Registration No. 333-83010
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
----------------------------
NATIONWIDE VLI SEPARATE ACCOUNT-4
(EXACT NAME OF TRUST)
Pre-Effective Amendment No. 1
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NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
PATRICIA R. HATLER
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------------------
Approximate date of proposed public offering: (Upon the effective date of this
Registration Statement. May 20, 2002 requested.)
The Registrant hereby agrees to amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall therefore become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
1.....................................................................Nationwide Life Insurance Company
The Variable Account
2.....................................................................Nationwide Life Insurance Company
3.....................................................................Custodian of Assets
4.....................................................................Distribution of the Policies
5.....................................................................The Variable Account
6.....................................................................Not Applicable
7.....................................................................Not Applicable
8.....................................................................Not Applicable
9.....................................................................Legal Proceedings
10.....................................................................Information About the Policies; How the Cash Value
Varies; Right to Exchange for a Fixed Benefit
Policy; Reinstatement; Other Policy Provisions
11 Investments of the Variable Account
12.....................................................................The Variable Account
13.....................................................................Policy Charges
Reinstatement
14.....................................................................Underwriting and Issuance - Premium Payments,
Minimum Requirements for Issuance of a Policy
15.....................................................................Investments of the Variable Account; Premium
Payments
16.....................................................................Underwriting and Issuance - Allocation of Cash Value
17.....................................................................Surrendering the Policy for Cash
18.....................................................................Reinvestment
19.....................................................................Not Applicable
20.....................................................................Not Applicable
21.....................................................................Policy Loans
22.....................................................................Not Applicable
23.....................................................................Not Applicable
24.....................................................................Not Applicable
25.....................................................................Nationwide Life Insurance Company
26.....................................................................Not Applicable
27.....................................................................Nationwide Life Insurance Company
28.....................................................................Company Management
29.....................................................................Company Management
30.....................................................................Not Applicable
31.....................................................................Not Applicable
32.....................................................................Not Applicable
33.....................................................................Not Applicable
34.....................................................................Not Applicable
35.....................................................................Nationwide Life Insurance Company
36.....................................................................Not Applicable
37.....................................................................Not Applicable
N-8B-2 ITEM CAPTION IN PROSPECTUS
38.....................................................................Distribution of the Policies
39.....................................................................Distribution of the Policies
40.....................................................................Not Applicable
41(a)..................................................................Distribution of the Policies
42.....................................................................Not Applicable
43.....................................................................Not Applicable
44.....................................................................How the Cash Value Varies
45.....................................................................Not Applicable
46.....................................................................How the Cash Value Varies
47.....................................................................Not Applicable
48.....................................................................Custodian of Assets
49.....................................................................Not Applicable
50.....................................................................Not Applicable
51.....................................................................Summary of the Policies;
Information About the Policies
52.....................................................................Substitution of Securities
53.....................................................................Taxation of the Company
54.....................................................................Not Applicable
55.....................................................................Not Applicable
56.....................................................................Not Applicable
57.....................................................................Not Applicable
58.....................................................................Not Applicable
59.....................................................................Financial Statements
TABLE OF CONTENTS
- - What should I know about this and other variable life insurance products
before purchasing a variable life insurance policy?
- - How can I obtain additional information about Nationwide and this variable
life insurance policy?
GLOSSARY OF SPECIAL TERMS.......................................................
POLICY EXPENSES.................................................................
- - How much does this variable life insurance policy cost?
INVESTMENT OPTIONS..............................................................
- - What underlying mutual funds are available in this variable life insurance
policy and how much does each fund cost, after expense reimbursement?
- - What are the underlying mutual fund expenses before expense reimbursement?
- - Are there any other investment options available to me?
MORE INFORMATION ABOUT THIS POLICY .............................................
- - Are there riders available to added to the policy?
- - Ok. Now that I know a little more about where I can invest my money, describe
this policy in detail.
- - Are there any criteria for purchasing this policy?
- - What is the minimum amount of premium you will accept?
- - Tell me more about the charges I must pay in order to make sure a death
benefit is paid if the insured dies.
RIGHT TO CANCEL.................................................................
- - What if I decide I don't want this policy after I purchase it?
ALLOCATION OF PREMIUM PAYMENTS..................................................
- - I've decided I want to purchase this policy. What happens after I send in my
initial premium payment?
- - When will my premium payments be allocated to my requested sub-account
options?
VALUING ACCOUNT VALUES..........................................................
- - Once my premium payments can be applied to my policy, how much can my premium
purchase?
TRANSFERRING ALLOCATIONS........................................................
- - May I make transfers between investment options? o How do I make transfers?
CASH VALUE AND SURRENDERS.......................................................
- - Does my policy have any value besides death benefit value?
- - What if I want to take a partial or total surrender? What happens next?
- - Will partial surrenders have any effect on my policy's cash value?
- - Will I have to pay taxes on any amounts surrendered?
POLICY LOANS....................................................................
- - May I take a loan against my policy?
- - Will my loan have any effect on investment performance?
- - What about interest?
- - Will a loan have any effect on my death benefit amount or cash value amount?
- - When and how do I make loan repayments?
DEATH BENEFIT...................................................................
- - Do I have a choice of death benefit options?
- - May I ever change the specified amount after my policy is issued?
- - May I change my death benefit option after my policy is issued?
- - What happens once the last surviving insured dies?
- - How is the death benefit distributed?
- - Earlier you mentioned a maturity date. What is the maturity date?
- - What if I don't want to get paid the policy's cash value on the maturity
date? May I extend the maturity date?
ASSIGNMENT......................................................................
- - May I ever assign my policy?
POLICY LAPSE AND REINSTATEMENT..................................................
- - Can my policy ever lapse and what happens if it does?
PERIODIC INFORMATION............................................................
- - Will I ever receive periodic information from you about my policy?
POLICY OWNER AND BENEFICIARY....................................................
- - Tell me more about my rights as policy owner as well as the rights of the
beneficiary. Do the insureds have any rights under the policy if I am not one
of the insureds?
TAX INFORMATION.................................................................
- - Tell me more about how my life insurance policy is taxed. What should I look
out for?
MORE INFORMATION ABOUT NATIONWIDE...............................................
- - Tell me a little more about Nationwide and the variable account.
OTHER GENERAL INFORMATION.......................................................
- - Legal Considerations
- - State Regulation
- - Advertising
- - Legal Proceedings
- - Independent Certified Public Accountants....................................
- - Registration Statement
- - Who is the general distributor (principal underwriter) for this policy?
- - How are the policies sold (distributed)?
APPENDIX A: OBJECTIVES FOR THE UNDERLYING MUTUAL FUNDS..........................
APPENDIX B: ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH
BENEFITS ...................................................................
APPENDIX C: PERFORMANCE SUMMARY INFORMATION.....................................
NATIONWIDE LIFE INSURANCE COMPANY
Last Survivor Flexible Premium Variable Universal Life Insurance Policies
Issued by Nationwide Life Insurance Company through its
Nationwide VLI Separate Account-4
The date of this prospectus is May 22, 2002.
- --------------------------------------------------------------------------------
WHAT SHOULD I KNOW ABOUT THIS AND OTHER VARIABLE LIFE INSURANCE PRODUCTS BEFORE
PURCHASING A VARIABLE LIFE INSURANCE POLICY?
Variable life insurance policies are complex products with unique benefits and
advantages that may be particularly useful for certain individuals with life
insurance and estate planning needs. There are, however, costs and charges
associated with benefits that variable life insurance products provide - costs
and charges that may not be present in term or universal life insurance
policies, as well as other investment products such as mutual funds or
annuities. With help from a financial consultant, you are encouraged to evaluate
your particular needs - whether estate planning, investment or otherwise - in
order to determine if a variable life insurance policy is the right financial
instrument to meet your needs. This process will aid you in determining whether
the purchase of the variable life insurance policy described in this prospectus
is consistent with your goals, risk tolerance, time horizon, family situation,
tax situation and other personal needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THIS VARIABLE
LIFE INSURANCE POLICY BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY
AND KEEP IT FOR FUTURE REFERENCE.
The life insurance policies offered by this prospectus are last survivor
flexible premium variable universal life insurance policies (last survivor
flexible premium variable adjustable life insurance policies in Puerto Rico).
They provide flexibility to vary the amount and frequency of premium payments. A
cash surrender value may be offered if you terminate your policy during the
lifetime of either of the insureds.
The purpose of this policy is to provide life insurance protection for the
beneficiary named in the policy. No claim is made that the policy is in any way
similar or comparable to a systematic investment plan of a mutual fund.
The death benefit and cash value of this policy may vary to reflect the
experience of the Nationwide VLI Separate Account-4 (the "variable account") or
the fixed account, depending on how premium payments are invested.
PLEASE REMEMBER THAT THIS POLICY:
- - IS NOT A BANK DEPOSIT
- - IS NOT FDIC INSURED
- - IS NOT INSURED OR ENDORSED BY A BANK OR ANY FEDERAL GOVERNMENT AGENCY
- - IS NOT AVAILABLE IN EVERY STATE
- - MAY GO DOWN IN VALUE
You assume certain risks when investing in the policies, including the risk of
losing money.
We guarantee to keep your policy in force so long as minimum premium
requirements have been met. We guarantee the death benefit for as long as your
policy is in force. The cash surrender value is not guaranteed. Your policy will
lapse if the cash surrender value is insufficient to cover policy charges.
Benefits described in this prospectus may not be available in every jurisdiction
- - please refer to your policy for specific benefit information.
This prospectus is not an offering in any jurisdiction where such offering may
not lawfully be made.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
HOW CAN I OBTAIN ADDITIONAL INFORMATION ABOUT NATIONWIDE AND THIS VARIABLE LIFE
INSURANCE POLICY?
For general information or to obtain FREE copies of the:
- prospectus, annual report or semi-annual report for any underlying mutual
fund; and
- any required forms,
call: 1-800-547-7548
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 182150
COLUMBUS, OHIO 43218-2150
1
Material incorporated by reference in this prospectus can be found on the SEC
website at:
www.sec.gov
Information about this and other Best of America products can be found on the
worldwide web at:
www.bestofamerica.com
2
GLOSSARY OF SPECIAL TERMS
ATTAINED AGE- The insured's age on the policy date, plus the number of full
years since the policy date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the cash
value of the variable account.
AVERAGE ISSUE AGE - The arithmetic average of the ages of the two insureds at
the policy issuance.
BENEFICIARY- The person to whom death benefit proceeds are paid.
CASH VALUE- The sum of the value of all variable account accumulation units
attributable to your policy plus amounts credited to the fixed account and your
policy loan account, if any.
FIXED ACCOUNT- An investment option, which is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
GUIDELINE LEVEL PREMIUM- The level annual premiums required to mature the
policy under reasonable mortality and expense charges with an annual effective
interest rate of 5%. It is calculated pursuant to Rule 6e-3(T) of the Investment
Company Act of 1940. The SEC has neither approved nor disapproved the accuracy
of any calculation using the guideline level premium.
INSUREDS- The two people whose lives are covered by this policy.
MATURITY DATE- The policy anniversary on or following the younger insured's
100th birthday.
MINIMUM REQUIRED DEATH BENEFIT- The lowest death benefit that will qualify the
policy as life insurance under Section 7702 of the Internal Revenue Code.
NATIONWIDE- Nationwide Life Insurance Company. "We", "our" and "us" refer to
Nationwide.
NET AMOUNT AT RISK- The death benefit minus the cash value. On the monthly
anniversary date, the net amount at risk is the death benefit minus the cash
value prior to subtraction of the base policy cost of insurance charge (which
consists of the administrative charge, per unit charge, and Mortality and
Expense Risk fee).
NET PREMIUMS- The actual premiums minus the percent of premium charges. The
percent of premium charges are shown on the policy data page.
POLICY OWNER- The policy owner has all rights under this policy. The policy
owner is the person or entity whose name is on the application unless later
changed. "You" or "your" refer to the policy owner.
SPECIFIED AMOUNT- The dollar amount used to determine the death benefit of your
policy. Your specified amount is listed on your policy data page.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units are separately maintained.
VALUATION PERIOD- Each day the New York Stock Exchange is open.
VARIABLE ACCOUNT- Nationwide VLI Separate Account-4, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
3
POLICY EXPENSES
HOW MUCH DOES THIS VARIABLE LIFE INSURANCE POLICY COST?
There are certain charges associated with the policy, in addition to those
charges assessed by the underlying mutual funds. Below is a summary of those
charges. A detailed summary of the charges assessed to your individual policy
can be found on the policy data page that is issued with your policy.
SOME CHARGES ARE TAKEN MONTHLY. THOSE CHARGES ARE:
THE MORTALITY AND EXPENSE RISK CHARGE
The amount charged for mortality and expense risks depends on how long you have
owned your policy.
- - For policy years 1-15, a charge at an annualized rate of 0.80% of the
policy's variable account assets are assessed on each monthly anniversary
day.
- - For policy years 16 and after, a charge at an annualized rate of 0.30% of the
policy's variable account assets are assessed on each monthly anniversary
day.
PER $1,000 OF SPECIFIED AMOUNT CHARGE...............................................maximum of $0.40 per $1,000 of specified amount
(This charge is assessed monthly during the first three policy years only)
MONTHLY POLICY EXPENSE CHARGE.................................................................................... a maximum of $7.50
COST OF INSURANCE CHARGE...............................................................................varies based on insurability.
SOME CHARGES ARE TAKEN AS A RESULT OF AN ACTION TAKEN BY YOU. FOR INSTANCE, A
SURRENDER CHARGE IS ASSESSED IF YOU SURRENDER A PART OR ALL OF YOUR POLICY PRIOR
TO THE END OF THE SURRENDER PERIOD. THE CHARGES THAT FALL WITHIN THIS CATEGORY
ARE:
MAXIMUM SURRENDER CHARGE.................................................22.50% multiplied by the lesser of (a) or (b), where:
(a) = the Guideline Level Premium;; and
(b) = premiums paid during the first two policy years
Plus (c) multiplied by (d) where:
(c) = the specified amount divided by 1,000; and
(d) = the administrative target component as illustrated by Chart 1 below;
this factor allows the company to account for the probability
(at various ages) that death will occur and no CDSC will be recouped.
CHART 1
AVERAGE ISSUE AGE ADMINISTRATIVE TARGET
COMPONENT
------------------- ---------------------
21 through 39 4.00
40 through 49 6.00
50 through 59 7.00
60 through 85 8.00
4
MAXIMUM PREMIUM LOAD....................................................................................7.50% for policy years 1-15
(for policy years 16 and after, the
maximum premium load is guaranteed to
never exceed 6.00%)
PARTIAL SURRENDER PROCESSING FEE (PER PARTIAL SURRENDER)...............................lesser of $25 or 2% of the amount surrendered
IF YOU DECIDE TO TAKE A LOAN, INTEREST IS APPLIED TO THE LOANED AMOUNT. THE
AMOUNT OF INTEREST APPLIED IS GUARANTEED NEVER TO BE GREATER THAN THE PERCENTAGE
SHOWN BELOW.
INTEREST ASSESSED ON LOANED AMOUNTS.............................................................................................4.5%
DETAILED DESCRIPTIONS OF EACH CHARGE SHOWN ABOVE CAN BE FOUND LATER IN THIS
PROSPECTUS.
INVESTMENT OPTIONS
Not all investment options are available in all states.
WHAT UNDERLYING MUTUAL FUNDS ARE AVAILABLE IN THIS VARIABLE LIFE INSURANCE
POLICY AND HOW MUCH DOES EACH FUND COST, AFTER EXPENSE REIMBURSEMENT?
The following underlying mutual funds are available under the policies:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS AFTER EXPENSE
REIMBURSEMENTS)
To be added by Pre-Effective Amendment.
- ------------------------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century VP 0.70% 0.00% 0.00% 0.70%
Income & Growth Fund: Class I
American Century Variable Portfolios, Inc. - American Century VP 1.26% 0.00% 0.00% 1.26%
International Fund: Class I
American Century Variable Portfolios, Inc. - American Century VP 1.00% 0.00% 0.00% 1.00%
Ultra Fund: Class I
American Century Variable Portfolios, Inc. - American Century VP 0.97% 0.00% 0.00% 0.97%
Value Fund: Class I
Dreyfus Investment Portfolios: Small Cap Stock Index: Service Shares 0.35% 0.00% 0.25% 0.60%
The Dreyfus Socially Responsible Growth Fund, Inc.: Initial Shares 0.75% 0.03% 0.00% 0.78%
Dreyfus Stock Index Fund, Inc.: Initial Shares 0.25% 0.01% 0.00% 0.26%
Dreyfus Variable Investment Fund - Appreciation Portfolio: Initial 0.75% 0.03% 0.00% 0.78%
Shares
Federated Insurance Series - Federated Quality Bond Fund II: 0.55% 0.15% 0.00% 0.70%
Primary Shares
Fidelity VIP Equity-Income Portfolio: Service Class 0.48% 0.10% 0.10% 0.68%
Fidelity VIP Growth Portfolio: Service Class 0.58% 0.10% 0.10% 0.78%
Fidelity VIP High Income Portfolio: Service Class 0.58% 0.13% 0.10% 0.81%
Fidelity VIP Overseas Portfolio: Service Class 0.73% 0.20% 0.10% 1.03%
Fidelity VIP II Contrafund(R)Portfolio: Service Class 0.58% 0.10% 0.10% 0.78%
Fidelity VIP III Value Strategies Portfolio: Service Class 0.58% 0.26% 0.10% 0.94%
GVIT Comstock GVIT Value Fund: Class I 0.79% 0.28% 0.00% 1.07%
GVIT Dreyfus GVIT Mid Cap Index Fund: Class I 0.50% 0.26% 0.00% 0.76%
GVIT Federated GVIT High Income Bond Fund: Class I 0.75% 0.28% 0.00% 1.03%
GVIT Gartmore GVIT Emerging Markets Fund: Class I 1.15% 0.21% 0.00% 1.36%
GVIT Gartmore GVIT Global Financial Services Fund: Class I 1.00% 0.26% 0.00% 1.26%
GVIT Gartmore GVIT Global Health Sciences Fund: Class I 1.00% 0.32% 0.00% 1.32%
5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
GVIT Gartmore GVIT Global Technology and Communications Fund: Class 0.98% 0.26% 0.00% 1.24%
I
GVIT Gartmore GVIT Global Utilities Fund: Class I 0.80% 0.28% 0.00% 1.08%
GVIT Gartmore GVIT Government Bond Fund: Class I 0.50% 0.25% 0.00% 0.75%
GVIT Gartmore GVIT Growth Fund: Class I 0.59% 0.25% 0.00% 0.84%
GVIT Gartmore GVIT International Growth Fund: Class I 1.00% 0.33% 0.00% 1.33%
GVIT Gartmore GVIT Investor Destinations Conservative Fund 0.00% 0.36% 0.25% 0.61%
GVIT Gartmore GVIT Investor Destinations Moderately Conservative 0.00% 0.36% 0.25% 0.61%
Fund
GVIT Gartmore GVIT Investor Destinations Moderate Fund 0.13% 0.20% 0.25% 0.58%
GVIT Gartmore GVIT Investor Destinations Moderately Aggressive Fund 0.10% 0.26% 0.25% 0.61%
GVIT Gartmore GVIT Investor Destinations Aggressive Fund 0.07% 0.29% 0.25% 0.61%
GVIT Gartmore GVIT Money Market Fund: Class I 0.38% 0.25% 0.00% 0.63%
GVIT Gartmore GVIT Nationwide Leaders Fund: Class I 0.84% 0.41% 0.00% 1.25%
GVIT Gartmore GVIT Total Return Fund: Class I 0.59% 0.25% 0.00% 0.84%
GVIT Gartmore GVIT U.S. Growth Leaders Fund: Class I 0.90% 0.22% 0.00% 1.12%
GVIT Gartmore GVIT Worldwide Leaders Fund: Class I 0.99% 0.26% 0.00% 1.25%
GVIT GVIT Small Cap Growth Fund: Class I 1.10% 0.28% 0.00% 1.38%
GVIT GVIT Small Cap Value Fund: Class I 0.86% 0.22% 0.00% 1.08%
GVIT GVIT Small Company Fund: Class I 0.93% 0.26% 0.00% 1.19%
GVIT J.P. Morgan GVIT Balanced Fund: Class I 0.74% 0.27% 0.00% 1.01%
GVIT MAS GVIT Multi Sector Bond Fund: Class I 0.75% 0.27% 0.00% 1.02%
GVIT Strong GVIT Mid Cap Growth Fund: Class I 0.90% 0.27% 0.00% 1.17%
Janus Aspen Series - Capital Appreciation Portfolio: Service Shares 0.65% 0.01% 0.25% 0.91%
Janus Aspen Series - Global Technology Portfolio: Service Shares 0.65% 0.05% 0.25% 0.95%
Janus Aspen Series - International Growth Portfolio: Service Shares 0.65% 0.06% 0.25% 0.96%
Neuberger Berman AMT Guardian Portfolio 0.85% 0.14% 0.00% 0.99%
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.84% 0.07% 0.00% 0.91%
Neuberger Berman AMT Partners Portfolio 0.82% 0.05% 0.00% 0.87%
Oppenheimer Variable Account Funds - Oppenheimer Aggressive Growth 0.64% 0.04% 0.00% 0.68%
Fund/VA: Initial Class
Oppenheimer Variable Account Funds - Oppenheimer Capital 0.64% 0.04% 0.00% 0.68%
Appreciation Fund/VA: Initial Class
Oppenheimer Variable Account Funds - Oppenheimer Global Securities 0.64% 0.06% 0.00% 0.70%
Fund/VA: Initial Class
Oppenheimer Variable Account Funds - Oppenheimer Main Street Growth 0.68% 0.05% 0.00% 0.73%
& Income Fund/VA: Initial Class
Strong Opportunity Fund II, Inc. 0.75% 0.35% 0.00% 1.10%
The Universal Institutional Funds, Inc. - Emerging Markets Debt 0.80% 0.37% 0.00% 1.17%
Portfolio
The Universal Institutional Funds, Inc. - U.S. Real Estate Portfolio 0.75% 0.35% 0.00% 1.10%
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable 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 mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
WHAT ARE THE UNDERLYING MUTUAL FUND EXPENSES BEFORE EXPENSE REIMBURSEMENT?
6
Some underlying mutual funds are subject to fee waivers, expense reimbursements
and/or custodial credits. The following chart shows what the expenses would have
been for such funds without fee waivers, expense reimbursements or custodial
credits.
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund net assets, before
reimbursements and waivers)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated Quality Bond Fund II: Primary 0.60% 0.40% 0.25% 1.25%
Shares
GVIT Gartmore GVIT Investor Destinations Conservative Fund 0.13% 0.43% 0.25% 0.81%
GVIT Gartmore GVIT Investor Destinations Moderately Conservative Fund 0.13% 0.42% 0.25% 0.80%
GVIT Gartmore GVIT Investor Destinations Moderately Aggressive Fund 0.13% 0.26% 0.25% 0.64%
GVIT Gartmore GVIT Investor Destinations Aggressive Fund 0.13% 0.29% 0.25% 0.67%
GVIT Gartmore GVIT Nationwide Leaders Fund: Class I 0.90% 0.41% 0.00% 1.31%
Strong Opportunity Fund II, Inc. 0.75% 0.65% 0.00% 1.40%
The Universal Institutional Funds, Inc. - Emerging Markets Debt 0.80% 0.37% 0.00% 1.17%
Portfolio
The Universal Institutional Funds, Inc. - U.S. Real Estate Portfolio 0.80% 0.35% 0.00% 1.15%
----- ----- ----- -----
No charge is assessed to you for income taxes incurred by us as a result of the
operations of the sub-accounts. However, we reserve the right to assess a charge
for income taxes against the sub-accounts of the variable account if income
taxes are incurred.
