VariTrak Variable Universal Life Insurance P R O S P E C T U S Dated May 1, 2016 National Life Insurance Company Home Office: National Life Drive, National Variable Life Insurance Account Montpelier, Vermont 05604 Telephone: (800) 732-8939 This prospectus describes the VariTrak policy, a variable universal life insurance policy offered by National Life Insurance Company ( National Life, we, our, us ). This policy combines insurance and investment features. The policy s primary purpose is to provide insurance protection on the life of the insured person. You can make premium payments at various times and in various amounts. You can also allocate premiums among a number of funds with different investment objectives, and you can increase or decrease the death benefit payable under your policy. This policy is not available to new purchasers. You may allocate premium payments to the National Variable Life Insurance Account, a Separate Account of National Life, or to the General Account, or a combination of the two. The General Account pays interest at a guaranteed rate of at least 4%. The Separate Account is divided into several subaccounts. Each subaccount buys shares of a specific portfolio. The available portfolios are: American Century Investment Sentinel Asset Management, Inc. Fred Alger Management, Inc. AllianceBernstein L.P. Sentinel Variable Products Trust The Alger Portfolios AB Variable Products Balanced Capital Appreciation Series Fund, Inc. Bond Large Cap Growth International Growth Common Stock Small Cap Growth International Value Mid Cap 1 Small/Mid Cap Value Small Company Value Management, Inc. American Century Variable Portfolios, Inc. VP Income & Growth VP International VP Ultra VP Value American Century Variable Portfolios, Inc. II VP Inflation Protection The Dreyfus Corporation Dreyfus Variable Investment Fund VIF Appreciation Portfolio VIF Opportunistic Small Cap Portfolio VIF Quality Bond Portfolio Dreyfus Socially Responsible Growth Fund, Inc. Deutsche Investment Management Americas Inc. Deutsche Variable Series II Deutsche Large Cap Value VIP Deutsche Small Mid Cap Value VIP Deutsche Investments VIT Funds Deutsche Small Cap Index VIP Fidelity Management & Research Company Fidelity Variable Insurance Products VIP Equity-Income VIP Growth VIP High Income VIP Overseas VIP Contrafund VIP Index 500 VIP Mid Cap VIP Value Strategies VIP Investment Grade Bond VIP Government Money Market Franklin Templeton Investments Franklin Templeton Variable Insurance Products Trust Templeton Foreign VIP Franklin Global Real Estate VIP Franklin Mutual Shares VIP Franklin Small Cap Value VIP Franklin Small-Mid Cap Growth VIP Franklin U.S Government VIP Franklin Global Discovery VIP Invesco Advisers, Inc. Invesco Variable Insurance Funds Invesco V.I. Mid Cap Growth Invesco V.I. Global Health Care Invesco V.I. Technology J.P. Morgan Investment Management Inc. JPMorgan Insurance Trust Small Cap Core Portfolio Neuberger Berman Investment Advisers LLC Neuberger Berman Advisers Management Trust Short Duration Bond Portfolio Mid Cap Growth Portfolio Large Cap Value Portfolio Socially Responsive Portfolio Wells Fargo Funds Managem ent, LLC Wells Fargo Funds VT Discovery VT Opportunity OppenheimerFunds, Inc. Oppenheimer Variable Account Funds Capital Income Fund/VA Main Street Small Cap/VA Global Strategic Income/VA Van Eck Associates T. Rowe Price Associates, Inc. Corporation T. Rowe Price Equity Series, Inc. VanEck VIP Trust Blue Chip Growth Portfolio Unconstrained Emerging Equity Income Portfolio Markets Health Sciences Portfolio Emerging Markets Personal Strategy Balanced Global Hard Assets Portfolio 1 As of the date of this Prospectus, the Sentinel Variable Products Mid Cap Fund is soliciting shareholder proxies for a shareholder meeting to be held on May 23, 2016 to vote on a proposal to reorganize with and into the Sentinel Variable Products Small Company Fund. If shareholders approve the proposal, it is anticipated that the Reorganization will occur on or about June 17, 2016.
