loss) from redemption of fund shares (41,446) 24,932 10,354 Net change in unrealized appreciation(depreciation) (148,313) 224,336 118,634 ----------- ------------- ------------ NET INCREASE(DECREASE) IN NET ASSETS RESULTING FROM (151,567) 318,823 134,840 OPERATIONS NET INCREASE(DECREASE) FROM POLICYOWNER TRANSACTIONS 479,900 1,330,394 856,576 ----------- ------------- ------------ TOTAL INCREASE(DECREASE) IN NET ASSETS 328,333 1,649,217 991,416 ----------- ------------- ------------ NET ASSETS AT JANUARY 1, 1998 253,944 604,610 356,132 ----------- ------------- ------------ NET ASSETS AT DECEMBER 31, 1998 $ 582,277 $ 2,253,827 $ 1,347,548 =========== ============= ============ The accompanying notes are an integral part of these financial statements.
F-I-15 OPPENHEIMER VARIABLE ACCOUNTS FUND ---------------------------------------------- GROWTH & STRATEGIC INCOME HIGH INCOME BOND ------------- ------------ ------------ $ (18,641) $ 70,016 $ 20,786 81,644 ----- ----- (460,734) (102,622) (9,229) ------------- ------------ ------------ (397,731) (32,606) 11,557 3,062,174 (25,113) 62,721 ------------- ------------ ------------ 2,664,443 (57,719) 74,278 ------------- ------------ ------------ 1,351,804 709,348 504,723 ------------- ------------ ------------ $ 4,016,247 $ 651,629 $ 579,001 ============= ============ ============ $ (3,960) $ 26,788 $ 33,971 5,794 ----- ----- 197,475 6,886 (19,428) ------------- ------------ ------------ 199,309 33,674 14,543 514,599 304,273 214,887 ------------- ------------ ------------ 713,908 337,947 229,430 ------------- ------------ ------------ 637,896 371,401 275,293 ------------- ------------ ------------ $ 1,351,804 $ 709,348 $ 504,723 ============= ============ ============ $ 7,825 $ 4,552 $ 12,866 1,441 (1,436) (5,635) (4,187) (10,716) (740) ------------- ------------ ------------ 5,079 (7,600) 6,491 557,879 309,237 249,444 ------------- ------------ ------------ 562,958 301,637 255,935 ------------- ------------ ------------ 74,938 69,764 19,358 ------------- ------------ ------------ $ 637,896 $ 371,401 $ 275,293 ============= ============ ============ F-I-16 ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND DESCRIPTION OF OPERATIONS The Acacia National Variable Life Insurance Separate Account I (the Account) began operations on December 1, 1995 as a separate investment account within Acacia National Life Insurance Company (the Company), a wholly owned subsidiary of Acacia Life Insurance Company. The assets of the Account are held by the Company and are segregated from all of the Company's other assets. The Account is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. At December 31, 2000, there are twenty eight subaccounts within the Account. Five of the subaccounts invest only in a corresponding Portfolio of Calvert Variable Series, Inc. which is a diversified open-end management investment company managed by Calvert Asset Management Company, Inc. (see note 3). Three of the subaccounts invest only in a corresponding Portfolio of The Alger American Fund which is a diversified open-end management investment company managed by Fred Alger Management, Inc. (Alger Management). Three of the subaccounts invest only in a corresponding Portfolio of Deutsche Asset Management which is a diversified open-end management investment company managed by Deutsche Asset Management. One subaccount invests only in a corresponding Portfolio of Dreyfus Family of Funds which is a diversified open-end management investment company managed by Dreyfus Service Corporation.Three of the subaccounts invest only in a corresponding Portfolio of Fidelity Variable Insurance Products which is a diversified open-end management investment company managed by Fidelity Management and Research Company. Two of the subaccounts invest only in a corresponding Portfolio of Franklin Templeton Variable Insurance Products Trust which is a diversified open-end management investment company managed by Templeton Investment Counsel, Inc. Three of the subaccounts invest only in a corresponding Portfolio of Neuberger Berman Advisers Management Trust which is a diversified open-end management investment company managed by Neuberger Berman Management Incorporated. Two of the subaccounts invest only in a corresponding Portfolio of Strong Variable Insurance Funds, Inc. which is a diversified open-end management investment company managed by Strong Capital Management, Inc. One of the subaccounts invest only in a corresponding Portfolio of Van Eck Worldwide Insurance Trust which is a diversified open-end management investment company managed by Van Eck Associates Corporation. Five of the subaccounts invest only in a corresponding Portfolio of Oppenheimer Variable Accounts Fund which is a diversified open-end management investment company managed by Oppenheimer Funds, Inc. Each Portfolio pays the manager a monthly fee for its investments and business affairs. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CONSISTENCY Due to changes in the processing environment during 1999, certain information is presented differently between years. In 2000 and 1999, net realized gains/losses on redemption of fund shares is included in net change in unrealized appreciation/depreciation. Capital gain distributions received are reflected in the net realized gain distributions. In 1998, net realized gains and losses on redemption of fund shares are separately presented. Capital gain distributions received from funds are included in dividend distributions received. VALUATION OF INVESTMENTS The assets of the Account are carried at the net asset value of the underlying Portfolios. The value of the policyowners' units corresponds to the Account's investment in the underlying subaccounts. The availability of investment portfolio and subaccount options may vary between products. Share transactions and security transactions are accounted for on a trade date basis. However, dividends of $30,157 for the Stock Index Portfolio and $21,938 for the International Stock Fund II Portfolio were received in 1997 and recorded in 1998. All affected policyowner accounts were adjusted. FEDERAL AND STATE TAXES The operations of the Account are included in the federal income tax return of the Company, which is taxed as a life insurance company under the Internal Revenue Code. The Company has the right to charge the Account any federal income taxes, or provisions for federal income taxes, attributed to the operations of the Account or to the policies funded in the Account. Currently, the Company does not make a charge for income or other taxes. Charges for state and local taxes, if any, attributable to the Account may also be made. F-I-17 ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I NOTES TO FINANCIAL STATEMENTS 2. POLICYOWNER CHARGES The Company charges the Account for mortality and expense risks assumed. A daily charge is made on the average daily value of the net assets representing equity of policyowners held in each subaccount per each product's current policy provisions. Additional charges are made at intervals and in amounts per each product's current policy provisions. These charges are prorated against the balance in each investment option of the policyowner, including the Fixed Account option which is not reflected in this separate account. 3. RELATED PARTIES Calvert Asset Management Company, Inc., an affiliate of the Company, serves as an investment advisor to the Calvert Variable Series, Inc. Social Money Market, Social Balanced, Social Small Cap Growth, Social Mid Cap Growth and Social International Equity Portfolios. The Advisors Group, Inc., an affiliate of the Company, acts as a principal underwriter of the policies pursuant to an underwriting agreement with the Company. F-I-18 ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I NOTES TO FINANCIAL STATEMENTS 4. UNITS OWNED -------------- Units owned are as follows:
