<PAGE> 1
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
TO 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-2
(EXACT NAME OF TRUST)
_____________________
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
GORDON E. MCCUTCHAN
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(NAME AND ADDRESS OF AGENT FOR SERVICE)
_____________________
Title and amount of securities being registered: Last survivor flexible
premium variable universal life insurance policies. Such policies are not
issued in predetermined amounts or units.
The Registrant elects to register an indefinite number of securities by
this registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable
fee in the amount of $500.00 accompanies this registration.
Approximate date of proposed public offering: (As soon as practicable
after the effective date of this Registration Statement).
[ ] Check box if it is proposed that this filing will become effective on
(date) at (time) pursuant to Rule 487.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
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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<PAGE> 2
<TABLE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
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
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
</TABLE>
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<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
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<S> <C>
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>
3 of 44
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY
P.O. Box 182150
Columbus, Ohio 43218-2150
(800) 547-7548, TDD (800) 238-3035
LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-2
The Life Insurance Policies offered by this prospectus are last survivor
variable life insurance policies (collectively referred to as the "Policies").
The Policies are designed to provide life insurance coverage on two named
Insureds with a death benefit payable on the death of the last survivor
insured. The Policies afford flexibility to vary the amount and frequency
of premium payments. The Policies may also provide a Cash Surrender Value
if the Policy is surrendered during the lifetime of either Insured.
Nationwide Life Insurance Company (the "Company") guarantees to keep the Policy
in force during the first three years so long as the Minimum Premium
requirement has been met. The death benefit and Cash Value of the Policies may
vary to reflect the experience of the Nationwide VLI Separate Account-2 (the
"Variable Account") or the Fixed Account to which Cash Values are allocated.
The Policies described in this prospectus are designed to meet the definition
of "life insurance" under Section 7702 of the Internal Revenue Code.
The Policy Owner may allocate Net Premiums and Cash Value to the Fixed Account
and to one or more of the sub-accounts of the Variable Account. The assets of
each sub-account will be used to purchase, at net asset value, shares of a
designated underlying Mutual Fund in the following series of the underlying
variable account Mutual Fund options:
<TABLE>
<S> <C>
DREYFUS OPPENHEIMER VARIABLE ACCOUNT FUNDS:
-Dreyfus Stock Index Fund -Bond Fund
-Dreyfus Socially Responsible Growth Fund -Global Securities Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND: -Multiple Strategies Fund
-High Income Portfolio* STRONG VARIABLE INSURANCE PRODUCTS FUND:
-Equity-Income Portfolio -Special Fund II, Inc.
-Growth Portfolio -Discovery Fund II, Inc.
-Overseas Portfolio TCI PORTFOLIOS, INC.:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: -TCI Growth
-Asset Manager Portfolio -TCI Balanced
-Contrafund Portfolio -TCI International
NATIONWIDE SEPARATE ACCOUNT TRUST: VAN ECK WORLDWIDE INSURANCE TRUST:
-Capital Appreciation Fund -Gold and Natural Resources Fund
-Money Market Fund -Worldwide Bond Fund
-Government Bond Fund VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
-Total Return Fund -American Capital Real Estate Securities Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT WARBURG PINCUS TRUST
TRUST: -International Equity Portfolio
-Limited Maturity Bond Portfolio -Small Company Growth Portfolio
-Growth Portfolio
-Partners Portfolio
<FN>
*The High Income Portfolio may invest in lower quality debt securities commonly referred to as junk bonds.
</TABLE>
The Company guarantees that the death benefit for a Policy will never be less
than the Specified Amount stated on the Policy data pages as long as the Policy
is in force. There is no guaranteed Cash Surrender Value. If the Cash Surrender
Value is insufficient to cover the charges under the Policy, the Policy will
lapse without value. The Company guarantees to keep the Policy in force during
the first three years so long as the Minimum Premium requirement has been met.
This prospectus generally describes only that portion of the Cash Value
allocated to the Variable Account. For a brief summary of the Fixed Account
Option, see "The Fixed Account Option."
1
<PAGE> 5
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS
FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS
PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH.
The date of this Prospectus is January 1, 1996.
2
<PAGE> 6
GLOSSARY OF TERMS
ATTAINED AGE-The 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 Variable
Account Cash Value.
BASIC SPECIFIED AMOUNT-A dollar amount used to determine the death benefit
under a Policy. The Basic Specified Amount is shown on the Policy Data Page.
BENEFICIARY-The person to whom the Death Proceeds are paid.
CASH SURRENDER VALUE-The Policy's Cash Value less Indebtedness and Surrender
Charge, if any.
CASH VALUE-The sum of the associated values in the Variable Account, the Fixed
Account and the Policy Loan Account.
CODE-The Internal Revenue Code of 1986, as amended.
DEATH PROCEEDS-Amount of money payable to the Beneficiary if both Insureds die
while the Policy is in force.
FIXED ACCOUNT-An investment option which is funded by the General Account of
the Company.
GENERAL ACCOUNT-All assets of the Company other than those of the Variable
Account or of other separate accounts that have been or may be established by
the Company.
GUIDELINE LEVEL PREMIUM-The amount of level annual premium calculated in
accordance with the provisions of the Internal Revenue Code of 1986. It
represents the level annual premiums required to mature the Policy under
guaranteed mortality and expense charges, and an interest rate of 5%.
INDEBTEDNESS-Amounts owed the Company as a result of Policy loans including
both principal and accrued interest.
INITIAL PREMIUM-The Initial Premium is the premium required for coverage to
become effective on the Policy Date. It is shown on the Policy Data Page.
INSUREDS-The persons whose lives are covered by the Policy, and who are named
on the Policy Data Page.
MATURITY DATE-The Policy Anniversary on or following the younger Insured's
100th birthday.
MINIMUM PREMIUM-The Minimum Premium is shown on the Policy Data Page. It is
used to measure the total amount of premiums that must be paid during the first
three Policy Years to guarantee the Policy remains in force.
MONTHLY ANNIVERSARY DAY-The same day as the Policy Date for each succeeding
month.
MUTUAL FUNDS-The underlying mutual funds which correspond to the sub-accounts
of the Variable Account.
NET PREMIUMS-Net Premiums are equal to the actual premiums minus the percent of
premium charge. The percent of premium charges are shown on the Policy Data
Page.
POLICY ANNIVERSARY-The same day and month as the Policy Date for succeeding
years.
POLICY CHARGES-All deductions made from the Cash Value.
POLICY DATE-The date the provisions of the Policy take effect, as shown on the
Policy Owner's Policy Data Page.
POLICY LOAN ACCOUNT-The Portion of the Cash Value which results from Policy
Indebtedness.
POLICY OWNER-The person designated in the Policy application as the Owner. In
the State of New York, the variable life insurance Policies offered by the
Company are offered as "Certificates" for "Certificate Owners" under a group
contract rather than individual Policies. The provisions of both these
Certificates and the Policies are essentially the same and references to the
provisions of Policies and rights of Policy Owners in this prospectus include
Certificates and Certificate Owners.
POLICY YEAR-Each year commencing with the Policy Date and each Policy
Anniversary thereafter.
SCHEDULED PREMIUM-The Scheduled Premium is shown on the Policy Data Page.
SEC-The United States Securities and Exchange Commission.
3
<PAGE> 7
SUPPLEMENTAL SPECIFIED AMOUNT-A dollar amount used to determine the
supplemental death benefit under the Policy. The Supplemental Specified Amount
generally has no per unit charge and has a cost of insurance charge lower than
that of the Basic Specified Amount. The Supplemental Specified Amount is shown
on the Policy Data Page.
SURRENDER CHARGE-An amount deducted from the Cash Value if the Policy is
surrendered.
VALUATION DATE-Each day both the New York Stock Exchange and the Company's home
office are open for business or any other day during which there is a
sufficient degree of trading such that the current net asset value of the
Accumulation Units might be materially affected.
VALUATION PERIOD-A period commencing with the close of business on a Valuation
Date and ending at the close of business for the next succeeding Valuation
Date.
VARIABLE ACCOUNT-Nationwide VLI Separate Account-2, a separate
investment account of Nationwide Life Insurance Company.
4
<PAGE> 8
<TABLE>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS.......................................................................................3
SUMMARY OF THE POLICIES.................................................................................7
Variable Life Insurance.........................................................................7
The Variable Account and its Sub-Accounts.......................................................7
The Fixed Account...............................................................................7
Deductions and Charges..........................................................................7
Premiums........................................................................................9
NATIONWIDE LIFE INSURANCE COMPANY......................................................................10
THE VARIABLE ACCOUNT...................................................................................10
Investments of the Variable Account............................................................10
Dreyfus........................................................................................11
Fidelity Variable Insurance Products Fund......................................................12
Fidelity Variable Insurance Products Fund II...................................................12
Nationwide Separate Account Trust..............................................................13
Neuberger & Berman Advisers Management Trust...................................................13
Oppenheimer Variable Account Funds.............................................................14
Strong Variable Insurance Products Funds.......................................................14
TCI Portfolios, Inc., a member of the Twentieth Century Family of Mutual Funds.................14
Van Eck Worldwide Insurance....................................................................15
Van Kampen American Capital Life Investment Trust..............................................15
Warburg Pincus Trust...........................................................................16
Reinvestment...................................................................................16
Transfers......................................................................................16
Dollar Cost Averaging..........................................................................17
Substitution of Securities.....................................................................17
Voting Rights..................................................................................17
INFORMATION ABOUT THE POLICIES.........................................................................18
Underwriting and Issuance......................................................................18
-Minimum Requirements for Issuance of a Policy.................................................18
-Premium Payments..............................................................................18
Allocation of Cash Value.......................................................................18
Short-Term Right to Cancel Policy..............................................................19
POLICY CHARGES.........................................................................................19
Deductions from Premiums.......................................................................19
Surrender Charges..............................................................................19
Deductions from Cash Value.....................................................................20
-Monthly Cost of Insurance.....................................................................21
-Monthly Administrative Charge.................................................................21
-Increase Charge...............................................................................21
Deductions from the Sub-Accounts...............................................................21
HOW THE CASH VALUE VARIES..............................................................................22
How the Investment Experience is Determined....................................................22
Net Investment Factor..........................................................................22
Valuation of Assets............................................................................23
Determining the Cash Value.....................................................................23
Valuation Periods and Valuation Dates..........................................................23
SURRENDERING THE POLICY FOR CASH.......................................................................23
Right to Surrender.............................................................................23
Cash Surrender Value...........................................................................23
Partial Surrenders.............................................................................23
Maturity Proceeds..............................................................................24
Income Tax Withholding.........................................................................24
POLICY LOANS...........................................................................................24
Taking a Policy Loan...........................................................................24
Effect on Investment Performance...............................................................24
Interest.......................................................................................25
Effect on Death Benefit and Cash Value.........................................................25
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
Repayment...............................................................25
HOW THE DEATH BENEFIT VARIES....................................................25
Calculation of the Death Benefit........................................25
TABLE OF APPLICABLE PERCENTAGES OF CASH VALUE FOR GUIDELINE PREMIUM TEST........26
Proceeds Payable on Death...............................................26
RIGHT OF CONVERSION.............................................................26
CHANGES OF INVESTMENT POLICY....................................................26
GRACE PERIOD....................................................................27
-Without Death Benefit Guarantees.......................................27
-Death Benefit Guarantee #1.............................................27
-Death Benefit Guarantee #2.............................................27
-Death Benefit Guarantee #3.............................................27
REINSTATEMENT...................................................................27
THE FIXED ACCOUNT OPTION........................................................28
CHANGES IN EXISTING INSURANCE COVERAGE..........................................28
Specified Amount Increases..............................................29
Specified Amount Decreases..............................................29
Changes in the Death Benefit Option.....................................29
OTHER POLICY PROVISIONS.........................................................29
Policy Owner............................................................29
Beneficiary.............................................................29
Assignment..............................................................30
Incontestability........................................................30
Error in Age or Sex.....................................................30
Suicide.................................................................30
Nonparticipating Policies...............................................30
LEGAL CONSIDERATIONS............................................................30
DISTRIBUTION OF THE POLICIES....................................................30
CUSTODIAN OF ASSETS.............................................................30
TAX MATTERS.....................................................................31
-Taxation of Policy Split Option Rider..................................31
-Estate and Generation Skipping Taxes...................................31
Policy Proceeds.........................................................31
Taxation of the Company.................................................32
Other Considerations....................................................33
THE COMPANY.....................................................................33
COMPANY MANAGEMENT..............................................................33
Directors of the Company................................................34
Executive Officers of the Company.......................................35
OTHER CONTRACTS ISSUED BY THE COMPANY...........................................35
STATE REGULATION................................................................35
REPORTS TO POLICY OWNERS........................................................35
ADVERTISING.....................................................................36
LEGAL PROCEEDINGS...............................................................36
EXPERTS.........................................................................36
REGISTRATION STATEMENT..........................................................36
LEGAL OPINIONS..................................................................36
APPENDIX........................................................................37
FINANCIAL STATEMENTS............................................................38
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
6
<PAGE> 10
THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION
FOR THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES
ARE IN ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL
FUND.