YOU CAN FIND THE OBJECTIVES FOR EACH OF THE FUNDS LISTED ABOVE IN APPENDIX A.
PLEASE TAKE A LOOK AT APPENDIX B IF YOU WOULD LIKE TO SEE THE MOST RECENT
HISTORICAL PERFORMANCE FOR EACH OF THE FUNDS LISTED ABOVE.
ARE THERE ANY OTHER INVESTMENT OPTIONS AVAILABLE TO ME?
Yes. You may also invest in the fixed account option available in your policy.
The fixed account is an investment option that is funded by assets of our
general account. The general account contains all of our assets other than those
in this and our other separate accounts. The general account is used to support
our annuity and insurance obligations and may contain compensation for mortality
and expense risks. The general account is not subject to the same laws as the
variable account and the SEC has not reviewed material in this prospectus
relating to the fixed account. However, information relating to the fixed
account is subject to federal securities laws relating to accuracy and
completeness of prospectus disclosure.
Premiums will be allocated to the fixed account as elected by you, subject to
the limits disclosed in this prospectus.
The investment income earned by the fixed account will be allocated to the
policies at varying guaranteed interest rate(s) depending on the following
categories of fixed account allocations:
- - Portfolio Rate - The rate credited on the fixed account net of policy loans.
This rate is a weighted average of all investments in the fixed account made
over time at different rates of return and is subject to change based on
market conditions. The Dollar Cost Averaging Rate is the same as the
Portfolio Rate.
- - Renewal Rate - The rate available for maturing fixed account allocations
which are entering a new guarantee period. You will be notified of this rate
in a letter issued with the quarterly statements when
7
any of the money in your fixed account matures. At that time, you will have
an opportunity to leave the money in the fixed account and receive the
Renewal Rate or you can move the money to any of the sub-accounts.
- Enhanced Dollar Cost Averaging Rate - From time to time, we may offer a
more favorable rate for an initial premium into a new policy when used in
conjunction with an enhanced dollar cost averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during which the 12 month anniversary of the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to your policy on a daily basis. As
a result, the credited interest rate is compounded daily to achieve the stated
effective yield.
The guaranteed rate for any premium payment will be effective for not less than
twelve months. We guarantee that the rate will not be less than 3.0% per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
our sole discretion. You assume the risk that interest credited to fixed account
allocations may not exceed the minimum guarantee of 3.0% for any given year.
We guarantee that the fixed account value will not be less than the amount of
the premium allocated to the fixed account, plus interest credited as described
above, less any surrenders and any applicable charges.
MORE INFORMATION ABOUT THIS POLICY
ARE THERE RIDERS AVAILABLE TO BE ADDED TO THE POLICY?
Yes, the riders you currently can add to the policy are:
- Policy Split Option Rider
- Estate Protection Rider
NOT ALL RIDERS ARE AVAILABLE IN ALL STATES.
OK. NOW THAT I KNOW A LITTLE MORE ABOUT WHERE I CAN INVEST MY MONEY, DESCRIBE
THIS POLICY IN DETAIL.
The policy described in this application meets the definition of "life
insurance" as defined in Section 7702 of the Internal Revenue Code. We
continually monitor this policy to make sure that it continues to meet the
requirements of Section 7702.
If you purchase this policy, you will not be paid dividends from us. This policy
is not a participating policy. It does not share in the profits or surplus
earnings of Nationwide like traditional term or universal life insurance
policies. In addition, any dividends paid by the underlying mutual funds will be
automatically reinvested in that fund.
With variable life insurance policies, including the policy described in this
prospectus, the cash value and the death benefit vary with the investment
performance of the investment options you select, however, remember that the
death benefit cannot fall below the amount you've specified, often called the
"specified amount." The specified amount will be reflected on your policy data
page.
In this policy, you request the amount of specified amount you feel you need
upon the death of the last surviving named insured - such insured could be you
or another named person. In return for our guarantee that a death benefit will
be paid upon the death of the last surviving named insured while the policy is
in force, you must deposit a minimum amount of premium, in addition to paying
certain costs.
ARE THERE ANY CRITERIA FOR PURCHASING THIS POLICY?
Minimum requirements for policy issuance include:
- - The insureds must be between ages 21 and 85 inclusively;
- - we may require satisfactory evidence of insurability (including a medical
exam); and
- - you must specify a death benefit amount of at least $100,000.
WHAT IS THE MINIMUM AMOUNT OF PREMIUM YOU WILL ACCEPT?
The minimum amount of premium you must pay depends on how much life insurance
you specify, however, each premium payment must be at least $50. The initial
premium is payable in full at our home office or to our authorized agent.
TELL ME MORE ABOUT THE CHARGES I MUST PAY IN ORDER TO MAKE SURE A DEATH BENEFIT
IS PAID IF BOTH INSUREDS DIE.
In order to make sure the policy does not lapse, you will need to pay the
following charges:
- - Cost of Insurance Charge
- - Mortality and Expense Risk Charge
- - Per $1,000 of Specified Amount Charge
- - Monthly Policy Expense Charge
- - Premium Load
Each of the charges shown previously are discussed in further detail below.
COST OF INSURANCE CHARGE
We deduct a Cost of Insurance Charge from the cash value on a monthly basis.
This charge is determined by
8
multiplying the monthly cost of insurance rate by the net amount at risk (the
death benefit minus the policy's cash value). This deduction is charged
proportionately to the cash value in each sub-account and the fixed account,
unless you elect otherwise.
If you elect to increase the specified amount (the amount used to calculate the
death benefit), the net amount at risk will also increase. In order for us to
support this increased risk, we will assess an additional Cost of Insurance
Charge to the increase. The underwriting criteria, such as the insured's age and
health, may be different at the time of the specified amount increase than at
the time of application. Therefore, the monthly cost of insurance rate we use to
calculate the Cost of Insurance Charge for the increase may be different than
the rate we used to calculate the Cost of Insurance Charge for the initial
specified amount.
Monthly cost of insurance rates will not exceed those guaranteed in the policy.
Guaranteed cost of insurance rates are based on the 1980 Commissioners' Standard
Ordinary Mortality Table, Age Last Birthday (1980 CSO). Guaranteed cost of
insurance rates for policies issued on a substandard basis are based on
appropriate multiples of the 1980 CSO. These mortality tables are sex distinct.
In addition, separate mortality tables will be used for tobacco and non-tobacco.
MORTALITY AND EXPENSE RISK CHARGE
We assume certain risks for guaranteeing the mortality and expense charges. The
mortality risk assumed under this policy is that the insureds may not live as
long as expected. The expense risk assumed is that the actual expenses incurred
in issuing and administering this policy may be greater than expected. In
addition, we assume risks associated with the non-recovery of policy issue,
underwriting and other administrative expenses due to policies that lapse or are
surrendered in the early policy years.
In exchange for assuming the risks described above, we deduct a Mortality and
Expense Risk Charge from the variable account on a monthly basis. For each
policy in years 1-15, this charge is equal to an annualized rate of 0.80% of the
policy's variable account assets on each monthly anniversary day. For policy
years 16 and after, this charge is equal to an annualized rate of 0.30% of the
policy's variable account assets on each monthly anniversary day. Mortality and
Expense Risk Charge deductions will be charged proportionally to the cash value
in each sub-account in which you invest unless you tell us otherwise.
PER $1,000 OF SPECIFIED AMOUNT CHARGE
We deduct a charge from the cash value on a monthly basis for the first three
policy years only. The amount of the charge varies with the age of the younger
insured at the time of policy issuance in accordance with the following chart
which reflects the maximum per $1,000 of Specified Amount charge:
- ------------------ --------------- --------------- ---------------
YOUNGER CHARGE PER YOUNGER CHARGE PER
ISSUE AGE $1,000 OF ISSUE AGE $1,000 OF
SPECIFIED SPECIFIED
AMOUNT AMOUNT
- ------------------ --------------- --------------- ---------------
21-25 $0.10 52-53 $0.26
26 $0.11 54-55 $0.28
27 $0.12 56-57 $0.30
28 $0.13 58-59 $0.32
29 $0.14 60 $0.33
30 $0.15 61 $0.34
31-38 $0.16 62 $0.35
39 $0.17 63 $0.36
40-45 $0.18 64 $0.37
46-47 $0.20 65 $0.38
48-49 $0.22 66 $0.39
50-51 $0.24 67-85 $0.40
The following chart lists the charges we currently assess:
- ------------------ --------------- --------------- ---------------
YOUNGER CHARGE PER YOUNGER CHARGE PER
ISSUE AGE $1,000 OF ISSUE AGE $1,000 OF
SPECIFIED SPECIFIED
AMOUNT AMOUNT
- ------------------ --------------- --------------- ---------------
21-26 $0.02 50-51 $0.14
27-29 $0.03 52 $0.15
30-33 $0.04 53 $0.16
34-36 $0.05 54 $0.17
37-38 $0.06 55 $0.18
39-41 $0.07 56-57 $0.19
42-43 $0.08 58 $0.20
44-45 $0.09 59 $0.21
46 $0.10 60-61 $0.22
47 $0.11 62 $0.23
48 $0.12 63-64 $0.24
49 $0.13 65-75 $0.25
76-85 $0.30
This charge is taken on each monthly anniversary day. This charge compensates us
for sales expenses and expenses associated with underwriting, issuing and
distributing the policy.
Sales expenses include actual expenses paid to the broker or agent who is
servicing you.
9
Issue expenses include costs associated with the underwriting process.
MONTHLY POLICY EXPENSE CHARGE
We deduct a Policy Expense Charge from the cash value in the amount of $5.00 per
month. This charge is guaranteed to never go above $7.50 per month. The Policy
Expense Charge is taken proportionately against the sub-accounts of the variable
account and the fixed account on each monthly contract anniversary day. The
Monthly Policy Expense Charge compensates us for administrative expenses.
Administrative expenses include actual expenses related to the maintenance of
the policies including account and record-keeping, and providing you with
periodic reports.
Neither we nor Nationwide Investment Services Corporation (nor any of the
affiliates of either) receive profits or other benefits not included in the
charges described in this section.
MAXIMUM PREMIUM LOAD
We deduct a premium load from the cash value in the amount of 7.5% of premium
payments for policy years 1-15 and 5.5% of premium payments for policy years 16
and after. The premium load is assessed monthly and is guaranteed not to exceed
6.0% of premium payments for policy years 16 and after.
The premium load compensates Nationwide for tax expenses including state premium
and other state and local taxes as well as federal taxes imposed under Section
848 of the Internal Revenue Code. This charge is not a sales charge. The amount
charged may be more or less than the amount actually assessed by the state in
which you live.
RIGHT TO CANCEL
WHAT IF I DECIDE I DON'T WANT THIS POLICY AFTER I PURCHASE IT?
You may cancel the policy by returning it by the latest of:
- - 10 days after receiving the policy;
- - 45 days after signing the application; or
- - 10 days after we deliver a Notice of Right of Withdrawal.
If you decide to cancel, the policy can be mailed to the registered
representative who sold it you or returned directly to us. The cancellation will
be effective as of the date the request to cancel is postmarked, or if you
return the policy and the request to cancel directly to us, the date we receive
the returned policy and request to cancel.
Returned policies are deemed void from the beginning. We will refund the amount
prescribed by the state in which the policy was issued within 7 days after we
receive the policy. (For policies issued in New York, we will refund any
premiums paid.) The refunded amount will reflect the policy's investment
experience from the time of issuance to the time of termination, as well as the
deduction of any policy charges, unless the state in which the policy was issued
requires another amount to be refunded.
In addition you may, at any time during the first 24 months after your policy is
issued, submit a written request to us for an irrevocable one-time election to
transfer all sub-account cash value to the fixed account. This right of
conversion is subject to state availability.
ALLOCATION OF PREMIUM PAYMENTS
I'VE DECIDED I WANT TO PURCHASE THIS POLICY. WHAT HAPPENS AFTER I SEND IN MY
INITIAL PREMIUM PAYMENT?
Initial premiums allocated to a sub-account on the application are allocated to
the GVIT Gartmore GVIT Money Market Fund: Class I during the period in which you
may cancel the policy, unless your state requires premiums to be allocated to
the fixed account. (In New York, premiums are allocated to either the GVIT
Gartmore GVIT Money Market Fund: Class I or the fixed account based on your
election. If you make no election, premiums are allocated to the GVIT Gartmore
GVIT Money Market Fund: Class I.) At the expiration of this period, the premiums
are used to purchase shares of the underlying mutual funds you specified at net
asset value for the respective sub-account(s).
Upon payment of the initial premium, temporary insurance may be provided.
Issuance of continuing insurance coverage is dependent upon completion of all
underwriting requirements, payment of the initial premium, and delivery of the
policy while both insureds are still living.
Additional premium payments may be made at any time while the policy is in
force, subject to the following conditions:
- we may require satisfactory evidence of insurability before accepting
any additional premium payment which results in an increase in the net
amount at risk; and
- premium payments in excess of the premium limit established by the IRS
to qualify the policy as a contract for life insurance will be refunded.
Additional premium payments or other changes to the policy may jeopardize the
policy remaining within the definition of "life insurance" as defined by the
Internal Revenue Code. We will monitor premiums paid and other policy
transactions and will notify you when we believe your policy may be in jeopardy
of violating the life insurance guidelines.
10
We will send scheduled premium payment reminder notices to you according to the
premium mode shown on your policy data page.
We allocate premium payments to the sub-accounts and/or the fixed account, as
you instruct. All percentage allocations must be in whole numbers, and must be
at least 1%. The sum of allocations must equal 100%. Future premium allocations
may be changed by giving us written notice.
You may change the allocation of premiums or transfer cash value from one
sub-account to another. Cash value transferred to the variable account from the
fixed account, or between sub-accounts, will receive the accumulation unit value
next determined after the transfer request is received. Premiums allocated to
the fixed account at the time of application may not be transferred from the
fixed account prior to the first policy anniversary.
WHEN WILL MY PREMIUM PAYMENTS BE ALLOCATED TO MY REQUESTED SUB-ACCOUNT OPTIONS?
Premium payments received by us in good order will be applied to the
sub-accounts and/or fixed account within 2 business days of receipt. Premiums
will not be used to purchase accumulation units when the New York Stock Exchange
is closed or on the following nationally recognized holidays:
- - New Year's Day - Independence Day
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial Day
We will not use premiums to purchase accumulation units if:
1) trading on the New York Stock Exchange is restricted;
2) an emergency exists making disposal or valuation of securities held in the
variable account impracticable; or
3) the SEC, by order, permits a suspension or postponement for the protection
of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. If we are closed on days when the New York Stock Exchange
is open, your cash value may be affected since you would not have access to your
account.
VALUING ACCOUNT VALUES
ONCE MY PREMIUM PAYMENTS CAN BE APPLIED TO MY POLICY, HOW MUCH CAN MY PREMIUM
PURCHASE?
The number of "units" your premium can purchase is determined primarily by
policy charges and the net asset value of the underlying mutual funds as of the
date your premium is allocated to those funds.
How we determine your Variable Account Value - Valuing an Accumulation Unit
Premium payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
We use the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including
underlying charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b) where:
a) is the sum of:
1) the net asset value of the underlying mutual fund as of the end of the
current valuation period; and
2) the per share amount of any dividend or income distributions made by the
underlying mutual fund (if the date of the dividend or income distribution
occurs during the current valuation period).
b) is the net asset value per share of the underlying mutual fund determined as
of the end of the immediately preceding valuation period.
We currently do not maintain a tax reserve with respect to the policies since
income with respect to the underlying mutual funds is not taxable to us or the
variable account. We do, however, reserve the right to adjust the calculation of
the net investment factor to reflect a tax reserve should such income or other
items become taxable to us. Based on the change in the net investment factor,
the value of an accumulation unit may increase or decrease. Changes in the net
investment factor may not be directly proportional to changes in the net asset
value of underlying mutual fund shares because of the deduction of variable
account charges.
Determining Fixed Account Value
We determine the value of the fixed account by:
1) adding all amounts allocated to the fixed account; minus
2) amounts previously withdrawn or transferred from the fixed account to the
sub-accounts; plus
11
3) any interest earned on the amounts allocated; minus
4) charges deducted in accordance with the policy.
TRANSFERRING ALLOCATIONS
MAY I MAKE TRANSFERS BETWEEN INVESTMENT OPTIONS?
Yes. You may make transfers among investment options after your policy is issued
provided you meet the criteria listed below.
Transfers from the Fixed Account to the Sub-Accounts
Fixed account allocations may be transferred to the sub-accounts only upon
reaching the end of an interest rate guaranteed period. Normally, we will permit
100% of fixed account allocations to be transferred to the variable account.
However, we may under certain economic conditions and at our discretion, limit
the maximum transferable amount. In addition, we reserve the right to restrict
transfers between the fixed account and the sub-accounts to one per policy year.
Under no circumstances will the maximum transferable amount be less than 20% of
the portion of cash value attributable to the fixed account as of the end of the
previous policy year (subject to state restrictions). Those of you who have
entered into dollar cost averaging agreements with us may transfer under the
terms of that agreement.
Transfers of the fixed account allocations must be made within 30 days after
reaching the end of an interest rate guarantee period.
Transfers to the Fixed Account
Transfers to the fixed account may not be made prior to the first policy
anniversary or within 12 months of any prior transfer. We reserve the right to
restrict the amount transferred to the fixed account to 25% of the portion of
cash value attributable to the sub-accounts as of the close of business of the
prior valuation period. In addition, we reserve the right to refuse a transfer
to the fixed account if the fixed account value before the transfer is greater
than or equal to 30% of your policy's cash value.
Transfers Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation period.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 30 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the sub-accounts. We will determine the amount that may be transferred and will
declare this amount at the end of the guarantee period.
For new premium payments allocated to the fixed account, or transfers to the
fixed account from the sub-accounts, this period begins on the date of deposit
or transfer and ends on the one year anniversary of the deposit or transfer. The
guaranteed interest rate period may last for up to 3 months beyond the 1 year
anniversary because a guaranteed term ends on the last day of a calendar
quarter.
During an interest rate guarantee period, transfers cannot be made from the
fixed account and amounts transferred to the fixed account must remain on
deposit.
Dollar Cost Averaging Program
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from the fixed account and/or certain sub-accounts into other
sub-accounts. This program is not available in the State of New York. We do not
guarantee that this program will result in profit or protect you from loss.
If you elect this option, you must direct us via the instructions below to
automatically transfer amounts from the fixed account, Federated Insurance
Series - Federated Quality Bond Fund II, Fidelity VIP High Income Portfolio:
Service Class, GVIT - Gartmore GVIT Government Bond Fund: Class I, GVIT -
Federated GVIT High Income Bond Fund: Class I, and the GVIT - Gartmore GVIT
Money Market Fund: Class I to any other specified sub-account(s).
Transfers will occur monthly or at another frequency if permitted by us. We will
process transfers until either the value in the originating investment option is
exhausted, or you instruct us in writing to stop the transfers.
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested.
No charge is assessed for using a Dollar Cost Averaging program. We reserve the
right to stop establishing new Dollar Cost Averaging programs at any time.
Enhanced Dollar Cost Averaging Program
We may from time to time, offer enhanced rate dollar cost averaging programs.
Dollar cost averaging transfers for this program may only be made from the fixed
account. Such enhanced rate dollar cost averaging programs allow you to earn a
higher rate of interest on assets in the fixed account than would normally be
credited when not participating in the program. Each enhanced interest rate is
guaranteed for as long as the corresponding program is in effect. We will
process transfers until either amounts in the enhanced rate fixed account are
exhausted or you instruct us in writing to stop the transfers. For this program
only, when a
12
written request to discontinue transfers is received, we will automatically
transfer the remaining amount in the enhanced rate fixed account to the GVIT -
Gartmore GVIT Money Market Fund: Class I. We are required by state law to
reserve the right to postpone payment of assets in the fixed account for a
period of up to six months from the date of the surrender request.
HOW DO I MAKE TRANSFERS?
We will accept transfer requests in writing, over the telephone or via the
internet. See the following table for specific contact information.
- ------------------------ -----------------------------------------
Form of Request Contact Information
- ------------------------ -----------------------------------------
Written request Nationwide Life Insurance Company
P.O. Box 182150
Columbus, OH 43218-2150
Telephone request 1-800-547-7548
TDD 1-800-238-3035
Internet request www.bestofamerica.com
Transfer requests may be submitted at any time. Requests received by us after
the close of business of a valuation period will be processed the next valuation
period.
We will use reasonable procedures to confirm that instructions received are
genuine and will not be liable for following instructions we reasonably
determine to be genuine. We may withdraw the telephone and/or internet exchange
privilege upon 30 days written notice to you.
Market-Timing Firms
We reserve the right to refuse or limit transfer requests (or take any other
action deemed necessary) in order to protect policy owners and beneficiaries
from the negative investment results that may result from short-term trading or
other harmful investment practices that are employed by some policy owners (or
third parties acting on their behalf).
If we determine that a policy owner (or a third party acting on the policy
owner's behalf) is engaging in harmful short-term trading, we reserve the right
to take action to protect investors, including exercising our right to terminate
the ability of specified policy owners to submit transfer requests via
telephone, facsimile, or over the internet. If we exercise this right, affected
policy owners would be limited to submitting transfer requests via U.S. mail.
Any action we take pursuant to this provision will be preceded by a 30 day
written notice to the affected policy owner.
CASH VALUE AND SURRENDERS
DOES MY POLICY HAVE ANY VALUE BESIDES DEATH BENEFIT VALUE?
Yes. Your policy has cash value if you have paid all the required premiums to
keep the policy in force. Assuming your policy is not in a grace period, you may
take partial surrenders of the cash value, total surrenders or take a policy
loan subject to the terms and conditions described in this "Cash Values and
Surrenders" section.
Cash Value
Cash value is the sum of the value of all variable account accumulation units
attributable to your policy plus amounts credited to the fixed account and your
policy loan account, if any. We will determine the value of the assets in your
variable account at the end of each valuation period. The cash value will be
determined at least monthly.
The number of accumulation units credited to each sub-account is determined by
dividing the net amount allocated to the sub-account by the accumulation unit
value for the sub-account for the valuation period during which the premium is
received by us. In the event part or all of the cash value is surrendered, we
will deduct an appropriate number of accumulation units from the variable
account sub-accounts in the same proportion that your interest in the variable
account sub-accounts are allocated, unless otherwise directed by you. Deductions
will be taken from the fixed account only to the extent that there are
insufficient assets in the sub-accounts.
The cash value in the fixed account and the policy loan account is credited with
interest daily at an effective annual rate which we periodically declare. The
annual effective rate will never be less than 3%. Upon request, we will inform
you of the applicable rates for each account.
On any date during the policy year, the cash value equals:
1) the cash value on the preceding valuation date; plus
2) any new premium applied since the previous valuation date; plus
3) any interest added to assets in the fixed account; plus
4) any interest added to assets in the policy loan account, if applicable; plus
or minus
5) any investment results for assets invested in the sub-accounts; minus
6) policy charges; minus
7) partial surrenders, if applicable; minus
8) any surrender charges, if applicable.