CALVERT VARIABLE SERIES, INC. -------------------------------------------------------------------- SMALL CAP MID CAP INTERNATIONAL MONEY MARKET BALANCED GROWTH GROWTH EQUITY ------------- ------------ ------------ ------------ ------------- Units owned at January 1, 2000 1,365,876 18,502 10,097 15,794 43,130 Units acquired 18,806,731 57,154 42,250 28,617 273,933 Units disposed 16,347,483 60,109 34,621 33,065 222,910 ------------- ------------ ------------ ------------ ------------- Units owned at December 31, 2000 3,825,124 15,547 17,726 11,346 94,153 ============= ============ ============ ============ ============= Units owned at January 1, 1999 598,035 2,990 7,476 7,670 15,712 Units acquired 5,307,754 17,585 7,132 26,315 33,694 Units disposed 4,539,913 2,073 4,511 18,191 6,276 ------------- ------------ ------------ ------------ ------------- Units owned at December 31, 1999 1,365,876 18,502 10,097 15,794 43,130 ============= ============ ============ ============ ============= Units owned at January 1, 1998 330,489 1,678 3,703 900 1,788 Units acquired 2,498,903 2,971 5,008 7,984 17,004 Units disposed 2,231,357 1,659 1,235 1,214 3,080 ------------- ------------ ------------ ------------ ------------- Units owned at December 31, 1998 598,035 2,990 7,476 7,670 15,712 ============= ============ ============ ============ ============= F-I-19 THE ALGER AMERICAN FUND DEUTSCHE ASSET MANAGEMENT ---------------------------------------------- ------------------------------------------- EAFE EQUITY MIDCAP SMALL EQUITY 500 SMALL CAP GROWTH GROWTH CAPITALIZATION INDEX INDEX INDEX -------------- -------------- ------------- ------------ ------------- -------------- 188,423 80,307 212,186 ----- ----- ----- 478,518 183,457 288,448 883,157 1,528,444 317,096 390,138 139,642 226,845 551,030 834,340 196,562 -------------- -------------- ------------- ------------ ------------- -------------- 276,803 124,122 273,789 332,127 694,104 120,534 ============== ============== ============= ============ ============= ============== 113,872 50,595 153,159 ----- ----- ----- 146,269 79,523 151,870 ----- ----- ----- 71,718 49,811 92,843 ----- ----- ----- -------------- -------------- ------------- ------------ ------------- -------------- 188,423 80,307 212,186 ----- ----- ----- ============== ============== ============= ============ ============= ============== 62,387 24,543 69,933 ----- ----- ----- 78,302 32,437 103,745 ----- ----- ----- 26,817 6,385 20,519 ----- ----- ----- -------------- -------------- ------------- ------------ ------------- -------------- 113,872 50,595 153,159 ----- ----- ----- ============== ============== ============= ============ ============= ==============
F-I-20 ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I NOTES TO FINANCIAL STATEMENTS 4. UNITS OWNED (CONTINUED) -------------------------- Units owned are as follows:
DREYFUS FAMILY OF FUNDS FIDELITY VARIABLE INSURANCE PRODUCTS -------------- ------------------------------------------ STOCK EQUITY-INCOME HIGH INCOME CONTRAFUND INDEX S-CLASS 2 S-CLASS 2 S-CLASS 2 -------------- -------------- ------------- ------------- Units owned at January 1, 2000 533,318 ----- ----- ----- Units acquired 293,192 179,054 402 24,306 Units disposed 592,356 119,024 7 11,827 -------------- -------------- ------------- ------------- Units owned at December 31, 2000 234,154 60,030 395 12,479 ============== ============== ============= ============= Units owned at January 1, 1999 320,865 ----- ----- ----- Units acquired 357,435 ----- ----- ----- Units disposed 144,982 ----- ----- ----- -------------- -------------- ------------- ------------- Units owned at December 31, 1999 533,318 ----- ----- ----- ============== ============== ============= ============= Units owned at January 1, 1998 125,133 ----- ----- ----- Units acquired 230,164 ----- ----- ----- Units disposed 34,432 ----- ----- ----- -------------- -------------- ------------- ------------- Units owned at December 31, 1998 320,865 ----- ----- ----- ============== ============== ============= =============
F-I-21
FRANKLIN TEMPLETON NEUBERGER BERMAN STRONG VARIABLE VARIABLE INSURANCE PRODUCTS TRUST ADVISORS MANAGEMENT TRUST INSURANCE FUNDS, INC. ----------------------------- ------------------------------------- ----------------------- LIMITED ASSET INTERNATIONAL MATURITY INTERNATIONAL STRATEGY SECURITIES BOND GROWTH PARTNERS STOCK DISCOVERY ------------ ------------ ---------- ------------- ---------- ----------------------- ----- ----- 263,134 112,854 ----- 297,791 33,373 1,122 115,077 7,427,644 228,409 422,494 470,221 12,682 369 66,615 7,446,379 279,658 275,591 716,878 30,195 ------------ ------------ ---------- ------------- ---------- ------------ ---------- 753 48,462 244,399 61,605 146,903 51,134 15,860 ============ ============ ========== ============= ========== ============ ========== ----- ----- 173,713 97,419 ----- 262,868 28,197 ----- ----- 200,479 48,449 ----- 258,376 91,292 ----- ----- 111,058 33,014 ----- 223,453 86,116 ------------ ------------ ---------- ------------- ---------- ------------ ---------- ----- ----- 263,134 112,854 ----- 297,791 33,373 ============ ============ ========== ============= ========== ============ ========== ----- ----- 77,059 45,761 ----- 137,912 18,742 ----- ----- 136,118 65,880 ----- 201,600 14,670 ----- ----- 39,464 14,222 ----- 76,644 5,215 ------------ ------------ ---------- ------------- ---------- ----------- ----------- ----- ----- 173,713 97,419 ----- 262,868 28,197 ============ ============ ========== ============= ========== =========== ===========
F-I-22 ACACIA NATIONAL VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I NOTES TO FINANCIAL STATEMENTS 4. UNITS OWNED (CONTINUED) ----------- Units owned are as follows:
VAN ECK WORLDWIDE OPPENHEIMER VARIABLE INSURANCE TRUST ACCOUNTS FUND -------------------- ------------------------------------------ CAPITAL AGGRESSIVE HARD ASSETS APPRECIATION GROWTH -------------------- -------------------- -------------------- Units owned at January 1, 2000 108,328 202,934 123,920 Units acquired 472,193 549,645 12,196,315 Units disposed 446,935 607,386 11,293,371 -------------------- -------------------- -------------------- Units owned at December 31, 2000 133,586 145,193 1,026,864 ==================== ==================== ==================== Units owned at January 1, 1999 73,721 150,216 95,687 Units acquired 105,757 135,346 159,858 Units disposed 71,150 82,628 131,625 -------------------- -------------------- -------------------- Units owned at December 31, 1999 108,328 202,934 123,920 ==================== ==================== ==================== Units owned at January 1, 1998 22,198 49,967 28,422 Units acquired 59,926 119,856 77,765 Units disposed 8,403 19,607 10,500 -------------------- -------------------- -------------------- Units owned at December 31, 1998 73,721 150,216 95,687 ==================== ==================== ====================
F-I-23 OPPENHEIMER VARIABLE ACCOUNTS FUND ----------------------------------------------------------- GROWTH & STRATEGIC INCOME HIGH INCOME BOND ----------------- ----------------- ---------------- 82,912 61,136 44,565 658,673 80,166 229,038 471,935 82,114 216,643 ----------------- ----------------- ---------------- 269,650 59,188 56,960 ================= ================= ================ 47,458 33,313 24,847 93,705 60,039 54,441 58,251 32,216 34,723 ----------------- ----------------- ---------------- 82,912 61,136 44,565 ================= ================= ================ 5,836 6,274 1,797 48,498 33,123 77,960 6,876 6,084 54,910 ----------------- ----------------- ---------------- 47,458 33,313 24,847 ================= ================= ================ F-I-24 INDEPENDENT AUDITORS' REPORT To the Board of Directors Acacia National Life Insurance Company Bethesda, Maryland We have audited the accompanying statements of admitted assets, liabilities, and surplus - statutory basis of Acacia National Life Insurance Company (a wholly owned subsidiary of Acacia Life Insurance Company) as of December 31, 2000 and 1999, and the related statements of operations - statutory basis, changes in surplus - statutory basis, and cash flows - statutory basis for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described more fully in Note 1 to the financial statements, the Company prepared these financial statements using accounting practices prescribed or permitted by the Bureau of Insurance, State Corporation Commission of the Commonwealth of Virginia, which practices differ from accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the statutory basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. In our opinion, because of the effects of the matter discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of Acacia National Life Insurance Company as of December 31, 2000 and 1999, or the results of its operations or its cash flows for the years then ended. In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, and surplus of Acacia National Life Insurance Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, on the basis of accounting described in Note 1. /s/ Deloitte & Touche LLP Lincoln, Nebraska February 16, 2001 (April 9, 2001 as to Note 9) F-II-1 ACACIA NATIONAL LIFE INSURANCE COMPANY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS - STATUTORY BASIS (COLUMNAR AMOUNTS IN THOUSANDS)