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The variable life insurance Policies offered by Nationwide Life Insurance
Company (the "Company") are offered on a "last survivor" basis. The Policies
are designed to provide life insurance coverage on two Insureds named in the
Policy and the death benefit is paid on the death of the last surviving
Insured. The Policies also may provide a Cash Surrender Value if the policy is
surrendered while the Policy is in force. The death benefit and cash value of
the Policies may vary to reflect the experience of the Nationwide VLI Separate
Account-2 (the "Variable Account") or the Fixed Account to which Cash Values
are allocated (see "How the Death Benefit Varies"). There is no guaranteed
Cash Surrender Value (see "How the Cash Value Varies"). If the Cash Surrender
Value is insufficient to pay Policy Charges, the Policy will lapse without
value. The Company guarantees to keep the Policy in force during the first
three years so long as certain requirements have been met (see "Underwriting
and Issuance"). Under certain conditions, a Policy may become a Modified
Endowment Contract as a result of a material change or a reduction in benefits
as defined by the Internal Revenue Code (the "Code"). Excess premiums paid
also may cause the Policy to become a Modified Endowment Contract. A loan,
distribution, or other amount received from a Modified Endowment Contract
during the life of the Insured will be taxed to the extent of any accumulated
income on the Contract. Subject to certain exceptions, any amounts that are
taxable withdrawals will be subject to a 10% tax penalty. The Company will
monitor premiums paid and other policy transactions and will notify the Policy
Owner when the Policy's non-Modified Endowment Contract status is in jeopardy
(see "Tax Matters").
THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS
The Company places the Policy's Net Premiums in the Variable Account or the
Fixed Account at the time the Policy is issued. The Policy Owner chooses the
sub-accounts of the Variable Account or the Fixed Account into which the Cash
Value will be allocated (see "Allocation of Cash Value"). Assets of each sub-
account are invested at net asset value in shares of a corresponding underlying
Mutual Fund. For a description of the underlying Mutual Fund options and their
investment objectives, see "Investments of the Variable Account."
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's General
Account. Cash Values allocated to the Fixed Account are credited with interest
daily at a rate declared by the Company. The interest rate declared is at the
Company's sole discretion, but may never be less than an effective annual rate
of 4%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the assets of the Variable Account and
the Cash Value of the Policy. These charges are made for sales expenses, tax
expenses, providing life insurance protection and assuming the mortality and
expense risks. For a discussion of any charges imposed by the underlying
Mutual Fund options, see the prospectuses of the respective underlying Mutual
Funds.
The Company deducts a sales load from each premium payment, which will not
exceed 5.0% during the first ten policy years or 1.5% thereafter. Currently,
the sales load is 5.0% during the first ten policy years and 0% thereafter.
The total sales load actually deducted from any Policy will be equal to the sum
of this front-end sales load plus any sales surrender charge that may be
deducted from Policies that are surrendered.
The Company also deducts a tax expense charge from all premium payments of 3.5%.
This charge compensates the Company for premium taxes imposed by various state
and local jurisdictions and for federal taxes imposed under Section 848 of the
Code. The charge includes a premium tax deduction of 2.25% and a federal tax
deduction of 1.25%.
The Company also deducts a charge from the Policy's Cash Value on the Policy
Date and each subsequent Monthly Anniversary Day reflecting the sum of:
1. monthly cost of insurance;
2. monthly cost of any additional benefits provided by riders to the
Policy;
3. a monthly administrative expense charge; and
7
<PAGE> 11
4. an increase charge per $1000 applied to any increase in the
Specified Amount. The increase charge is $2.04 per year per
$1000 and is shown on the Policy data page. This charge is
designed to cover the costs associated with increasing the
Specified Amount (see "Policy Charges"). This charge will be
deducted on each Monthly Anniversary Day for the first 12
months after the increase becomes effective.
The monthly administrative expense charge in reference to number 3 in
this provision is imposed at the rate set forth below:
<TABLE>
<CAPTION>
Per $1,000 Basic
Policy Year(s) Specified Amount
<S> <C>
1-10 $0.04 but not less than
$20.00 on more than $80 per
policy
11+ $0.02 but not less than
$10.00 on more than $40 per
policy
</TABLE>
The charge for year 11+ may be increased at the sole discretion of the
Company but may not exceed the charge for years 1-10.
The Company also deducts on a daily basis from the assets of the Variable
Account a charge to assume mortality and expense risks. This charge is
equivalent to an annual effective rate of 0.80% of the daily net assets of the
Variable Account. On each Policy Anniversary beginning with the 10th, the
mortality and expense risk charge is reduced to 0.50% on an annual basis of the
daily net assets of the Variable Account. On a current basis, the mortality
and expense risk charge is reduced to 0.30% on an annual basis of the daily net
assets on each Policy Anniversary beginning with the 10th, provided the
Surrender Value is at least $100,000 or more on such Anniversary.
For Policies which are surrendered during the first fourteen Policy Years, the
Company deducts a Surrender Charge. This Surrender Charge is comprised of an
Underwriting Surrender Charge and a Sales Surrender Charge. The maximum
initial Surrender Charge varies by issue ages, sexes, and underwriting
classifications of the insureds and is calculated based on the initial
Specified Amount. The following table illustrates the maximum initial
Surrender Charge per $1,000 of initial Specified Amount for Policies which are
issued on a male non-tobacco preferred and a female non-tobacco other than
preferred basis. (see Appendix 1 for specific examples).
<TABLE>
<CAPTION>
Average
Issue Initial Specified Amount
Age $100,000+
--- ---------
<S> <C>
35 $5.39
45 8.37
55 11.16
65 15.67
75 23.20
</TABLE>
Underlying Mutual Fund shares are purchased at net asset value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each underlying Mutual Fund's investment adviser
for managing the underlying Mutual Fund and selecting its portfolio of
securities. Other underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the underlying Mutual Fund. The
management fees and other expenses for each underlying Mutual Fund for its most
recently completed fiscal year, expressed as a percentage of the underlying
Mutual Fund's average assets, are as follows:
8
<PAGE> 12
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Management Other Total
Fees Expenses Expenses
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
American Capital Real Estate Securities 1.00% 0.00% 1.00%
Portfolio
-----------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.14% 0.26% 0.40%
-----------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund 0.00% 0.25% 0.25%
-----------------------------------------------------------------------------------
Fidelity VIP-Equity-Income Portfolio 0.52% 0.06% 0.58%
-----------------------------------------------------------------------------------
Fidelity VIP-Growth Portfolio 0.62% 0.07% 0.69%
-----------------------------------------------------------------------------------
Fidelity VIP-High Income Portfolio 0.61% 0.10% 0.71%
-----------------------------------------------------------------------------------
Fidelity VIP-Overseas Portfolio 0.77% 0.15% 0.92%
-----------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager 0.72% 0.07% 0.79%
Portfolio
-----------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 0.62% 0.27% 0.89%
-----------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.06% 0.56%
-----------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
-----------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.04% 0.54%
-----------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.02% 0.52%
-----------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.79% 0.12% 0.91%
Trust-Growth Portfolio
-----------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.60% 0.13% 0.73%
Trust-Limited Maturity Bond Portfolio
-----------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.80% 0.50% 1.30%
Trust-Partners Portfolio
-----------------------------------------------------------------------------------
Oppenheimer-Bond Fund 0.75% 0.06% 0.81%
-----------------------------------------------------------------------------------
Oppenheimer-Global Securities Fund 0.75% 0.20% 0.95%
-----------------------------------------------------------------------------------
Oppenheimer-Multiple Strategies 0.74% 0.05% 0.79%
-----------------------------------------------------------------------------------
Strong Discovery Fund II, Inc. 1.00% 0.21% 1.21%
-----------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.10% 1.10%
-----------------------------------------------------------------------------------
TCI Portfolios-TCI Balanced 1.00% 0.00% 1.00%
-----------------------------------------------------------------------------------
TCI Portfolios-TCI Growth 1.00% 0.00% 1.00%
-----------------------------------------------------------------------------------
TCI Portfolios-TCI International 1.50% 0.00% 1.50%
-----------------------------------------------------------------------------------
Van Eck-Worldwide Bond Fund 0.75% 0.18% 0.93%
-----------------------------------------------------------------------------------
Van Eck-Gold and Natural Resources 0.75% 0.21% 0.96%
-----------------------------------------------------------------------------------
Warburg Pincus-International Equity 1.00% 0.44% 1.44%
Portfolio
-----------------------------------------------------------------------------------
Warburg Pincus-Small Company Growth 0.90% 0.35% 1.25%
Portfolio
-----------------------------------------------------------------------------------
</TABLE>
The Mutual Fund expenses shown above are assessed at the underlying Mutual Fund
level and are not direct charges against the Variable Account or reductions in
Cash Value. These underlying Mutual Fund expenses are taken into consideration
in computing each underlying Mutual Fund's net asset value, which is the share
price used to calculate the Variable Account's unit value. The management fees
and other expenses are more fully described in the prospectuses for each
individual underlying Mutual Fund.
PREMIUMS
The minimum Initial Premium for which a Policy may be issued is equal to three
Minimum Monthly Premiums. A policy may be issued to Insureds up to age 85.
For a limited time, the Policy Owner has the right to cancel the Policy and
receive a full refund of premiums paid (see "Short-Term Right to Cancel
Policy").
The Initial Premium is due on the Policy Date. It will be credited on the
Policy Date. Any due and unpaid monthly deductions will be subtracted from the
Cash Value at this time. Insurance will not be effective until the Initial
Premium is paid. The Initial Premium is shown on the Policy data page.
Premiums, other than the Initial Premium may be made at any time while the
Policy is in force subject to the limits described below. During the first
three Policy Years, the total premium payments less any Policy Indebtedness,
less any partial surrenders, and less any partial surrender fee must be greater
than or equal to the Minimum Premium requirement in order to guarantee the
Policy remain in force. The Minimum Premium
9
<PAGE> 13
requirement is equal to the Minimum Monthly Premium multiplied by the number of
completed policy months. The Minimum Monthly Premium is shown on the Policy
data page.
We will send Scheduled Premium payment reminder notices to you. We will send
them according to the premium mode shown on the Policy data page.
You may pay the Initial Premium to us at our home office or to an authorized
agent. All premiums after the first are payable at our home office. Premium
receipts will be furnished upon request.
Each premium must be at least equal to the Minimum Monthly Premium. The
Company reserves the right to require satisfactory evidence of insurability
before accepting any additional premium payment which results in any increase
in the net amount at risk. Also, we will refund any portion of any premium
payment which is determined to be in excess of the premium limit established by
law to qualify your Policy as a contract for life insurance. Where permitted
by state law, we may also require that any existing Policy Indebtedness is
repaid prior to accepting any additional premium payments.