There is no guaranteed cash value. The cash value will vary with the investment
experience of the variable account and/or the daily crediting of interest in the
fixed
13
account and policy loan account depending on your investment allocations.
Cash Surrender Value
It's important to remember that if your policy is terminated during the
insured's lifetime, a cash surrender value may be payable to you under the
policy, however, the amount of the cash surrender value is not guaranteed by us.
Your policy will lapse without value if the cash surrender value falls below
what is needed to cover policy charges.
You may surrender your policy for the cash surrender value any time while an
insured is living. The cancellation will be effective as of the date we receive
the policy accompanied by a signed, written request for cancellation. In some
cases, we may require additional documentation of a customary nature.
We are required by state law to reserve the right to postpone payment of assets
in the fixed account for a period of up to 6 months from the date of the
surrender request.
The cash surrender value equals the policy's cash value, next computed after the
date we receive a proper written request for surrender AND the policy, minus any
charges, indebtedness or other deductions due on that date, which may also
include a surrender charge.
The cash surrender value increases or decreases daily to reflect the investment
experience of the variable account and the daily crediting of interest in the
fixed account and the policy loan account.
If, at any time, the policy's cash surrender value falls below zero and the
policy continuation provision is not in effect, the grace period will begin. You
will be notified that your policy has negative cash surrender value and will be
given the opportunity to pay premiums to bring the policy out of the grace
period.
WHAT IF I WANT TO TAKE A PARTIAL OR TOTAL SURRENDER? WHAT HAPPENS NEXT?
If you wish to totally or partially surrender your policy, you may be assessed a
surrender charge. The following information explains in detail what charges you
will incur for surrendering a portion or all of your policy.
Total Surrenders
You may surrender your policy and receive your policy's cash surrender value,
which is the policy's cash value, less indebtedness or other deductions. If you
elect to surrender the entire policy during the first 14 policy years, we will
deduct a surrender charge from your policy's cash value. The charge is deducted
proportionally from the cash value in each sub-account and the fixed account.
The maximum initial surrender charge varies by issue age, sex, specified amount
and underwriting classification. The maximum initial surrender charge will not
exceed 22.5% multiplied by the lesser of:
(a) or (b), where:
(a) = the Guideline Level Premium; and
(b) = premiums paid during the first two policy years;
Plus (c) multiplied by (d), where:
(c) = the specified amount divided by 1,000; and
(d) = the administrative target component as illustrated by Chart 1 as
follows, this factor allows the company to account for the probability
(at various ages) that death will occur and no CDSC will be recouped.
In certain scenarios, usually involving decreases in your policy value, your
policy's surrender charge may equal all of your policy's cash surrender value.
In other scenarios, usually involving a large initial premium or significant
additions of premium after the second policy year, your policy's surrender
charge may be nominal relative to the premiums you have paid.
CHART 1
Average Issue Age Administrative Target
Component
- ---------------------------------- -------------------------------
21 through 39 4.00
40 through 49 6.00
50 through 59 7.00
60 through 85 8.00
Surrender charges for years 2-15 are a percentage of the initial surrender
charge as shown in the following chart:
- -----------------------------------------------------------
POLICY YEAR SURRENDER CHARGE POLICY SURRENDER
YEAR CHARGE
- -----------------------------------------------------------
1 100% of initial 9 30% of initial
surrender charge surrender
charge
2 95% of initial 10 25% of initial
surrender charge surrender
charge
3 85% of initial 11 20% of initial
surrender charge surrender
charge
4 80% of initial 12 15% of initial
surrender charge surrender
charge
5 70% of initial 13 10% of initial
surrender charge surrender
charge
6 60% of initial 14 5% of initial
surrender charge surrender
charge
7 50% of initial 15 0% of initial
surrender charge surrender
charge
8 40% of initial
surrender charge
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The surrender charge schedule will be fixed at the end of the second policy year
and will remain the same for the life of the policy, unless the specified amount
is increased. The surrender charge schedule itself will not vary due to changes
in specified amount or cash value.
Surrender charges reimburse us for certain expenses related to the sale of the
policies, including commissions, costs of sales literature, and other
promotional activity. The surrender charges may be insufficient to recover
certain expenses related to the sale of the policies. Unrecovered expenses are
borne by our general assets which may include profits, if any, from Mortality
and Expense Risk Charges. Additional premiums and/or income earned on assets in
the variable account have no effect on these charges.
If, at any time, your policy's cash surrender value is less than or equal to
zero, the grace period will begin, unless the policy is covered by the policy
continuation provision. You will be notified that your policy has negative cash
surrender value and will be given the opportunity to pay premiums to bring the
policy out of the grace period.
Partial Surrenders
After your policy has been in force for one year, you may request a partial
surrender. Such requests must be made in writing. Partial surrenders will be
deducted proportionately from the assets in each sub-account, unless otherwise
directed by you. Amounts will be deducted from the fixed account only to the
extent that there are insufficient assets in the variable account.
When you take a partial surrender, we reduce the policy's cash value by the
amount of the partial surrender.
Partial surrenders are permitted if they satisfy the following:
1) the minimum partial surrender is $200;
2) during the first 10 policy years, the sum of all partial surrenders in a
given year may not exceed 10% of your policy's cash surrender value as of
the beginning of that policy year;
3) after your 10th policy year, the maximum partial surrender is limited to
the cash surrender value less the greater of $500 or 3 month's policy
charges;
4) a partial surrender may not cause the total specified amount to be reduced
below the minimum issue amount as shown on the policy data page;
5) after the partial surrender, your policy continues to qualify as life
insurance; and
6) the partial withdrawal does not occur during the first 12 months of the
policy.
We reserve the right to limit the number of partial surrenders to one in each
policy year. Certain partial surrenders may result in currently taxable income
and tax penalties.
Currently, we do not assess a fee for processing partial surrenders. However, we
reserve the right to assess a Partial Surrender Processing Fee equal to the
lesser of $25 or 2% of the amount surrendered for each partial surrender.
WILL PARTIAL SURRENDERS HAVE ANY EFFECT ON MY POLICY'S CASH VALUE?
Yes. When a partial surrender is taken, we will reduce the cash value by the
partial surrender amount withdrawn and any surrender fees taken. In addition, we
will reduce the Specified Amount by the amount necessary to prevent an increase
in the net amount at risk. Any decrease will reduce your insurance in the
following order:
1) against the insurance provided by the most recent increase;
2) against the most recent increase successively; and
3) against the insurance under the original application.
WILL I HAVE TO PAY TAXES ON ANY AMOUNTS SURRENDERED?
Federal law requires us to withhold income tax from any portion of surrender
proceeds subject to tax. We will withhold income tax unless you advise us, in
writing, of your request not to withhold. If you request that taxes not be
withheld, or if the taxes withheld are insufficient, you may be liable for
payment of an estimated tax. You should consult a tax adviser.
If your policy is an employer-sponsored life insurance arrangement, you may be
required to report for income tax purposes, one or more of the following:
1) the value each year of the life insurance protection provided;
2) an amount equal to any employer-paid premiums; or
3) some or all of the amount by which the current value exceeds the
employer's interest in the policy.
You should consult with the sponsor or the administrator of your plan, and/or
with their personal tax or legal adviser, to determine the tax consequences, if
any, of your employer-sponsored life insurance arrangement.
POLICY LOANS
MAY I TAKE A LOAN AGAINST MY POLICY?
Yes, provided your policy meets certain criteria. After the first policy year,
you may request a policy loan using
15
your policy as security. Any request for a policy loan must be in written form
and signed by you. Certain policy loans may result in current taxable income and
tax penalties. Policy loans are subject to the following:
- - we will not grant a loan for an amount less than $200.
- - the maximum total amount that may be borrowed, including any outstanding
loans, as of the date the loan is processed, is:
a) 90% of the cash value in the sub-accounts; plus
b) 100% of the cash value in the fixed account; plus
c) 100% of the cash value in the policy loan account; minus
d) 100% of the surrender charge.
- - if the cash value is less than or equal to $0, no additional loans may be
taken.
- - if total indebtedness ever equals or exceeds the cash value less surrender
charges, your policy will terminate without value, subject to the grace
period provisions.
Policy indebtedness will be deducted from the death benefit, cash surrender
value upon surrender, or the maturity proceeds.
If you are considering getting a policy loan in connection with your retirement
income plan, you should consult your personal tax adviser regarding potential
tax consequences that may arise if necessary payments are not made to keep the
policy from lapsing. The amount of the payments necessary to prevent your policy
from lapsing will increase with age.
WILL MY LOAN HAVE ANY EFFECT ON INVESTMENT PERFORMANCE?
Yes. When a loan is made, an amount equal to the amount of the loan is
transferred from the variable account to the policy loan account. If the assets
relating to your policy are held in more than one sub-account, withdrawals from
the sub-accounts will be made in proportion to the assets in each sub-account at
the time of the loan, unless otherwise directed by you. Policy loans will be
transferred from the fixed account only when sufficient amounts are not
available in the sub-accounts.
The amount taken out of the variable account will not be affected by the
variable account's investment experience while the loan is outstanding.
WHAT ABOUT INTEREST?
The annual effective loan interest rate charged on policy loans is guaranteed to
never be greater than 4.50%.
If it is determined that such loans will be treated, as a result of the
differential between the interest crediting rate and the loan interest rate, as
taxable distributions under any applicable ruling, regulation, or court
decision, we retain the right to increase the net cost (by decreasing the
interest crediting rate) on all subsequent policy loans to an amount that would
result in the transaction being treated as a loan under federal tax law. If this
amount is not prescribed by such ruling, regulation, or court decision, the
amount will be an amount which we consider to be more likely to result in the
transaction being treated as a loan under federal tax law.
Amounts transferred to the policy loan account will earn interest daily from the
date of transfer. The earned interest is transferred from the policy loan
account to the variable account or the fixed account on each policy anniversary,
at the time a new loan is requested, or at the time of loan repayment. It will
be allocated according to the fund allocation factors in effect at the time of
the transfer.
Interest is charged daily and is payable at the end of each policy year or at
the time of loan repayment. Unpaid interest will be added to the existing policy
indebtedness as of the due date and will be charged interest at the same rate as
the rest of the indebtedness.
Whenever the total policy indebtedness exceeds the cash value less any surrender
charges, we will send a notice to you and the assignee, if any. Your policy will
terminate without value 61 days after the mailing of the notice unless a
sufficient repayment is made during that period. A repayment is sufficient if it
is large enough to reduce the total policy indebtedness to an amount equal to
the total cash value less any surrender charge plus an amount sufficient to
continue your policy in force for 3 months.
WILL A LOAN HAVE ANY EFFECT ON MY DEATH BENEFIT AMOUNT OR CASH VALUE AMOUNT?
Yes. A policy loan, whether or not repaid, will have a permanent effect on your
death benefit and cash value because the investment results of the variable
account or the fixed account will apply only to the non-loaned portion of the
cash value. The longer the loan is outstanding, the greater the effect is likely
to be. Depending on the investment results of the variable account or the fixed
account while the loan is outstanding, the effect could be favorable or
unfavorable.
WHEN AND HOW DO I MAKE LOAN REPAYMENTS?
All or part of the indebtedness may be repaid at any time while your policy is
in force during the insured's lifetime. Any payment intended as a loan
repayment, rather than a premium payment, must be identified as such. Loan
repayments will be credited to the sub-accounts and the fixed account in
proportion to your underlying mutual fund allocation factors in effect at the
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time of the repayment. Each repayment must be at least $50. We reserve the right
to require that any loan repayments resulting from policy loans transferred from
the fixed account must be first allocated to the fixed account.
DEATH BENEFIT
DO I HAVE A CHOICE OF DEATH BENEFIT OPTIONS?
Yes. In fact you may choose one of three death benefit options. All the death
benefit options listed below qualify as life insurance using the guideline
premium/cash value corridor test under Section 7702 of the Internal Revenue
Code.
Keep in mind that whatever death benefit option you choose, the death benefit
will never be less than the specified amount, less partial withdrawals and/or
policy indebtedness. The death benefit may vary with the cash value of the
policy, which depends on investment performance.
The death benefit options you may choose are as follows:
Option 1. If you elect Option 1 and the last surviving insured dies, the amount
of the death benefit will be equal the greater of:
1) the specified amount on the date death proceeds become payable; or
2) the applicable percentage of cash value, as indicated in the chart below,
as of the date death proceeds become
payable.
Option 2. If you elect Option 2 and the last surviving insured dies, the amount
of the death benefit will be equal to the greater of:
1) the specified amount plus the cash value on the date death proceeds become
payable; or
2) the applicable percentage of the cash value, as indicated on the chart
below, as of the date the death proceeds become payable.
Option 3. If you elect Option 3 and the last surviving insured dies, the amount
of the death benefit will be equal to the greater of:
1) the specified amount plus the accumulated premium amount on the date death
proceeds become payable; or
2) the applicable percentage of cash value, as indicated on the chart below,
as of the date the death proceeds become payable.
The accumulated premium amount is all premium payments accumulated to the
date of death less any partial surrenders accumulated to the date of death.
The accumulations will be calculated based on the interest rate declared at
the time the policy is issued. In no event will the accumulated premium
amount be less than zero ($0) or greater than the maximum increase as shown
on the policy data page.
The cost of insurance you will pay varies based on the Death Benefit Option you
select. For example, with Option 1 you will incur a lower cost of insurance than
if you elect Option 2 which provides a death benefit of the specified amount
plus any cash value you have accrued in the policy. Similarly, Option 3 provides
for a death benefit that may exceed the specified amount by the amount of
premium you have paid. Therefore, with Option 1 you will incur a lower cost of
insurance than if you elect Option 3. The cost of insurance for Option 2 may be
higher or lower than the cost of insurance for Option 3 depending on whether or
not your policy's cash value exceeds the amount of premium you have paid plus
any interest credited on that premium.
Not all death benefits are available in all states.
Percentage of Cash Value
Section 7702 of the Internal Revenue Code under the Guideline Premium/Cash Value
Corridor Test, requires that the death benefit be greater than or equal to the
cash value multiplied by the applicable percentages shown on the following
table:
- --------------------------------------------------------
ATTAINED APPLICABLE ATTAINED APPLICABLE
AGE OF THE PERCENTAGE AGE OF PERCENTAGE
YOUNGER THE
INSURED YOUNGER
INSURED
- --------------------------------------------------------
21-40 250% 70 115%
41 243% 71 113%
42 236% 72 111%
43 229% 73 109%
44 222% 74 107%
45 215% 75 105%
46 209% 76 105%
47 203% 77 105%
48 197% 78 105%
49 191% 79 105%
50 185% 80 105%
51 178% 81 105%
52 171% 82 105%
53 164% 83 105%
54 157% 84 105%
55 150% 85 105%
56 146% 86 105%
57 142% 87 105%
58 138% 88 105%
59 134% 89 105%
60 130% 90 105%
61 128% 91 104%
62 126% 92 103%
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63 124% 93 102%
64 122% 94 101%
65 120% 95 100%
66 119% 96 100%
67 118% 97 100%
68 117% 98 100%
69 116% 99 100%
100 100%
MAY I EVER CHANGE THE SPECIFIED AMOUNT AFTER MY POLICY IS ISSUED?
Yes. You may request certain changes in the insurance coverage under your
policy. Requests must be in writing and received by us at our home office. No
change in specified amount will take effect unless the cash surrender value,
after the change, is sufficient to keep your policy in force for at least 3
months.
Specified Amount Increases
After the first policy year, you may request an increase to the specified
amount. Any increase will be subject to the following conditions:
1) the request must be applied for in writing;
2) satisfactory evidence of insurability must be provided;
3) the increase must be for a minimum of $10,000; and
4) the cash surrender value is sufficient to keep the policy in force for at
least 3 months.
Any approved increase will have an effective date of the monthly anniversary day
or on the next day we approve the supplemental application. We reserve the right
to limit the number of specified amount increases to one each policy year.
Specified Amount Decreases
After the first policy year, you may request a decrease to the specified amount.
Any approved decrease will be effective on the monthly anniversary day or on the
next day we receive the request. Any such decrease will reduce the insurance in
the following order:
1) against insurance provided by the most recent increase;
2) against the next most recent increases successively; and
3) against insurance provided under the original application.
We reserve the right to limit the number of specified amount decreases to one
each policy year. We will refuse a request for a decrease which would:
1) reduce the specified amount below the minimum issue amount as is shown on
the policy data page or on the initial application;
2) disqualify the policy as a contract for life insurance; or
3) result in both:
(a) a negative guideline single premium; and
(b) an aggregate guideline level premium that would be negative at any
time prior to the maturity of the policy.
The "guideline single premium" and "guideline level premium" are defined in
Section 7702 of the Internal Revenue Code. The guideline single premium is
calculated at the time your policy is issued and equals the premium necessary to
fund the future benefits under the policy, based on the assumption of a level 6%
rate of return, current expenses, and reasonable mortality charges. The
guideline level premium equals the level annual amount to be paid over a period
that ends when the younger insured becomes 100 years old, based on the same
assumptions, except with a level 4% rate of return. Please note that these
premium levels do NOT guarantee that your policy will stay in force. Rather,
these premium levels are used to ensure your policy meets the Internal Revenue
Code's definition of life insurance.
Also, if you take a partial surrender, your cash value may not be enough to
avoid causing your policy to lapse (see Policy Lapse and Reinstatement below).
To avoid lapsing your policy, you may reduce your policy's specified amount to a
level where the cash value is sufficient to keep the policy in force. Keep in
mind, however, the reduction in the specified amount must meet the requirements
of this Specified Amount Decreases section.
MAY I CHANGE MY DEATH BENEFIT OPTION AFTER MY POLICY IS ISSUED?
Yes. After the first policy year and before the death of the last surviving
insured, you may elect to change the death benefit option under your policy.
Only one change of death benefit option is permitted per policy year. The
effective date of a change will be the monthly anniversary day following the
date the change is approved by us.
If the change is from Option 1 to Option 2:
The specified amount will be decreased by the amount of the cash value.
If the change is from Option 2 to Option 1:
The specified amount will be increased by the amount of the cash value.
If the change is from Option 3 to Option 1:
18
The specified amount will be increased by the amount of the accumulated premium
account.
If the change is from Option 3 to Option 2:
The specified amount will be adjusted by the amount of the difference between
cash value and the accumulated premium account. If the cash value is greater
than the accumulated premium account, this will result in a decrease to the
specified amount. If the cash value is less than the accumulated premium
account, the option change will result in an increase in specified amount. WE
WILL NOT ALLOW DEATH BENEFIT OPTION CHANGES FROM OPTION 1 TO OPTION 3 OR OPTION
2 TO OPTION 3.
In order for any change in the death benefit option to become effective, the
cash surrender value, after the change, must be sufficient to keep the policy in
force for at least 3 months.
We will adjust the specified amount so that the net amount at risk remains
constant before and after the death benefit option change. A change in death
benefit option will not be permitted if it results in the total premiums paid
exceeding the then current maximum premium limitations under the guideline
premium/cash value corridor test of Section 7702 of the Internal Revenue Code.
WHAT HAPPENS ONCE THE LAST SURVIVING INSURED DIES?
If the last surviving insured dies while your policy is in force and prior to
the maturity date, death proceeds will be payable to the beneficiary(ies). The
amount of the death proceeds is equal to:
1) the death benefit provided by the policy; plus
2) any insurance that may be provided by riders to the policy; minus
3) any indebtedness; minus 4) any due and unpaid monthly deductions
accruing during a grace period.
We will pay the death proceeds to the beneficiary after receipt of proof of
death of the last surviving insured, at the home office in a satisfactory
format. Death proceeds may be adjusted under certain conditions (see "Error in
Age or Sex" and "Suicide").
Incontestability
We will not contest payment of the death proceeds based on the initial specified
amount after the policy has been in force during both insureds' lifetimes for 2
years from the policy date. We will not contest payment of the death proceeds
based on an increase in specified amount requiring evidence of insurability
after the increase has been in force during both insureds' lifetimes for 2 years
from its effective date.
Error in Age or Sex
If the age or sex of either the insureds has been misstated, the death benefit
and cash value will be adjusted. The cash value will be adjusted to reflect the
cost of insurance charges on the correct age and sex from the policy date.
Suicide
If either insured dies by suicide, while sane or insane, within 2 years from the
policy date, we will pay no more than the sum of the premiums paid, less any
indebtedness and less any partial surrenders. If either insured dies by suicide,
while sane or insane, within 2 years from the date we accept an application for
an increase in the specified amount, we will pay no more than the death benefit
associated with the initial specified amount, plus the Cost of Insurance Charges
associated with the increase in specified amount.
HOW IS THE DEATH BENEFIT DISTRIBUTED?
Death benefit proceeds may be paid in lump sum or in any form of distribution
listed in this provision. If the beneficiary of the death benefit does not
specify the method of payment, we will pay it in a lump sum. Proceeds from any
optional form of distribution will be paid from our general account and
therefore will not be affected by the investment experience of any sub-account.
One or a combination of settlement options may be chosen if the total amount
placed under the option is at least $2,000 and each payment is at least $20.
A settlement option election may be changed at any time by proper written
request to our home office. Once recorded, the request will be effective on the
date it was requested. We may require proof of the age and sex of any person to
be paid under a settlement option. While the policy is in force, you may choose
or change settlement options at any time. If no settlement option has been
chosen prior to the date the death proceeds become payable, the beneficiary may
choose one. A change in beneficiary automatically revokes any settlement option
in effect.
When death proceeds become payable under any option, a settlement contract is
issued in exchange for this policy. The new contract's effective date is the
date death proceeds become payable or the date on which the policy is
surrendered.
Settlement option payments may not be assigned. To the extent permitted by law,
settlement option payments are not subject to the claims of creditors or to
legal process.
For any settlement options, payments may be made annually, semi-annually,
quarterly or monthly. Under Options 1, 2 and 4 below, withdrawal of any
outstanding balance may be made by written request to us. No
19
amount left with us under Options 3, 5 or 6 may be withdrawn.
Options 1, 2, 4 and the guaranteed period of Option 3, provide for payment of
interest at a guaranteed minimum interest rate of 2.5% per year, compounded
annually. Any interest to be paid in excess of this rate will be determined once
a year.
OPTION 1. INTEREST INCOME. In this Option, proceeds remain with us to earn
interest. This interest may be left to accumulate or to be paid periodically.
OPTION 2. INCOME FOR A FIXED PERIOD. In this Option, proceeds remaining with us
will be paid over a specified number of years, not to exceed 30 years. Each
payment consists of a portion of the death benefit proceeds plus a portion of
the interest credited on the outstanding balance.
OPTION 3. LIFE INCOME WITH PAYMENTS GUARANTEED. In this Option, payments are
made for a guaranteed period of 10, 15 or 20 years, and thereafter for the
remainder of a payee's lifetime. The amount payable monthly for each $1,000 left
with us will be determined according to the payee's sex and age on the effective
date of the Option.
OPTION 4. FIXED INCOME FOR VARYING PERIODS. In this Option, death benefit
proceeds may be left on deposit with us at interest with payments of a fixed
amount being paid at specified intervals until the principal and interest have
been exhausted. The last payment will be for the balance only. The total amount
payable each year may not be less than 5% of the original proceeds (i.e., not
less than $50 per annum of each $1,000 of original proceeds).
OPTION 5. JOINT AND SURVIVOR LIFE INCOME. In this Option, equal payments will be
made for the longer of the lives of two named payees.
OPTION 6. ALTERNATE LIFE INCOME. In this Option, we will use the proceeds to
purchase an annuity. The amount payable will be 102% of our current individual
immediate annuity purchase rate on the effective date of the settlement
contract. We reserve the right to change the current annuity rates at any time.
However, once this Option has been selected and the settlement contract is
issued, any revision in rates will not affect payment to a payee or payees. Upon
request, we will quote the amount currently payable under this settlement
option.
EARLIER YOU MENTIONED A MATURITY DATE. WHAT IS THE MATURITY DATE?
The maturity date is the policy anniversary on or next following the younger
insured's 100th birthday. If your policy is still in force, maturity proceeds
may be payable to you on the maturity date. If paid, maturity proceeds are equal
to the amount of the policy's cash value, less any indebtedness.
WHAT IF I DON'T WANT TO GET PAID THE POLICY'S CASH VALUE ON THE MATURITY DATE?
MAY I EXTEND THE MATURITY DATE?
Yes. If the last surviving insured is alive on the original maturity date of the
policy, you may extend the maturity date. Unless you elect otherwise, the
maturity date will automatically be extended until the date the last surviving
insured dies, subject to the following:
1) no premium payments will be allowed after the original maturity date;
2) increases to the specified amount will not be permitted after the original
maturity date;
3) death benefit option changes will not be permitted after the original
maturity date;
4) on the original maturity date, 100% of the cash value in the sub-accounts
will be transferred to the fixed account;
5) after the original maturity date, transfers from the fixed account to the
sub-accounts will not be permitted;
6) no further monthly deductions will be taken after the original maturity
date (the cost of insurance charges will be $0);
7) the specified amount for the maturity date extension will be equal to the
specified amount on the younger insured's 85th birthday, less (a) and (b)
where:
(a) is any decrease to the specified amount on or after the younger
insured's attained age 85; and
(b) is an adjustment for partial withdrawals taken after the younger
insured's attained age 85.
The amount of the adjustment varies based on the death benefit option and the
insured's attained age defined as follows:
----------------------------------------
YOUNGER INSURED'S ATTAINED AGE
----------------------------------------
86-90 91 and Older
Death Benefit Option 1 Amount by which Amount proportionate
the base policy to the ratio of the
specified withdrawal to the
amount is policy value prior
reduced due to to the withdrawal
the withdrawal
Death Benefit Option 2 $0 $0
or 3
ASSIGNMENT
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MAY I EVER ASSIGN MY POLICY?
Yes. While either insured is living, you may assign your rights in the policy.
The assignment must be in writing in a form acceptable to us, signed by you and
received at our home office. Assignments will not affect any payments made or
actions taken by us prior to our receipt of the assignment request. We are not
responsible for any assignment not submitted, nor are we responsible for the
sufficiency or validity of any assignment. Assignments are subject to any
indebtedness owed to us before being recorded. The interest of any beneficiary
will be subject to the rights of any assignee of record on file at our home
office.
POLICY LAPSE AND REINSTATEMENT
CAN MY POLICY EVER LAPSE AND WHAT HAPPENS IF IT DOES?
It is possible that your policy could lapse if your cash surrender value is
insufficient to cover all policy charges. If the cash surrender value on a
monthly anniversary day is not sufficient to cover that month's policy charges,
and premium payments required under the "Guaranteed Policy Continuation"
provision have not been met, a grace period will be allowed for the payment of a
premium. Such premium must equal or exceed the lesser of 3 times the monthly
charges and the premium required to bring the guaranteed policy continuation
provision into effect.
We will send you a notice at the start of the grace period, at the address on
the application or another address specified by you, stating the amount of
premium required. The grace period will end 61 days after the date the notice is
mailed. We will send an additional reminder notice at least 31 days prior to the
end of the grace period. If sufficient premium is not received by us by the end
of the grace period, your policy will lapse without value. If death proceeds
become payable during the grace period, we will pay the death proceeds.
Guaranteed Policy Continuation Period
We will not lapse the policy, if on each monthly anniversary day (1) is greater
than (2), where:
1) is the sum of all premiums paid to date, minus any indebtedness and minus
any partial surrenders; and
2) is the sum of the monthly death benefit guarantee premiums due since the
policy date including any premium for the current monthly anniversary day.
If (1) is not greater than or equal to (2), then the guaranteed policy
continuation provision is not in effect and the policy will go into the grace
period. The monthly death benefit guarantee premiums and the death benefit
guarantee period are shown on the policy data page. The monthly death benefit
guarantee premiums may vary by policy duration and may be affected by changes to
the policy.
This policy has two levels of guaranteed policy continuation guarantees, the
Initial Death Benefit Guarantee and the Limited Death Benefit Guarantee. Each
level of guarantee has its own minimum premium requirement. Each level of
premium and the period in which it applies is shown on the policy data page. The
Limited Death Benefit Guarantee will be permanently lost when premium payments
fall below those required to maintain this benefit unless sufficient premiums
are paid within a 61-day grace period.
Reinstatement
If the grace period ends and you have neither paid the required premium nor
surrendered your policy for its cash surrender value, you may reinstate the
policy by:
1) submitting a written request at any time within 3 years after the end of
the grace period and prior to the maturity date;
2) providing evidence of insurability satisfactory to us;
3) paying sufficient premium to cover all policy charges that were due and
unpaid during the grace period;
4) paying sufficient premium to keep your policy in force for 3 months from
the date of reinstatement; and
5) paying or reinstating any indebtedness against the policy which existed at
the end of the grace period.
The effective date of a reinstated policy will be the monthly anniversary day or
on the next date the application for reinstatement is approved by us. If the
policy is reinstated, the cash value on the date of reinstatement, but prior to
applying any premiums or loan repayments, will be set equal to the lesser of:
1) the cash value at the end of the grace period; or
2) the surrender charge for the policy year in which your policy is
reinstated.
Unless otherwise specified, all amounts will be invested according to the
investment instructions in effect at the start of the grace period.
PERIODIC INFORMATION
WILL I EVER RECEIVE PERIODIC INFORMATION FROM YOU ABOUT MY POLICY?
Yes. We will mail to you at the last known address of record:
- an annual statement containing: the amount of the current death benefit,
cash value, cash surrender
21
value, premiums paid, monthly charges deducted, amounts invested in the
fixed account and the sub-accounts, as well as policy indebtedness;
- annual and semi-annual reports containing all applicable information and
financial statements or their equivalent, which must be sent to the
underlying mutual fund beneficial shareholders as required by the rules
under the Investment Company Act of 1940 for the variable account; and
- statements of significant transactions, such as changes in specified
amount, changes in death benefit options, changes in future premium
allocations, transfers among sub-accounts, premium payments, loans, loan
repayments, reinstatement and termination.
POLICY OWNER AND BENEFICIARY
TELL ME MORE ABOUT MY RIGHTS AS POLICY OWNER AS WELL AS THE RIGHTS OF THE
BENEFICIARY. DO THE INSUREDS HAVE ANY RIGHTS UNDER THE POLICY IF I AM NOT ONE OF
THE INSUREDS?
An insured does not have any rights in the policy, unless an insured is also the
policy owner (you). You have all rights under the policy until the last
surviving insured dies.
Policy Owner
While either insured is living, all rights in this policy are vested in the
policy owner (you) named on the application or as subsequently changed, subject
to assignment, if any.
You may name a contingent policy owner or a new policy owner while either
insured is living. Any change must be in a written form satisfactory to us and
received at our home office. Once received, the change will be effective when
signed. The change will not affect any payment made or action taken by us before
request was received. We may require that your policy be submitted for
endorsement before making a change.
If you are someone other than one of the insureds, you name no contingent policy
owner, and you die before the last surviving insured, your rights in this policy
belong to your estate.
Beneficiary
The beneficiary(ies) and/or contingent beneficiary will be as named on the
application or as subsequently changed, subject to assignment, if any.
You may name a new beneficiary and/or contingent beneficiary while either
insured is living. Any change must be in a written form satisfactory to us and
received at our home office. Once received, the change will be effective when
signed. The change will not affect any payment made or action taken by us before
it was received. We may require that your policy be submitted for endorsement
before making a change.
If any beneficiary predeceases an insured, that beneficiary's interest passes to
any surviving beneficiary(ies), or contingent beneficiaries unless otherwise
provided. Multiple beneficiaries will be paid in equal shares, unless otherwise
provided. If no named beneficiary survives both insureds, the death proceeds
will be paid to you or your estate.
TAX INFORMATION
TELL ME MORE ABOUT HOW MY LIFE INSURANCE POLICY IS TAXED. WHAT SHOULD I LOOK OUT
FOR?
First, we should state that we are not providing tax advice. For any tax advice,
you should contact your personal tax adviser.
Policy Proceeds
Section 7702 of the Internal Revenue Code provides that if certain tests are
met, a policy will be treated as a life insurance policy for federal tax
purposes. As we stated earlier, we will monitor compliance with these tests.
This policy should thus receive the same federal income tax treatment as fixed
benefit life insurance. As a result, the death proceeds payable under this
policy are generally excludable from gross income of the beneficiary under
Section 101 of the Internal Revenue Code. However, if the policy is transferred
for valuable consideration, then a portion of the death proceeds may be
includable in the beneficiary's gross income.
Section 7702A of the Internal Revenue Code defines modified endowment contracts
as those life insurance policies issued or materially changed on or after June
21, 1988 on which the total premiums paid during the first seven years exceed
the amount that would have been paid if the policy provided for paid up benefits
after seven level annual premiums.
As a general rule, distributions from a life insurance policy (other than a
modified endowment contract) during the life of the insured are treated as the
non-taxable return of premium, to the extent of premiums previously paid. For
this purpose, dividends that are used to purchase paid-up additions or to reduce
premiums are not treated as distributions. Aggregate amounts distributed in
excess of aggregate premiums paid are generally treated as taxable ordinary
income. A loan from a life insurance policy that is not a modified endowment
contract generally is not treated as a taxable distribution. However, if the
total loan is not repaid and is forgiven (such as if the life insurance policy
lapses or is surrendered), then the amount of the outstanding loan balance is
treated as a distribution to you and may be treated as ordinary income in whole
or in part.
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The Internal Revenue Code provides special rules for the taxation of surrenders,
partial surrenders, loans, collateral assignments and other pre-death
distributions from modified endowment contracts (other than certain
distributions to terminally ill individuals). Under these special rules, such
transactions are taxable to the extent the cash value of the policy exceeds, at
the time of distribution, the premiums paid into the policy. In addition, a 10%
tax penalty generally applies to the taxable portion of such distributions
unless you are over age 59 1/2 or disabled, or the distribution is part of a
series of substantially equal periodic payments as defined in the Internal
Revenue Code.
Under certain circumstances, certain distributions made under a policy on the
life of a "terminally ill individual," as that term is defined in the Internal
Revenue Code, are treated as death proceeds and are subject to the death benefit
rules of Section 101 of the Internal Revenue Code, described above.
The policies offered by this prospectus may or may not be issued as modified
endowment contracts. If the policy is not issued as a modified endowment
contract, we will monitor the premium payment and will notify you when your
policy is in jeopardy of becoming a modified endowment contract. If a policy is
not a modified endowment contract, a cash distribution during the first 15 years
after a policy is issued which causes a reduction in death benefits may still
become fully or partially taxable to you pursuant to Section 7702(f)(7) of the
Internal Revenue Code. You should carefully consider this potential effect and
seek further information before initiating any changes in the terms of the
policy. Under certain conditions, a policy may become a modified endowment, or
may become subject to a new 7 year testing period, as a result of a material
change or a reduction in benefits as defined by Section 7702A(c) of the Internal
Revenue Code.
In addition to the tests required under Section 7702, Section 817(h) of the
Internal Revenue Code requires that the investments of separate accounts such as
the variable account be adequately diversified. Regulations under 817(h) provide
that a variable life policy that fails to satisfy the diversification standards
will not be treated as life insurance unless such failure was inadvertent, is
corrected, and you or we pay an amount to the IRS. The amount will be based on
the tax that would have been paid by you if the income, for the period the
policy was not diversified, had been received by you.
If the failure to diversify is not corrected in this manner, you will be deemed
to be the owner of the underlying securities and taxed on the earnings of your
account.
Representatives of the IRS have suggested, from time to time, that the number of
underlying mutual funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the U.S. Secretary of the Treasury issue additional
rules or regulations limiting the number of underlying mutual funds, transfers
between underlying mutual funds, exchanges of underlying mutual funds or changes
in investment objectives of underlying mutual funds such that the policy would
no longer qualify as life insurance under Section 7702 of the Internal Revenue
Code, we will take whatever steps are available to remain in compliance.
We will monitor compliance with these regulations and, to the extent necessary,
will change the objectives or assets of the sub-account investments to remain in
compliance.
A total surrender or cancellation of the policy by lapse or the maturity of the
policy on its maturity date may have adverse tax consequences. If the amount
received by you plus total policy indebtedness exceeds the premiums paid into
the policy, then the excess generally will be treated as taxable income,
regardless of whether or not the policy is a modified endowment contract.
Withholding
Distributions of income from a life insurance policy (including a modified
endowment contract) are subject to federal income tax withholding. The recipient
may elect not to have the withholding taken from the distribution. In some
instances, however, a distribution may be subject to mandatory back-up
withholding (the recipients cannot waive this withholding). The mandatory
back-up withholding rate is 30.5% of the income that is distributed. Mandatory
back-up withholding will occur if no taxpayer identification number is provided
to us, or if the IRS notifies us that back-up withholding is required.
Federal Estate and Generation-Skipping Transfer Taxes
State and local estate, inheritance, income and other tax consequences of
ownership or receipt of policy proceeds depend on the circumstances of each
policy owner or beneficiary.
The federal estate tax is integrated with the federal gift tax under a unified
tax rate schedule. In general, in 2002, an estate of less than $1,000,000
(inclusive of certain pre-death gifts) will not incur a federal estate tax
liability. In addition, an unlimited marital deduction may be available for
federal estate tax purposes, for certain amounts that pass to the surviving
spouse.
When the last surviving insured dies, the death benefit will generally be
included in that insured's federal gross estate if:
1) the proceeds were payable to or for the benefit of the insured's estate;
or
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2) the insured held any "incident of ownership" in the policy at death or at
any time within 3 years of death. An incident of ownership is, in general,
any right that may be exercised by the insured, such as the right to
borrow on the policy, or the right to name a new beneficiary.
If you (whether or not you are an insured) transfer ownership of your policy to
another person, such transfer may be subject to a federal gift tax. In addition,
if you transfer the policy to someone two or more generations younger than you,
the transfer may be subject to the federal generation-skipping transfer tax
("GSTT"), the taxable amount being the value of the policy.
Similarly, if the beneficiary is two or more generations younger than the
insured, the payment of the death proceeds at the death of the insured may be
subject to the GSTT. Pursuant to regulations recently promulgated by the U.S.
Secretary of the Treasury, we may be required to withhold a portion of the death
proceeds and pay them directly to the IRS as the GSTT liability.
The GSTT provisions generally apply to the same transfers that are subject to
estate or gift taxes.
The tax rate is a flat rate equal to the maximum estate tax rate (currently
55%), and there is a provision for an aggregate $1 million exemption. Due to the
complexity of these rules, you should consult with counsel and other competent
advisors regarding these taxes.
Non-Resident Aliens
Pre-death distributions from modified endowment contracts to nonresident aliens
("NRAs") are generally subject to federal income tax and tax withholding, at a
statutory rate of 30% of the amount of income that is distributed. We are
required to withhold such amount from the distribution and remit it to the IRS.
Distributions to certain NRAs may be subject to lower, or in certain instances
zero, tax and withholding rates, if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to us sufficient proof of his or her residency and
citizenship in the form and manner prescribed by the IRS. In addition, the NRA
must obtain an individual taxpayer identification number from the IRS, and
furnish that number to us prior to the distribution. If we do not have the
proper proof of citizenship or residency and a proper individual taxpayer
identification number prior to any distribution, we will be required to withhold
30% of the income, regardless of any treaty provision.
A pre-death distribution may not be subject to withholding where the recipient
sufficiently establishes to us that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and that such
payment is includable in the recipient's gross income for United States federal
income tax purposes. Any such distributions may be subject to back-up
withholding at the statutory rate if no taxpayer identification number, or an
incorrect taxpayer identification number, is provided.
Taxation of Nationwide
We are taxed as a life insurance company under the Internal Revenue Code. Since
the variable account is not a separate entity from us and its operations form a
part of us, it will not be taxed separately as a "regulated investment company"
under Sub-chapter M of the Internal Revenue Code. Investment income and realized
capital gains on the assets of the variable account are reinvested and taken
into account in determining the value of accumulation units. As a result, such
investment income and realized capital gains are automatically applied to
increase reserves under the policies.
We do not initially expect to incur any federal income tax liability that would
be chargeable to the variable account. Based upon these expectations, no charge
is currently being made against the variable account for federal income taxes.
If, however, we determine that on a separate company basis such taxes may be
incurred, we reserve the right to assess a charge for such taxes against the
variable account.
We may also incur state and local taxes (in addition to premium taxes) in
several states. At present, these taxes are not significant. If they increase,
however, charges for such taxes may be made.
Tax Changes
The Internal Revenue Code has been subjected to numerous amendments and changes,
and it is reasonable to believe that it will continue to be revised. The United
States Congress has, in the past, considered numerous legislative proposals
that, if enacted, could change the tax treatment of the policies. It is
reasonable to believe that such proposals, and future proposals, may be enacted
into law. In addition, the U.S. Treasury Department may amend existing
regulations, issue new regulations, or adopt new interpretations of existing law
that may be at variance with its current positions on these matters. In
addition, current state law (which is not discussed herein), and future
amendments to state law, may affect the tax consequences of the policy.
If you, an insured, or the beneficiary or other person receiving any benefit or
interest in or from the policy is not both a resident and citizen of the United
States, there may be a tax imposed by a foreign country, in addition to any tax
imposed by the United States. The foreign law (including regulations, rulings,
and case law) may change and impose additional taxes on the policy, the
24
death proceeds, or other distributions and/or ownership of the policy, or a
treaty may be amended and all or part of the favorable treatment may be
eliminated.
Any or all of the foregoing may change from time to time without any notice, and
the tax consequences arising out of a policy may be changed retroactively. There
is no way of predicting if, when, or to what extent any such change may take
place. No representation is made as to the likelihood of the continuation of
these current laws, interpretations, and policies.
The foregoing is a general explanation as to certain tax matters pertaining to
insurance policies. It is not intended to be legal or tax advice. You should
consult your independent legal, tax and/or financial adviser.
MORE INFORMATION ABOUT NATIONWIDE
TELL ME A LITTLE MORE ABOUT NATIONWIDE AND THE VARIABLE ACCOUNT.
We are a stock life insurance company organized under the laws of the State of
Ohio in March 1929 with our home office at One Nationwide Plaza, Columbus, Ohio
43215. We are a provider of life insurance, annuities and retirement products.
We are admitted to do business in all states, the District of Columbia and
Puerto Rico.
Custodian of Assets
We serve as the custodian of the assets of the variable account.
Other Contracts Issued by Nationwide
We offer variable contracts and policies with benefits that vary in accordance
with the investment experience of various separate accounts of Nationwide.
The Variable Account and Underlying Mutual Funds
Nationwide VLI Separate Account-4 is a separate account that invests in the
underlying mutual funds listed in Appendix A. We established the separate
account on December 3, 1987 pursuant to Ohio law. Although the separate account
is registered with the SEC as a unit investment trust pursuant to the Investment
Company Act of 1940 ("1940 Act"), the SEC does not supervise the management of
us or the variable account.
Income, gains and losses credited to, or charged against the variable account
reflect the variable account's own investment experience and not the investment
experience of our other assets. The variable account's assets are held
separately from our assets and in general are not chargeable with liabilities
incurred in any of our other businesses. We are obligated to pay all amounts
promised to you under the policy.
The variable account is divided into sub-accounts. You elect to have premiums
allocated among the sub-accounts and the fixed account at the time of
application.
We use the assets of each sub-account to buy shares of the underlying mutual
funds based on your instructions. A policy's investment performance depends upon
the performance of the underlying mutual funds chosen by you.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and objectives. However the underlying
mutual funds are NOT directly related to any publicly traded mutual fund. YOU
SHOULD NOT COMPARE THE PERFORMANCE OF A PUBLICLY TRADED FUND WITH THE
PERFORMANCE OF UNDERLYING MUTUAL FUNDS PARTICIPATING IN THE VARIABLE ACCOUNT.
The performance of the underlying mutual funds could differ substantially from
that of any publicly traded funds.
Changes of Investment Policy
We may materially change the investment policy of the variable account. We must
inform you and obtain all necessary regulatory approvals. Any change must be
submitted to the various state insurance departments which may disapprove it if
deemed detrimental to the overall interests of the policy owners or if it
renders our operations hazardous to the public. If you object, the policy may be
converted to a substantially comparable general account life insurance policy
offered by us. You have the later of 60 days (6 months in Pennsylvania) from the
date of the investment policy change or 60 days (6 months in Pennsylvania) from
being informed of the change to make the conversion. We will not require
evidence of insurability for this conversion.
Upon electing such a policy conversion, we will transfer the cash value of the
policy (as of the conversion date) to the fixed account, which will provide for
an amount of insurance not exceeding the policy's original death benefit. After
the conversion, the policy will not be affected by the investment experience of
any separate account.
Voting Rights
If you have allocated assets to the underlying mutual funds, you are entitled to
certain voting rights. We will vote your shares at special shareholder meetings
based on your instructions. However, if the law changes
25
allowing us to vote in its own right, we may elect to do so.
If you have voting interests in an underlying mutual fund, you will be notified
of issues requiring the shareholder's vote as soon as possible prior to the
shareholder meeting. Notification will contain proxy materials and a form to
return to us with your voting instructions. We will vote shares for which no
instructions are received in the same proportion as those that are received.
The number of shares which you may vote is determined by dividing the cash value
of the amount they have allocated to an underlying mutual fund by the net asset
value of that underlying mutual fund. We will designate a date for this
determination not more than 90 days before the shareholder meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through our other separate accounts. We do not
anticipate any disadvantage to this. However, it is possible that a conflict may
arise between the interests of the variable account and one or more of the other
separate accounts in which these underlying mutual funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, we will take whatever steps are necessary to
protect you and payees, including withdrawal of the variable account from
participation in the underlying mutual fund(s) involved in the conflict.
Substitution of Securities
We may substitute, eliminate and/or combine shares of another underlying mutual
fund for shares already purchased or to be purchased in the future if either of
the following occur:
1) shares of a current underlying mutual fund option are no longer available
for investment; or
2) further investment in an underlying mutual fund option is inappropriate.
No substitution, elimination, and/or combination of shares may take place
without the prior approval of the SEC.
OTHER GENERAL INFORMATION
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from premiums made on or after
August 1, 1983. The policies offered by this prospectus are based upon actuarial
tables which distinguish between men and women. Thus the policies provide
different benefits to men and women of the same age. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris on any employment related insurance or benefit program before
purchasing this policy.
STATE REGULATION
We are subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year covering our operations
for the preceding year and its financial condition as of the end of such year.