DECEMBER 31 ------------------------------------------------ ADMITTED ASSETS 2000 1999 --------------- ---------------------- ---------------------- Investments Bonds $ 472,273 $ 522,328 Mortgage loans 854 894 Preferred stocks 70 70 Common stocks 473 385 Short-term investments 15,525 5,685 Other investments 447 495 Loans on insurance policies 9,109 7,955 ---------------------- ---------------------- Total investments 498,751 537,812 Cash 2,121 5,195 Accrued investment income 8,686 9,157 Reinsurance recoverable - affiliate 1,863 1,162 Income taxes receivable - affiliate 4,012 1,203 Other assets 348 370 Separate accounts 170,582 140,638 ---------------------- ---------------------- $ 686,363 $ 695,537 ====================== ====================== LIABILITIES AND SURPLUS LIABILITIES Life and annuity reserves $ 434,988 $ 464,615 Funds left on deposit 47,091 65,002 Reserve for unpaid claims 190 1,461 Interest maintenance reserve 1,224 1,684 Accrued separate account transfers (9,023) (7,702) Accounts payable - affiliates 581 999 Other liabilities 3,693 2,927 Asset valuation reserve 214 1,805 Separate accounts 170,582 140,638 ---------------------- ---------------------- 649,540 671,429 ---------------------- ---------------------- SURPLUS Preferred stock, 8% non-voting, non-cumulative, $1,000 par value, 10,000 shares authorized; 6,000 shares issued and outstanding 6,000 6,000 Common stock, $170 par value; 15,000 shares authorized, issued and outstanding 2,550 2,550 Additional paid-in capital 28,450 13,450 Retained earnings (deficit) (177) 2,108 ---------------------- ---------------------- 36,823 24,108 ---------------------- ---------------------- $ 686,363 $ 695,537 ====================== ======================
The accompanying notes are an integral part of these statutory basis financial statements. F-II-2 ACACIA NATIONAL LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS-STATUTORY BASIS (IN THOUSANDS)
YEARS ENDED DECEMBER 31 ------------------------------------------------ 2000 1999 ------------------------ --------------------- INCOME Premium income $ 85,364 $ 79,057 Less net reinsurance: Yearly renewable term (19,805) (5,318) ------------------------ --------------------- Net premium income 65,559 73,739 Funds left on deposit 5,652 8,257 Net investment income 41,480 41,553 Miscellaneous insurance income 16,169 1,481 ------------------------ --------------------- 128,860 125,030 ------------------------ --------------------- EXPENSES Benefits to policyowners 110,657 86,472 Decrease in reserves (47,538) (15,569) Commissions 9,316 7,256 General insurance expenses 11,608 13,562 Taxes, licenses and fees 1,949 2,154 Amortization of goodwill 405 382 Net premium transferred to separate accounts 41,811 34,764 ------------------------ --------------------- 128,208 129,021 ------------------------ --------------------- Income (loss) before federal income taxes and realized capital losses 652 (3,991) Income tax expense (benefit) 134 (439) ------------------------ --------------------- Income (loss) before realized capital losses 518 (3,552) Realized capital losses net of tax of ($944) and ($972) and transfers to interest maintenance reserve of ($190) and ($1,111) for 2000 and 1999, respectively) (5,611) (6,244) ------------------------ --------------------- Net loss $ (5,093) $ (9,796) ======================== =====================
The accompanying notes are an integral part of these statutory basis financial statements. F-II-3 ACACIA NATIONAL LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN SURPLUS - STATUTORY BASIS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS, EXCEPT SHARES)
Preferred Stock Common Stock Additional Retained ------------------ ----------------- Paid-in Earnings Shares Amount Shares Amount Capital (Deficit) Total ---------- -------- -------- -------- --------- ----------- -------- BALANCE, January 1, 1999 6,000 $ 6,000 15,000 $ 2,550 $ 13,450 $ 9,690 $ 31,690 Change in non-admitted assets - - - - - (3) (3) Change in net unrealized capital gains - - - - - (1,491) (1,491) Transfer from asset valuation reserve - - - - - 3,708 3,708 Net loss - - - - - (9,796) (9,796) -------- ---------- --------- --------- ----------- ----------- ------------ BALANCE, December 31, 1999 6,000 6,000 15,000 2,550 13,450 2,108 24,108 Capital contribution from Acacia Life - - - - 15,000 - 15,000 Change in non-admitted assets - - - - - 790 790 Change in net unrealized capital gains - - - - - 427 427 Transfer from asset valuation reserve - - - - - 1,591 1,591 Net loss - - - - - (5,093) (5,093) -------- --------------------- --------- ----------- ----------- ------------ BALANCE, December 31, 2000 6,000 $ 6,000 15,000 $ 2,550 $ 28,450 $ (177) $ 36,823 ======== ========== ========= ========== ============ =========== ===============
The accompanying notes are an integral part of these statutory basis financial statements. F-II-4 ACACIA NATIONAL LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS - STATUTORY BASIS (IN THOUSANDS)
YEARS ENDED DECEMBER 31 --------------------------------------------------- 2000 1999 -------------------------- ----------------------- OPERATING ACTIVITIES: Net premium income received $ 83,766 $ 74,462 Miscellaneous insurance income 3,033 8,904 Net investment income received 42,329 43,690 Net premium transferred to separate accounts (42,372) (37,511) Benefits paid to policyowners (107,795) (89,096) Commissions, expenses and taxes, other than federal income tax (23,651) (21,394) Federal income taxes (1,999) 608 Other operating income and disbursements (4,744) (7,174) -------------------------- ----------------------- Net cash used in operating activities (51,433) (27,511) -------------------------- ----------------------- INVESTING ACTIVITIES: Proceeds from investments sold, matured or repaid 149,867 337,366 Purchase of investments (105,514) (312,277) Change in loans on insurance policies (1,154) (376) -------------------------- ----------------------- Net cash provided by investing activities 43,199 24,713 -------------------------- ----------------------- FINANCING ACTIVITIES: Capital contribution from Acacia Life 15,000 - -------------------------- ----------------------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 6,766 (2,798) CASH AND SHORT-TERM INVESTMENTS- BEGINNING OF PERIOD 10,880 13,678 -------------------------- ----------------------- CASH AND SHORT-TERM INVESTMENTS- END OF PERIOD $ 17,646 $ 10,880 ========================== =======================
The accompanying notes are an integral part of these statutory basis financial statements. F-II-5 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND NATURE OF OPERATIONS Acacia National Life Insurance Company (the Company) is a wholly owned subsidiary of Acacia Life Insurance Company (Acacia Life). Acacia Life is a wholly owned subsidiary of Ameritas Holding Company (AHC) which is a wholly owned subsidiary of Ameritas Acacia Mutual Holding Company (AAMHC). Effective January 1, 1999 Ameritas Mutual Insurance Holding Company (AMIHC) and Acacia Mutual Holding Corporation (AMHC) merged to form AAMHC. In addition their two wholly owned subsidiaries, Ameritas Holding Company and Acacia Financial Group, Ltd. (AFG), merged to form AHC. The business combination was accounted for as a pooling of interests. The Company, domiciled in Virginia, underwrites and markets variable, deferred and immediate annuities and variable life insurance products within the United States and is licensed to operate in 46 states and the District of Columbia. Non-insurance products and services are offered by an affiliate of the Company, Acacia Financial Corporation (AFC), a wholly owned subsidiary of Acacia Life, which is a holding company of several financial service companies. Principal subsidiaries of AFC include: Calvert Group Ltd. (Calvert), a provider of investment advisory, management and administrative services to The Calvert Group of mutual funds; Acacia Federal Savings Bank (AFSB), a federally chartered savings bank; and The Advisors Group, Inc. (TAG), a broker/dealer. In addition to Acacia Life, AHC is also a 100% owner of Ameritas Life Insurance Corp. (Ameritas) an insurance company domiciled in Nebraska. BASIS OF PRESENTATION The accompanying financial statements have been prepared, except as to form, on the basis of accounting practices prescribed or permitted by the Bureau of Insurance, State Corporate Commission of the Commonwealth of Virginia (statutory basis or SAP), which are designed primarily to demonstrate ability to meet claims of policyowners. These practices differ in certain respects, which in some cases may be material, from generally accepted accounting principles (GAAP) applied in the presentation of financial condition and results of operations on the "going concern" basis commonly followed by other types of enterprises. In March of 1998, the National Association of Insurance Commissioners adopted the Codification of Statutory Accounting Principles (Codification). The Codification, which is intended to standardize regulatory accounting and reporting to the state insurance departments, is effective January 1, 2001. However, statutory accounting principles will continue to be established by individual state laws and permitted practices. The state of Virginia will require adoption of Codification for the preparation of statutory financial statements effective January 1, 2001. The Company estimates that the adoption of Codification will increase the Company's statutory net worth as of January 1, 2001 by approximately $4,000 to $5,000 which primarily relates to accounting principles regarding deferred taxes, adjustments to the carrying amount of the interest maintenance reserve and the admission of goodwill as an asset. The accompanying statutory financial statements vary in some respects from generally accepted accounting principles. The most significant differences include: (a) bonds are generally carried at amortized cost rather than being valued at either amortized cost or fair value based on their classification according to the Company's ability and intent to hold or trade the securities; (b) costs related to acquiring new business are charged to operations as incurred and not deferred, whereas premiums are taken into income on a pro rata basis over the respective term of the policies; (c) policy reserves are carried at amounts which approximate surrender values rather than accumulation values and statutory investment reserves are established; (d) a provision has not been made for F-II-6 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) federal income taxes resulting from all of the cumulative differences in assets and liabilities determined on a tax return and financial statement basis; and (e) changes in certain assets designated as "non-admitted" assets have been charged to surplus. The Company does not prepare separate company financial statements on a GAAP basis and the impact of the difference between the statutory basis and GAAP is not practicably determinable for the purpose of separate company GAAP financial statements. USE OF ESTIMATES The preparation of financial statements in conformity with statutory accounting practices requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The principal accounting and reporting practices followed are: INVESTMENTS Investments are reported according to valuation procedures prescribed by the National Association of Insurance Commissioners (NAIC), and generally: bonds and mortgage loans are valued at amortized cost; preferred stock at cost; common stock at fair value; other investments, venture capital partnerships, are carried on the equity method; and separate account assets are carried at fair value. Realized capital gains and losses, including valuation allowances on specific investments, are recorded in the statement of operations and unrealized gains and losses are credited or charged to retained earnings (deficit). Short-term investments consists of mutual funds carried at cost and fixed maturity securities that when purchased have a remaining maturity of less than one year. At December 31, 2000 and 1999, the Company had short-term investments of $5,300 and $3,075, respectively, in various mutual funds to which an affiliate of the Company is the advisor. SEPARATE ACCOUNTS The Company operates separate accounts on which the earnings or losses accrue exclusively to contract holders. The assets (mutual fund investments) and liabilities of each account are clearly identifiable and distinguishable from other assets and liabilities of the Company. Amounts are reported at fair value. NON-ADMITTED ASSETS Certain assets (primarily goodwill) are designated as "non-admitted" under statutory accounting requirements. These assets are excluded from the statements of admitted assets, liabilities and surplus by adjustments to retained earnings (deficit). Total "non-admitted assets" were $2,191 and $2,981 in 2000 and 1999, respectively. RESERVES Life policy reserves are computed by using the Commissioners Reserve Valuation Method (CRVM) and the Commissioners Standard Ordinary Mortality table. Annuity reserves are calculated using the Commissioners Annuity Reserve Valuation Method (CARVM) and the maximum valuation interest rate; for annuities with life contingencies, the prescribed valuation mortality table is used. Reserves for unpaid claims include claims reported and unpaid and claims not yet reported, the latter estimated on the basis of historical experience. As such amounts are necessarily estimates, the ultimate liability will differ from the amount recorded and will be reflected in operations when additional information becomes known. F-II-7 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RESERVES (CONTINUED) Accrued separate account transfers primarily consist of the amount of policyholder account values over modified reserves used in the separate account, such as the use of CARVM and CRVM. The interest maintenance reserve (IMR) is calculated based on the prescribed methods developed by the NAIC. Realized gains and losses, net of tax, resulting from interest rate changes on fixed income investments are deferred and credited to this reserve. These gains and losses are then amortized into investment income over what would have been the remaining years to maturity of the underlying investment. Amortization included in net investment income was $270 and $407 for 2000 and 1999, respectively. The asset valuation reserve (AVR) is a required appropriation of surplus to provide for possible losses that may occur on certain investments held by the Company. The reserve is computed based on holdings of bonds, stocks, and short-term investments and realized and unrealized gains and losses, other than those resulting from interest rate changes. Changes in the reserve are charged or credited to retained earnings (deficit). INCOME TAXES The Company, beginning in 1999, files a consolidated tax return with Acacia Life Insurance Company. Prior to 1999, the Company filed a consolidated return with Acacia Mutual Holding Corporation and its subsidiaries. An agreement among the members of the consolidated group, generally, provides for distribution of consolidated tax results as if filed on a separate return basis. The Company's federal income tax returns have been examined by and settled with the Internal Revenue Service through 1995. Under statutory accounting practices, no provision is made for deferred federal income taxes related to temporary differences between statutory and taxable income. Such temporary differences arise primarily from capitalization and amortization of deferred policy acquisition costs, certain reserve calculations and recognition of realized gains or losses on sales of bonds. Federal income tax regulations allowed certain special deductions for 1983 and prior years which are accumulated in a memorandum tax account designated as "policyholders' surplus". Generally, this policyholders' surplus account (PSA) will become subject to tax at the then current rates only if the accumulated PSA exceeds certain maximum limitations or if certain cash distributions are deemed to be paid out of the account. At December 31, 2000 and 1999, the Company has $6,600 in their policyholders' surplus accounts which is not reflected in the financial statements. RECOGNITION OF PREMIUM INCOME AND RELATED EXPENSES Premiums are reported as income when collected over the premium paying periods of the policies. Annuity and fund deposits are included as income when received. Policy acquisition costs, such as commissions and other marketing and issuance expenses incurred in connection with acquiring new business, are charged to operations as incurred. Premium income consists of: Years Ended December 31 ---------------------------- 2000 1999 ------------------------------------------------------------------------------ -Life $ 33,385 $ 27,747 ------------------------------------------------------------------------------ Annuity 51,979 51,310 ------------------------------------------------------------------------------ $ 85,364 $ 79,057 ------------------------------------------------------------------------------ F-II-8 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 2. FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate a value: BONDS -- For publicly traded securities, fair value is determined using an independent pricing source. For securities without a readily ascertainable fair value, fair value has been determined using an interest rate spread matrix based upon quality, weighted average maturity and Treasury yields. MORTGAGE LOANS -- Mortgage loans in good standing are valued on the basis of discounted cash flow. The interest rate that is assumed is based upon the weighted average term of the mortgage and appropriate spread over Treasuries. There were no mortgage loans in default at December 31, 2000. PREFERRED STOCKS -- For publicly traded securities, fair value is determined using an independent pricing source. COMMON STOCKS -- For publicly traded securities, fair value is determined using an independent pricing source. SHORT-TERM INVESTMENTS -- The carrying amount approximates fair value because of the short maturity of these instruments. LOANS ON INSURANCE POLICIES -- Fair values for loans on insurance policies are estimated using a discounted cash flow analysis at interest rates currently offered for similar loans. Loans on insurance policies with similar characteristics are aggregated for purposes of the calculations. CASH, ACCRUED INVESTMENT INCOME, REINSURANCE RECOVERABLE-AFFILIATE -- The carrying amount equals fair value. INVESTMENT-TYPE CONTRACTS -- Reserves held on investment-type insurance contracts, i.e. contracts which do not contain significant morbidity risks, are carried at amounts which approximate fair value. FUNDS LEFT ON DEPOSIT -- Funds on deposit which do not have fixed maturities are carried at the amount payable on demand at the reporting date. F-II-9 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 2. FINANCIAL INSTRUMENTS (CONTINUED) The estimated fair values of the Company's financial instruments are as follows:
DECEMBER 31, ------------------------------------------------------------------- 2000 1999 ------------------------------ -------------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE --------------------------------------------------------------------------------------------------------------------- Financial assets: --------------------------------------------------------------------------------------------------------------------- Bonds $ 472,273 $ 479,755 $ 522,328 $ 518,824 Preferred stocks 70 80 70 106 Common stocks 473 473 385 385 Mortgage loans 854 905 894 861 Short-term investments 15,525 15,525 5,685 5,685 Loans on insurance policies 9,109 6,899 7,955 6,816 Cash 2,121 2,121 5,195 5,195 Accrued investment income 8,686 8,686 9,157 9,157 Reinsurance recoverable-affiliate 1,863 1,863 1,162 1,162 Financial Liabilities: Investment-type contracts $ 326,229 $ 326,229 $ 357,515 $ 357,515 Funds left on deposit 47,091 47,091 65,002 65,002
These values do not necessarily represent the value for which the financial instrument could be sold. 3. INVESTMENTS The table below provides additional information relating to bonds and stocks held by the Company as of December 31, 2000:
DECEMBER 31, 2000 ----------------------------------------------------------------- AMORTIZED GROSS UNREALIZED FAIR -------------------------- COST GAINS LOSSES VALUE ------------------------------------------------------------------------------------------------------------------------ U.S. Corporate $ 255,707 $ 10,817 $ 6,609 $ 259,915 ------------------------------------------------------------------------------------------------------------------------ Mortgage-backed 94,446 1,758 358 95,846 ------------------------------------------------------------------------------------------------------------------------ U.S. Treasury securities and obligations of U.S. government agencies 63,765 4,954 50 68,669 Foreign 16,632 291 99 16,824 Asset backed 41,723 315 3,537 38,501 ------------------------------------------------------------------------------------------------------------------------ Total bonds $ 472,273 $ 18,135 $ 10,653 $ 479,755 ------------------------------------------------------------------------------------------------------------------------ Preferred stocks $ 70 $ 10 $ - $ 80 ------------------------------------------------------------------------------------------------------------------------ Common stocks $ 1,050 $ - $ 577 $ 473 ------------------------------------------------------------------------------------------------------------------------
F-II-10 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 3. INVESTMENTS (CONTINUED) The comparative data as of December 31, 1999 is summarized as follows:
DECEMBER 31, 1999 ---------------------------------------------------------------- AMORTIZED GROSS UNREALIZED FAIR ----------------------------- COST GAINS LOSSES VALUE ------------------------------------------------------------------------------------------------------------------------- U.S. Corporate $ 292,892 $ 7,649 $ 8,603 $ 291,938 ------------------------------------------------------------------------------------------------------------------------- Mortgage-backed 102,157 803 2,465 100,495 U.S. Treasury securities and obligations of U.S. government agencies 68,397 3,284 314 71,367 Foreign 15,237 15 603 14,649 Asset backed 43,645 9 3,279 40,375 ------------------------------------------------------------------------------------------------------------------------- Total bonds $ 522,328 $ 11,760 $ 15,264 $ 518,824 ------------------------------------------------------------------------------------------------------------------------- Preferred stocks $ 70 $ 36 $ - $ 106 ------------------------------------------------------------------------------------------------------------------------- Common stocks $ 1,137 $ - $ 752 $ 385
The amortized cost and fair value of bonds at December 31, 2000 are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. AMORTIZED FAIR COST VALUE ------------------------------------------------------------------------------ Due in one year or less $ 29,705 $ 30,309 Due after one year through five years 138,482 140,202 Due after five years through ten years 73,877 76,930 Due after ten years 94,040 97,967 Mortgage-backed securities 94,446 95,846 Asset backed 41,723 38,501 ------------------------------------------------------------------------------ Total $ 472,273 $ 479,755 ------------------------------------------------------------------------------ At December 31, 2000, the Company had bonds with a book value of $6,855 and a fair value of $7,700 on deposit with various State Insurance Departments. Sales of bond investments in 2000 and 1999 resulted in proceeds of $109,950 and $294,291, respectively. Gains of $453 and $1,489 and losses of $793 and $3,316 were realized on those sales in 2000 and 1999, respectively. The Company's bond investment portfolio is predominantly comprised of investment grade securities. At December 31, 2000 and 1999, approximately $29,295 and $40,760, respectively, in bonds (6.0% and 7.7%, respectively, of the total bond portfolio) are considered "below investment grade". Securities are classified as "below investment grade" by utilizing rating criteria established by the NAIC. During 2000 and 1999, the Company recorded other than temporary write downs on bonds of $6,363 and $6,759, respectively. F-II-11 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 4. RELATED PARTY TRANSACTIONS Since the Company has no employees, affiliates (primarily Acacia Life and Ameritas and its subsidiaries) provide technical, financial, legal, marketing and investment advisory support to the Company under various administrative service agreements. The cost of these services to the Company for the years ended December 31, 2000 and 1999 was $12,470 and $15,929, respectively. The Company entered into reinsurance agreements (yearly renewable term) with affiliates. Under these agreements, these affiliates assume life insurance risk in excess of the Company's retention limit. These reinsurance contracts do not relieve the Company of its obligations to its policyowners (see footnote 5). The assets of the defined contribution plan under Internal Revenue Code Section 401(k) for the employees of Acacia Life include an investment in a deposit administration contract with the Company of $18,305 at December 31, 1999. During 2000, these funds were withdrawn from the Company and deposited with Ameritas. The Company's Variable Universal Life and Variable Annuity products are distributed through TAG. Policies placed by this affiliate generated commission expense of $6,032 and $4,402 for the years ended December 31, 2000 and 1999, respectively. 