The value of your policy will depend upon the investment results of the portfolios you select. The policy s value and death benefit will fluctuate based on the investment results of the chosen portfolios, the crediting of interest to the General Account, and the deduction of charges. You bear the entire investment risk for all amounts allocated to the Separate Account. There is no guaranteed minimum value for any of the portfolios. We do not guarantee any minimum policy value. You could lose some or all of your money. Prior to making any investment decisions, you should carefully review this product prospectus and all applicable supplements. In addition, you should review the prospectuses and supplements for the underlying portfolios that we make available as investment options under the policies. They are available without charge by contacting the Home Office, at the address and phone number listed above. You should keep all prospectuses and supplements for future reference. An investment in the policy is not a bank deposit. Neither the U.S. government nor any governmental agency insures or guarantees your investment in the policy. It may not be advantageous to purchase a policy as a replacement for another type of life insurance or as a means to obtain additional insurance protection if you already own another variable universal life insurance policy. It also may not be advantageous for you to finance the purchase of this policy through use of a loan or through making withdrawals from another policy that you already own. The Securities and Exchange Commission ( SEC ) has not approved or disapproved the policy or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. 2
TABLE OF CONTENTS SUMMARY OF THE BENEFITS AND RISKS OF THE POLICY... 5 Summary of Principal Policy Benefits... 5 Summary of the Principal Risks of Purchasing a Policy... 6 Fee Tables... 7 NATIONAL LIFE AND THE GENERAL ACCOUNT... 16 National Life... 16 The General Account... 16 THE SEPARATE ACCOUNT AND THE PORTFOLIOS... 17 The Separate Account... 17 The Portfolios... 17 THE POLICY... 26 Premiums... 26 Transfers... 28 Telephone Transaction Privilege... 28 Facsimile Transaction Privilege... 29 Electronic Mail Transaction Privilege... 29 Disruptive Trading... 29 Other Transfer Rights... 31 Change of Address Notification... 31 Abandoned Property Requirements... 31 AVAILABLE AUTOMATED PORTFOLIO MANAGEMENT FEATURES... 31 Accumulated Value... 31 DEATH BENEFIT... 32 Ability to Adjust Face Amount... 34 Payment of Policy Benefits... 35 Settlement Options... 35 PAYMENT OF PROCEEDS... 36 POLICY LOANS... 36 SURRENDERS AND WITHDRAWALS... 38 LAPSE AND REINSTATEMENT... 40 CHARGES AND DEDUCTIONS... 40 Premium Tax Charge... 41 Surrender Charge... 41 Monthly Deductions... 42 Mortality and Expense Risk Charge... 44 Withdrawal Charge... 44 Transfer Charge... 44 Projection Report Charge... 45 Other Charges... 45 OPTIONAL BENEFITS... 45 Additional Protection Benefit... 45 Guaranteed Death Benefit... 46 No-Lapse Guarantee... 46 Accelerated Care Rider... 47 Chronic Care Protection... 47 Accelerated Benefit... 47 Overloan Protection Rider... 48 FEDERAL TAX CONSIDERATIONS... 48 Tax Status of the Policy... 49 Tax Treatment of Policy Benefits... 49 Possible Tax Law Changes... 52 Possible Charges for National Life s Taxes... 52 LEGAL MATTERS... 53 DISTRIBUTION OF THE POLICIES... 53 OTHER POLICY PROVISIONS... 54 HOUSEHOLDING AND DELIVERY OF DOCUMENTS... 54 FINANCIAL STATEMENTS... 54 GLOSSARY... 56 APPENDIX A... A-1 Illustration of Death Benefits, Accumulated Values and Cash Surrender Values... A-1 APPENDIX B... B-1 3
Surrender Charge Target Premiums ( SCTP ) and Deferred Sales Charges ( DSC )... B-1 APPENDIX C... C-1 Overloan Protection Rider... C-1 APPENDIX D... D-1 Statement of Additional Information... D-1 Table of Contents... D-1 The policy may not be available in all states and its terms may vary by state. This prospectus does not offer the policy in any state in which we may not legally offer the policy. This policy is no longer sold. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. The primary purpose of this variable life insurance policy is to provide insurance protection. We do not claim that the policy is in any way similar or comparable to an investment in a mutual fund. 4
SUMMARY OF THE BENEFITS AND RISKS OF THE POLICY This summary provides you with a brief overview of the benefits and risks associated with the Policy. You should read the entire prospectus before purchasing the Policy. Important details regarding the Policy are contained in other sections of this prospectus and in the Statement of Additional Information ("SAI"). Please consult your agent and refer to your Policy for details. For your convenience, we have defined certain terms we use in the Glossary at the end of the prospectus. Summary of Principal Policy Benefits Life Insurance Protection. The Policy provides a means for an Owner to accumulate life insurance on the life of a specified Insured. Proceeds under the Policy can generally pass free of federal and state income tax at the death of an Insured. As long as your Policy remains in force, we will pay the Death Benefit to your Beneficiary, when we receive due proof of the death of the Insured. We will increase the Death Benefit by any additional benefits provided by a supplementary benefit rider. We will reduce the Death Benefit by any outstanding Policy loans and accrued interest and any unpaid Monthly Deductions. Death Benefit Option A and Option B. We offer two Death Benefit options, which we call Option A and Option B. You may choose which option to apply to your Policy. If you choose Death Benefit Option A, the Death Benefit will be based on the greater of: Face Amount; or the Accumulated Value multiplied by a factor specified by federal income tax law. If you choose Death Benefit Option B, the Death Benefit will be based on the greater of: the Face Amount plus the Accumulated Value; or the Accumulated Value multiplied by the same factor that applies to Option A. You may adjust the Death Benefit by changing the Death Benefit option or by increasing or decreasing the Face Amount of your Policy. See Death Benefit. In addition, for Policies issued before September 19, 2011, accelerated care and chronic care protection riders are available if they were elected before Policy issue. The accelerated care rider provides periodic partial prepayments of the Death Benefit if the Insured becomes chronically ill, and the chronic care protection rider