Regulation by the Insurance Department includes periodic examination to
determine our contract liabilities and reserves so that the Insurance Department
may certify the items are correct. Our books and accounts are subject to review
by the Insurance Department at all times and a full examination of its
operations is conducted periodically by the National Association of Insurance
Commissioners. Such regulation does not, however, involve any supervision of
management or investment practices or policies. In addition, We are subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
ADVERTISING
We are ranked and rated by independent financial rating services, including
Moody's, Standard & Poor's and A.M. Best Company. The purpose of these ratings
is to reflect our financial strength or claims-paying ability. The ratings are
not intended to reflect the investment experience or financial strength of the
variable account. We may advertise these ratings from time to time. In addition,
we may include in certain advertisements, endorsements in the form of a list of
organizations, individuals or other parties which recommend us or the policies.
Furthermore, we may occasionally include in advertisements comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
LEGAL PROCEEDINGS
We are a party to litigation and arbitration proceedings in the ordinary course
of its business, none of which is expected to have a material adverse effect on
us.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing
26
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements.
On October 29, 1998, we were named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by us and the other named Nationwide affiliates which were used to fund
certain tax-deferred retirement plans. The amended complaint seeks unspecified
compensatory and punitive damages. No class has been certified. On June 11,
1999, we and the other named defendants filed a motion to dismiss the amended
complaint. On March 8, 2000, the court denied the motion to dismiss the amended
complaint filed by us and other named defendants. On January 25, 2002, the
plaintiffs filed a motion for leave to amend their complaint to add three new
named plaintiffs. On February 9, 2002, the plaintiffs filed a motion for class
certification. The class has not been certified. Nationwide intends to defend
this lawsuit vigorously.
On August 15, 2001, Nationwide was named in a lawsuit filed in Connecticut
federal court titled Lou Haddock, as trustee of the Flyte Tool & Die,
Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services,
Inc. and Nationwide Life Insurance Company. On September 5, 2001, the plaintiffs
amended their complaint to include class action allegations. The plaintiffs seek
to represent a class of plan trustees who purchased variable annuities to fund
qualified ERISA retirement plans. The amended complaint alleges that the
retirement plans purchased variable annuity contracts from Nationwide which
invested in mutual funds that were offered by separate mutual fund companies;
that Nationwide was a fiduciary under ERISA and that Nationwide breached its
fiduciary duty when it accepted certain fees from the mutual fund companies that
purportedly were never disclosed by Nationwide; and that Nationwide violated
ERISA by replacing many of the mutual funds originally included in the
plaintiffs' annuities with "inferior" funds because the new funds purportedly
paid more in revenue sharing. The amended complaint seeks disgourgement of fees
by Nationwide and other unspecified compensatory damages. On November 15,
2001, Nationwide filed a motion to dismiss the amended complaint, which has
not been decided. On December 3, 2001, the plaintiffs filed a motion for class
certification. On January 15, 2002, the plaintiffs filed a response to
Nationwide's motion to dismiss the amended complaint. On February 22, 2002,
Nationwide filed a reply in support of its motion to dismiss.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on us in the future.
The general distributor, Nationwide Investment Services Corporation, is not
engaged in any litigation of any material nature.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of Nationwide VLI
Separate Account- 4 and Nationwide Life Insurance Company for the periods
indicated have been included herein in reliance upon the reports of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC under the Securities Act of
1933, as amended, for the policies discussed in this prospectus. However, the
prospectus does not contain all the information included in the registration
statement. The registration statement may also contain amendments and exhibits
that are not included in the prospectus. The prospectus is meant to be a summary
and explanation of the policy, which is the legal binding instrument for the
policies. Please refer to your policy for additional information.
WHO IS THE GENERAL DISTRIBUTOR (PRINCIPAL UNDERWRITER) FOR THIS POLICY?
The general distributor (principal underwriter) for this policy is Nationwide
Investment Services Corporation ("NISC" or "Nationwide Investment Scvs.
Corporation for policies issued in the State of Michigan), Two Nationwide Plaza,
Columbus, Ohio 43215. NISC is our wholly owned subsidiary. NISC was organized as
an Oklahoma corporation on March 19, 1974.
HOW ARE THE POLICIES SOLD (DISTRIBUTED)?
The policies will be sold by licensed insurance agents in those states where the
policies may lawfully be sold. Agents are registered representatives of broker
dealers registered under the Securities Exchange Act of 1934 who are member
firms of the National Association of Securities Dealers, Inc. ("NASD"). The
policies will be distributed by the general distributor, NISC pursuant to an
agreement with us dated May 1, 2000. NISC is a wholly owned subsidiary of
Nationwide and a member of the NASD.
NISC acts as general distributor for the following separate accounts, all of
which are separate investment accounts of Nationwide or its affiliates:
- Nationwide VLI Separate Account-2;
- Nationwide VLI Separate Account-3;
- Nationwide VLI Separate Account-4;
- Nationwide VLI Separate Account-5;
- Nationwide Multi-Flex Variable Account;
- Nationwide Variable Account;
- Nationwide Variable Account-II;
- Nationwide Variable Account-4;
- Nationwide Variable Account-5;
- Nationwide Variable Account-6;
- Nationwide Variable Account-7;
- Nationwide Variable Account-8;
- Nationwide Variable Account-9;
- Nationwide Variable Account-10;
- Nationwide VA Separate Account-A;
- Nationwide VA Separate Account-B;
- Nationwide VA Separate Account-C;
- Nationwide VL Separate Account-A;
- Nationwide VL Separate Account-B;
- Nationwide VL Separate Account-C; and
- Nationwide VL Separate Account-D.
Gross first year commissions plus any expense allowance payment paid by us on
the sale of these policies provided by NISC will not exceed 99% of the target
premiums plus 4% of any excess premium payments. Gross renewal commissions in
years 2 through 10 paid by Nationwide will not exceed 4% of actual premium
payments, and will not exceed 2% in policy years 11 and thereafter.
No underwriting commissions have been paid by us to NISC.
27
NATIONWIDE INVESTMENT SERVICES CORPORATION DIRECTORS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph J. Gasper Director and Chairman of the Board
Richard A. Karas Director and Vice Chairman
Mark R. Thresher Director, Senior Vice President and Treasurer
Duane C. Meek President
Robert A. Oakley Executive Vice President - Chief Financial Officer
Robert J. Woodward, Jr. Executive Vice President - Chief Investment Officer
Barbara J. Shane Vice President - Compliance Officer
Alan A. Todryk Vice President - Taxation
Carol L. Dove Associate Vice President -
Treasury Services and Assistant Treasurer
Glenn W. Soden Associate Vice President and Secretary
John F. Delaloye Assistant Secretary
E. Gary Berndt Assistant Treasurer
Terry C. Smetzer Assistant Treasurer
The business address of the Directors and Officers listed above is One
Nationwide Plaza, Columbus, Ohio 43215.
28
ADDITIONAL INFORMATION ABOUT NATIONWIDE
The life insurance business, including annuities, is the only business in which
we are engaged.
We market our policies through independent insurance brokers, general agents,
and registered representatives of registered NASD broker/dealer firms.
We serve as depositor for the following separate investment accounts, each of
which is a registered investment company:
- - Nationwide Variable Account;
- - Nationwide Variable Account-II;
- - Nationwide Variable Account-3;
- - Nationwide Variable Account-4;
- - Nationwide Variable Account-5;
- - Nationwide Variable Account-6;
- - Nationwide Variable Account - 7;
- - Nationwide Variable Account-8;
- - Nationwide Variable Account-9;
- - Nationwide Variable Account-10;
- - Nationwide Variable Account-11;
- - MFS Variable Account;
- - Nationwide Multi-Flex Variable Account;
- - Nationwide VLI Separate Account;
- - Nationwide VLI Separate Account-2;
- - Nationwide VLI Separate Account-3;
- - Nationwide VLI Separate Account-4; and
- - Nationwide VLI Separate Account-5.
We, like other insurance companies, are subject to regulation and supervision by
the regulatory authorities of the states in which it is licensed to do business.
A license from the state insurance department is a prerequisite to the
transaction of insurance business in that state. In general, all states have
statutory administrative powers. Such regulation relates, among other things, to
licensing of insurers and their agents, the approval of policy forms, the
methods of computing reserves, the form and content of statutory financial
statements, the amount of policyholders' and stockholders' dividends, and the
type of distribution of investments permitted.
We operate in the highly competitive field of life insurance. There are
approximately 2,300 stock, mutual and other types of insurers in the life
insurance business in the United States, and a large number of them compete with
the registrant in the sale of insurance policies.
As is customary in insurance company groups, employees are shared with the other
insurance companies in the group. In addition to its direct salaried employees,
we share employees with Nationwide Mutual Insurance Company and Nationwide
Mutual Fire Insurance Company.
We do not presently own or lease any materially important physical properties
when its property holdings are viewed in relation to its total assets. We share
our home office, other facilities and equipment with Nationwide Mutual Insurance
Company.
COMPANY MANAGEMENT
Nationwide and Nationwide Life and Annuity Insurance Company, together with
Nationwide Mutual Insurance Company, Nationwide Mutual Fire Insurance Company,
Nationwide Property and Casualty Insurance Company and Nationwide General
Insurance Company and their affiliated companies comprise the Nationwide group
of companies. The companies listed above have substantially common boards of
directors and officers.
Nationwide Financial Services, Inc. ("NFS") is the sole shareholder of
Nationwide. NFS serves as a holding company for other financial institutions.
Nationwide is the sole owner of Nationwide Life and Annuity Insurance Company.
Each of the directors and officers listed below is a director or officer
respectively of at least one or more of the other major insurance affiliates of
the Nationwide group of companies. The business address of the directors and
officers listed below is One Nationwide Plaza, Columbus, OH 43215.
29
W. G. JURGENSEN has been Chief Executive Officer of Nationwide since August
2000, Chief Executive Officer-Elect from May to August 2000 and a Director of
Nationwide since May 2000. Previously, he was Executive Vice President of Bank
One Corporation from 1998 to 2000. Mr. Jurgensen was Executive Vice President of
First Chicago NBD Corporation and Chairman of FCC National Bank from 1996 to
1998. Mr. Jurgensen has been with Nationwide for 2 years.
JOSEPH J. GASPER has been President and Chief Operating Officer and a Director
of Nationwide since April 1996. Previously, he was Executive Vice
President-Property and Casualty Operations of Nationwide from April 1995 to
April 1996. He was Senior Vice President-Property and Casualty Operations of
Nationwide from September 1993 to April 1995. Prior to that time, Mr. Gasper
held various management positions with the Nationwide companies. Mr. Gasper has
been with Nationwide for 35 years.
GALEN R. BARNES has been a Director of Nationwide since May 2001. He served as
President of Nationwide Insurance Enterprise from April 1996 to April 1999. He
was Director and Vice Chairman of the Wausau Insurance Companies, a Nationwide
affiliate, from September 1996 to December 1998; and Director, President and
Chief Operating Officer from May 1993 to September 1996. Mr. Barnes was Senior
Vice President of Nationwide from May 1993 to April 1996. Prior to that time,
Mr. Barnes held several positions within Nationwide. Mr. Barnes has been with
Nationwide for 25 years.
RICHARD D. HEADLEY has been Executive Vice President of Nationwide since July
2000. Previously, he was Executive Vice President-Chief Information Technology
Officer of Nationwide from August 1999 to August 2000, and Senior Vice
President-Chief Information Technology Officer of Nationwide from October 1997
to May 1999. Prior to that time, Mr. Headley was Chairman and Chief Executive
Officer of Banc One Services Corporation from 1992 to October 1997. Mr. Headley
has been with Nationwide for 4 years.
MICHAEL S. HELFER has been Executive Vice President-Corporate Strategy of
Nationwide since August 2000. He has been a Director of Nationwide since May
2001. Prior to that time, Mr. Helfer was a partner with Wilmer, Cutler and
Pickering from 1978 to October 2000. Mr. Helfer has been with Nationwide for 2
years.
DONNA A. JAMES has been Executive Vice President-Chief Administrative Officer of
Nationwide since July 2000 and a Director of Nationwide since May 2001. Ms.
James was Senior Vice President-Chief Human Resources Officer from May 1999 to
July 2000 and Senior Vice President-Human Resources of Nationwide from December
1997 to May 1999. Previously, she was Vice President-Human Resources of
Nationwide from July 1996 to December 1997. Previously, Ms. James was Vice
President-Assistant to the CEO of Nationwide from March 1996 to July 1996 and
Associate Vice President-Assistant to the CEO from May 1994 to March 1996. Prior
to that time, Ms. James held several positions within Nationwide. Ms. James has
been with Nationwide for 20 years.
MICHAEL C. KELLER has been Executive Vice President-Chief Information Officer of
Nationwide since June 2001. Prior to that time, Mr. Keller was Senior Vice
President of Bank One from January 1998 to June 2001, and held various
management positions with IBM from July 1982 to December 1997. Mr. Keller has
been with Nationwide for 1 year.
ROBERT A. OAKLEY has been Executive Vice President-Chief Financial Officer of
Nationwide since April 1995 and a Director of Nationwide since May 2001.
Previously, he was Senior Vice President-Chief Financial Officer of Nationwide
from October 1993 to April 1995. Prior to that time, Mr. Oakley held several
positions within Nationwide. Mr. Oakley has been with Nationwide for 26 years.
ROBERT J. WOODWARD, JR. has been Executive Vice President-Chief Investment
Officer of Nationwide since August 1995 and a Director of Nationwide since May
2001. Previously, he was Senior Vice President-Fixed Income Investments of
Nationwide from March 1991 to August 1995. Prior to that time, Mr. Woodward held
several positions within Nationwide. Mr. Woodward has been with Nationwide for
37 years.
JOHN R. COOK, JR. has been Senior Vice President-Chief Communications Officer of
Nationwide since May 1997. Previously, Mr. Cook was Senior Vice President-Chief
Communications Officer of USAA from July 1989 to May 1997. Mr. Cook has been
with Nationwide for 5 years.
30
DAVID A. DIAMOND has been Senior Vice President-Corporate Strategy since
December 2000. Previously, he was Senior Vice President-Corporate Controller of
Nationwide from August 1999 to December 2000. He was Vice President-Controller
of Nationwide from October 1993 to August 1996. Prior to that time, Mr. Diamond
held several positions within Nationwide. Mr. Diamond has been with Nationwide
for 13 years.
PHILIP C. GATH has been Senior Vice President-Chief Actuary-Nationwide Financial
since May 1998. Previously, Mr. Gath was Vice President-Product
Manager-Individual Variable Annuity from July 1997 to May 1998, and Vice
President-Individual Life Actuary from August 1989 to July 1997. Prior to that
time, Mr. Gath held several positions within Nationwide. Mr. Gath has been with
Nationwide for 33 years.
PATRICIA R. HATLER has been Senior Vice President, General Counsel and Secretary
of Nationwide since April 2000, and was Senior Vice President and General
Counsel from July 1999 to April 2000. Prior to that time, she was General
Counsel and Corporate Secretary of Independence Blue Cross from 1983 to July
1999. Ms. Hatler has been with Nationwide for 3 years.
DAVID K. HOLLINGSWORTH has been Senior Vice President-President Nationwide
Insurance Sales since August 2001. Mr. Hollingsworth has been with Nationwide
for 12 years.
DAVID R. JAHN has been Senior Vice President-Product Management since November
2000. Mr. Jahn has been with Nationwide for 30 years.
RICHARD A. KARAS has been Senior Vice President-Sales-Financial Services of
Nationwide since March 1993. Previously, he was Vice President-Sales-Financial
Services of Nationwide from February 1989 to March 1993. Prior to that time, Mr.
Karas held several positions within Nationwide. Mr. Karas has been with
Nationwide for 37 years.
GREGORY S. LASHUTKA has been Senior Vice President-Corporate Relations of
Nationwide since January 2000. Prior to that time, he was Mayor of the City of
Columbus (Ohio) from January 1992 to December 1999. Mr. Lashutka has been with
Nationwide for 2 years.
EDWIN P. MCCAUSLAND, JR. has been Senior Vice President-Fixed Income Securities
since April 1998. Prior to joining Nationwide, he was Vice President-Managing
Director of Massachusetts Life Insurance Company. Mr. McCausland has been with
Nationwide for 5 years.
ROBERT H. MCNAGHTEN has been Senior Vice President-Real Estate Investments since
November 2001. Prior to joining Nationwide in 1987 he was Executive Vice
President with Buckeye Federal Savings & Loan. Mr. McNaghten has been with
Nationwide for 15 years.
MICHAEL D. MILLER has been Senior Vice President-NI Finance since May 2001.
Prior to joining Nationwide in 1985 he was P/C Accounting Manager with Celina
Group. Mr. Miller has been with Nationwide for 17 years.
BRIAN W. NOCCO has been Senior Vice President and Treasurer of Nationwide since
April 2001. Prior to that time, he was Executive Vice President of Imperial Bank
and subsidiaries from May 1998 to June 2001. He was Senior Vice President-Chief
Compliance Officer with The Chubb Corporation from 1994 to 1998 and Treasurer
and Vice President-Finance of Continental Bank Corporation from 1986 to 1994.
From 1974 to 1986 he held management positions in several companies. Mr. Nocco
has been with Nationwide for 1 year.
MARK D. PHELAN has been Senior Vice President-Technology and Operations of
Nationwide since December 2000. Prior to that time, he was Executive Vice
President of Check Free Corporation from October 1992 to November 1997, Sales
Vice President of AT&T Corporation from February 1982 to November 1992, and
Operations Manager with IBM Corporation from April 1977 to February 1982. Mr.
Phelan has been with Nationwide for 2 years.
DOUGLAS C. ROBINETTE has been Senior Vice President-Claims since November 2000.
Prior to joining Nationwide, he was a CPA with KPMG LLP. Mr. Robinette has been
with Nationwide for 15 years.
JOHN S. SKUBIK has been Senior Vice President-Strategic Initiatives since
November 2001. Prior to joining Nationwide in 2001, Mr. Skubik was an Executive
Vice President with Bank One.
MARK R. THRESHER has been Senior Vice President-Finance-Nationwide Financial
since May 1999. Previously, he was Vice President-Controller of Nationwide from
August 1996 to May 1999. He was Vice
31
President and Treasurer of Nationwide from June 1996 to August 1996. Prior to
that time, Mr. Thresher served as a partner with KPMG LLP from July 1988 to May
1996. Mr. Thresher has been with Nationwide for 6 years.
RICHARD M. WAGGONER has been Senior Vice President-Operations since August 1999.
Mr. Waggoner has been with Nationwide for 18 years.
SUSAN A. WOLKEN has been Senior Vice President-Product Management and Nationwide
Financial Marketing since May 1999. Previously, she was Senior Vice
President-Life Company Operations of Nationwide from June 1997 to May 1999. She
was Senior Vice President-Enterprise Administration of Nationwide from July 1996
to June 1997. Prior to that time, she was Senior Vice President-Human Resources
of Nationwide from April 1995 to July 1996, Vice President-Human Resources of
Nationwide from September 1993 to April 1995, and Vice President-Individual Life
and Health Operations from September 1993 to April 1995. Ms. Wolken has been
with Nationwide for 27 years.
32
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investment
vehicles for variable annuity contracts and variable life insurance policies
issued by insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP INCOME & GROWTH: CLASS I
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S&P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of
the S&P 500. Such a management technique known as "portfolio optimization"
may cause the Fund to be more heavily invested in some industries than in
others. However, the Fund may not invest more than 25% of its total assets
in companies whose principal business activities are in the same industry.
AMERICAN CENTURY VP INTERNATIONAL: CLASS I
Investment Objective: Capital growth. The Fund will seek to achieve its
investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is
the primary intent of the manager to diversify investments across a broad
range of foreign issuers. Although the primary investment of the Fund will
be common stocks (defined to include depository receipts for common stock
and other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up to
35% of its assets in such other securities.
AMERICAN CENTURY VP ULTRA FUND: CLASS I
Investment Objective: Capital growth by investing in common stocks of
growing companies. The basis of the strategy used by the Fund is that, over
the long term, stocks of companies with earnings and revenue growth have a
greater than average chance to increase in value over time. This strategy
looks for stocks of large companies with earnings and revenues that are not
only growing, but growing at a successively faster or accelerating pace.
Although most of the Fund's assets will be invested in U.S. companies,
there is no limit on the amount of assets the Fund can invest in foreign
companies. Most of the Fund's foreign investments are in companies located
and doing business in developed countries.
AMERICAN CENTURY VP VALUE: CLASS I
Investment Objective: Long-term capital growth; income is a secondary
objective. The equity securities in which the Fund will invest will be
primarily securities of well-established companies with
intermediate-to-large market capitalizations that are believed by
management to be undervalued at the time of purchase. Under normal market
conditions, the Fund expects to invest at least 80% of the value of its
total assets in equity securities, including common and preferred stock,
convertible preferred stock and convertible debt obligations.
33
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.: INITIAL SHARES
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation serves as the Fund's investment
adviser. NCM Capital Management Group, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment standards, but which also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of
life in America. Current income is secondary to the primary goal.
DREYFUS STOCK INDEX FUND, INC.: INITIAL SHARES
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as
the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus,
serves as the Fund's index manager. Dreyfus is a wholly owned subsidiary of
Mellon Bank, N.A., which is a wholly owned subsidiary of Mellon Bank
Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
The Dreyfus Corporation serves as the Fund's manager. Fayez Sarofim & Company
serves as the sub-adviser and provides day-to-day management of the portfolio.
APPRECIATION PORTFOLIO: INITIAL SHARES
Investment Objective: Primarily long-term capital growth consistent with
the preservation of capital; current income is a secondary investment
objective. This Portfolio invests primarily in the common stocks of
domestic and foreign issuers.
FEDERATED INSURANCE SERIES
Federated Insurance Series (the "Trust"), an open-end management investment
company, was established as a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Trust offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Federated Investment Management Company serves as the
investment adviser.
FEDERATED QUALITY BOND FUND II: PRIMARY SHARES
Investment Objective: Current income by investing in investment grade
fixed income securities.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund ("VIP") is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on November 13, 1981. Shares of VIP are purchased by insurance companies
to fund benefits under variable life insurance policies and variable annuity
contracts. Fidelity Management & Research Company ("FMR") is the manager for VIP
and its portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation.
34
The Portfolio's goal is to achieve a yield which exceeds the composite
yield on the securities comprising the Standard & Poor's 500 Composite
Stock Price Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is also
important to point out that this Portfolio makes sense for you if you can
afford to ride out changes in the stock market because it invests primarily
in common stocks. FMR can also make temporary investments in securities
such as investment-grade bonds, high-quality preferred stocks and
short-term notes, for defensive purposes when it believes market conditions
warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred stocks,
including convertible securities; and
- up to 20% in common stocks and other equity securities when consistent
with the Portfolio's primary objective or acquired as part of a unit
combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's Investor Service, Inc. ("Moody's"); BB or lower by Standard &
Poor's and may be deemed to be of a speculative nature. The Portfolio may
also purchase lower-quality bonds such as those rated Ca3 by Moody's or C-
by Standard & Poor's which provide poor protection for payment of principal
and interest (commonly referred to as "junk bonds"). For a further
discussion of lower-rated securities, please see the "Risks of Lower-Rated
Debt Securities" section of the Portfolio's prospectus.
VIP OVERSEAS PORTFOLIO: SERVICE CLASS
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II ("VIP II") is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. Fidelity Management & Research Company ("FMR") is the manager of VIP
II and its portfolios.
VIP II CONTRAFUND(R) PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation by investing primarily in
companies that FMR believes to be undervalued due to an overly pessimistic
appraisal by the public. This strategy can lead to investments in domestic
or foreign companies, small and large, many of which may not be well known.