5. REINSURANCE The Company reinsures all life insurance risks over its retention limit of ten thousand per policy under yearly renewable term insurance agreements with Acacia Life and several other non-affiliated companies. The Company remains obligated for amounts ceded in the event that reinsurers do not meet their obligations. Since the reinsurance treaties are of such a nature as to pass economic risk to the reinsurer, appropriate reductions are made from income, claims, expense and liability items in accounting for the reinsurance ceded. Premiums and benefits have been reduced by amounts reinsured as follows: 2000 1999 ---------------- ------------- Premiums ceded: Acacia Life $ 18,079 $ 4,634 Others 1,726 684 -------------- -------------- Total premium ceded $ 19,805 $ 5,318 ============== ============== Death benefits reimbursed: Acacia Life $ 4,429 $ 3,186 Others 249 1,082 -------------- -------------- Total benefits reimbursed $ 4,678 $ 4,268 ============== ============== Life and annuity reserves ceded: Acacia Life $ 2,828 $ 2,501 Others 523 497 -------------- -------------- Total life and annuity reserves ceded $ 3,351 $ 2,998 ============== ============== In 1999, reinsurance premiums were recorded net of commission and expense allowances. In 2000, the commission and expense allowances are recorded in miscellaneous income and total $13,808. F-II-12 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 5. REINSURANCE (CONTINUED) ASSUMPTION REINSURANCE AGREEMENT Effective May 31, 1996 under an assumption reinsurance agreement, the Company assumed certain assets and liabilities relating to annuities previously underwritten by the National American Life Insurance Company (NALICO), which had been in rehabilitation. Approximately $405 and $382 of goodwill was amortized through operations during 2000 and 1999. At December 31, 2000 and 1999, the balance of goodwill treated as a non-admitted asset was $2,191 and $2,596, respectively. 6. SEPARATE ACCOUNTS The Company is currently marketing variable life and variable annuity products which have separate accounts as an investment option. Separate Account I (Account I) was formed to receive and invest premium receipts from variable life insurance policies issued by the Company. Separate Account II (Account II) was formed to receive and invest premium receipts from variable annuity policies issued by the Company. Both Separate Accounts are registered under the Investment Company Act of 1940, as amended, as unit investment trusts. Account I and II's assets and liabilities are segregated from the other assets and liabilities of the Company. Amounts in the Separate Accounts are: DECEMBER 31 -------------------------------- 2000 1999 ----------------------------------------------------------------------------- Separate Account I $ 61,824 $ 50,119 Separate Account II 108,758 90,519 ----------------------------------------------------------------------------- $ 170,582 $ 140,638 ----------------------------------------------------------------------------- Included as investment options in the variable accounts are funds which are managed by an affiliate, Calvert. Separate account assets in these funds totaled $24,506 and $13,710 at December 31, 2000 and 1999, respectively. 7. DIVIDEND LIMITATION The Company is subject to regulation by the insurance departments of the states in which it operates, primarily its state of domicile, Virginia. Insurance department regulations in these states restrict the advance of funds to parent and affiliated companies as well as the amount of dividends that may be paid without prior approval. 8. COMMITMENTS AND CONTINGENCIES INVESTMENT Commitments were outstanding for investments to be purchased in subsequent years totaling $1,064 and $80 as of December 31, 2000 and 1999, respectively. These commitments have been made in the normal course of investment operations and are not reflected in the accompanying financial statements. The Company's exposure to credit loss is represented by the contractual notional amount of those instruments. The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance sheet instruments. F-II-13 ACACIA NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (IN THOUSANDS) 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) STATE LIFE AND HEALTH GUARANTY FUNDS As a condition of doing business, all states and jurisdictions have adopted laws requiring membership in life and health insurance guaranty funds. Member companies are subject to assessment each year based on life, health or annuity premiums collected in the state. In some states these assessments may be applied against premium taxes. The Company has estimated its costs related to past insolvencies and has provided a reserve included in other liabilities of $377 and $540 as of December 31, 2000 and 1999, respectively. The Company has estimated its recoveries from premium tax credits to be $112 and $0 as of December 31, 2000 and 1999, respectively. LITIGATION From time to time, the Company is subject to litigation in the normal course of business. Management does not believe that the Company is party to any such pending litigation which would have a material adverse effect on its financial statements or future operations. 9. SUBSEQUENT EVENT On March 29, 2001, the Board of Directors authorized the Company's management to take the necessary actions to change the Company's domicile from the Commonwealth of Virginia to the District of Columbia. F-II-14 APPENDIX A ILLUSTRATIONS The following tables indicate how the account values and Death Benefit Proceeds vary with the investment experience of the Funds and differences between the guaranteed and current costs of the Policy. The tables show how the account values and Death Benefit Proceeds of a Policy, issued to an Insured of a certain age with regular annual premiums, differ over time if the investment return on the assets of each Portfolio were a uniform annual rate of 0%, 8% and 12%. The tables beginning on page A-2 illustrate a Policy issued to a male, age 35, under a standard non-smoker rate class. The account values and Death Benefit Proceeds would be different from those shown if the gross annual investment rates of return averaged 0%, 8% and 12% over a period of years but fluctuated above and below those averages for individual Policy years. The values also assume that no loans or partial surrenders are made by the Owner. The columns headed Guaranteed Charges reflect that throughout the life of the Policy the monthly charge for the cost of insurance is based on the maximum level permitted under the Policy, a Premium Expense Charge of 2.25%, a monthly administrative charge of $27 for the first Policy year and $8 each month thereafter, and a daily charge for mortality and expense risks equal to an annual rate of 0.90% for the first fifteen years. This charge is then reduced by 0.05% each year until it reaches 0.45% in the 24th year and thereafter. The columns headed Current Charges assume that, throughout the life of the Policy, the monthly cost of insurance is based on the current cost of insurance rate, a Premium Expense Charge of 2.25%, a monthly administrative charge of $27 for the first Policy year and $8 each month thereafter and a daily charge for mortality and expense risks equal to an annual rate of 0.90% for the first fifteen years. This charge is then reduced by 0.05% each year until it reaches 0.45% in the 25th year and thereafter. The amounts shown in the tables for account values and Death Benefit Proceeds reflect that the net investment return of the Portfolios is lower than the gross return listed due to investment advisory and other fees of the Funds. The values shown take into account an average of the expenses paid by each Portfolio available for investment at an equivalent annual rate of 0.90% (which is in excess of the current equivalent annual rate of 0.88% of the aggregate average daily net assets of the Funds). The investment adviser or other affiliates of various Funds have agreed to reimburse the Portfolios to the extent that the aggregate operating expenses (certain Portfolios may exclude certain items) were in excess of an annual rate of average daily net assets. These agreements are expected to continue in future years but may be terminated at any time. As long as the expense limitations continue for a Portfolio, if a reimbursement occurs, it has the effect of lowering the Portfolio's expense ratio and increasing its total return. Details