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the Nationwide
Insurance Enterprise which includes Nationwide Mutual Insurance Company,
Nationwide Indemnity Company, Nationwide Mutual Fire Insurance Company,
Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty
Insurance Company, National Casualty Company, West Coast Life Insurance
Company, Scottsdale Indemnity Company and Nationwide General Insurance Company.
The Company's home office is at One Nationwide Plaza, Columbus, Ohio 43216.
The Company offers a complete line of life insurance, including annuities and
accident and health insurance. It is admitted to do business in all states,
the District of Columbia, and Puerto Rico (For additional information, see "The
Company").
THE VARIABLE ACCOUNT
The Variable Account was established by a resolution of the Company's Board of
Directors, on May 7, 1987, pursuant to the provisions of Ohio law. The Company
has caused the Variable Account to be registered with the Securities and
Exchange Commission as a unit investment trust pursuant to the provisions of
the Investment Company Act of 1940. Such registration does not involve
supervision of the management of the Variable Account or the Company by the
Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with the liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. The death benefit and Cash Value under the
Policy may vary with the investment performance of the investments in the
Variable Account (see "How the Death Benefit Varies", and "How the Cash Value
Varies").
Net Premium payments and Cash Value are allocated within the
Variable Account among one or more sub-accounts (see "Tax Matters").
The assets of each sub-account are used to purchase shares of the underlying
Mutual Fund options designated by the Policy Owner. Thus, the investment
performance of a Policy depends upon the investment performance of the
underlying Mutual Fund options designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application, the Policy Owner elects to have the Net Premiums
allocated among one or more of the Variable Account sub-accounts and the Fixed
Account (see "Allocation of Cash Value"). During the period in which the
Policy Owner may exercise his or her short-term right to cancel the Policy, all
Net Premiums not allocated to the Fixed Account are placed in the Nationwide
Separate Account Trust Money Market Fund sub-account. At the end of this
period, the Cash Value in that sub-account will be transferred to the Variable
Account sub-accounts based on the Fund allocation factors. Any subsequent Net
Premiums received after this period will be allocated based on the Fund
allocation factors.
No less than 5% of Net Premiums may be allocated to any one sub-account or the
Fixed Account. The Policy Owner may change the allocation of Net Premiums or
may transfer Cash Value from one sub-account to another, subject to such terms
and conditions as may be imposed by each underlying Mutual Fund option and
10
<PAGE> 14
as set forth in this prospectus (see "Transfers", "Allocation of Cash Value",
and "Short-Term Right to Cancel Policy").
These underlying Mutual Fund options are available only to serve as the
underlying investment for variable annuity and variable life contracts issued
through separate accounts of life insurance companies which may or may not be
affiliated, also known as "mixed and shared funding." There are certain risks
associated with mixed and shared funding, which is disclosed in the underlying
Mutual Funds' prospectuses. A full description of the underlying Mutual Funds,
their investment policies and restrictions, risks and charges are contained in
the prospectuses of the respective underlying Mutual Funds.
Each of the underlying Mutual Fund options is a registered investment company
which receives investment advice from a registered investment adviser:
1) Dreyfus Stock Index Fund, managed by Wells Fargo Nikko
Investment Advisors;
2) The Dreyfus Socially Responsible Growth Fund, Inc., managed by
Dreyfus Corporation;
3) Fidelity Variable Insurance Products Fund, managed by Fidelity
Management & Research Company; and
4) Fidelity Variable Insurance Products Fund II, managed by
Fidelity Management & Research Company.
5) Nationwide Separate Account Trust, managed by Nationwide
Financial Services, Inc.;
6) Neuberger & Berman Advisers Management Trust, managed by
Neuberger & Berman Management Incorporated;
7) Oppenheimer Variable Account Funds, managed by Oppenheimer
Management Corporation;
8) Strong Variable Insurance Products Fund, managed by
Strong/Corneliuson Capital Management, Inc.;
9) TCI Portfolios, Inc., a member of the Twentieth Century Family
of Mutual Funds;
10) Van Eck Worldwide Insurance Trust, managed by Van Eck
Associates Corporation;
11) Van Kampen American Capital Life Investment Trust managed by
Van Kampen American Capital Management, Inc.
12) Warburg Pincus Trust, managed by Warburg Pincus Counsellors,
Inc.
A summary of investment objectives is contained in the description of each
underlying Mutual Fund below. More detailed information may be found in the
current prospectus for each underlying Mutual Fund option. A prospectus for the
underlying Mutual Fund option(s) being considered must accompany this
prospectus and should be read in conjunction herewith.
DREYFUS
- - DREYFUS STOCK INDEX FUND
Dreyfus Stock Index Fund is an open-end, non-diversified, management
investment company. It was incorporated under Maryland law on January
24, 1989, and commenced operations on September 29, 1989. Wells Fargo
Nikko Investment Advisors serves as the Fund's index fund manager. As
of May 1, 1994, Dreyfus Life and Annuity Index Fund began doing
business as Dreyfus Stock Index Fund.
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 SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company. It was incorporated under
Maryland law on July 20, 1992, and commenced operations on October 7,
1993. Dreyfus Corporation serves as the Fund's investment advisor.
Tiffany Capitol Advisors, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital
growth through equity investment in companies that, in the opinion of
the Fund's management, not only meet traditional investment
11
<PAGE> 15
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.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fund is an open-end, diversified, management investment company organized
as a Massachusetts business trust on November 13, 1981. The Fund's shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. Fidelity Management & Research Company ("FMR") is the Fund's
manager.
- - HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income
by investing primarily in high-risk, high-yielding, lower-rated, fixed-
income securities, while also considering growth of capital. The
portfolio's manager 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, zero coupon
securities, and mortgage-backed and asset-backed securities.
- 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; 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.
- - EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily
in income-producing equity securities. In choosing these securities
FMR also will consider the potential for capital appreciation. 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.
- - GROWTH PORTFOLIO
Investment Objective: Seeks to achieve 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 mutual funds. It is also important to point
out that the Portfolio makes most sense for you if you can afford to
ride out changes in the stock market, because it invests primarily in
common stocks. FMR also can 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.
- - OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fund is an open-end, diversified, management investment company organized
as a Massachusetts business trust on March 21, 1988. The Fund's shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. FMR is the Fund's manager.
- - ASSET MANAGER PORTFOLIO
Investment Objective: To seek to obtain high total return with reduced
risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed income instruments.
- - CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing
primarily in companies that the fund manager believes to be undervalued
due to an overly pessimistic appraisal by the public. This strategy
12
<PAGE> 16
can lead to investments in domestic or foreign companies, small and
large, many of which may not be well known. The fund 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.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company organized under the laws of Massachusetts, by a
Declaration of Trust, dated June 30, 1981, as subsequently amended. The Trust
offers shares in the four separate Funds listed below, each with its own
investment objectives. Currently, shares of the Trust will be sold only to
life insurance company separate accounts to fund the benefits under variable
insurance or annuity policies issued by life insurance companies. The assets of
the Trust are managed by Nationwide Financial Services, Inc., of One Nationwide
Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of Nationwide Life
Insurance Company.
- - CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the
long term.
- - MONEY MARKET FUND
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
- - GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with capital preservation through investing primarily in
bonds and securities issued or backed by the U.S. Government, its
agencies or instrumentalities.
- - TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested
capital from a flexible combination of current return and capital gains
through investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
- - LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be available
without significant risk to principal. It seeks to achieve its
objectives through investments in a diversified portfolio of limited
maturity debt securities.
- - GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide
investors with above average potential for capital appreciation. To
maximize this potential, the investment adviser may also utilize, from
time to time, securities convertible into common stocks, warrants
and options to purchase such stocks.
- - PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This portfolio will
seek to achieve its objective by investing primarily in the common
stock of established companies. Its investment program seeks securities
believed to be undervalued based on fundamentals such as low
price-to-earnings ratios, consistent cash flows, and support from asset
values. The objective of the Partners Portfolio is not
13
<PAGE> 17
fundamental and can be changed by the Trustees of the Trust without
shareholder approval. Shareholders will, however, receive at least 30
days prior notice thereof. There is no assurance the investment
objective will be met.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-ended, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. Oppenheimer Management Corporation is
the Funds' investment advisor.
- - BOND FUND
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
the Fund seeks capital growth when consistent with its primary
objective.
- - GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by
investing a substantial portion of assets in securities of foreign
issuers, "growth-type" companies, cyclical industries and special
situations which are considered to have appreciation possibilities.
Current income is not an objective. These securities may be considered
to be speculative.
- - MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which
includes current income and capital appreciation in the value of its
shares) from investments in common stocks and other equity securities,
bonds and other debt securities, and "money market" securities.
STRONG VARIABLE INSURANCE PRODUCTS FUNDS
The Strong Variable Insurance Products Funds are diversified, open-end
management investment companies, commonly called mutual funds. Strong Special
Fund II, Inc. ("Special Fund II") and Strong Discovery Fund II, Inc.
("Discovery Fund II") were separately incorporated in Wisconsin on December 28,
1990. Shares of the Funds may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity and variable
life insurance contracts. Strong/Corneliuson Capital Management, Inc. is the
investment advisor for each of the Funds.
- - SPECIAL FUND II, INC.
Investment Objective: To seek capital appreciation through investments
in a diversified portfolio of equity securities.
- - DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities.
TCI PORTFOLIOS, INC., A MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS
TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It is a
diversified, open-end management company, designed only to provide investment
vehicles for variable annuity and variable life insurance products of insurance
companies. A member of the Twentieth Century Family of Mutual Funds, TCI
Portfolios is managed by Investors Research Corporation.
- - TCI BALANCED
Investment Objective: Capital growth and current income. The fund
will seek to achieve its objective by maintaining approximately 60% of
the assets of the fund in common stocks (including securities
convertible into common stocks and other equity equivalents) that are
considered by management to have better-than-average prospects for
appreciation and approximately 40% in fixed income securities. There
can be no assurance that the Fund will achieve its investment
objective.
- - TCI GROWTH
Investment Objective: Capital growth. The fund will seek to achieve
its objective by investing in common stocks (including securities
convertible into common stocks and other equity equivalents) that meet
certain fundamental and technical standards of selection and have, in
the opinion of the fund's investment manager, better than average
potential for appreciation. The fund tries to stay fully invested in
such securities, regardless of the movement of stock prices generally.
14
<PAGE> 18
The fund may invest in cash and cash equivalents temporarily or when it
is unable to find common stocks meeting its criteria of selection. It
may purchase securities only of companies that have a record of at
least three years continuous operation. There can be no assurance that
the Fund will achieve its investment objective.
- - TCI INTERNATIONAL
Investment Objective: To seek 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. Securities of United States issuers may be included in the
portfolio from time to time. Although the primary investment of the
fund will be common stocks (defined to include depository receipts for
common stocks), the fund may also invest in other types of securities
consistent with the fund's objective. When the manager believes that
the total return 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. There can be no assurance that the
fund will achieve its objectives.
(Although the Statement of Additional Information concerning TCI
Portfolios, Inc., refers to redemptions of securities in kind under
certain conditions, all surrendering or redeeming Contract Owners will
receive cash from the Company.)
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a "business trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Shares of the Trust are offered only to
separate accounts of various insurance companies to fund benefits of variable
insurance and annuity policies. The assets of the Trust are managed by Van Eck
Associates Corporation.
- - GOLD AND NATURAL RESOURCES FUND
Investment Objective: To seek long-term capital appreciation by
investing in equity and debt securities of companies engaged in the
exploration, development, production and distribution of gold and other
natural resources, such as strategic and other metals, minerals, forest
products, oil, natural gas and coal. Current income is not an
objective.
- - WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible
policy of investing globally, primarily in debt securities.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen American Capital Life Investment Trust is an open-end
diversified management investment company organized as a Massachusetts business
trust on June 3, 1985. The Trust offers shares in separate portfolios which
are sold only to insurance companies to provide funding for variable life
insurance policies and variable annuity contracts. Van Kampen American Capital
Asset Management, Inc. serves as the Portfolio's investment adviser.
-AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
Investment Objective: To seek long-term capital growth by investing in
a 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,
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 Fund's total assets will be invested in Real Estate
Securities, primarily equity securities of real estate investment
trusts. The Fund 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. There can be no assurance that the Fund will
achieve its investment objective.
15
<PAGE> 19
WARBURG PINCUS TRUST
The Warburg Pincus Trust ("Trust") is an open-end management investment company
organized in March 1995 as a business trust under the laws of The Commonwealth
of Massachusetts. The Trust offers its shares to insurance companies for
allocation to separate accounts for the purpose of funding variable annuity and
variable life contracts. Trust portfolios are managed by Warburg, Pincus
Counsellors, Inc. ("Counsellors.")
- - INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: To seek long-term capital appreciation by
investing primarily in a broadly diversified portfolio of equity
securities of companies, wherever organized, that in the judgment of
"Counsellors" have their principal business activities and interests
outside the United States. The Portfolio will ordinarily invest
substantially all of its assets, but no less than 65% of its total
assets, in common stocks, warrants and securities convertible into or
exchangeable for common stocks. The Portfolio intends to invest
principally in the securities of financially strong companies with
opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets.
- - SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a
portfolio of equity securities of small-sized domestic companies. The
Portfolio ordinarily will invest at least 65% of its total assets in
common stocks or warrants of small-sized companies (i.e., companies
having stock market capitalizations of between $25 million and $1
billion at the time of purchase) that represent attractive
opportunities for capital growth. The Portfolio intends to invest
primarily in companies whose securities are traded on domestic stock
exchanges or in the over-the-counter market. The Portfolio's
investments will be made on the basis of their equity characteristics
and securities ratings generally will not be a factor in the selection
process.
REINVESTMENT
The Funds described above have as a policy the distribution of dividends in the
form of additional shares (or fractions thereof) of the underlying Mutual
Funds. The distribution of additional shares will not affect the number of
Accumulation Units attributable to a particular Policy. (See "Allocation of
Cash Value.")
TRANSFERS
After the first Policy Anniversary, the Policy Owner may annually transfer a
portion of the value of the Variable Account to the Fixed Account, without
penalty or adjustment. The Policy Owner may request a transfer of up to 100%
of the Cash Value from the Variable Account to the Fixed Account. The Company
reserves the right to restrict transfers to the Fixed Account to 25% of the
Cash Value. The Policy Owner's Cash Value in each sub-account will be
determined as of the date the transfer request is received in the home office
in good order.
The Policy Owner may transfer a portion of the value of the Fixed Account to
the Variable Account once each Policy Year, without penalty or adjustment. The
Policy Owner may request a transfer of up to 100% of the Cash Value in the
Fixed Account to the Variable sub-accounts. The Company reserves the right to
restrict the amounts of such transfers to 25% of the Cash Value in the Fixed
Account.
Transfers among the sub-accounts may be made once per Valuation Date and may be
made either in writing or, in states allowing such transfers, by telephone. In
states allowing telephone transfers, and if the Owner so elects, the Company
will also permit the Policy Owner to utilize the Telephone Exchange Privilege
for exchanging amounts among sub-account options. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. Such procedures may include any or all of the following, or such
other procedures as the Company may, from time to time, deem reasonable:
requesting identifying information, such as name, contract number, Social
Security number, and/or personal identification number; tape recording all
telephone transactions; and providing written confirmation thereof to both the
Policy Owner and any agent of record at the last address of record. Although
failure to follow reasonable procedures may result in the Company's liability
for any losses due to unauthorized or fraudulent telephone transfers, the
Company will not be liable for following instructions communicated by telephone
which it reasonably believes to be genuine. Any losses incurred pursuant to
actions taken by the Company in reliance on telephone instructions reasonably
believed to be genuine shall be borne by the Contract Owner. The Company may
determine to withdraw the Telephone Exchange Privilege, upon 30 days written
notice to Policy Owners.
16
<PAGE> 20
Policy Owners who have entered into a Dollar Cost Averaging Agreement with the
Company (see "Dollar Cost Averaging" below) may transfer from the Fixed Account
to the Variable Account under the terms of that agreement.
DOLLAR COST AVERAGING
The Policy Owner may direct the Company to automatically transfer from the
Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio
sub-account to any other sub-account within the Variable Account on a monthly
basis. This service is intended to allow the Policy Owner to utilize Dollar
Cost Averaging, a long-term investment program which provides for regular,
level investments over time. The Company makes no guarantees that Dollar Cost
Averaging, will result in a profit or protect against loss in a declining
market. To qualify for Dollar Cost Averaging, there must be a minimum total
Cash Value, less Policy Indebtedness, of $15,000. Transfers for purposes of
Dollar Cost Averaging can only be made from the Money Market sub-account, Fixed
Account, or the Limited Maturity Bond Portfolio sub-account. The minimum
monthly Dollar Cost Averaging transfer is $100. In addition, Dollar Cost
Averaging monthly transfers from the Fixed Account must be equal to or less
than 1/30th of the Fixed Account value when the Dollar Cost Averaging program
is requested. Transfers out of the Fixed Account, other than for Dollar Cost
Averaging, may be subject to certain additional restrictions (see "Transfers"
above). A written election of this service, on a form provided by the Company,
must be completed by the Policy Owner in order to begin transfers. Once
elected, transfers from the Money Market sub-account, Fixed Account, or the
Limited Maturity Bond Portfolio sub-account will be processed monthly until
either the value in the Money Market sub-account, Fixed Account, or the Limited
Maturity Bond Portfolio sub-account is completely depleted or the Policy Owner
instructs the Company in writing to cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost Averaging
upon 30 days' written notice to Policy Owners however, any such discontinuation
would not affect Dollar Cost Averaging programs already commenced. The Company
also reserves the right to assess a processing fee for this service.
SUBSTITUTION OF SECURITIES
If shares of the underlying Mutual Fund options should no longer be available
for investment by the Variable Account or, if in the judgment of the Company's
management further investment in such underlying Mutual Funds should become
inappropriate in view of the purposes of the Policy, the Company may substitute
shares of another underlying Mutual Fund for shares already purchased or to be
purchased in the future by Net Premium payments under the Policy. No
substitution of securities in the Variable Account may take place without prior
approval of the Securities and Exchange Commission, and under such requirements
as it and any state insurance department may impose.
VOTING RIGHTS
Voting rights under the Policies apply only with respect to Cash Value
allocated to the sub-accounts of the Variable Account.
In accordance with its view of present applicable law, the Company will vote
the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds
in accordance with instructions received from Policy Owners. However, if the
Investment Company Act of 1940 or any regulation thereunder should be amended
or if the present interpretation thereof should change, and as a result the
Company determines that it is permitted to vote the shares of the underlying
Mutual Funds in its own right, the Company may elect to do so.
The Policy Owner shall have the voting interest under a Policy. The number of
shares in each sub-account for which the Policy Owner may give voting
instructions is determined by dividing any portion of the Policy's Cash Value
derived from participation in that underlying Mutual Fund by the net asset
value of one share of that underlying Mutual Fund.
The number of shares which a person has a right to vote will be determined as
of a date chosen by the Company, but not more than 90 days prior to the
meeting of the underlying Mutual Fund. Voting instructions will be solicited
by written communication prior to such meeting.
The Company will vote underlying Mutual Fund shares in accordance
with instructions received from the Policy Owners. Underlying Mutual Fund
shares held by the Company or by the Variable Account as to which no timely
instructions are received will be voted by the Company in the same proportion
as the voting instructions which are received.
17
<PAGE> 21
Each person having a voting interest in the Variable Account will receive
periodic reports relating to investments of the Variable Account, the
underlying Mutual Funds' proxy material and a form with which to give such
voting instructions.
Notwithstanding contrary Policy Owner voting instructions, the Company may vote
underlying Mutual Fund shares in any manner necessary to enable the underlying
Mutual Fund to: (1) make or refrain from making any change in the investments
or investment policies for any of the underlying Mutual Funds, if required by
an insurance regulatory authority; (2) refrain from making any change in the
investment policies or any investment adviser or principal underwriter of any
portfolio which may be initiated by Policy Owners or the underlying Mutual
Fund's Board of Directors, provided the Company's disapproval of the change is
reasonable and, in the case of a change in the investment policies or
investment adviser, based on a good faith determination that such change would
be contrary to state law or otherwise inappropriate in light of the portfolio's
objective and purposes; or (3) enter into or refrain from entering into any
advisory agreement or underwriting contract, if required by any insurance
regulatory authority.
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -Minimum Requirements for Issuance of a Policy
The Policies are designed to provide life insurance coverage and the
flexibility to vary the amount and frequency of premium payments. At issue,
the Policy Owner selects the initial Specified Amount, consisting of the
initial Basic Specified Amount and the initial Supplemental Specified Amount,
if any, and premium. The minimum Specified Amount is $100,000. Policies may
be issued to Insureds with issue ages 18 to 85. Before issuing any Policy, the
Company requires satisfactory evidence of insurability which may include
medical examinations.
- -Premium Payments
The Initial Premium for a Policy is payable in full to an authorized agent or
at the Company's home office. Upon payment of an initial premium, temporary
insurance may be provided, subject to a maximum amount. The effective date of
permanent insurance coverage is dependent upon completion of all underwriting
requirements, payment of the entire Initial Premium, and delivery of the policy
while both Insureds are still living.
Subsequent premiums may be paid at any time while the Policy is in force
subject to the limits described below. During the first three Policy Years,
the total premium payments less any Policy Indebtedness, partial surrenders,
and less any partial surrender fee must be greater than or equal to the Minimum
Premium requirement in order to guarantee the Policy remains in force. The
Minimum Premium requirement is equal to the Minimum Monthly Premium multiplied
by the number of completed policy months. The Minimum Monthly Premium is shown
on the Policy data page.
Each premium payment must be at least equal to the Minimum Monthly Premium.
Additional premium payments may be made at any time while the Policy is in
force. However, the Company reserves the right to require satisfactory
evidence of insurability before accepting any additional premium payment which
results in an increase in the net amount at risk. Also, the Company will
refund any portion of any premium payment which is determined to be in excess
of the premium limit established by law to qualify the Policy as a contract
for life insurance. The Company may also require that any existing Policy
Indebtedness is repaid prior to accepting any additional premium payments.
Additional premium payments or other changes to the contract, may jeopardize
the Policy's non-modified endowment status. The Company will monitor premiums
paid and other policy transactions and will notify the Policy Owner when
non-modified endowment contract status is in jeopardy (see "Tax Matters").
ALLOCATION OF CASH VALUE
At the time a Policy is issued, its Cash Value will be based on the Nationwide
Separate Account Trust Money Market Fund sub-account value or the Fixed Account
as if the Policy had been issued and the Initial Net Premium invested on the
date such premium was received in good order by the Company. When the Policy
is issued, the Net Premiums will be allocated to the Nationwide Separate
Account Trust Money Market Fund sub-account (for any Net Premiums allocated to
a sub-account on the Application) or the Fixed Account until the expiration of
the period in which the Policy Owner may exercise his or her short-term right
to cancel the Policy. Net Premiums not designated for the Fixed Account will
be placed in the Nationwide Separate Account Trust
18
<PAGE> 22
Money Market Sub-Account. At the expiration of the period in which the Policy
Owner may exercise his or her short term right to cancel the Policy, shares of
the underlying Mutual Funds specified by the Policy Owner are purchased at net
asset value for the respective sub-account(s). The Policy Owner may change the
allocation of Net Premiums or may transfer Cash Value from one sub-account to
another, subject to such terms and conditions as may be imposed by each
underlying Mutual Fund and as set forth in the prospectus. Net Premiums
allocated to the Fixed Account at the time of application may not be transferred
prior to the first Policy Anniversary (see "Transfers" and "Investments of the
Variable Account").
The designation of investment allocations will be made by the prospective Policy
Owner at the time of application for a Policy. The Policy Owner may change the
way in which future Net Premiums are allocated by giving written notice to the
Company. All percentage allocations must be in whole numbers, and must be at
least 5%. The sum of allocations must equal 100%.