The Portfolio primarily invests in common stock and securities convertible
into common stock, but it has the flexibility to invest in any type of
security that may produce capital appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III ("VIP III") is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable
35
annuity contracts. Fidelity Management & Research Company ("FMR") is the manager
of VIP III and it's portfolios.
VIP III VALUE STRATEGIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. The Portfolio pursues its
objective by investing primarily in common stocks.
GARTMORE VARIABLE INSURANCE TRUST
Gartmore Variable Insurance Trust (formerly, Nationwide Separate Account Trust)
("GVIT") is an open-end management investment company created under the laws of
Massachusetts. GVIT offers shares in the mutual funds listed below, each with
its own investment objectives. Shares of GVIT will be sold primarily to separate
accounts to fund the benefits under variable life insurance policies and
variable annuity contracts issued by life insurance companies. Gartmore Global
Asset Management Trust, an indirect subsidiary of Nationwide Mutual Insurance
Company, manages the assets of the Gartmore GVIT Emerging Markets Fund and
Gartmore GVIT International Growth Fund. The remaining assets of GVIT are
managed by Gartmore Mutual Fund Capital Trust ("GMF"), an indirect subsidiary of
Nationwide Financial Services, Inc.
COMSTOCK GVIT VALUE FUND: CLASS I
Subadviser: Van Kampen Asset Management Inc.
Investment Objective: Capital growth and income through investments in
equity securities, including common stocks, preferred stocks and securities
convertible into common and preferred stocks. Under normal market
conditions, Van Kampen Asset Management Inc. seeks to achieve the Fund's
investment objective by investing in a portfolio of equity securities,
consisting principally of common stocks.
DREYFUS GVIT MID CAP INDEX FUND: CLASS I
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. Under normal conditions, the
Fund invests at least 80% of its net assets in equity securities of
companies included in the Standard & Poor's MidCap 400 Index and in
derivative instruments linked to the S&P 400. The Fund is neither sponsored
by nor affiliated with Standard & Poor's Corporation.
FEDERATED GVIT HIGH INCOME BOND FUND:
CLASS I
Subadviser: Federated Investment Counseling
Investment Objective: To provide high current income. Under normal
conditions, the Fund invests at least 80% of the Fund's net assets in
corporate bonds that are rated BBB or lower by a rating agency or that are
unrated but of comparable quality. Such funds are commonly referred to as
"junk bonds."
GARTMORE GVIT EMERGING MARKETS FUND: CLASS I
Subadviser: Gartmore Global Partners
Investment Objective: Long term capital growth. Under normal conditions,
the Fund invests at least 80% of its net assets in equity securities of
companies located in emerging market or developing countries or that derive
a significant portion of their earnings or revenue from emerging market
countries.
GARTMORE GVIT GLOBAL FINANCIAL SERVICES FUND: CLASS I
Subadviser: Gartmore Global Partners
Investment Objective: Long-term capital growth. To achieve its objective,
the Fund normally invests at least 80% of its net assets in equity
securities issued by U.S. and foreign companies with business operations in
the financial services sector. These companies will be economically tied to
a number of countries throughout the world, including the United States.
GARTMORE GVIT GLOBAL HEALTH SCIENCES FUND: CLASS I
Investment Objective: Long-term capital appreciation. To achieve its
objective, the Fund normally invests at least 80% of its assets in equity
securities issued by U.S. and foreign companies engaged in
36
the development, production, or distribution of products and services that
have a health sciences orientation (those that focus on maintaining or
improving one's quality of life). These companies will be economically tied
to a number of countries throughout the world, including the United States.
GARTMORE GVIT GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND: CLASS I
Investment Objective: Long term capital appreciation by investing under
normal conditions at least 80% of its net assets in equity securities
issued by companies with business operations in technology and
communications and/or technology and communication related industries.
These companies will be tied economically to a number of countries
throughout the world, including the United States.
GARTMORE GVIT GLOBAL UTILITIES FUND: CLASS I
Subadviser: Gartmore Global Partners
Investment Objective: Long-term capital growth. To achieve its objective,
the Fund normally invests at least 80% of its net assets in equity
securities issued by U.S. and foreign companies with business operations in
the utilities sector. These companies will be economically tied to a number
of countries throughout the world, including the United States.
GARTMORE GVIT GOVERNMENT BOND FUND: CLASS I
Investment Objective: Seeks as high a level of income as is consistent with
the preservation of capital. Under normal conditions, the Fund invests at
least 80% of its net assets in U.S. government and agency bonds, bills and
notes. The duration of the Fund will typically be four to six years.
GARTMORE GVIT GROWTH FUND: CLASS I
Investment Objective: Long-term capital appreciation. The Fund invests
primarily in large capitalization companies. The Fund looks for companies
whose earnings are expected to grow faster than other companies in the
market.
GARTMORE GVIT INTERNATIONAL GROWTH FUND: CLASS I
Subadviser: Gartmore Global Partners
Investment Objective: Long term capital growth by investing primarily in
equity securities of companies in Europe, Australia, the Far East and other
regions, including developing countries.
GARTMORE GVIT INVESTOR DESTINATIONS FUNDS
GARTMORE GVIT INVESTOR DESTINATIONS CONSERVATIVE FUND
Investment Objective: To maximize total investment return by seeking
income and, secondarily, long term growth of capital. The Fund invests
in a target allocation mix of 10% large cap U.S. stocks, 5% mid cap
U.S. stocks, 5% international stocks, 35% bonds, and 45% short-term
investments.
GARTMORE GVIT INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
Investment Objective: To maximize total investment return by seeking
income and, secondarily, growth of capital. The Fund invests in a
target allocation mix of 20% large cap U.S. stocks, 10% mid cap U.S.
stocks, 10% international stocks, 35% bonds, and 25% short-term
investments.
GARTMORE GVIT INVESTOR DESTINATIONS MODERATE FUND
Investment Objective: To maximize total investment return by seeking
growth of capital and income. The Fund invests in a target allocation
mix of 30% large cap U.S. stocks, 10% mid cap U.S. stocks, 5% small
cap U.S. stocks, 15% international stocks, 25% bonds, and 15%
short-term investments.
GARTMORE GVIT INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
Investment Objective: To maximize total investment return primarily by
seeking growth of capital, but also income. The Fund invests in a
target allocation mix of 35% large cap U.S. stocks, 15% mid cap U.S.
stocks, 5% small cap U.S. stocks, 25% international stocks, 15% bonds,
and 5% short-term investments.
37
GARTMORE GVIT INVESTOR DESTINATIONS AGGRESSIVE FUND
Investment Objective: To maximize total investment return primarily by
seeking growth of capital. The Fund invests in a target allocation mix
of 40% large cap U.S. stocks, 15% mid cap U.S. stocks, 10% small cap
U.S. stocks, 30% international funds, and 5% bonds.
GARTMORE GVIT MONEY MARKET FUND: CLASS I
Investment Objective: As high a level of current income as is consistent
with the preservation of capital and maintenance of liquidity. The Fund
invests in high-quality money market obligations maturing in 397 days or
less.
GARTMORE GVIT NATIONWIDE LEADERS FUND: CLASS I
Investment Objective: High total return from a concentrated portfolio of
U.S. securities. To achieve its objective, the Fund typically invests at
least 80% of its net assets in equity securities, primarily in common
stocks and convertible securities of U.S. leaders. A U.S. leader is a
company with a strong and improving franchise that is well positioned to
take advantage of opportunities in the marketplace. The Fund typically
invests in a core group of 20 to 30 common stocks of large capitalization
companies.
GARTMORE GVIT TOTAL RETURN FUND: CLASS I
Investment Objective: Seeks total return through a flexible combination of
capital appreciation and current income. The Fund invests primarily in
common stocks and convertible securities.
GARTMORE GVIT U.S. GROWTH LEADERS FUND: CLASS I
Investment Objective: Long-term capital growth. To achieve its objective,
the Fund normally invests at least 80% of its net assets in equity
securities of U.S. growth leaders. The Fund will invest in companies whose
earnings are expected to grow faster than other companies in the market.
The Fund typically invests in a core group of 20 to 30 common stocks of
large capitalization companies.
GARTMORE GVIT WORLDWIDE LEADERS FUND:
CLASS I
Subadviser: Gartmore Global Partners
Investment Objective: Long-term capital growth. Under normal conditions,
the Fund invests at least 80% of its net assets in equity securities of
companies located throughout the world considered to be leaders.
GVIT SMALL CAP GROWTH FUND: CLASS I
Subadvisers: Neuberger Berman, LLC and Waddell & Reed Investment Management
Company
Investment Objective: Seeks capital growth by investing in a broadly
diversified portfolio of equity securities issued by U.S. and foreign
companies with market capitalizations in the range of companies represented
by the Russell 2000, known as small cap companies. Under normal conditions,
the Fund will invest at least 80% of its net assets in the equity
securities of small cap companies.
GVIT SMALL CAP VALUE FUND: CLASS I
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. Under normal conditions, the
Fund invests at least 80% of its net assets in equity securities of small
capitalization companies. These are companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Index. The Fund will
invest in stocks of U.S. and foreign companies which the portfolio managers
believe qualify as "value" companies.
GVIT SMALL COMPANY FUND: CLASS I
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC, Gartmore
Global Partners, Strong Capital Management, Inc. and Waddell & Reed
Investment Management Company
Investment Objective: Long-term growth of capital. Under normal conditions,
the Fund will invest at least 80% of its net assets in equity securities
issued by small capitalization companies. These are companies whose equity
market capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Index.
J.P. MORGAN GVIT BALANCED FUND: CLASS I
Subadviser: J.P. Morgan Investment Management, Inc.
38
Investment Objective: A high total return from a diversified portfolio of
equity and fixed income securities. Under normal conditions, the Fund
invests approximately 50% of its net assets in equity securities and 30% of
its net assets in fixed income securities (including U.S. government
corporate, mortgage-backed and asset-backed securities). The equity
securities held by the Fund generally are common stocks of large and medium
sized companies included in the Standard & Poor's 500 Index.
MAS GVIT MULTI SECTOR BOND FUND: CLASS I
Subadviser: Miller, Anderson & Sherrerd, LLP
Investment Objective: Primarily seeks above average total return over a
market cycle of three to five years. The Fund invests in a diversified
portfolio of U.S. and foreign fixed income securities, including high yield
securities (commonly referred to as "junk bonds") and emerging markets
securities.
STRONG GVIT MID CAP GROWTH FUND: CLASS I
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by focusing on common stocks of U.S.
and foreign companies that the subadviser believes are reasonably priced
and have above-average growth potential. Under normal conditions, the Fund
invests at least 80% of its net assets in equity securities issued by mid
capitalization companies.
JANUS ASPEN SERIES
The Janus Aspen Series is an open-end management investment company whose shares
are offered in connection with investment in and payments under variable annuity
contracts and variable life insurance policies, as well as certain qualified
retirement plans. Janus Capital Corporation serves as investment adviser to each
Portfolio.
CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES
Investment Objective: Long-term growth of capital by investing primarily in
common stocks selected for their growth potential. The Portfolio may invest
in companies of any size, from larger, well-established companies to
smaller, emerging growth companies.
GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
Investment Objective: Long-term growth of capital by investing primarily in
equity securities of U.S. and foreign companies selected for their growth
potential. Under normal circumstances, the Portfolio invests at least 65%
of its total assets in securities of companies that the Portfolio manager
believes will benefit significantly from advances or improvements in
technology.
INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES
Investment Objective: Long-term growth of capital by investing at least 65%
of its total assets in securities of issuers from at least five different
countries, excluding the United States. Although the Portfolio intends to
invest substantially all of its assets in issuers located outside the
United States, it may invest in U.S. issuers and it may at times invest all
of its assets in fewer than five countries, or even a single country.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST ("AMT")
Neuberger Berman AMT is an open-end, diversified management investment company
that offers its portfolios in connection with variable annuity contracts and
variable life insurance policies, and certain qualified plans. Prior to May 1,
2000, the portfolios invested through a two-tier master/feeder structure,
whereby each portfolio invested its assets in another fund that served as a
corresponding "master series;" the master series invested in securities.
Effective May 1, 2000, the portfolios converted to a conventional one-tier
structure, whereby each portfolio holds its securities directly. Neuberger
Berman Management Inc. is the investment adviser.
AMT GUARDIAN PORTFOLIO
Investment Objective: Long-term capital growth, with current income as a
secondary objective. The Portfolio pursues these goals by investing mainly
in common stocks of large-capitalization companies.
39
AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital growth. The Portfolio pursues this goal by
investing mainly in common stocks of mid-capitalization companies. The
managers look for fast-growing companies that are in new or rapidly
evolving industries and seek to reduce risk by diversifying among many
companies, industries and sectors.
AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth. The Portfolio pursues its goal by
investing mainly in common stocks of mid- to large-capitalization
companies.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold to provide benefits under variable life insurance policies
and variable annuity contracts. OppenheimerFunds, Inc. is the investment
adviser.
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA: INITIAL CLASS
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or
to be developing new products, services or markets and normally retain a
relatively larger portion of their earnings for research, development and
investment in capital assets. The Fund may also invest in cyclical
industries in "special situations" that OppenheimerFunds, Inc. believes
present opportunities for capital growth.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA: INITIAL CLASS
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history
of earnings and dividends and are issued by seasoned companies (companies
which have an operating history of at least five years including
predecessors). Current income is a secondary consideration in the selection
of the Fund's portfolio securities.
OPPENHEIMER GLOBAL SECURITIES FUND/VA: INITIAL CLASS
Investment Objective: Long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special appreciation
possibilities. These securities may be considered speculative.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA: INITIAL CLASS
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities
and U.S. debt obligations, and cash and cash equivalents. From time to
time, the Fund may focus on small to medium capitalization issuers, the
securities of which may be subject to greater price volatility than those
of larger capitalized issuers.
STRONG OPPORTUNITY FUND II, INC.
The Strong Opportunity Fund II, Inc. is a diversified, open-end management
company commonly called a mutual fund. The Strong Opportunity Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management, Inc. is the
investment adviser for the Fund.
Investment Objective: Capital appreciation through investments in a
diversified portfolio of equity securities.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
40
The Universal Institutional Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors.
EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located. Morgan Stanley Dean Witter Investment Management,
Inc. is the Portfolio's investment adviser.
U. S. REAL ESTATE PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in
a diversified portfolio of securities of companies operating in the real
estate industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, including
common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies. A
"real estate industry company" is a company that derives at least 50% of
its assets (marked to market), gross income or net profits from the
ownership, construction, management or sale of residential, commercial or
industrial real estate. Under normal market conditions, at least 65% of the
Portfolio's total assets will be invested in Real Estate Securities,
primarily equity securities of real estate investment trusts. The Portfolio
may invest up to 25% of its total assets in securities issued by foreign
issuers, some or all of which may also be Real Estate Securities. Morgan
Stanley Asset Management, Inc. serves as the Portfolio's investment
adviser.
41
APPENDIX A: ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH
BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the policies change with investment performance. The illustrations
illustrate how cash values, cash surrender values and death benefits under a
policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the cash values, cash surrender values and death benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the policies would go into default at which time additional
premium payments would be required to continue the policy in force. The
illustrations also assume there is no policy indebtedness, no additional premium
payments are made, no cash values are allocated to the fixed account, and there
are no changes in the specified amount or death benefit option.
The amounts shown for the cash value, cash surrender value and death benefit as
of each policy anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the deduction of underlying mutual fund investment advisory fees and other
expenses, which are equivalent to an annual effective rate of 0.96%. This
effective rate is based on the average of the fund expenses, after expense
reimbursement, for the preceding year for all underlying mutual fund options
available under the policy as of December 31, 2001. Some underlying mutual funds
are subject to expense reimbursements and fee waivers. Absent expense
reimbursement and fee waivers, the annual effective rate would have been 0.69%.
Nationwide anticipates that the expense reimbursement and fee waiver
arrangements will continue past the current year. Should there be an increase or
decrease in the expense reimbursements or fee waivers of these underlying mutual
funds, such change will be reflected in the net asset value of the corresponding
underlying mutual fund.
Taking into account the underlying mutual fund expenses, gross annual rates of
return of 0%, 6% and 12% correspond to net investment experience at constant
annual rates of -0.96%, 5.0% and 11.04%.
The illustrations also reflect the fact that Nationwide makes monthly charges
for providing insurance protection, recovering taxes, providing for
administrative expenses, and assuming mortality and expense risks. Current
values reflect current cost of insurance charges and guaranteed values reflect
the maximum cost of insurance charges guaranteed in the policy. The values shown
are for policies which are issued as standard. Policies issued on a substandard
basis would result in lower cash values and death benefits than those
illustrated.
The illustrations also reflect the fact that no charges for federal or state
income taxes are currently made against the variable account. If such a charge
is made in the future, it will require a higher gross investment return than
illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, Nationwide will furnish a comparable illustration based
on the proposed insured's age, sex, smoking classification, rating
classification and premium payment requested.
APPENDIX A: ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH
BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the policies change with investment performance. The illustrations
illustrate how cash values, cash surrender values and death benefits under a
policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the cash values, cash surrender values and death benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the policies would go into default, at which time additional
premium payments would be required to continue the policy in force. The
illustrations also assume there is no policy indebtedness, no additional premium
payments are made, no cash values are allocated to the fixed account, and there
are no changes in the specified amount or death benefit option.
The amounts shown for the cash value, cash surrender value and death benefit as
of each policy anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the deduction of underlying mutual fund investment advisory fees and other
expenses, which are equivalent to an annual effective rate of 0.96%. This
effective rate is based on the average of the fund expenses, after expense
reimbursement, for the preceding year for all underlying mutual fund options
available under the policy as of December 31, 2001. Some underlying mutual funds
are subject to expense reimbursements and fee waivers. Absent expense
reimbursement and fee waivers, the annual effective rate would have been 0.69%.
Nationwide anticipates that the expense reimbursement and fee waiver
arrangements will continue past the current year. Should there be an increase or
decrease in the expense reimbursements or fee waivers of these underlying mutual
funds, such change will be reflected in the net asset value of the corresponding
underlying mutual fund.
Taking into account the underlying mutual fund expenses, gross annual rates of
return of 0%, 6% and 12% correspond to net investment experience at constant
annual rates of -0.96%, 5.0% and 11.04%.
The illustrations also reflect the fact that Nationwide makes monthly charges
for providing insurance protection, recovering taxes, providing for
administrative expenses, and assuming mortality and expense risks. Current
values reflect current cost of insurance charges and guaranteed values reflect
the maximum cost of insurance charges guaranteed in the policy. The values shown
are for policies which are issued as standard. Policies issued on a substandard
basis would result in lower cash values and death benefits than those
illustrated.
The illustrations also reflect the fact that no charges for federal or state
income taxes are currently made against the variable account. If such a charge
is made in the future, it will require a higher gross investment return than
illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, Nationwide will furnish a comparable illustration based
on the proposed insured's age, sex, smoking classification, rating
classification and premium payment requested.
42
APPENDIX B: ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH
BENEFITS
$12,150 ANNUAL PREMIUM: $1,000,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO PREFERRED, ISSUE AGE 55 FEMALE: NON-TOBACCO PREFERRED, ISSUE AGE 55
OPTION 1 CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 12,758 8,838 - 1,000,000 9,430 - 1,000,000 10,023 289 1,000,000
2 26,153 17,504 7,014 1,000,000 19,232 8,742 1,000,000 21,033 10,543 1,000,000
3 40,218 25,988 16,602 1,000,000 29,411 20,025 1,000,000 33,118 23,733 1,000,000
4 54,986 36,424 27,590 1,000,000 42,180 33,346 1,000,000 48,652 39,819 1,000,000
5 70,493 46,631 38,901 1,000,000 55,431 47,701 1,000,000 65,698 57,969 1,000,000
6 86,775 56,621 49,996 1,000,000 69,193 62,567 1,000,000 84,419 77,793 1,000,000
7 103,872 66,352 60,831 1,000,000 83,441 77,920 1,000,000 104,935 99,414 1,000,000
8 121,823 75,824 71,407 1,000,000 98,193 93,776 1,000,000 127,428 123,011 1,000,000
9 140,671 85,043 81,731 1,000,000 113,472 110,159 1,000,000 152,100 148,787 1,000,000
10 160,462 94,009 91,248 1,000,000 129,297 126,536 1,000,000 179,171 176,410 1,000,000
11 181,243 102,738 100,530 1,000,000 145,705 143,496 1,000,000 208,899 206,691 1,000,000
12 203,063 111,271 109,615 1,000,000 162,757 161,101 1,000,000 241,593 239,937 1,000,000
13 225,973 119,612 118,508 1,000,000 180,484 179,379 1,000,000 277,556 276,452 1,000,000
14 250,030 127,765 127,213 1,000,000 198,915 198,363 1,000,000 317,125 316,573 1,000,000
15 275,289 135,733 135,733 1,000,000 218,083 218,083 1,000,000 360,670 360,670 1,000,000
16 301,810 144,481 144,481 1,000,000 239,466 239,466 1,000,000 410,912 410,912 1,000,000
17 329,658 153,010 153,010 1,000,000 261,765 261,765 1,000,000 466,453 466,453 1,000,000
18 358,899 161,204 161,204 1,000,000 284,921 284,921 1,000,000 527,801 527,801 1,000,000
19 389,601 168,970 168,970 1,000,000 308,902 308,902 1,000,000 595,561 595,561 1,000,000
20 421,839 176,228 176,228 1,000,000 333,690 333,690 1,000,000 670,442 670,442 1,000,000
21 455,688 182,884 182,884 1,000,000 359,265 359,265 1,000,000 753,259 753,259 1,000,000
22 491,230 188,804 188,804 1,000,000 385,581 385,581 1,000,000 844,956 844,956 1,000,000
23 528,549 193,824 193,824 1,000,000 412,585 412,585 1,000,000 946,648 946,648 1,000,000
24 567,734 197,746 197,746 1,000,000 440,210 440,210 1,000,000 1,059,331 1,059,331 1,112,298
25 608,878 200,314 200,314 1,000,000 468,375 468,375 1,000,000 1,183,824 1,183,824 1,243,016
26 652,080 200,764 200,764 1,000,000 496,687 496,687 1,000,000 1,321,288 1,321,288 1,387,352
27 697,441 199,111 199,111 1,000,000 525,314 525,314 1,000,000 1,473,051 1,473,051 1,546,704
28 745,071 194,921 194,921 1,000,000 554,182 554,182 1,000,000 1,640,535 1,640,535 1,722,561
29 795,082 187,638 187,638 1,000,000 583,211 583,211 1,000,000 1,825,275 1,825,275 1,916,539
30 847,594 176,568 176,568 1,000,000 612,332 612,332 1,000,000 2,028,933 2,028,933 2,130,379
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE
PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
42.1
$12,150 ANNUAL PREMIUM: $1,000,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO PREFERRED, ISSUE AGE 55 FEMALE: NON-TOBACCO PREFERRED, ISSUE AGE 55
OPTION 1 GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 12,758 7,632 - 1,000,000 8,185 - 1,000,000 8,740 - 1,000,000
2 26,153 15,013 4,523 1,000,000 16,589 6,098 1,000,000 18,233 7,743 1,000,000
3 40,218 22,124 12,738 1,000,000 25,195 15,809 1,000,000 28,531 19,145 1,000,000
4 54,986 32,213 23,379 1,000,000 37,363 28,529 1,000,000 43,167 34,333 1,000,000
5 70,493 41,926 34,197 1,000,000 49,832 42,103 1,000,000 59,066 51,337 1,000,000
6 86,775 51,229 44,604 1,000,000 62,576 55,950 1,000,000 76,319 69,693 1,000,000
7 103,872 60,078 54,557 1,000,000 75,555 70,034 1,000,000 95,013 89,492 1,000,000
8 121,823 68,409 63,992 1,000,000 88,712 84,295 1,000,000 115,233 110,816 1,000,000
9 140,671 76,143 72,831 1,000,000 101,970 98,657 1,000,000 137,056 133,743 1,000,000
10 160,462 83,191 80,431 1,000,000 115,241 112,481 1,000,000 160,567 157,806 1,000,000
11 181,243 89,454 87,245 1,000,000 128,427 126,219 1,000,000 185,858 183,650 1,000,000
12 203,063 94,827 93,171 1,000,000 141,421 139,765 1,000,000 213,040 211,383 1,000,000
13 225,973 99,201 98,097 1,000,000 154,111 153,007 1,000,000 242,242 241,138 1,000,000
14 250,030 102,448 101,896 1,000,000 166,366 165,814 1,000,000 273,615 273,063 1,000,000
15 275,289 104,398 104,398 1,000,000 178,013 178,013 1,000,000 307,312 307,312 1,000,000
16 301,810 105,549 105,549 1,000,000 189,984 189,984 1,000,000 345,435 345,435 1,000,000
17 329,658 104,852 104,852 1,000,000 200,927 200,927 1,000,000 386,627 386,627 1,000,000
18 358,899 101,876 101,876 1,000,000 210,436 210,436 1,000,000 431,135 431,135 1,000,000
19 389,601 96,094 96,094 1,000,000 218,016 218,016 1,000,000 479,280 479,280 1,000,000
20 421,839 86,904 86,904 1,000,000 223,101 223,101 1,000,000 531,519 531,519 1,000,000
21 455,688 73,628 73,628 1,000,000 225,054 225,054 1,000,000 588,506 588,506 1,000,000
22 491,230 55,509 55,509 1,000,000 223,159 223,159 1,000,000 651,160 651,160 1,000,000
23 528,549 31,672 31,672 1,000,000 216,582 216,582 1,000,000 720,733 720,733 1,000,000
24 567,734 1,023 1,023 1,000,000 204,280 204,280 1,000,000 798,908 798,908 1,000,000
25 608,878 * - * - * - 184,852 184,852 1,000,000 887,932 887,932 1,000,000
26 652,080 * - * - * - 156,358 156,358 1,000,000 990,504 990,504 1,040,029
27 697,441 * - * - * - 116,120 116,120 1,000,000 1,104,320 1,104,320 1,159,536
28 745,071 * - * - * - 60,413 60,413 1,000,000 1,229,094 1,229,094 1,290,548
29 795,082 * - * - * - * - * - * - 1,365,680 1,365,680 1,433,964
30 847,594 * - * - * - * - * - * - 1,514,971 1,514,971 1,590,720
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE
PROSPECTUS APPENDIX.
*UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
43
$12,150 ANNUAL PREMIUM: $1,000,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO PREFERRED, ISSUE AGE 55 FEMALE: NON-TOBACCO PREFERRED, ISSUE AGE 55
OPTION 2 CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 12,758 8,838 - 1,008,838 9,430 - 1,009,430 10,023 289 1,010,023
2 26,153 17,503 7,013 1,017,503 19,232 8,742 1,019,232 21,033 10,543 1,021,033
3 40,218 25,986 16,600 1,025,986 29,409 20,023 1,029,409 33,116 23,730 1,033,116
4 54,986 36,419 27,585 1,036,419 42,173 33,339 1,042,173 48,645 39,811 1,048,645
5 70,493 46,618 38,889 1,046,618 55,415 47,686 1,055,415 65,680 57,950 1,065,680
6 86,775 56,597 49,972 1,056,597 69,163 62,538 1,069,163 84,382 77,756 1,084,382
7 103,872 66,309 60,788 1,066,309 83,386 77,865 1,083,386 104,864 99,343 1,104,864
8 121,823 75,752 71,335 1,075,752 98,097 93,680 1,098,097 127,299 122,882 1,127,299
9 140,671 84,931 81,618 1,084,931 113,316 110,003 1,113,316 151,883 148,571 1,151,883
10 160,462 93,842 91,081 1,093,842 129,056 126,295 1,129,056 178,824 176,063 1,178,824
11 181,243 102,502 100,293 1,102,502 145,351 143,143 1,145,351 208,371 206,163 1,208,371
12 203,063 110,954 109,298 1,110,954 162,266 160,609 1,162,266 240,829 239,172 1,240,829
13 225,973 119,203 118,098 1,119,203 179,825 178,720 1,179,825 276,489 275,384 1,276,489
14 250,030 127,250 126,698 1,127,250 198,054 197,502 1,198,054 315,673 315,121 1,315,673
15 275,289 135,101 135,101 1,135,101 216,983 216,983 1,216,983 358,736 358,736 1,358,736
16 301,810 143,714 143,714 1,143,714 238,078 238,078 1,238,078 408,367 408,367 1,408,367
17 329,658 152,079 152,079 1,152,079 260,016 260,016 1,260,016 463,111 463,111 1,463,111
18 358,899 160,056 160,056 1,160,056 282,687 282,687 1,282,687 523,357 523,357 1,523,357
19 389,601 167,527 167,527 1,167,527 305,998 305,998 1,305,998 589,559 589,559 1,589,559
20 421,839 174,386 174,386 1,174,386 329,866 329,866 1,329,866 662,230 662,230 1,662,230
21 455,688 180,513 180,513 1,180,513 354,182 354,182 1,354,182 741,918 741,918 1,741,918
22 491,230 185,732 185,732 1,185,732 378,777 378,777 1,378,777 829,172 829,172 1,829,172
23 528,549 189,832 189,832 1,189,832 403,435 403,435 1,403,435 924,555 924,555 1,924,555
24 567,734 192,554 192,554 1,192,554 427,877 427,877 1,427,877 1,028,642 1,028,642 2,028,642
25 608,878 193,577 193,577 1,193,577 451,744 451,744 1,451,744 1,141,994 1,141,994 2,141,994
26 652,080 191,940 191,940 1,191,940 473,995 473,995 1,473,995 1,264,549 1,264,549 2,264,549
27 697,441 187,689 187,689 1,187,689 494,569 494,569 1,494,569 1,397,298 1,397,298 2,397,298
28 745,071 180,327 180,327 1,180,327 512,838 512,838 1,512,838 1,540,755 1,540,755 2,540,755
29 795,082 169,250 169,250 1,169,250 528,033 528,033 1,528,033 1,695,376 1,695,376 2,695,376
30 847,594 153,755 153,755 1,153,755 539,236 539,236 1,539,236 1,861,543 1,861,543 2,861,543
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE
PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
44
$12,150 ANNUAL PREMIUM: $1,000,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO PREFERRED, ISSUE AGE 55 FEMALE: NON-TOBACCO PREFERRED, ISSUE AGE 55
OPTION 2 GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
1 12,758 7,631 - 1,007,631 8,184 - 1,008,184 8,739 - 1,008,739
2 26,153 15,010 4,520 1,015,010 16,585 6,095 1,016,585 18,229 7,739 1,018,229
3 40,218 22,113 12,727 1,022,113 25,183 15,797 1,025,183 28,517 19,131 1,028,517
4 54,986 32,186 23,352 1,032,186 37,331 28,498 1,037,331 43,129 34,295 1,043,129
5 70,493 41,869 34,140 1,041,869 49,763 42,033 1,049,763 58,982 51,253 1,058,982
6 86,775 51,123 44,497 1,051,123 62,442 55,816 1,062,442 76,151 69,526 1,076,151
7 103,872 59,893 54,372 1,059,893 75,315 69,794 1,075,315 94,703 89,182 1,094,703
8 121,823 68,109 63,692 1,068,109 88,309 83,892 1,088,309 114,693 110,276 1,114,693
9 140,671 75,677 72,364 1,075,677 101,321 98,008 1,101,321 136,155 132,842 1,136,155
10 160,462 82,491 79,731 1,082,491 114,233 111,473 1,114,233 159,113 156,353 1,159,113
11 181,243 88,437 86,229 1,088,437 126,907 124,699 1,126,907 183,582 181,374 1,183,582
12 203,063 93,391 91,735 1,093,391 139,192 137,535 1,139,192 209,566 207,910 1,209,566
13 225,973 97,225 96,120 1,097,225 150,919 149,815 1,150,919 237,062 235,957 1,237,062
14 250,030 99,792 99,239 1,099,792 161,896 161,344 1,161,896 266,046 265,494 1,266,046
15 275,289 100,901 100,901 1,100,901 171,870 171,870 1,171,870 296,440 296,440 1,296,440
16 301,810 101,004 101,004 1,101,004 181,630 181,630 1,181,630 329,957 329,957 1,329,957
17 329,658 99,039 99,039 1,099,039 189,713 189,713 1,189,713 364,827 364,827 1,364,827
18 358,899 94,552 94,552 1,094,552 195,546 195,546 1,195,546 400,688 400,688 1,400,688
19 389,601 87,013 87,013 1,087,013 198,443 198,443 1,198,443 437,043 437,043 1,437,043
20 421,839 75,851 75,851 1,075,851 197,640 197,640 1,197,640 473,300 473,300 1,473,300
21 455,688 60,486 60,486 1,060,486 192,317 192,317 1,192,317 508,782 508,782 1,508,782
22 491,230 40,345 40,345 1,040,345 181,619 181,619 1,181,619 542,742 542,742 1,542,742
23 528,549 14,859 14,859 1,014,859 164,644 164,644 1,164,644 574,351 574,351 1,574,351
24 567,734 * - * - * - 140,388 140,388 1,140,388 602,626 602,626 1,602,626
25 608,878 * - * - * - 107,640 107,640 1,107,640 626,316 626,316 1,626,316
26 652,080 * - * - * - 64,892 64,892 1,064,892 643,792 643,792 1,643,792
27 697,441 * - * - * - 10,320 10,320 1,010,320 652,995 652,995 1,652,995
28 745,071 * - * - * - * - * - * - 651,389 651,389 1,651,389
29 795,082 * - * - * - * - * - * - 636,103 636,103 1,636,103
30 847,594 * - * - * - * - * - * - 604,037 604,037 1,604,037
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE
PROSPECTUS APPENDIX.
*UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
45
APPENDIX C: PERFORMANCE SUMMARY INFORMATION
The following performance tables display historical investments results of the
underlying mutual fund sub-accounts. This information may be useful in helping
potential investors in deciding which underlying mutual fund sub-accounts to
choose and in assessing the competence of the underlying mutual funds'
investment advisers. The performance figures shown be considered in light of the
investment objectives and policies, characteristics and quality of the
underlying portfolios of the underlying mutual funds, and the market conditions
during the periods of time quoted. The performance figures should not be
considered as estimates or predictions of future performance. Investment return
and the principal value of the underlying mutual fund sub-accounts are not
guaranteed and will fluctuate so that a policy owner's units, when redeemed, may
be worth more or less than their original cost.
THE BEST of AMERICA PROTECTION LAST SURVIVOR FPVUL PERFORMANCE TABLE
CASH VALUES
------------------------------------------------------------------------------------------------------
1 YEAR TO 2 YEARS TO 3 YEARS TO 5 YEARS TO 10 YEARS TO
03/31/02 03/31/02 03/31/02 03/31/02 03/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
FUND CASH CASH CASH CASH CASH
UNDERLYING INVESTMENT OPTIONS INCEPTION ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR.
DATE** VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
American Century Variable 10/30/97 $16,786 $6,109 $29,896 $19,753 $45,271 $36,195 NA NA NA NA
Portfolios, Inc. - American
Century VP Income & Growth
Fund: Class I
American Century Variable 05/01/94 $13,572 $2,895 $22,287 $12,144 $37,461 $28,385 $75,962 $68,488 NA NA
Portfolios, Inc. - American
Century VP International
Fund: Class I
American Century Variable 05/01/96 $19,257 $8,579 $42,002 $31,859 $64,753 $55,677 $118,168 $110,694 NA NA
Portfolios, Inc. - American
Century VP Value Fund: Class
I
Dreyfus Socially Responsible 10/06/93 $14,649 $3,972 $25,158 $15,015 $38,519 $29,444 $81,089 $73,615 NA NA
Growth Fund, Inc.: Initial
Shares
Dreyfus Stock Index Fund, 09/29/89 $16,192 $5,515 $28,629 $18,486 $43,343 $34,268 $89,900 $82,426 $312,455 $309,786
Inc.: Initial Shares
Dreyfus Variable Investment 04/05/93 $16,762 $6,085 $31,535 $21,392 $47,462 $38,386 $96,561 $89,087 NA NA
Fund - Appreciation
Portfolio: Initial Shares
Federated Insurance Series - 04/22/99 $16,981 $6,304 $35,854 $25,710 NA NA NA NA NA NA
Federated Quality Bond Fund
II: Primary Shares
Fidelity VIP Equity-Income 10/09/86 $17,026 $6,349 $34,741 $24,598 $52,497 $43,421 $100,215 $92,741 $319,378 $316,709
Portfolio: Service Class
Fidelity VIP Growth 10/09/86 $15,786 $5,109 $26,307 $16,163 $41,043 $31,967 $92,221 $84,747 $314,798 $312,129
Portfolio: Service Class
Fidelity VIP High Income 09/19/85 $14,163 $3,486 $25,416 $15,272 $36,621 $27,545 $63,859 $56,385 $161,477 $158,808
Portfolio: Service Class
Fidelity VIP II Contrafund(R) 01/03/95 $16,819 $6,142 $29,462 $19,318 $45,338 $36,262 $95,746 $88,272 NA NA
Portfolio: Service Class
Fidelity VIP III Growth 01/03/95 $16,224 $5,547 $27,314 $17,171 $39,164 $30,089 $74,783 $67,309 NA NA
Opportunities Portfolio:
Service Class
Fidelity VIP Overseas 01/28/87 $14,436 $3,758 $24,608 $14,464 $39,139 $30,064 $74,772 $67,298 $204,677 $202,008
Portfolio: Service Class
GVIT Comstock GVIT Value 10/31/97 $16,062 $5,384 $27,730 $17,586 $42,350 $33,274 NA NA NA NA
Fund: Class I
GVIT Dreyfus GVIT Mid Cap 10/31/97 $19,264 $8,587 $36,604 $26,461 $60,707 $51,631 NA NA NA NA
Index Fund: Class I
GVIT Federated GVIT High 10/31/97 $16,530 $5,853 $32,992 $22,849 $48,602 $39,526 NA NA NA NA
Income Bond Fund: Class I
GVIT Gartmore GVIT Emerging 08/30/00 $17,993 $7,316 NA NA NA NA NA NA NA NA
Markets Fund: Class I
GVIT Gartmore GVIT Global 06/30/00 $14,351 $3,674 NA NA NA NA NA NA NA NA
Technology and
Communications Fund: Class I
GVIT Gartmore GVIT 11/08/82 $16,936 $6,259 $35,932 $25,788 $54,815 $45,739 $101,476 $94,002 $246,171 $243,501
Government Bond Fund: Class
I
GVIT Gartmore GVIT Growth 04/15/92 $16,081 $5,403 $24,350 $14,207 $32,945 $23,869 $61,048 $53,574 NA NA
Fund: Class I
GVIT Gartmore GVIT 08/30/00 $13,232 $2,554 NA NA NA NA NA NA NA NA
International Growth Fund:
Class I
GVIT Gartmore GVIT Money 11/10/81 $16,658 $5,981 $34,190 $24,047 $52,427 $43,351 $95,531 $88,057 $218,348 $215,678
Market Fund: Class I
GVIT Gartmore GVIT Total 11/08/82 $17,005 $6,328 $31,386 $21,242 $46,479 $37,403 $89,551 $82,077 $279,537 $276,868
Return Fund: Class I
GVIT Gartmore GVIT Worldwide 10/31/97 $15,598 $4,921 $26,491 $16,348 $39,973 $30,898 NA NA NA NA
Leaders Fund: Class I
GVIT GVIT Small Cap Growth: 05/03/99 $16,842 $6,165 $26,422 $16,279 NA NA NA NA NA NA
Class I
GVIT GVIT Small Cap Value: 10/31/97 $18,593 $7,916 $39,602 $29,458 $71,909 $62,833 NA NA NA NA
Class I
GVIT GVIT Small Company 10/23/95 $17,737 $7,060 $32,090 $21,947 $57,450 $48,374 $113,374 $105,900 NA NA
Fund: Class I
GVIT J.P. Morgan GVIT 10/31/97 $16,481 $5,803 $31,612 $21,468 $46,801 $37,725 NA NA NA NA
Balanced Fund: Class I
GVIT MAS GVIT Multi Sector 10/31/97 $16,674 $5,997 $34,197 $24,054 $52,064 $42,989 NA NA NA NA
Bond Fund: Class I
GVIT Strong GVIT Mid Cap 10/31/97 $14,453 $3,776 $22,019 $11,875 $37,647 $28,571 NA NA NA NA
Growth Fund: Class I
Janus Aspen Series - Capital 05/01/97 $15,014 $4,337 $23,708 $13,564 $37,086 $28,010 NA NA NA NA
Appreciation Portfolio:
Service Shares
Janus Aspen Series - Global 01/18/00 $13,176 $2,499 $18,682 $8,538 NA NA NA NA NA NA
Technology Portfolio:
Service Shares
Janus Aspen Series - 05/02/94 $14,561 $3,883 $23,188 $13,045 $41,195 $32,120 $86,694 $79,220 NA NA
International Growth
Portfolio: Service Shares
---------------------
INCEPTION TO
03/31/02
- ---------------------------------------------------
CASH
UNDERLYING INVESTMENT OPTIONS ACCUM SURR.
VALUE VALUE
- ---------------------------------------------------
American Century Variable $91,993 $84,519
Portfolios, Inc. - American
Century VP Income & Growth
Fund: Class I
American Century Variable $154,077 $149,807
Portfolios, Inc. - American
Century VP International
Fund: Class I
American Century Variable $148,324 $141,918
Portfolios, Inc. - American
Century VP Value Fund: Class
I
Dreyfus Socially Responsible $217,868 $214,665
Growth Fund, Inc.: Initial
Shares
Dreyfus Stock Index Fund, $497,100 $496,033
Inc.: Initial Shares
Dreyfus Variable Investment $276,900 $273,696
Fund - Appreciation
Portfolio: Initial Shares
Federated Insurance Series - $54,371 $45,295
Federated Quality Bond Fund
II: Primary Shares
Fidelity VIP Equity-Income $763,404 $763,404
Portfolio: Service Class
Fidelity VIP Growth $834,524 $834,524
Portfolio: Service Class
Fidelity VIP High Income $421,483 $421,483
Portfolio: Service Class
Fidelity VIP II Contrafund(R) $196,726 $192,455
Portfolio: Service Class
Fidelity VIP III Growth $145,209 $140,939
Opportunities Portfolio:
Service Class
Fidelity VIP Overseas $410,248 $410,248
Portfolio: Service Class
GVIT Comstock GVIT Value $81,869 $74,395
Fund: Class I
GVIT Dreyfus GVIT Mid Cap $114,959 $107,484
Index Fund: Class I
GVIT Federated GVIT High $89,188 $81,714
Income Bond Fund: Class I
GVIT Gartmore GVIT Emerging $32,869 $22,725
Markets Fund: Class I
GVIT Gartmore GVIT Global $17,952 $7,809
Technology and
Communications Fund: Class I
GVIT Gartmore GVIT $785,622 $785,622
Government Bond Fund: Class
I
GVIT Gartmore GVIT Growth $186,782 $184,113
Fund: Class I
GVIT Gartmore GVIT $25,441 $15,298
International Growth Fund:
Class I
GVIT Gartmore GVIT Money $642,747 $642,747
Market Fund: Class I
GVIT Gartmore GVIT Total $1,210,602 $1,210,602
Return Fund: Class I
GVIT Gartmore GVIT Worldwide $78,932 $71,458
Leaders Fund: Class I
GVIT GVIT Small Cap Growth: $50,677 $41,602
Class I
GVIT GVIT Small Cap Value: $136,542 $129,068
Class I
GVIT GVIT Small Company $187,823 $182,484
Fund: Class I
GVIT J.P. Morgan GVIT $83,727 $76,253
Balanced Fund: Class I
GVIT MAS GVIT Multi Sector $92,496 $85,021
Bond Fund: Class I
GVIT Strong GVIT Mid Cap $83,668 $76,194
Growth Fund: Class I
Janus Aspen Series - Capital $94,350 $86,876
Appreciation Portfolio:
Service Shares
Janus Aspen Series - Global $31,764 $22,688
Technology Portfolio:
Service Shares
Janus Aspen Series - $202,277 $198,006
International Growth
Portfolio: Service Shares
46
THE BEST of AMERICA PROTECTION LAST SURVIVOR FPVUL PERFORMANCE TABLE
CASH VALUES
------------------------------------------------------------------------------------------------------
1 YEAR TO 2 YEARS TO 3 YEARS TO 5 YEARS TO 10 YEARS TO
03/31/02 03/31/02 03/31/02 03/31/02 03/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
FUND CASH CASH CASH CASH CASH
UNDERLYING INVESTMENT OPTIONS INCEPTION ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR.
DATE** VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT 11/03/97 $16,875 $6,197 $32,339 $22,196 $50,192 $41,116 NA NA NA NA
Guardian Portfolio
Neuberger Berman AMT Mid-Cap 11/03/97 $15,902 $5,225 $24,553 $14,410 $42,269 $33,194 NA NA NA NA
Growth Portfolio
Neuberger Berman AMT 03/22/94 $17,309 $6,632 $33,373 $23,229 $50,303 $41,227 $93,722 $86,248 NA NA
Partners Portfolio
Oppenheimer Variable Account 08/15/86 $14,273 $3,596 $21,478 $11,334 $37,299 $28,223 $81,116 $73,642 $262,052 $259,382
Funds - Oppenheimer
Aggressive Growth Fund/VA:
Initial Class
Oppenheimer Variable Account 04/03/85 $15,291 $4,614 $27,032 $16,889 $45,207 $36,131 $100,202 $92,728 $362,164 $359,495
Funds - Oppenheimer Capital
Appreciation Fund/VA:
Initial Class
Oppenheimer Variable Account 06/30/95 $17,119 $6,441 $30,216 $20,073 $53,701 $44,625 $113,596 $106,122 $356,605 $353,935
Funds - Oppenheimer Global
Securities Fund/VA: Initial
Class
Oppenheimer Variable Account 07/05/95 $16,477 $5,800 $29,383 $19,240 $45,117 $36,041 $86,048 $78,574 NA NA
Funds - Oppenheimer Main
Street Growth & Income
Fund/VA: Initial Class
Strong Opportunity Fund II, 06/30/95 $16,670 $5,993 $32,017 $21,874 $53,816 $44,741 $112,756 $105,282 NA NA
Inc
The Universal Institutional 06/16/97 $18,871 $8,194 $38,313 $28,169 $63,975 $54,899 NA NA NA NA
Funds, Inc. - Emerging
Markets Debt Portfolio
The Universal Institutional 10/18/99 $14,386 $3,709 $23,036 $12,892 NA NA NA NA NA NA
Funds, Inc. -Mid Cap Growth
Portfolio
The Universal Institutional 07/03/95 $19,465 $8,788 $43,660 $33,517 $67,976 $58,900 $117,851 $110,377 NA NA
Funds, Inc. -U.S. Real
Estate Portfolio
---------------------
INCEPTION TO
03/31/02
- ---------------------------------------------------
CASH
UNDERLYING INVESTMENT OPTIONS ACCUM SURR.