of the reimbursement arrangements are discussed in the prospectus Summary section, Fund Expense Summary footnotes. After a deduction of these amounts, the illustrated gross investment rates of 0%, 8%, and 12% correspond to approximate net annual rates of -1.80%, 6.20% and 10.20% respectively. The hypothetical values shown in the tables do not reflect any charges for federal income taxes against the Variable Account, since ANLIC is not currently making such charges. However, such charges may be made in the future and, in that event, the gross annual investment rate of return would have to exceed 0%, 8% and 12% by an amount to cover the tax charges to produce the Death Benefit Proceeds and account values illustrated. (See the section on Federal Tax Matters.) The tables illustrate the Policy values that would result based upon hypothetical investment rates and premium payment schedules, if all Net Premiums are allocated to the Variable Account and if no Policy loans, partial surrenders or changes in benefits are applied for. Upon request, ANLIC will provide a comparable illustration based upon the Insured's age, sex, rate class, Face Amount or premium schedule requested, and additional benefits. For unisex policies, ANLIC will supply such illustrations without regard to the Insured's sex. ANLIC reserves the right to charge a fee not to exceed $25 for this service. ALLOCATOR 2000 A-1 ACACIA NATIONAL LIFE INSURANCE COMPANY
ALLOCATOR 2000 FLEXIBLE REMIUM VARIABLE LIFE PREPARED FOR: VALUED CLIENT ANNUAL PREMIUM: $1,838 MALE AGE 35 NON-TOBACCO RIDERS: NONE OPTION A FACE AMOUNT :$250,000 12.00% HYPOTHETICAL GROSS ANNUAL RATE OF RETURN CURRENT CHARGES GUARANTEED CHARGES --------------- ------------------ NET END OF ANNUAL ACCOUNT SURRENDER DEATH SURRENDER DEATH YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE BENEFIT ------------------------------------------------------------------------------------------- 1 36 1,838 1,197 645 250,000 645 250,000 2 37 1,838 2,737 2,186 250,000 2,173 250,000 3 38 1,838 4,407 3,856 250,000 3,829 250,000 4 39 1,838 6,217 5,666 250,000 5,623 250,000 5 40 1,838 8,183 7,632 250,000 7,569 250,000 6 41 1,838 10,312 9,760 250,000 9,676 250,000 7 42 1,838 12,617 12,066 250,000 11,958 250,000 8 43 1,838 15,120 14,753 250,000 14,616 250,000 9 44 1,838 17,834 17,651 250,000 17,482 250,000 10 45 1,838 20,781 20,781 250,000 20,575 250,000 11 46 1,838 23,978 23,978 250,000 23,730 250,000 12 47 1,838 27,448 27,448 250,000 27,152 250,000 13 48 1,838 31,218 31,218 250,000 30,867 250,000 14 49 1,838 35,317 35,317 250,000 34,904 250,000 15 50 1,838 39,775 39,775 250,000 39,291 250,000 16 51 1,838 44,644 44,644 250,000 44,079 250,000 17 52 1,838 49,964 49,964 250,000 49,307 250,000 18 53 1,838 55,780 55,780 250,000 55,019 250,000 19 54 1,838 62,144 62,144 250,000 61,265 250,000 20 55 1,838 69,119 69,119 250,000 68,104 250,000 25 60 1,838 116,076 116,076 250,000 114,047 250,000 30 65 1,838 194,211 194,211 250,000 190,287 250,000 35 70 1,838 327,327 327,327 379,699 319,357 370,454 40 75 1,838 546,948 546,948 585,235 529,078 566,113 45 80 1,838 910,835 910,835 956,377 873,967 917,666 50 85 1,838 1,502,043 1,502,043 1,577,146 1,421,806 1,492,897 55 90 1,838 2,446,560 2,446,560 2,568,888 2,271,862 2,385,455 60 95 1,838 4,001,649 4,001,649 4,041,666 3,658,602 3,695,188
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY AN OWNER AND THE DIFFERENT INVESTMENT RATE OF RETURN FOR THE FUND PORTFOLIOS. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY ANLIC OR THE FUNDS THAT THIS HYPOTHETICAL INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER A PERIOD OF TIME. ALLOCATOR 2000 A-2 ACACIA NATIONAL LIFE INSURANCE COMPANY
ALLOCATOR 2000 FLEXIBLE REMIUM VARIABLE LIFE Prepared for: Valued Client Annual Premium: $1,838 Male Age 35 Non-Tobacco Riders: None Option A Face Amount: $250,000 8.00% HYPOTHETICAL GROSS ANNUAL RATE OF RETURN CURRENT CHARGES GUARANTEED CHARGES --------------- ------------------ NET END OF ANNUAL ACCOUNT SURRENDER DEATH SURRENDER DEATH YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE BENEFIT ------------------------------------------------------------------------------------------- 1 36 1,838 1,140 589 250,000 589 250,000 2 37 1,838 2,569 2,018 250,000 2,005 250,000 3 38 1,838 4,058 3,507 250,000 3,481 250,000 4 39 1,838 5,610 5,059 250,000 5,019 250,000 5 40 1,838 7,229 6,678 250,000 6,620 250,000 6 41 1,838 8,910 8,359 250,000 8,282 250,000 7 42 1,838 10,655 10,104 250,000 10,007 250,000 8 43 1,838 12,469 12,101 250,000 11,982 250,000 9 44 1,838 14,349 14,165 250,000 14,021 250,000 10 45 1,838 16,299 16,299 250,000 16,125 250,000 11 46 1,838 18,316 18,316 250,000 18,110 250,000 12 47 1,838 20,399 20,399 250,000 20,158 250,000 13 48 1,838 22,551 22,551 250,000 22,271 250,000 14 49 1,838 24,772 24,772 250,000 24,447 250,000 15 50 1,838 27,059 27,059 250,000 26,685 250,000 16 51 1,838 29,423 29,423 250,000 28,994 250,000 17 52 1,838 31,859 31,859 250,000 31,368 250,000 18 53 1,838 34,360 34,360 250,000 33,802 250,000 19 54 1,838 36,922 36,922 250,000 36,286 250,000 20 55 1,838 39,538 39,538 250,000 38,815 250,000 25 60 1,838 53,227 53,227 250,000 51,876 250,000 30 65 1,838 66,183 66,183 250,000 63,686 250,000 35 70 1,838 78,873 78,873 250,000 69,324 250,000 40 75 1,838 93,580 93,580 250,000 57,560 250,000 45 80 1,838 106,518 106,518 250,000 -- -- 50 85 1,838 109,942 109,942 250,000 -- -- 55 90 1,838 74,382 74,382 250,000 -- -- 59 94 1,838 -- -- -- -- --
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY AN OWNER AND THE DIFFERENT INVESTMENT RATE OF RETURN FOR THE FUND PORTFOLIOS. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY ANLIC OR THE FUNDS THAT THIS HYPOTHETICAL INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER A PERIOD OF TIME. ALLOCATOR 2000 A-3 ACACIA NATIONAL LIFE INSURANCE COMPANY
ALLOCATOR 2000 FLEXIBLE REMIUM VARIABLE LIFE Prepared for: Valued Client Annual Premium: $ 1,838 Male Age 35 Non-Tobacco Riders: None Option A Face Amount: $250,000 0.00% HYPOTHETICAL GROSS ANNUAL RATE OF RETURN CURRENT CHARGES GUARANTEED CHARGES --------------- ------------------ NET END OF ANNUAL ACCOUNT SURRENDER DEATH SURRENDER DEATH YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE BENEFIT ------------------------------------------------------------------------------------------- 1 36 1,838 1,029 477 250,000 477 250,000 2 37 1,838 2,247 1,695 250,000 1,683 250,000 3 38 1,838 3,416 2,865 250,000 2,840 250,000 4 39 1,838 4,535 3,983 250,000 3,948 250,000 5 40 1,838 5,604 5,053 250,000 5,003 250,000 6 41 1,838 6,616 6,065 250,000 6,001 250,000 7 42 1,838 7,569 7,018 250,000 6,941 250,000 8 43 1,838 8,464 8,097 250,000 8,004 250,000 9 44 1,838 9,296 9,112 250,000 9,005 250,000 10 45 1,838 10,063 10,063 250,000 9,938 250,000 11 46 1,838 10,760 10,760 250,000 10,615 250,000 12 47 1,838 11,380 11,380 250,000 11,217 250,000 13 48 1,838 11,924 11,924 250,000 11,739 250,000 14 49 1,838 12,385 12,385 250,000 12,177 250,000 15 50 1,838 12,758 12,758 250,000 12,525 250,000 16 51 1,838 13,039 13,039 250,000 12,778 250,000 17 52 1,838 13,216 13,216 250,000 12,926 250,000 18 53 1,838 13,275 13,275 250,000 12,953 250,000 19 54 1,838 13,201 13,201 250,000 12,842 250,000 20 55 1,838 12,977 12,977 250,000 12,577 250,000 25 60 1,838 9,013 9,013 250,000 8,325 250,000 30 65 1,838 -- -- 250,000 -- 250,000 35 70 -- -- -- -- -- --
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY AN OWNER AND THE DIFFERENT INVESTMENT RATE OF RETURN FOR THE FUND PORTFOLIOS. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY ANLIC OR THE FUNDS THAT THIS HYPOTHETICAL INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER A PERIOD OF TIME. ALLOCATOR 2000 A-4 ACACIA NATIONAL LIFE INSURANCE COMPANY