SHORT-TERM RIGHT TO CANCEL POLICY
A Policy may be returned for cancellation and a full refund of premium within 10
days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails or delivers a
Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or
delivered to the registered representative who sold it, or to the Company.
Immediately after such mailing or delivery, the Policy will be deemed void from
the beginning. The Company will refund the total premiums paid within seven
days after it receives the Policy.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
The Company deducts a sales load from each premium payment which will not exceed
5.0% during the first ten policy years or 1.5% thereafter. Currently, the sales
load is 5.0% during the first ten policy years and 0% thereafter. The total
sales load actually deducted from any Policy will be equal to the sum of this
front-end sales load plus any sales surrender charge that may be deducted from
Policies that are surrendered.
The Company also deducts a tax expense charge from all premium payments equal to
3.5%. This charge reimburses the Company for premium taxes imposed by various
state and local jurisdictions and for federal taxes imposed under Section 848 of
the Code.
The 2.25% premium tax deduction approximates the Company's average expense for
state and local premium tax. Premium taxes vary by jurisdiction ranging from
zero to more than 4%. The premium tax deduction is made whether or not any
premium tax applies and the deduction may be higher or lower than the premium
tax imposed. The 1.25% federal tax deduction is designed to reimburse the
Company for expenses incurred from federal taxes imposed under Section 848 of
the Code (enacted by the Omnibus Budget Reconciliation Act of 1990). The
federal tax deduction is a factor the Company must use when computing the
maximum sales load chargeable under SEC rules. The Company does not expect to
make a profit from the tax expense charge. These charges will be increased or
decreased to reflect charges in these or additional taxes imposed on the
Company.
SURRENDER CHARGES
The Company will deduct a Surrender Charge from the Policy's Cash Value for any
Policy surrendered during the first fourteen Policy Years. The maximum initial
Surrender Charge varies by the issue ages, sexes, and underwriting
classifications of the Insureds and is calculated based on the initial Specified
Amount. The following table illustrates the maximum initial Surrender Charge
per $1,000 of initial Specified Amount for Policies which are issued on a male
non-tobacco preferred and a female non-tobacco other than preferred basis (see
Appendix 1 for specific examples).
<TABLE>
<CAPTION>
Average
Issue Initial Specified Amount
Age $100,000+
--- ---------
<S> <C>
35 $5.39
45 8.37
55 11.16
65 15.67
75 23.20
</TABLE>
19
<PAGE> 23
The Surrender Charge is comprised of two components: an underwriting surrender
charge and sales surrender charge. The underwriting surrender charge varies by
issue age in the following manner:
<TABLE>
<CAPTION>
Underwriting Surrender
Issue Charge per $1,000 of Initial
Age Specified Amount
--- ----------------
<S> <C>
0-39 $4.00
40-49 6.00
50-59 7.00
60-85 8.00
</TABLE>
The underwriting surrender charge is designed to cover the administrative
expenses associated with underwriting and issuing the Policy, including the
costs of processing applications, conducting medical exams, determining
insurability and the Insured's underwriting class, and establishing policy
records. The Company does not expect to profit from the underwriting surrender
charges. The Surrender Charge may be insufficient to recover certain expenses
related to the sale of the Policies. Unrecovered expenses are born by the
Company's general assets which may include profits, if any, from mortality and
expense risk charges (see "Deductions from the Sub-Accounts"). Additional
premiums and/or income earned on assets in the Variable Account have no effect
on these charges. The remainder of the Surrender Charge which is not
attributable to the underwriting surrender charge component represents the
sales surrender charge component. In no event will this component exceed 23
3/4% of the lesser of the Guideline Level Premium in the first year or the
premiums actually paid in the first year. The purpose of the sales surrender
charge component is to reimburse the Company for some of the expenses incurred
in the distribution of the Policies.
The Surrender Charge is reduced in subsequent Policy Years in the following
manner:
<TABLE>
Surrender Charge Surrender Charge Surrender Charge
Completed as a % of Initial Completed as a % of Initial Completed as a % of Initial
Policy Years Surrender Charge Policy Years Surrender Charges Policy Years Surrender Charge
<S> <C> <C> <C> <C> <C>
0 100% 5 85% 10 60%
1 100% 6 80% 11 45%
2 100% 7 75% 12 30%
3 95% 8 70% 13 15%
4 90% 9 65% 14+ 0%
</TABLE>
Special guaranteed maximum Surrender Charges apply in Pennsylvania (see
Appendix 1).
DEDUCTIONS FROM CASH VALUE
The Company also deducts the following charges from the Policy's Cash Value on
the Policy Date and each subsequent Monthly Anniversary Day:
1. monthly cost of insurance charges; plus
2. monthly cost of any additional benefits provided by riders; plus
3. monthly administrative expense charge; plus
4. the increase charge per $1000 applied to any increase in the Specified
Amount (see "Specified Amount Increases"). The increase charge is $2.04
per year per $1000 and is shown on the Policy data page. This charge is
designed to cover the costs associated with increasing the Specified
Amount (see "Policy Charges"). This charge will be deducted on each
Monthly Anniversary Day for the first 12 months after the increase becomes
effective.
These deductions will be charged proportionately to the Cash Value in each
Variable Account sub-account and the Fixed Account.
20
<PAGE> 24
- -Monthly Cost of Insurance
The monthly cost of insurance charge is determined in a manner that reflects the
anticipated mortality of the two Insureds and the fact that the death benefit is
not payable until the death of the second Insured to die.
The monthly cost of insurance charge for each policy month is determined by
multiplying the monthly cost of insurance rate by the net amount at risk. The
net amount at risk is the difference between the death benefit and the Policy's
Cash Value, each calculated at the beginning of the policy month.
If death benefit Option 1 is in effect and there have been increases in the
Specified Amount, then the Cash Value shall first be considered a part of the
initial Specified Amount. If the Cash Value exceeds the initial Specified
Amount, it shall then be considered a part of the additional increases in
Specified Amount resulting from the increases in the order of the increases.
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 percentage multiples of the 1980 CSO. These mortality tables are
sex distinct. In addition, separate mortality tables will be used for standard
and non-tobacco.
The rate class of an Insured may affect the cost of insurance rate. The Company
currently places Insureds into both standard rate classes and substandard
classes that involve a higher mortality risk. In an otherwise identical Policy,
an Insured in the standard rate class will have a lower cost of insurance than
an Insured in a rate class with higher mortality risks.
- -Monthly Administrative Charge
The Company deducts a monthly Administrative Expense Charge to reimburse it for
certain expenses related to maintenance of the Policies, accounting and record
keeping and periodic reporting to Policy Owners. This charge is designed only
to reimburse the Company for certain actual administrative expenses. The
Company does not expect to recover from this charge any amount in excess of
aggregate maintenance expenses. Currently, this charge is:
<TABLE>
<CAPTION>
Per $1,000 Basic
Policy Year(s) Specified Amount
<S> <C>
1-10 $0.04 but not less than
$20.00 on more than $80 per
policy
11+ $0.02 but not less than
$10.00 on more than $40 per
policy
</TABLE>
The charge for year 11+ may be increased at the
sole discretion of the Company but may not exceed
the charge for years 1-10.
- -Increase Charge
The Increase Charge is comprised of two components: an underwriting increase
charge and a sales increase charge (see "Specified Amount Increases"). The
underwriting charge is $1.50 per year per $1000. This charge is to cover the
cost of underwriting the increases and any processing expenses. The Company
does not expect to profit from this charge. The sales charge is equal to .54
per year per $1000 and reimburses the Company for expenses incurred in
distribution.
DEDUCTIONS FROM THE SUB-ACCOUNTS
The Company assumes certain risks for guaranteeing the mortality and expense
charges. The mortality risks assumed under the Policies is that both Insureds
may die sooner than expected. The expense risk assumed is that the actual
expenses incurred in issuing and administering the Policies may be greater than
expected. In addition, the Company assumes risks associated with the
non-recovery of policy issue, underwriting and other administrative expenses due
to Policies which lapse or are surrendered in the early Policy Years.
To compensate the Company for assuming these risks associated with the Policies,
the Company deducts on a daily basis from the assets of the Variable Account a
charge to provide for mortality and expense risks. This charge is equivalent to
an annual effective rate of 0.80% of the daily net assets of the Variable
Account. On
21
<PAGE> 25
each Policy Anniversary beginning with the 10th, the mortality and expense risk
charge is reduced to 0.50% on an annual basis of the daily net assets of the
Variable Account. On a current basis, the mortality and expense risk charge is
reduced to 0.30% of an annual basis of the daily net assets on each Policy
Anniversary beginning with the 10th, provided the Surrender Value is at least
$100,000 on such Anniversary. To the extent that future levels of mortality
and expenses are less than or equal to those expected, the Company may realize
a profit from this charge. The Surrender Charge may be insufficient to recover
certain expenses related to the sale of the Policies. Unrecovered expenses are
born by the Company's general assets which may include profits, if any, from
mortality and expense risk charges (see "Surrender Charges").
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the sub-accounts of the Variable
Account (see "Taxation of the Company"). The Company reserves the right to
assess a charge for such taxes against the Variable Account if the Company
determines that such taxes will be incurred.
HOW THE CASH VALUE VARIES
On any date during the Policy Year, the Cash Value equals the Cash Value on the
preceding Valuation Date, plus any Net Premium applied since the previous
Valuation Date, minus any partial surrenders, plus or minus any investment
results, and less any Policy Charges.
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 Account and Policy Loan Account depending on the
allocation of Cash Value by the Policy Owner.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value in each sub-account is converted to Accumulation Units of that
sub-account. The conversion is accomplished by dividing the amount of Cash
Value allocated to a sub-account by the value of an Accumulation Unit for the
sub-account of the Valuation Period during which the allocation occurs.
The value of an Accumulation Unit for each sub-account was arbitrarily set
initially at $10 when the underlying Mutual Fund shares in that sub-account
were available for purchase. The value for any subsequent Valuation Period is
determined by multiplying the Accumulation Unit value for each sub-account for
the immediately preceding Valuation Period by the Net Investment Factor for the
sub-account during the subsequent Valuation Period. The value of an
Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by dividing
(a) by (b) and subtracting (c) from the result, where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held in
the sub-account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain distributions
made by the underlying Mutual Fund held in the sub-account if the
"ex-dividend" date occurs during the current Valuation Period, plus
or minus.
(3) a per share charge or credit for taxes reserved for, if any, which is
determined by the Company to have resulted from the investment
operations of the sub-account.
(b) is the net asset value per share of the underlying Mutual Fund held in
the sub-account determined at the end of the immediately preceding Valuation
Period, plus or minus the per share charge or credit for taxes reserved
for in the immediately preceding Valuation Period.
(c) is a daily Mortality and Expense Risk Charge multiplied by the number
of days in the current Valuation Period. Such Mortality and Expense Risk
Charge is equal to an annual rate of 0.80% of the daily net asset value of
the Variable Account. On each Policy Anniversary beginning with the 10th,
the mortality and expense risk charge is reduced to 0.50% on an annual
basis of the daily net assets of the Variable Account. On a current basis,
the Mortality and Expense Risk Charge is reduced to 0.30% on an annual
basis of the daily net assets on each Policy Anniversary beginning with the
10th, provided the Surrender Value is at least $100,000 on such
Anniversary.
22
<PAGE> 26
For underlying Mutual Fund options that credit dividends on a daily basis and
pay such dividends once a month, the Net Investment Factor allows for the
monthly reinvestment of these daily dividends.
The Net Investment Factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
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 for Mortality and Expense Risk Charge, and any charge or credit for
tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at their
net asset value.