VALUE VALUE
- ---------------------------------------------------
Neuberger Berman AMT $101,519 $94,045
Guardian Portfolio
Neuberger Berman AMT Mid-Cap $96,705 $89,231
Growth Portfolio
Neuberger Berman AMT $226,360 $223,157
Partners Portfolio
Oppenheimer Variable Account $685,751 $685,751
Funds - Oppenheimer
Aggressive Growth Fund/VA:
Initial Class
Oppenheimer Variable Account $1,068,036 $1,068,036
Funds - Oppenheimer Capital
Appreciation Fund/VA:
Initial Class
Oppenheimer Variable Account $464,660 $463,059
Funds - Oppenheimer Global
Securities Fund/VA: Initial
Class
Oppenheimer Variable Account $147,047 $141,709
Funds - Oppenheimer Main
Street Growth & Income
Fund/VA: Initial Class
Strong Opportunity Fund II, $373,595 $370,925
Inc
The Universal Institutional $104,754 $97,280
Funds, Inc. - Emerging
Markets Debt Portfolio
The Universal Institutional $42,616 $33,540
Funds, Inc. -Mid Cap Growth
Portfolio
The Universal Institutional $184,943 $179,604
Funds, Inc. -U.S. Real
Estate Portfolio
**The underlying mutual fund Inception Date is the date the underlying mutual
fund first became effective, which is not necessarily the same date the
underlying mutual fund was first made available through the variable account.
For those underlying mutual funds which have not been offered as sub-accounts
through the variable account for one of the quoted periods, the total return
figures will show the investment performance that the underlying mutual funds
would have achieved (reduced by the current asset charge and fund investment
advisory fees and expenses) had they been offered as sub-accounts through the
variable account for the period quoted. Certain underlying mutual funds are not
as old as some of the periods quoted, therefore, total return figures may not be
available for all of the periods shown.
The preceding table displays three types of total return. Simply stated, total
return shows the percent change in unit values, with dividends and capital gains
reinvested, after the deduction of the current asset charge (and the deduction
of applicable investment advisory fees and other expenses of the underlying
mutual funds). The total return figures shown in the Annual Percentage Change
and Annualized Percentage Change columns represent annualized figures, i.e.,
they show the rate of growth that would have produced the corresponding
cumulative return had performance been constant over the entire period quoted.
The Non-Annualized Percentage Change total return figures are not annual return
figures but instead represent the total percentage change in unit value over the
stated periods without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO
ACCOUNT THE SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY
CHARGES" SECTION. THESE OTHER CHARGES INCLUDE COST OF INSURANCE CHARGES AND
SURRENDER CHARGES.
The GVIT Gartmore GVIT Investor Destinations Conservative Fund, GVIT Gartmore
GVIT Investor Destinations Moderately Conservative Fund, GVIT Gartmore GVIT
Investor Destinations Moderate Fund, GVIT Gartmore GVIT Investor Destinations
Moderately Aggressive Fund, and GVIT Gartmore GVIT Investor Destinations
Aggressive Fund were added to the variable account on January 25, 2002.
Therefore, no performance information is available.
47
THE BEST of AMERICA PROTECTION LAST SURVIVOR FPVUL PERFORMANCE TABLE
CASH VALUES
------------------------------------------------------------------------------------------
Annual Percentage Change Non Annualized Percentage Change
- ---------------------------------------------------------------------------------------------------------------------------
Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs.
UNDERLYING INVESTMENT OPTIONS Inception Values 1999 2000 2001 To to to to
Date** 03/31/02 03/31/02 03/31/02 03/31/02 03/31/02
- ---------------------------------------------------------------------------------------------------------------------------
American Century Variable 10/30/97 12.40 18.02 -10.62 -8.35 4.00 3.34 -17.65 -4.12
Portfolios, Inc. - American
Century VP Income & Growth
Fund: Class I
American Century Variable 05/01/94 11.26 64.04 -16.83 -29.17 4.97 -15.03 -44.37 -6.65
Portfolios, Inc. - American
Century VP International Fund:
Class I
American Century Variable 05/01/96 14.24 -0.85 18.14 12.82 2.80 17.67 40.14 41.79
Portfolios, Inc. - American
Century VP Value Fund: Class I
Dreyfus Socially Responsible 10/06/93 11.35 30.08 -11.03 -22.57 5.25 -9.00 -34.05 -16.87
Growth Fund, Inc.: Initial
Shares
Dreyfus Stock Index Fund, Inc.: 09/29/89 12.35 20.60 -9.28 -12.18 3.74 -0.06 -21.91 -8.18
Initial Shares
Dreyfus Variable Investment 04/05/93 13.43 11.46 -0.65 -9.31 2.99 3.32 -8.07 -0.25
Fund - Appreciation Portfolio:
Initial Shares
Federated Insurance Series - 04/22/99 11.74 NA 10.45 8.01 -1.70 4.32 16.84 NA
Federated Quality Bond Fund II:
Primary Shares
Fidelity VIP Equity-Income 10/09/86 12.65 6.25 8.30 -5.09 4.33 4.93 9.51 11.09
Portfolio: Service Class
Fidelity VIP Growth Portfolio: 10/09/86 13.84 37.29 -11.07 -17.73 4.85 -2.44 -33.44 -8.44
Service Class
Fidelity VIP High Income 09/19/85 7.06 8.07 -22.61 -11.90 1.42 -11.50 -29.05 -29.69
Portfolio: Service Class
Fidelity VIP II Contrafund(R) 01/28/87 10.40 42.46 -19.15 -21.27 5.03 -9.87 -35.41 -10.18
Portfolio: Service Class
Fidelity VIP III Growth 01/03/95 13.57 24.15 -6.71 -12.36 3.33 3.70 -20.22 -0.99
Opportunities Portfolio:
Service Class
Fidelity VIP Overseas 01/03/95 9.11 4.18 -17.18 -14.44 2.98 0.03 -29.86 -25.79
Portfolio: Service Class
GVIT Comstock GVIT Value Fund: 10/31/97 10.79 18.49 -10.62 -12.15 3.44 -0.75 -26.33 -8.93
Class I
GVIT Dreyfus GVIT Mid Cap Index 10/31/97 16.21 20.92 15.21 -1.30 7.03 17.87 7.86 49.23
Fund: Class I
GVIT Federated GVIT High Income 10/31/97 10.75 3.19 -8.28 4.22 2.36 2.18 2.44 -1.79
Bond Fund: Class I
GVIT Gartmore GVIT Emerging 08/30/00 9.24 NA NA -5.18 6.45 11.44 NA NA
Markets Fund: Class I
GVIT Gartmore GVIT Global 06/30/00 3.13 NA NA -42.72 7.61 -11.37 NA NA
Technology and Communications
Fund: Class I
GVIT Gartmore GVIT Government 11/08/82 12.79 -2.35 12.54 7.25 -2.14 4.07 17.50 18.71
Bond Fund: Class I
GVIT Gartmore GVIT Growth Fund: 04/15/92 7.09 4.28 -26.53 -28.13 4.81 -0.76 -47.44 -46.09
Class I
GVIT Gartmore GVIT 08/30/00 6.46 NA NA -28.65 2.74 -17.02 NA NA
International Growth Fund:
Class I
GVIT Gartmore GVIT Money Market 11/10/81 12.16 4.85 6.03 3.60 0.10 2.57 8.72 14.21
Fund: Class I
GVIT Gartmore GVIT Total Return 11/08/82 11.37 6.94 -2.12 -11.82 3.79 4.87 -10.48 -5.49
Fund: Class I
GVIT Gartmore GVIT Worldwide 10/31/97 10.37 22.92 -12.32 -18.81 7.81 -3.34 -31.17 -16.03
Leaders Fund: Class I
GVIT GVIT Small Cap Growth: 05/03/99 14.57 NA -16.17 -10.84 5.92 3.38 -38.48 NA
Class I
GVIT GVIT Small Cap Value: 10/31/97 18.36 27.84 11.20 28.28 11.16 14.20 30.44 98.18
Class I
GVIT GVIT Small Company Fund: 10/23/95 15.33 44.02 8.90 -6.70 6.91 9.01 -9.56 55.92
Class I
GVIT J.P. Morgan GVIT Balanced 10/31/97 10.40 0.87 -0.35 -3.67 1.47 1.48 -5.83 -4.68
Fund: Class I
GVIT MAS GVIT Multi Sector Bond 10/31/97 11.49 1.56 5.65 4.19 -0.83 2.70 8.77 12.18
Fund: Class I
GVIT Strong GVIT Mid Cap Growth 10/31/97 12.22 84.75 -15.38 -30.31 11.83 -10.14 -51.36 -4.42
Fund: Class I
Janus Aspen Series - Capital 05/01/97 6.33 66.95 -19.35 -21.83 3.80 -6.88 -44.13 -16.61
Appreciation Portfolio: Service
Shares
Janus Aspen Series - Global 01/18/00 3.85 NA NA -37.31 7.93 -17.37 -64.19 NA
Technology Portfolio: Service
Shares
Janus Aspen Series - 05/02/94 6.25 82.31 -16.97 -23.43 4.93 -9.22 -44.68 10.37
International Growth Portfolio:
Service Shares
Neuberger Berman AMT Guardian 11/03/97 15.35 14.93 1.13 -1.51 4.66 3.93 -3.66 11.54
Portfolio
Neuberger Berman AMT Mid-Cap 11/03/97 14.71 53.89 -7.46 -24.64 6.72 -1.83 -44.60 8.92
Growth Portfolio
--------------------------------------------------
Annualized
Non Annualized Percentage Change Percentage Change
- --------------------------------------------------------------------------------
5 yrs. Inception 3 Yrs. 5 yrs. Inception
UNDERLYING INVESTMENT OPTIONS to to to to To
03/31/02 03/31/02 03/31/02 03/31/02 03/31/02
- --------------------------------------------------------------------------------
American Century Variable NA 33.67 -1.39 NA 6.79
Portfolios, Inc. - American
Century VP Income & Growth
Fund: Class I
American Century Variable 26.89 62.93 -2.27 4.88 6.36
Portfolios, Inc. - American
Century VP International Fund:
Class I
American Century Variable 79.09 101.59 12.34 12.36 12.59
Portfolios, Inc. - American
Century VP Value Fund: Class I
Dreyfus Socially Responsible 46.21 159.10 -5.97 7.89 11.88
Growth Fund, Inc.: Initial
Shares
Dreyfus Stock Index Fund, Inc.: 59.96 316.08 -2.80 9.85 12.08
Initial Shares
Dreyfus Variable Investment 66.72 217.13 -0.08 10.76 13.70
Fund - Appreciation Portfolio:
Initial Shares
Federated Insurance Series - NA 16.55 NA NA 5.35
Federated Quality Bond Fund II:
Primary Shares
Fidelity VIP Equity-Income 60.14 488.04 3.57 9.87 12.13
Portfolio: Service Class
Fidelity VIP Growth Portfolio: 75.17 602.72 -2.90 11.86 13.43
Service Class
Fidelity VIP High Income -16.95 200.03 -11.08 -3.65 6.87
Portfolio: Service Class
Fidelity VIP II Contrafund(R) 12.34 146.50 -3.51 2.35 6.13
Portfolio: Service Class
Fidelity VIP III Growth 71.14 185.12 -0.33 11.34 15.57
Opportunities Portfolio:
Service Class
Fidelity VIP Overseas 17.98 85.55 -9.46 3.36 8.91
Portfolio: Service Class
GVIT Comstock GVIT Value Fund: NA 9.82 -3.07 NA 2.14
Class I
GVIT Dreyfus GVIT Mid Cap Index NA 61.50 14.27 NA 11.46
Fund: Class I
GVIT Federated GVIT High Income NA 10.00 -0.60 NA 2.18
Bond Fund: Class I
GVIT Gartmore GVIT Emerging NA -20.27 NA NA - 13.31
Markets Fund: Class I
GVIT Gartmore GVIT Global NA -61.00 NA NA - 41.61
Technology and Communications
Fund: Class I
GVIT Gartmore GVIT Government 41.02 397.19 5.88 7.12 8.62
Bond Fund: Class I
GVIT Gartmore GVIT Growth Fund: -6.60 78.71 -18.61 -1.36 6.00
Class I
GVIT Gartmore GVIT NA -39.73 NA NA - 27.33
International Growth Fund:
Class I
GVIT Gartmore GVIT Money Market 26.46 265.42 4.53 4.81 6.56
Fund: Class I
GVIT Gartmore GVIT Total Return 43.94 1009.68 -1.86 7.56 13.21
Fund: Class I
GVIT Gartmore GVIT Worldwide NA 4.89 -5.66 NA 1.09
Leaders Fund: Class I
GVIT GVIT Small Cap Growth: NA 45.72 NA NA 13.82
Class I
GVIT GVIT Small Cap Value: NA 80.63 25.61 NA 14.32
Class I
GVIT GVIT Small Company Fund: 89.55 152.68 15.96 13.64 15.49
Class I
GVIT J.P. Morgan GVIT Balanced NA 5.55 -1.58 NA 1.23
Fund: Class I
GVIT MAS GVIT Multi Sector Bond NA 16.06 3.91 NA 3.43
Fund: Class I
GVIT Strong GVIT Mid Cap Growth NA 24.85 -1.50 NA 5.15
Fund: Class I
Janus Aspen Series - Capital NA 107.09 -5.88 NA 15.97
Appreciation Portfolio: Service
Shares
Janus Aspen Series - Global NA -61.43 NA NA - 35.13
Technology Portfolio: Service
Shares
Janus Aspen Series - 48.52 156.11 3.34 8.23 12.62
International Growth Portfolio:
Service Shares
Neuberger Berman AMT Guardian NA 61.43 3.71 NA 11.48
Portfolio
Neuberger Berman AMT Mid-Cap NA 72.39 2.89 NA 13.15
Growth Portfolio
48
THE BEST OF AMERICA PROTECTION LAST SURVIVOR FPVUL PERFORMANCE TABLE
CASH VALUES
Neuberger Berman AMT Partners 03/22/94 11.25 7.37 0.70 -2.83 5.54 6.62 0.02 5.93 46.39 155.07 1.94
Portfolio
Oppenheimer Variable Account 08/15/86 11.94 83.60 -11.24 -31.27 6.27 -11.12 -53.95 -3.16 51.18 503.85 -1.07
Funds - Oppenheimer Aggressive
Growth Fund/VA: Initial Class
Oppenheimer Variable Account 04/03/85 14.88 41.66 -0.23 -12.58 5.37 -5.31 -26.09 12.59 90.30 827.52 4.03
Funds - Oppenheimer Capital
Appreciation Fund/VA: Initial
Class
Oppenheimer Variable Account 06/30/95 8.61 58.48 5.09 -12.04 5.87 5.44 -17.67 44.27 98.54 288.98 12.99
Funds - Oppenheimer Global
Securities Fund/VA: Initial
Class
Oppenheimer Variable Account 07/05/95 10.64 21.71 -8.78 -10.16 3.84 1.66 -18.99 -2.17 39.61 133.94 -0.73
Funds - Oppenheimer Main Street
Growth & Income Fund/VA:
Initial Class
Strong Opportunity Fund II, Inc 06/30/95 9.67 34.91 6.35 -3.48 5.16 3.00 -4.18 34.58 105.07 348.99 10.41
The Universal Institutional 06/16/97 12.05 29.37 11.39 10.10 0.41 15.76 20.79 59.13 NA 21.45 16.75
Funds, Inc. - Emerging Markets
Debt Portfolio
The Universal Institutional 10/18/99 5.89 NA -7.33 -29.31 4.89 -10.58 -45.09 NA NA -13.08 NA
Funds, Inc. -Mid Cap Growth
Portfolio
The Universal Institutional 07/03/95 12.90 -3.37 28.06 9.84 5.45 19.07 47.87 51.88 55.95 138.54 14.95
Funds, Inc. -U.S. Real Estate
Portfolio
Neuberger Berman AMT Partners 7.92 12.38
Portfolio
Oppenheimer Variable Account 8.62 12.20
Funds - Oppenheimer Aggressive
Growth Fund/VA: Initial Class
Oppenheimer Variable Account 13.73 14.01
Funds - Oppenheimer Capital
Appreciation Fund/VA: Initial
Class
Oppenheimer Variable Account 14.70 12.67
Funds - Oppenheimer Global
Securities Fund/VA: Initial
Class
Oppenheimer Variable Account 6.90 13.45
Funds - Oppenheimer Main Street
Growth & Income Fund/VA:
Initial Class
Strong Opportunity Fund II, Inc 15.45 16.39
The Universal Institutional NA 4.14
Funds, Inc. - Emerging Markets
Debt Portfolio
The Universal Institutional NA -5.56
Funds, Inc. -Mid Cap Growth
Portfolio
The Universal Institutional 9.29 13.76
Funds, Inc. -U.S. Real Estate
Portfolio
**The underlying mutual fund Inception Date is the date the underlying mutual
fund first became effective, which is not necessarily the same date the
underlying mutual fund was first made available through the variable account.
For those underlying mutual funds which have not been offered as sub-accounts
through the variable account for one of the quoted periods, the total return
figures will show the investment performance that the underlying mutual funds
would have achieved (reduced by the current asset charge and fund investment
advisory fees and expenses) had they been offered as sub-accounts through the
variable account for the period quoted. Certain underlying mutual funds are not
as old as some of the periods quoted, therefore, total return figures may not be
available for all of the periods shown.
The preceding table displays three types of total return. Simply stated, total
return shows the percent change in unit values, with dividends and capital gains
reinvested, after the deduction of the current asset charge (and the deduction
of applicable investment advisory fees and other expenses of the underlying
mutual funds). The total return figures shown in the Annual Percentage Change
and Annualized Percentage Change columns represent annualized figures, i.e.,
they show the rate of growth that would have produced the corresponding
cumulative return had performance been constant over the entire period quoted.
The Non-Annualized Percentage Change total return figures are not annual return
figures but instead represent the total percentage change in unit value over the
stated periods without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO
ACCOUNT THE SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY
CHARGES" SECTION. THESE OTHER CHARGES INCLUDE COST OF INSURANCE CHARGES AND
SURRENDER CHARGES.
The GVIT Gartmore GVIT Investor Destinations Conservative Fund, GVIT Gartmore
GVIT Investor Destinations Moderately Conservative Fund, GVIT Gartmore GVIT
Investor Destinations Moderate Fund, GVIT Gartmore GVIT Investor Destinations
Moderately Aggressive Fund, and GVIT Gartmore GVIT Investor Destinations
Aggressive Fund were added to the variable account on January 25, 2002.
Therefore, no performance information is available.
49
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Form S-6 Registration Statement comprises the following papers and
documents:
- The facing sheet.
- Cross-reference to items required by Form N-8B-2.
- The prospectus consisting of __ pages.
- Representations and Undertakings.
- Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
1. Power of Attorney dated April 1, 2002. Attached hereto.
2. Resolution of the Depositor's Board of Filed previously in connection with Securities and Exchange Commission
Directors authorizing the establishment of File No. 333-31725 and is hereby incorporated by reference.
the Registrant, adopted
3. Distribution Contracts Filed previously in connection with Securities and Exchange Commission
File No. 333-66572 (Post-Effective Amendment No. 1) and is hereby
incorporated by reference.
4. Form of Security Filed previously in connection with Securities and Exchange Commission
File No. 333-83010 and is hereby incorporated by reference.
5. Articles of Incorporation of Depositor Filed previously in connection with Securities and Exchange Commission
File No. 333-27133 and is hereby incorporated by reference.
6. Application form of Security Filed previously in connection with Securities and Exchange Commission
File No. 333-83010 and is hereby incorporated by reference.
7. Opinion of Counsel Filed previously in connection with Securities and Exchange Commission
File No. 333-83010 and is hereby incorporated by reference.
8. Code of Ethics Applicable to the Separate Filed previously in connection with Securities and Exchange Commission
Account File No. 333-69160 and is hereby incorporated by reference..
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and Nationwide hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 (the "Act"). The Registrant and Nationwide elect to be
governed by Rule 6e-3(T)(b)(13)(i)(A) under the Act with respect to the
policies described in the prospectus. The policies have been designed in a
way as to qualify for the exemptive relief from various provisions of the
Act afforded by Rule 6e-3(T).
(b) Paragraph (b)(13)(iii)(F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges")
assumed by Nationwide under the policies. Nationwide represents that the
risk charges are within the range of industry practice for comparable
policies and reasonable in relation to all of the risks assumed by the
issuer under the policies. Actuarial memoranda demonstrating the
reasonableness of these charges are maintained by Nationwide, and will be
made available to the Securities and Exchange Commission (the "SEC") on
request.
(c) Nationwide has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit the
separate account and the contractholders and will keep and make available
to the SEC on request a memorandum setting forth the basis for this
representation.
(d) Nationwide represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of Nationwide,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the SEC
such supplementary and periodic information, documents, and reports as may
be prescribed by any rule or regulation of the SEC heretofore or hereafter
duly adopted pursuant to authority conferred in that section.
(f) The fees and charges deducted under the policy in the aggregate are
reasonable in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by Nationwide.
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide VLI Separate Account-4:
We consent to the use of our reports for Nationwide VLI Separate Account-4 dated
February 20, 2002 and for Nationwide Life Insurance Company and subsidiaries
dated January 29, 2002, included herein, and to the reference to our firm under
the heading "Independent Certified Public Accountants" in the Prospectus (File
No. 333-83010). Our report for Nationwide Life Insurance Company and
subsidiaries refers to a change to the method of accounting for derivative
instruments and hedging activities, and for purchased or retained interests in
securitized financial assets.
KPMG LLP
Columbus, Ohio
May 21, 2002
SIGNATURES
As required by the Securities Act of 1933, the Registrant, Nationwide VLI
Separate Account-4 has caused this Pre-Effective Amendment No. 1 Registration
Statement to be signed on its behalf in the City of Columbus, and the State of
Ohio, on this 21st day of May, 2002.
NATIONWIDE VLI SEPARATE ACCOUNT-4
--------------------------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
--------------------------------------------------
Attest: (Depositor)
By: /s/ GLENN W. SODEN By: /s/STEVEN SAVINI
- ---------------------------------------------- --------------------------------------------------
Glenn W. Soden Steven Savini
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 21st day of May, 2002.
<Table>
W. G. JURGENSEN Director and Chief Executive Officer
- -------------------------------
W. G. Jurgensen
JOSEPH J. GASPER Director and President and
- ------------------------------- Chief Operating Officer
Joseph J. Gasper
MICHAEL S. HELFER Director and Executive
- ------------------------------- Vice President-Corporate Strategy
Michael S. Helfer
DONNA A. JAMES Director and Executive Vice
- ------------------------------- President-Chief Administrative Officer
Donna A. James
ROBERT A. OAKLEY Director and Executive Vice
- ------------------------------- President-Chief Financial Officer
Robert A. Oakley
ROBERT A. WOODWARD, JR Director and Executive Vice
- ------------------------------- President-Chief Investment Officer
Robert A. Woodward, Jr.
GALEN R. BARNES Director
- -------------------------------
Galen R. Barnes
By /s/ STEVEN SAVINI
--------------------------------
Steven Savini
Attorney-in-Fact
</Table>