ALLOCATOR 2000 FLEXIBLE REMIUM VARIABLE LIFE Prepared for: Valued Client Annual Premium: $1,838 Male Age 35 Non-Tobacco Riders: None Option B Face Amount: $250,000 12.00% HYPOTHETICAL GROSS ANNUAL RATE OF RETURN CURRENT CHARGES GUARANTEED CHARGES --------------- ------------------ NET END OF ANNUAL ACCOUNT SURRENDER DEATH SURRENDER DEATH YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE BENEFIT ---------------------------------------------------------------------------------------- 1 36 1,838 1,194 643 251,194 643 251,194 2 37 1,838 2,730 2,179 252,730 2,166 252,717 3 38 1,838 4,391 3,840 254,391 3,812 254,363 4 39 1,838 6,187 5,636 256,187 5,592 256,143 5 40 1,838 8,132 7,581 258,132 7,517 258,068 6 41 1,838 10,231 9,679 260,231 9,593 260,145 7 42 1,838 12,496 11,945 262,496 11,834 262,386 8 43 1,838 14,946 14,578 264,946 14,438 264,805 9 44 1,838 17,590 17,406 267,590 17,233 267,417 10 45 1,838 20,446 20,446 270,446 20,234 270,234 11 46 1,838 23,527 23,527 273,527 23,271 273,271 12 47 1,838 26,850 26,850 276,850 26,543 276,543 13 48 1,838 30,435 30,435 280,435 30,071 280,071 14 49 1,838 34,302 34,302 284,302 33,872 283,872 15 50 1,838 38,471 38,471 288,471 37,966 287,966 16 51 1,838 42,980 42,980 292,980 42,389 292,389 17 52 1,838 47,853 47,853 297,853 47,164 297,164 18 53 1,838 53,112 53,112 303,112 52,313 302,313 19 54 1,838 58,786 58,786 308,786 57,859 307,859 20 55 1,838 64,903 64,903 314,903 63,829 313,829 25 60 1,838 103,389 03,389 353,389 101,210 351,210 30 65 1,838 157,555 157,555 407,555 153,283 403,283 35 70 1,838 237,409 237,409 487,409 222,203 472,203 40 75 1,838 362,146 362,146 612,146 307,679 557,679 45 80 1,838 551,258 551,258 801,258 401,683 651,683 50 85 1,838 832,477 832,477 1,082,477 487,926 737,926 55 90 1,838 1,233,634 1,233,634 1,483,634 527,018 777,018 60 95 1,838 1,840,116 1,840,116 2,090,116 461,827 711,827
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY AN OWNER AND THE DIFFERENT INVESTMENT RATE OF RETURN FOR THE FUND PORTFOLIOS. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY ANLIC OR THE FUNDS THAT THIS HYPOTHETICAL INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER A PERIOD OF TIME. ALLOCATOR 2000 A-5 ACACIA NATIONAL LIFE INSURANCE COMPANY
ALLOCATOR 2000 FLEXIBLE REMIUM VARIABLE LIFE Prepared for: Valued Client Annual Premium: $1,838 Male Age 35 Non-Tobacco Riders: None Option B Face Amount: $250,000 8.00% HYPOTHETICAL GROSS ANNUAL RATE OF RETURN CURRENT CHARGES GUARANTEED CHARGES --------------- ------------------ NET END OF ANNUAL ACCOUNT SURRENDER DEATH SURRENDER DEATH YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE BENEFIT ----------------------------------------------------------------------------------------- 1 36 1,838 1,138 587 251,138 587 251,138 2 37 1,838 2,562 2,011 252,562 1,998 252,549 3 38 1,838 4,043 3,492 254,043 3,466 254,017 4 39 1,838 5,583 5,032 255,583 4,991 255,542 5 40 1,838 7,185 6,633 257,185 6,574 257,126 6 41 1,838 8,842 8,291 258,842 8,212 258,764 7 42 1,838 10,555 10,004 260,555 9,906 260,457 8 43 1,838 12,329 11,962 262,329 11,839 262,206 9 44 1,838 14,158 13,975 264,158 13,827 264,010 10 45 1,838 16,045 16,045 266,045 15,867 265,867 11 46 1,838 17,983 17,983 267,983 17,771 267,771 12 47 1,838 19,971 19,971 269,971 19,722 269,722 13 48 1,838 22,006 22,006 272,006 21,717 271,717 14 49 1,838 24,085 24,085 274,085 23,750 273,750 15 50 1,838 6,204 26,204 276,204 25,816 275,816 16 51 1,838 28,364 28,364 278,364 27,919 277,919 17 52 1,838 30,555 30,555 280,555 30,046 280,046 18 53 1,838 32,764 32,764 282,764 32,184 282,184 19 54 1,838 34,976 34,976 284,976 34,315 284,315 20 55 1,838 37,174 37,174 287,174 36,421 286,421 25 60 1,838 47,271 47,271 297,271 45,869 295,869 30 65 1,838 52,255 52,255 302,255 49,722 299,722 35 70 1,838 50,178 50,178 300,178 39,140 289,140 40 75 1,838 40,310 40,310 290,310 -- -- 45 80 1,838 10,361 10,361 260,361 -- -- 50 85 1,838 -- -- -- -- --
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY AN OWNER AND THE DIFFERENT INVESTMENT RATE OF RETURN FOR THE FUND PORTFOLIOS. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY ANLIC OR THE FUNDS THAT THIS HYPOTHETICAL INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER A PERIOD OF TIME. ALLOCATOR 2000 A-6 ACACIA NATIONAL LIFE INSURANCE COMPANY
ALLOCATOR 2000 FLEXIBLE REMIUM VARIABLE LIFE Prepared for: Valued Client Annual Premium: $1,838 Male Age 35 Non-Tobacco Riders: None Option B Face Amount: $250,000 0.00% HYPOTHETICAL GROSS ANNUAL RATE OF RETURN CURRENT CHARGES GUARANTEED CHARGES --------------- ------------------ NET END OF ANNUAL ACCOUNT SURRENDER DEATH SURRENDER DEATH YEAR AGE OUTLAY VALUE VALUE BENEFIT VALUE BENEFIT --------------------------------------------------------------------------------------- 1 36 1,838 1,027 475 251,027 475 251,027 2 37 1,838 2,241 1,690 252,241 1,677 252,228 3 38 1,838 3,404 2,852 253,404 2,828 253,379 4 39 1,838 4,513 3,962 254,513 3,926 254,477 5 40 1,838 5,571 5,020 255,571 4,969 255,521 6 41 1,838 6,568 6,016 256,568 5,952 256,503 7 42 1,838 7,502 6,951 257,502 6,873 257,424 8 43 1,838 8,375 8,008 258,375 7,914 258,281 9 44 1,838 9,181 8,997 259,181 8,888 259,072 10 45 1,838 9,918 9,918 259,918 9,791 259,791 11 46 1,838 10,580 10,580 260,580 10,433 260,433 12 47 1,838 11,161 11,161 261,161 10,994 260,994 13 48 1,838 11,660 11,660 261,660 11,472 261,472 14 49 1,838 12,071 12,071 262,071 11,859 261,859 15 50 1,838 12,388 12,388 262,388 12,151 262,151 16 51 1,838 12,608 12,608 262,608 12,343 262,343 17 52 1,838 12,717 12,717 262,717 12,422 262,422 18 53 1,838 12,701 12,701 262,701 12,373 262,373 19 54 1,838 12,543 12,543 262,543 12,179 262,179 20 55 1,838 12,229 12,229 262,229 11,823 261,823 25 60 1,838 7,738 7,738 257,738 7,057 257,057 30 65 1,838 -- -- 250,000 -- 250,000 35 70 1,838 -- -- -- -- --
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY AN OWNER AND THE DIFFERENT INVESTMENT RATE OF RETURN FOR THE FUND PORTFOLIOS. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATE OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY ANLIC OR THE FUNDS THAT THIS HYPOTHETICAL INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER A PERIOD OF TIME. ALLOCATOR 2000 A-7 APPENDIX B AUTOMATIC REBALANCING, MODEL ASSET ALLOCATION, DOLLAR COST AVERAGING AND EARNINGS SWEEP PROGRAMS To assist the Owner in making a premium allocation decision among Sub-Accounts, ANLIC offers automatic transfer programs. These programs are designed to meet individual needs of the Owner and are not guaranteed to improve performance of the Policy. The Owner may elect the Automatic Rebalancing Program that will adjust values in the Sub-Accounts to align with a specific percentage of total value in the Variable Account. By placing a written allocation election form on file with ANLIC, the Owner may have amounts automatically transferred from the Sub-Accounts on either a quarterly, semi-annual or annual basis. The Owner chooses the percentages to be used under the Automatic Rebalancing Program. Model Asset Allocation is offered through The Advisors Group, Inc ("TAG") in conjunction with the services of Ibbotson Associates who were among the first to develop the modern science of asset allocation. To assist the Owner, TAG representatives offer a service created by Ibbotson Associates to match the Owner's risk tolerance and investment objectives with a model Sub-Account percentage allocation formula. To use this service, the Owner first completes a questionnaire about risk tolerance and Policy performance objectives. The TAG representative uses the completed responses to match the Owner's needs to one of ten different model percentage allocation formulas designed by Ibbotson. The Owner may then elect to follow the recommended percentage allocation formula, or select a different formula. Ibbotson Associates provides a valuable service to an Owner who seeks to follow the science of asset allocation. Some research studies have shown that the asset allocation decision is the single largest determinant of Portfolio performance. Asset allocation combines the concepts of asset-liability management, mean-variance optimization, simulation and economic forecasting. Its objectives are to match asset classes and strategies to achieve better returns, to reduce volatility and to attain specific goals such as avoidance of interest rate or market risk. As an alternative, ANLIC also offers the Owner the option to elect the Dollar Cost Averaging Program. Dollar cost averaging is a long-term investment method that uses periodic premium allocations from the Money Market Sub-Account to other Sub-Accounts. Under the theory of dollar cost averaging, the Owner may pursue a strategy of regular and systematic purchases to take advantage of market value fluctuations. More Sub-Account accumulation units will be purchased when Sub-Account unit values are low and fewer units will be purchased when unit values are high. There is no guarantee that the Dollar Cost Averaging Program will protect against market loss or improve performance of the Policy. The Dollar Cost Averaging Program provides a valuable service to an Owner who is able to sustain a long term transfer schedule and who seeks to avoid the volatility often associated with equity investments. The Earnings Sweep Program allows an Owner to systematically reallocate interest earnings from the Fixed Account to one or more of the Subaccounts on a monthly, quarterly, semi-annual, or annual basis to meet your investment allocation percentages. ALLOCATOR 2000 B-1