DETERMINING THE CASH VALUE
The sum of the value of all Variable Account Accumulation Units attributable to
the Policy and amounts credited to the Fixed Account and the Policy Loan
Account is the Cash Value. The number of Accumulation Units credited per each
sub-account are 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 the Company. In the
event part or all of the Cash Value is surrendered or charges or deductions are
made against the Cash Value, an appropriate number of Accumulation Units from
the Variable Account and an appropriate amount from the Fixed Account will be
deducted in the same proportion that the Policy Owner's interest in the
Variable Account and the Fixed Account bears to the total Cash Value.
The Cash Value in the Fixed Account and the Policy Loan Account is credited
with interest daily at an effective annual rate which the Company periodically
declares. The annual effective rate will never be less than 4%. Upon request,
the Company will inform the Policy Owner of the then applicable rates for each
account.
VALUATION PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business on the New
York Stock Exchange and ending at the close of business for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock Exchange
and the Company's home office are open for business or any other day during
which there is sufficient degree of trading that the current net asset value of
the Accumulation Units might be materially affected.
SURRENDERING THE POLICY FOR CASH
RIGHT TO SURRENDER
The Policy Owner may surrender the Policy in full at any time while the policy
is in force and receive its Surrender Value. The cancellation will be
effective as of the date the Company receives a proper written request for
cancellation and the Policy. Such written request must be signed and, where
permitted, the signature guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a Commercial
Bank or a Savings and Loan, which is a member of the Federal Deposit Insurance
Corporation. In some cases, the Company may require additional documentation
of a customary nature.
CASH SURRENDER VALUE
The 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. The Surrender Value equals the
Policy's Cash Value, next computed after the date the Company receives a proper
written request for surrender and the Policy, minus any charges, Indebtedness
or other deductions due on that date, minus any Surrender Charge.
PARTIAL SURRENDERS
After the Policy has been in force for one year, the Policy Owner may request a
partial surrender. Partial surrenders will be permitted only if they satisfy
the following requirements:
1. The minimum partial surrender is $500;
2. The partial surrender may not reduce the Specified Amount to
less than the minimum issue amount;
23
<PAGE> 27
3. After the partial surrender, the Cash Surrender Value is greater
than $500 or an amount equal to three times the current monthly
deduction if higher;
4. The maximum total partial surrenders in any policy year are
limited to 10% of the total premium payments. On a current
basis, this requirement is waived in years 15 and beyond provided
the Cash Surrender Value is $10,000 or more after the withdrawal;
and
5. After the partial surrender, the Policy continues to qualify as
life insurance.
When a partial surrender is made, the Cash Value is reduced by the amount of
the partial surrender. Also, under death benefit Option 1, the Specified
Amount is reduced by the amount of the partial surrender. The Basic and
Supplemental Specified amounts are reduced proportionally. Partial surrender
amounts must be first deducted from the values in the Variable Account
sub-accounts. Partial surrenders will be deducted from the Fixed Account only
to the extent that insufficient values are available in the Variable Account
sub-accounts. The Company reserves the right to deduct a $25.00 fee from the
partial surrender amount.
Surrender charges will be waived for any partial surrenders which satisfy the
above conditions. Certain partial surrenders may result in currently taxable
income and tax penalties (see "Tax Matters").
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the younger
Insured's 100th birthday. The maturity proceeds will be payable to the Policy
Owner on the Maturity Date provided the Policy is still in force. The Maturity
Proceeds will be equal to the amount of the Policy's Cash Value, less any
Indebtedness.
INCOME TAX WITHHOLDING
Federal law requires the Company to withhold income tax from any portion of
surrender proceeds that is subject to tax, unless the Policy Owner advises the
Company, in writing, of his or her request not to withhold.
If the Policy Owner requests that the Company not withhold taxes, or if the
taxes withheld are insufficient, the Policy Owner may be liable for payment of
an estimated tax. The Policy Owner should consult his or her tax advisor.
POLICY LOANS
TAKING A POLICY LOAN
After the first Policy Year, the Policy Owner may take a Policy loan using the
Policy as security. Maximum Policy Indebtedness is limited to 90% of the Cash
Value less Surrender Charge less interest due on the next Policy Anniversary.
Maximum Policy Indebtedness, in Texas, is limited to 90% of the Cash Value in
the sub-accounts and 100% of the Cash Value in the Fixed Account less Surrender
Charge less interest due on the next Policy Anniversary. The Company will not
grant a loan for an amount less than $200. Should the Death Proceeds become
payable, the Policy be surrendered, or the Policy mature while a loan is
outstanding, the amount of Policy Indebtedness will be deducted from the death
benefit, Surrender Value or the maturity value, respectively.
Any request for a Policy loan must be in written form satisfactory to the
Company. The request must be signed and, where permitted, the signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia or Pacific Stock Exchange; or by a Commercial Bank or a Savings
and Loan which is a member of the Federal Deposit Insurance Corporation.
Certain policy loans may result in currently taxable income and tax penalties
(see "Tax Matters").
A Policy Owner considering the use of policy loans in connection with his or
her retirement income plan should consult his or her 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 such payments
necessary to prevent the Policy from lapsing would increase with age (see "Tax
Matters").
EFFECT ON INVESTMENT PERFORMANCE
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
a Policy are held in more than one sub-account, withdrawals from sub-accounts
will be made in proportion to the assets in each Variable sub-account at the
time of the loan. Policy loans will be transferred from the Fixed Account only
when insufficient amounts are available in the
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<PAGE> 28
Variable 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.
INTEREST
On a current basis, policy loans are credited with an annual effective rate of
5.1% during policy years 2 through 14 and an annual effective rate of 6% during
the 15th and subsequent policy years. The rate is guaranteed never to be lower
than 4%. The Company may change the current interest crediting rate on policy
loans at any time at its sole discretion. The loan interest rate is 6% per year
for all Policy loans. In the event that 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, the Company retains 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 that which the
Company considers 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 a Variable Account or the Fixed Account on each Policy Anniversary
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, the Company will send a notice to the Policy Owner and the
assignee, if any. The 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
Charges plus an amount sufficient to continue the Policy in force for 3
months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A Policy loan, whether or not repaid, will have a permanent effect on the 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.
REPAYMENT
All or part of the Indebtedness may be repaid at any time while the Policy is
in force during either 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 Variable sub-accounts and the Fixed Account
in proportion to the Policy Owner's underlying Mutual Fund allocation factors
in effect at the time of the repayment. Each repayment may not be less than
$50. The Company reserves 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.
HOW THE DEATH BENEFIT VARIES
CALCULATION OF THE DEATH BENEFIT
At issue, the Policy Owner selects the Basic Specified Amount and any
Supplemental Specified Amount.
While the Policy is in force, the death benefit will never be less than the
Specified Amount. The death benefit may vary with the Cash Value of the
Policy, which depends on investment performance.
The Policy Owner chooses one of two death benefit options. Under Option 1, the
death benefit will be the greater of the Specified Amount or the Applicable
Percentage of Cash Value. Under Option 1, the amount of the death benefit will
ordinarily not change for several years to reflect the investment performance
and may not change at all. If investment performance is favorable the amount
of death benefit may increase. To see how and when investment performance will
begin to affect death benefits, please see the illustrations. Under Option 2,
the death benefit will be the greater of the Specified Amount plus the Cash
Value, or the Applicable Percentage of Cash Value. It will vary directly with
the investment performance.
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<PAGE> 29
The term "Applicable Percentage" means the percentage shown in the
"Applicable Percentage of Contract Value Table." The Applicable Percentage
depends on whether the Policy Owner elected the Guideline Premium Test or the
Cash Value Accumulation Test. The following tables illustrate applicable
percentages:
<TABLE>
<CAPTION>
TABLE OF APPLICABLE PERCENTAGES OF CASH VALUE FOR GUIDELINE PREMIUM TEST
Attained Age Percentage Attained Age Percentage Attained Age Percentage
of Younger of Contract of Younger of Contract of Younger of Contract
Insured Value Insured Value Insured Value
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
</TABLE>
PROCEEDS PAYABLE ON DEATH
The actual Death Proceeds payable on the death of the last surviving Insured,
will be the death benefit as described above, less any Policy Indebtedness and
less any unpaid Policy Charges. Under certain circumstances, the Death Proceeds
may be adjusted (see "Incontestability", "Error in Age or Sex", and "Suicide").
RIGHT OF CONVERSION
The Policy Owner may at any time, upon written request within 24 months of the
Policy Date, transfer all sub-account Cash Values to the Fixed Account. No
transfer charge will be assessed.
CHANGES OF INVESTMENT POLICY
The Company may materially change the investment policy of the Variable
Account. The Company must inform the Policy Owners 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
interests of the Policy Owners or if it renders the Company's operations
hazardous to the public. A Policy Owner who objects may, upon written request,
transfer all sub-account Cash Values to the Fixed Account. The Policy Owner
has 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 such change to make this transfer. No transfer charge will be
assessed.
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<PAGE> 30
GRACE PERIOD
- -Without Death Benefit Guarantees
If the Surrender Value on a Monthly Anniversary Day is not sufficient to cover
the current monthly deduction, and no Death Benefit Guarantee is in effect, a
Grace Period will be allowed for the payment of a premium of at least 4 times
the current monthly deduction. The Company will send you a notice at the start
of the Grace Period at the last known address stating the amount of premium
required. The Grace Period will end 61 days after the later of the day the
Company mails the notice and the Monthly Anniversary Day when the Surrender
Value was insufficient. If the required amount is not paid by the end of the
Grace Period, this Policy will terminate without value. The Company will pay
the Death Proceeds if the Death Proceeds become payable during the Grace
Period.
- -Death Benefit Guarantee #1
The Company will not lapse this policy during the first 3 policy years if on
each Monthly Anniversary Day (1) is greater than or equal to (2) where:
(1) is the sum of all premiums paid to date minus any Indebtedness, any
partial surrenders and any partial surrender fees;
(2) is the sum of the Minimum Monthly Premiums since the Policy Date
including such premium for the current Monthly Anniversary Day. The
Minimum Monthly Premium is shown on the Policy Data Page.
If (1) is less than (2), the premium required if the Grace Period ends during
the first 3 policy years is the amount that will make (1) equal to (2), not 4
times the current monthly deduction.
- -Death Benefit Guarantee #2
The Company will not lapse this policy during the Death Benefit Guarantee #2
Period if on each Monthly Anniversary Day (1) is greater than or equal to (2)
where:
(1) is the sum of all premiums paid to date minus any Indebtedness, any
partial surrenders and any partial surrender fees; and
(2) is the sum of the Death Benefit #2 Guarantee Premiums since the Policy
Date including such premium for the current Monthly Anniversary Day.
The Death Benefit #2 Premium is shown on the Policy Data Page.
The Death Benefit #2 Period begins on the third Policy Anniversary and ends on
the Policy Anniversary when the younger Insured is or would have been age 75.
- -Death Benefit Guarantee #3
The Company will not lapse this policy during the Death Benefit Guarantee #3
Period if on each Monthly Anniversary Day (1) is greater than or equal to (2)
where:
(1) is the sum of all premiums paid to date minus any Indebtedness, any
partial surrenders and any partial surrender fees; and
(2) is the sum of the Death Benefit #3 Guarantee Premiums since the Policy
Date including such premium for the current Monthly Anniversary Day.
The Death Benefit #3 Premium is shown on the Policy Data Page.
REINSTATEMENT
If the Grace Period ends and the Policy Owner has neither paid the required
premium nor surrendered the Policy for its Cash Surrender Value, the Policy
lapses. The Policy Owner may reinstate the Policy provided both Insureds are
alive on the date of reinstatement 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 of both Insureds satisfactory to the
Company;
3. paying an amount of premium equal to the sum of the Minimum Monthly
Premiums missed since the beginning of the Grace Period, if the Policy
terminated in the first three policy years;
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<PAGE> 31
4. paying sufficient premium to cover all policy charges that were due and
unpaid during the Grace Period if the Policy terminated in the fourth or
later policy year;
5. paying sufficient premium to keep the Policy in force for 3 months from
the date of reinstatement; and
6. 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
on or next following the date the application for reinstatement is approved by
the Company. If your Policy is reinstated, the Cash Value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
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 the Policy was
reinstated.
Unless the Policy Owner has provided otherwise, all amounts will be allocated
based on the underlying Mutual Fund allocation factors in effect at the start
of the Grace Period.
THE FIXED ACCOUNT OPTION
Because of exemptive and exclusionary provisions, interests in the Company's
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the General Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus relating to the
Fixed Account option. Disclosures regarding the General Account may, however,
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
As explained earlier, a Policy Owner may elect to allocate or transfer all or
part of the Cash Value to the Fixed Account and the amount allocated or
transferred becomes part of the Company's General Account. The Company's
General Account consists of all assets of the Company other than those in the
Variable Account and in other separate accounts that have been or may be
established by the Company. Subject to applicable law, the Company has sole
discretion over the investment of the assets of the General Account, and Policy
Owners do not share in the investment experience of those assets. The Company
guarantees that the part of the Cash Value invested under the Fixed Account
option will accrue interest daily at an effective annual rate that the Company
declares periodically. The Fixed Account crediting rate will not be less than
an effective annual rate of 4%. Upon request the Company will inform a Policy
Owner of the then applicable rate. The Company is not obligated to credit
interest at a higher rate.
CHANGES IN EXISTING INSURANCE COVERAGE
The Policy Owner may request certain changes in the insurance coverage under
the Policy. Any request must be in writing and received at the Company's home
office. No change will take effect unless the Cash Surrender Value, after the
change, is sufficient to keep the Policy in force for at least 3 months.
SPECIFIED AMOUNT INCREASES
After the first Policy Year, the Policy Owner may request an increase to the
Specified Amount. Any increase will be subject to the following conditions:
1. the increase is applied for in writing;
2. satisfactory evidence of insurability of both Insureds is provided;
3. the increase is for a minimum of $10,000;
4. the Cash Surrender Value is sufficient to continue the Policy in force
for at least 3 months; and
5. age limits are the same as for a new issue.
Any approved increase will have an effective date of the Monthly Anniversary
Day on or next following the date the Company approves the application for the
increase. Basic and Supplemental Specified Amounts will
28
<PAGE> 32
increase proportionally. The Company reserves the right to limit the number of
Specified Amount increases to one each Policy Year.
SPECIFIED AMOUNT DECREASES
After the first Policy Year, the Policy Owner may also request a decrease to
the Specified Amount. Any approved decrease will be effective on the Monthly
Anniversary Day on or next following the date the Company receives the request.
Basic and Supplemental Specified Amounts will decrease proportionally. Any
such decrease shall reduce insurance in the following order:
1. insurance provided by the most recent increase;
2. the next most recent increases successively; and
3. insurance provided under the original application.
The Company reserves the right to limit the number of Specified Amount
decreases to one each Policy Year. The Company will refuse a request for a
decrease which would:
1. reduce the Specified Amount to less than the minimum issue amount or
2. disqualify the Policy as a contract for life insurance.
CHANGES IN THE DEATH BENEFIT OPTION
After the first Policy Year, the Policy Owner may change the death benefit
option under the Policy. If the change is from Option 1 to Option 2, the
Specified Amount will be decreased by the amount of the Cash Value. Basic and
Supplemental Specified Amounts will be decreased proportionally If the change
is from Option 2 to Option 1, the Specified Amount will be increased by the
amount of the Cash Value. Basic and Supplemental Specified Amounts will be
increased proportionally. Evidence of insurability is not required for a
change from Option 2 to Option 1. The Company reserves the right to require
evidence of insurability for a change from Option 1 to Option 2. The effective
date of the change will be the Monthly Anniversary Day on or next following the
date the Company approves the request for change. Only one change of option is
permitted per Policy Year. 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 prescribed by the Internal Revenue Service to
qualify the Policy as a life insurance contract.
OTHER POLICY PROVISIONS
POLICY OWNER
While either Insured is living, all rights in this Policy are vested in the
Policy Owner named in the application or as subsequently changed, subject to
assignment, if any.
The Policy Owner may name a contingent Policy Owner or a new Policy Owner while
the Insured is living. Any change must be in a written form satisfactory to
the Company and recorded at the Company's home office. Once recorded, the
change will be effective when signed. The change will not affect any payment
made or action taken by the Company before it was recorded. The Company may
require that the Policy be submitted for endorsement before making a change.
If the Policy Owner dies before both Insureds have died, and there is no
contingent Policy Owner, the Policy Owner's rights in this Policy belong to the
Policy Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application or as subsequently
changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while either Insured is
living. Any change must be in a written form satisfactory to the Company and
recorded at the Company's home office. Once recorded, the change will be
effective when signed. The change will not affect any payment made or action
taken by the Company before it was recorded.
If any Beneficiary predeceases the Insured, that Beneficiary's interest passes
to any surviving Beneficiary(ies), unless otherwise provided. Multiple
Beneficiaries will be paid in equal shares, unless otherwise provided. If no
named Beneficiary is living when Death Proceeds become payable, the Death
Proceeds shall be paid to the Policy Owner or the Policy Owner's estate.
29
<PAGE> 33
ASSIGNMENT
While either Insured is living, the Policy Owner may assign his or her rights
in the Policy. The assignment must be in writing, signed by the Policy Owner
and recorded by the Company at its home office. Any assignment will not affect
any payments made or actions taken by the Company before it was recorded. The
Company is not responsible for any assignment not submitted for recording, nor
is the Company responsible for the sufficiency or validity of any assignment.
The assignment will be subject to any Indebtedness.
INCONTESTABILITY
The Company will not contest payment of the Death Proceeds based on the initial
Specified Amount after the Policy has been in force during the lifetimes of
both Insureds for 2 years from the Policy Date. For any increase in Specified
Amount requiring evidence of insurability, the Company will not contest payment
of the Death Proceeds based on such an increase after it has been in force
during the lifetimes of both Insureds for 2 years from its effective date.
ERROR IN AGE OR SEX
If the age or sex of either Insured has been misstated, the affected benefits
will be adjusted by the ratio of the last monthly cost of insurance deducted to
the monthly cost of insurance that would have been deducted based on the true
age and sex of each Insured.
SUICIDE
If either Insured dies by suicide, while sane or insane, within two years from
the Policy Date, the Company 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 two years from the date an
application is accepted for an increase in the Specified Amount, the Company
will pay no more than the amount paid for such additional benefit.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends are payable. These
Policies do not share in the profits or surplus earnings of the Company.
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 and 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.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by licensed insurance agents in those states where
the Policies may lawfully be sold. Such agents will be registered
representatives of broker dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
(NASD). The Policies will be distributed by the General Distributor,
Nationwide Financial Services, Inc.
Gross first year commissions plus any expense allowance payments paid by the
Company on the sale of these policies provided by the General Distributor will
not exceed 80% of first year premiums up to the target Premium plus 4% of any
excess premium payments. Gross renewal commissions in years 2-10 paid by the
Company will not exceed 4% of actual premium payment, and will not exceed 1% in
years 11+.
CUSTODIAN OF ASSETS
The Company serves as the Custodian of the assets of the Variable Account.
30
<PAGE> 34
TAX MATTERS
- -Taxation of Policy Split Option Rider
The Policy Split Option Rider permits a Policy to be split into two other
single life insurance contracts upon the occurrence of a divorce of the joint
Insureds or other certain changes in the federal estate tax law (see "Rider"
section).
A policy split could have adverse tax consequences. It is not clear whether a
policy split will be treated as a nontaxable exchange under Section 1035 of the
Internal Revenue Code. If a policy split is not treated as a nontaxable
exchange, a split could result in the recognition of taxable income in an
amount up to any gain in the Policy at the time of the split. Additionally, it
is not clear whether, in all circumstances, the resulting individual contracts
would be treated as life insurance contracts for federal income tax purposes
and, if so treated, whether the individual contracts would be classified as
Modified Endowment Contracts. Before the Policy Owner exercised rights
provided by the policy split option rider, it is important that a competent tax
adviser be consulted regarding the possible consequences of a policy split.
- -Estate and Generation Skipping Taxes
Ownership of this Policy may have federal estate tax consequences for the
insured taxpayers. When the surviving Insured dies, the death benefit will
generally be included in the Insured's gross estate if (1) the proceeds were
payable to or for the benefit of the Insured's estate, or (2) the Insured held
incidents of ownership in the policy at death or within three years of death.
If the Policy Owner was not the last surviving Insured, the value of the Policy
would be included in the Policy Owner's estate.
Additionally, the transfer of the Policy or the designation of a beneficiary
may also have federal, state and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate and generation skipping
transfer taxes. For example, the transfer of the Policy to, the designation as
beneficiary, or the payment of proceeds to a person who is assigned to a
generation which is two or more generations below the generation of the Policy
Owner, may have generation skipping transfer tax considerations under Section
2601 of the Internal Revenue Code.
Federal estate, state and local estate, inheritance and other tax consequences
of ownership or receipt of Policy proceeds depend on the circumstances of each
Policy Owner or Beneficiary. A Policy Owner should consult with a competent
tax adviser for specific information regarding the applicability of such taxes.
POLICY PROCEEDS
Section 7702 of the Internal Revenue Code ("Code") provides that if certain
tests are met, a Policy will be treated as a life insurance policy for federal
tax purposes. The Company will monitor compliance with these tests. The
Policy should thus receive the same federal income tax treatment as fixed
benefit life insurance. As a result, the Death Proceeds payable under a Policy
are excludable from gross income of the beneficiary under Section 101 of the
Code.
Although the Company believes that the Policy is in compliance with Section
7702 of the Code, the manner in which Section 7702 should be applied to certain
features of a last survivor variable life insurance contract is not directly
addressed by Section 7702. In the absence of final regulations or other
guidance issued under Section 7702, there is some uncertainty whether a last
survivor variable life insurance contract will satisfy the Section 7702
definition of a life insurance contract.
Section 7702A of the Code defines Modified Endowment Contracts as those
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 (see "Information about the Policies"). The Code provides for
taxation of surrenders, partial surrenders, loans, collateral assignments and
other pre-death distributions from Modified Endowment Contracts in the same way
annuities are taxed. Modified Endowment Contract distributions are defined by
the Code as amounts not received as an annuity and are taxable to the extent
the Cash Value of the policy exceeds, at the time of distribution, the premiums
paid into the policy. A 10% tax penalty generally applies to the taxable
portion of such distributions unless the Policy Owner is over age 59 1/2 or
disabled.
The Policies offered by this prospectus may or may not be issued as Modified
Endowment Contracts. The Company will monitor premiums paid and will notify
the Policy Owner when the policy's non-modified
31
<PAGE> 35
endowment status is in jeopardy. 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 the Owner pursuant to Section 7702(f)(7) of the Code.
The Policy Owner 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 as a result
of a material change or a reduction in benefits as defined by Section 7702A(c)
of the Code.
In addition to meeting the tests required under Sections 7702, Section 817(h)
of the Code requires that the investments of separate accounts such as the
Variable Account be adequately diversified. Regulations issued by the
Secretary of the Treasury, set the standards for measuring the adequacy of this
diversification. To be adequately diversified, each sub-account of the
Variable Account must meet certain tests. The Company believes that the
investments of the Variable Account meet the applicable diversification
standards. The regulations provide that a variable life policy which does not
satisfy the diversification standards will not be treated as life insurance
under Section 7702 of the Internal Revenue Code, unless the failure to satisfy
regulations was inadvertent, the failure is corrected, and the Policy Owner or
the Company pays an amount to the Internal Revenue Service. The amount will be
based on the tax that would have been paid by the Policy Owner if the income,
for the period the policy was not diversified, had been received by the Policy
Owner. If the failure to diversify is not corrected in this manner, the Policy
Owner of the life policy will be deemed the owner of the underlying securities
and will be taxed on the earnings of his or her account.
Should the Secretary of the Treasury issue additional rules or regulations
limiting the number of funds, transfers between funds, exchanges of funds or
changes in investment objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code, the Company will take
whatever steps are available to remain in compliance.
The Company 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 the Policy Owner plus total Policy Indebtedness exceeds the
premiums paid into the Policy, the excess generally will be treated as taxable
income, regardless of whether or not the Policy is a modified endowment
contract.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, estates less than $600,000 will not incur a federal
estate tax liability. In addition, an unlimited marital deduction may be
available for federal estate and gift tax purposes. The unlimited marital
deduction permits the deferral of taxes until the death of the surviving
spouse, when the death benefit would be available to pay taxes due and other
expenses incurred.
If the Policy Owner (whether or not he or she is an Insured) transfers
ownership of the Contract to someone two or more generations younger, the
transfer may be subject to the generation-skipping transfer tax ("GSTT"), the
taxable amount being the value of the Policy. The GSTT provisions generally
apply to transfers subject to estate and gift tax rules. Individuals generally
are permitted an aggregate exemption of $1 million. Since these rules are
complex, the Policy Owner should consult with a tax adviser for specific
information on the transfer of benefits to younger generations.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Variable Account is not a separate entity from the Company and its operations
form a part of the Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the 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.
The Company does 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, the Company determines that on a
separate company basis such taxes may be incurred, it reserves the right to
assess a charge for such taxes against the Variable Account.
The Company 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.
32
<PAGE> 36
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Counsel
and other competent advisors should be consulted for more complete information.
This discussion is based on the Company's understanding of Federal income tax
laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these current
laws and interpretations.
THE COMPANY
The life insurance business, which includes product lines in health insurance
and annuities, is the only business in which the Company is engaged.
The Company markets its Policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
The Company, in common with other insurance companies, is 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.
The Company operates 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, the Company shares employees with Nationwide Mutual Insurance
Company and Nationwide Mutual Fire Insurance Company.
The Company does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. The Company shares home office, other facilities and equipment with
Nationwide Mutual Insurance Company.
COMPANY MANAGEMENT
Nationwide Life Insurance Company, together with Nationwide Mutual Insurance
Company, Nationwide Indemnity Company, Nationwide Mutual Fire Insurance
Company, Nationwide Life and Annuity Insurance Company, Nationwide Property and
Casualty Insurance Company, National Casualty Company, West Coast Life
Insurance Company, Scottsdale Indemnity Company and Nationwide General
Insurance Company and their affiliate companies comprise the Nationwide
Insurance Enterprise.
The companies comprising the Nationwide Insurance Enterprise have substantially
common boards of directors and officers. Nationwide Corporation is the sole
shareholder of Nationwide Life.
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<PAGE> 37
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
Director
Name Since Principal Occupation
---- ----- --------------------
<S> <C> <C>
Lewis J. Alphin 1993 Farm Owner and Operator (1)
Willard J. Engel 1994 General Manager Lyon County Cooperative Oil Company (1)
Fred C. Finney 1992 Owner and Operator, Moreland Fruit Farm; Operator, Melrose
Orchard
Peter F. Frenzer 1991 President, Nationwide Corporation; President and Chief Operating
Officer, Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company; Executive Vice President -
Investments, Nationwide Mutual Insurance Company, Nationwide
Mutual Fire Insurance Company, Nationwide General Insurance
Company, Nationwide Property and Casualty Insurance Company
Charles L. Fuellgraf, Jr. *+ 1969 Chief Executive Officer, Fuellgraf Electric Company, Electrical
Construction and Engineering Services (1)
Henry S. Holloway *+ 1986 Farm Owner and Operator (1)
D. Richard McFerson *+ 1988 President and Chief Executive Officer, Nationwide Mutual,
Nationwide Mutual Fire, Nationwide General, and Nationwide
Property and Casualty Insurance Companies, Chief Executive
Officer, Nationwide Life Insurance Company, Nationwide Life and
Annuity Insurance Company (2)
David O. Miller *+ 1985 Farm Owner and Land Developer; President, Owen Potato Farm, Inc.;
Partner, M&M Enterprises (1)
C. Ray Noecker 1994 Farm Owner and Operator (1)
James F. Patterson 1989 Vice President, Pattersons, Inc.; President Patterson Farms, Inc.
Robert H. Rickel 1984 Rancher (1)
Arden L. Shisler *+ 1984 Partner and Manager, Sweetwater Beef Farms; President and Chief
Executive Officer, K&B Transport, Inc. (1)
Robert L. Stewart 1989 Farm Owner and Operator; Owner, Sunnydale Mining (1)
Nancy C. Thomas * 1986 Farm Owner and Operator, Da-Ma-Lor Farm (1)
Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farm (1)
. . . . . . . . . . . . . . . . . .
<FN>
*Member, Executive Committee +Member, Investment Committee
(1) Principal occupation for last five years.
(2) Prior to assuming his current position, Mr. McFerson held other
executive management positions with the companies.
</TABLE>
Each of the directors is a director of the other major insurance affiliates of
the Nationwide Insurance Enterprise, except Mr. Frenzer who is a director only
of the Company and Nationwide Life Insurance Company. Each of the directors of
the Company is a director of Nationwide Financial Services, Inc., a registered
broker-dealer.
Messrs. Frenzer, Holloway, McFerson, Miller, Patterson and Shisler are directors
of Nationwide Corporation. Messrs. Fuellgraf, Frenzer, McFerson, Ms. Thomas and
Mr. Weihl are trustees of Nationwide Investing Foundation, a registered
investment company. Messrs. Frenzer and McFerson are trustees of Nationwide
Separate Account Trust, Financial Horizons Investment Trust and Nationwide
Investing Foundation II, registered investment companies. Mr. Engel is a
director of Western Cooperative Transport.
34
<PAGE> 38
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE COMPANY
NAME OFFICE HELD
---- -----------
<S> <C>
D. Richard McFerson President and Chief Executive Officer-Nationwide Insurance
Enterprise
Peter F. Frenzer President and Chief Operating Officer
Gordon E. McCutchan Executive Vice President-Law and Corporate Services and Secretary
James E. Brock Senior Vice President - Investment Product Operations
W. Sidney Druen Senior Vice President and General Counsel and Assistant Secretary
Harvey S. Galloway, Jr. Senior Vice President - Chief Actuary - Life, Health and
Annuities
Richard A. Karas Senior Vice President - Sales - Financial Services
Robert A. Oakley Executive Vice President-Chief Financial Officer
Carl Santillo Senior Vice President - Life and Health Operations
Mark A. Folk Vice President and Treasurer
</TABLE>
Mr. Frenzer is also President and Chief Operating Officer of Nationwide Life
and Annuity Insurance Company and President of Nationwide Corporation and
Executive Vice President-Investments of Nationwide Mutual Insurance Company.
Mr. Galloway is also an officer of Nationwide Mutual Insurance Company and
Nationwide Life and Annuity Insurance Company. Each of the other officers
listed above is also an officer of each of the companies comprising the
Nationwide Insurance Enterprise. Each of the executive officers listed above
has been associated with the registrant in an executive capacity for more than
the past five years, except Mr. Folk.
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of the Company.
STATE REGULATION
The Company is 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 the
operation of the Company 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 the Company's contract liabilities and
reserves so that the Insurance Department may certify the items are correct. The
Company's 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, the Company is subject to regulation under the insurance
laws of other jurisdictions in which it may operate.
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing the amount of the current death benefit, the Cash
Value, and Cash Surrender Value, premiums paid and monthly charges deducted
since the last report, the amounts invested in the Fixed Account and in the
Variable Account and in each sub-account of the Variable Account, and any Policy
Indebtedness.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as changes in Specified Amount, changes in death benefit option, changes in
future premium allocation, transfers among sub-accounts, premium payments,
loans, loan repayments, reinstatement and termination.
35
<PAGE> 39
ADVERTISING
The Company is also 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 the financial strength or claims-paying ability of
the Company. The ratings are not intended to reflect the investment experience
or financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the Company or the Contracts.
Furthermore, the Company 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
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The General Distributor, Nationwide Financial Services, Inc., is not engaged in
any material litigation of any nature.
EXPERTS
The financial statements and schedule have been included herein in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Account, the Company, and the Policies
offered hereby. Statements contained in this prospectus as to the content of
Policies and other legal instruments are summaries. For a complete statement
of the terms thereof, reference is made to such instruments as filed.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being passed
upon by Druen, Rath & Dietrich, One Nationwide Plaza, Columbus, Ohio 43216.
All the members of such firm are employed by the Nationwide Mutual Insurance
Company.
36
<PAGE> 40
APPENDIX
(Illustration of Surrender Charges, Illustrations of Cash Values, Cash
Surrender Values, and Death Benefits, Hypothetical Illustrations and
Performance Tables to be added by Pre-Effective Amendment to the Registration
Statement).
37
<PAGE> 41
FINANCIAL STATEMENTS
(TO BE ADDED BY PRE-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT)
38
<PAGE> 42
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 38 pages.
Representations and Undertakings.
The Signatures.
Accountants' Consent
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C>
1. Power of Attorney dated April 5, 1995 An original Power of Attorney dated April 5, 1995 is
included with Post-Effective Amendment No. 6 to the
Registration Statement on Form N-4 for the NACo Variable
Account (File No. 33-33425, 811-5999) and is hereby
incorporated by reference.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2
authorizing the establishment of the Registrant, for the Nationwide VLI Separate Account-2 (File No. 811-
adopted 5311), and hereby incorporated herein by reference.
3. Distribution Contracts Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account-2 (File No. 811-
5311), and hereby incorporated herein by reference.
4. Form of Security Included with the Registration Statement on Form S-6 for
the Nationwide VLI Separate Account-2 (File No. 33-
42180), and hereby incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account-2 (File No. 811-
5311), and hereby incorporated herein by reference.
6. Application form of Security Included with the Registration Statement on Form S-6 for
the Nationwide VLI Separate Account-2 (File No. 33-
42180), and hereby incorporated herein by reference.
7. Opinion of Counsel Included with the Registration Statement on Form S-6 for
the Nationwide VLI Separate Account-2 (File No. 33-
42180), and hereby incorporated herein by reference.
</TABLE>
39
<PAGE> 43
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and the Company 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 the Company
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
such 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
the Company under the Policies. The Company 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 the Company, and will be made available to the
Securities and Exchange Commission (the "Commission") on request.
(c) The Company 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 Commission on request a memorandum setting forth the basis for this
representation.
(d) The Company 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 the company,
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
Commission such supplementary and periodic information, documents, and reports
as may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
40
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, NATIONWIDE VLI SEPARATE ACCOUNT-2, has caused this Registration
Statement to be signed on its behalf in the City of Columbus, and State of Ohio
on this 3rd day of October 1995.
NATIONWIDE VLI SEPARATE ACCOUNT-2
---------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------
Attest: (Sponsor)
W. SIDNEY DRUEN By: JOSEPH P. RATH
- ------------------------------- ------------------------------
W. Sidney Druen Joseph P. Rath
Assistant Secretary Vice President and Associate
General Counsel
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 3rd day of October, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
- ---------------
Lewis J. Alphin
WILLARD J. ENGEL Director
- ----------------
Willard J. Engel
FRED C. FINNEY Director
- --------------
Fred C. Finney
PETER F. FRENZER President/Chief Operating
- ---------------- Officer and Director
Peter F. Frenzer
CHARLES L. FUELLGRAF, JR. Director
- -------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman of the Board
- ----------------- and Director
Henry S. Holloway
D. RICHARD McFERSON Chief Executive Officer
- ------------------- and Director
D. Richard McFerson
DAVID O. MILLER Director
- ---------------
David O. Miller
C. RAY NOECKER Director
- --------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ---------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By: JOSEPH P. RATH
- ------------------ --------------
James F. Patterson Joseph P. Rath, Attorney-in-Fact
ROBERT H. RICKEL Director
- ----------------
Robert H. Rickel
ARDEN L. SHISLER Director
- ----------------
Arden L. Shisler
ROBERT L. STEWART Director
- -----------------
Robert L. Stewart
NANCY C. THOMAS Director
- ---------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ---------------
Harold W. Weihl
</TABLE>
41