continues to pay benefits after the entire Death Benefit under the Policy has been prepaid under the accelerated care rider. There is an additional cost for the accelerated care rider and the chronic care protection rider. You may add additional insurance and other benefits to your Policy by rider. Please see Optional Benefits, below, for a description of the other optional benefits that we offer. You may receive personalized illustrations in connection with the purchase of this Policy that reflect your own particular circumstances. These hypothetical illustrations may help you to understand the long-term effects of different levels of investment performance, the possibility of lapse, and the charges and deductions under the Policy. They may also help you to compare this Policy to other life insurance policies. The personalized illustrations are based on hypothetical rates of return and are not a representation or guarantee of investment returns or cash value. Cash Benefits. You may borrow against your Policy. The maximum amount of all loans is the Cash Surrender Value less three times the most recent Monthly Deduction. When you take a loan we will transfer an amount equal to the loan to our General Account as Collateral. We charge interest on the loan, and we credit interest on Collateral. Loans may have adverse tax consequences. When the Death Benefit becomes payable or the Policy is surrendered, we will deduct Policy loans and accrued interest from the proceeds otherwise payable. We also currently plan to make preferred loans available when a Policy is 10 years old. You may request a Withdrawal of Cash Surrender Value. However: You must withdraw at least $500; 5
You cannot withdraw more than the Cash Surrender Value on the date we receive your request minus three times the most recent Monthly Deduction for the most recent Monthly Policy Date; You may not allocate Withdrawals to the General Account until all the value in the Separate Account has been exhausted. We may deduct a Withdrawal charge from each Withdrawal. Withdrawals may have tax consequences. You may surrender your Policy at any time and receive the Cash Surrender Value, if any. The Cash Surrender Value will equal the Accumulated Value less any Policy loan with accrued interest and any Surrender Charge. Tax Benefits. Assuming the Policy qualifies as a life insurance contract for federal income tax purposes, you should not be deemed to be in constructive receipt of the Policy s value until there is a distribution from the Policy. Moreover, Death Benefits payable under a Policy should be excludable from the gross income of the Beneficiary. As a result, your Beneficiary generally should not have to pay U.S. federal income tax on the Death Benefit, although other taxes, such as estate taxes may apply. Variety of Investment Options. You may allocate Net Premiums among the subaccounts of the Separate Account and the General Account. The subaccounts in the Separate Account invest in a wide variety of portfolios that cover a broad spectrum of investment objectives and risk tolerances. We will credit interest at an effective annual rate of at least 4.0% on amounts invested in the General Account. As your needs or financial goals change, you can change your investment mix. You may make transfers among the Separate Account and the General Account. Currently, you may make an unlimited number of such transfers within the subaccounts of the Separate Account and from the Separate Account to the General Account, without charge. You may not make transfers out of the General Account that exceed the greater of: (a) 25% of the non-loaned Accumulated Value in such account at the time of transfer; or (b) $1,000. We allow only one such transfer out of the General Account in any Policy Year. Summary of the Principal Risks of Purchasing a Policy Investment Risk. We cannot give any assurance that any portfolio will achieve its investment objectives. You bear the entire investment risk on the value of your Policy you allocate to the Separate Account. In addition, we deduct Policy fees and charges from your Accumulated Value, which can significantly reduce your Accumulated Value. During times of poor performance, these deductions will have an even greater impact on your Accumulated Value. You could lose everything you invest, and your Policy could lapse without value, unless you pay additional premium prior to the lapse. Please note that frequent, large, or short-term transfers among subaccounts, such as those associated with market timing transactions, can adversely affect the portfolios and the returns achieved by Owners. Such transfers may dilute the value of portfolio shares, interfere with the efficient management of the portfolios, and increase brokerage and administrative costs of the portfolios. To protect Owners and portfolios from such effects, we have developed market timing procedures. See Disruptive Trading below. If you allocate premiums to the General Account, we credit your Accumulated Value in the General Account with a declared rate of interest. You assume the risk that the rate may decrease, although it will never be lower than a guaranteed minimum effective annual rate of 4%. Risk of Lapse. If on any Monthly Policy Date the Cash Surrender Value of a Policy is insufficient to cover the Monthly Deductions and other charges under the Policy, we will notify you of this, and the Policy will enter a 61-day Grace Period. If the Grace Period expires without a sufficient payment, the Policy will lapse, and will have no further value. This could happen: (1) if the investment returns on your chosen investment portfolios are lower than anticipated; (2) if you do not pay premiums at the levels you planned; or (3) if you take Policy loans. Your Policy generally will not lapse: (1) during the first 5 Policy Years as long as you pay the Minimum Guarantee Premium; (2) if you purchase the no lapse guarantee rider or the guaranteed death benefit rider, subject to certain conditions; or (3) you elect and exercise the overloan protection rider, subject to certain conditions. Tax Risks. We anticipate that a Policy issued on the basis of a standard rate class should generally be deemed a life insurance contract under Federal tax law. However, due to limited guidance under the Federal tax law, there is some uncertainty about the application of the Federal tax law to Policies issued on a substandard basis (i.e., a rate class involving higher than standard mortality risk) and such a Policy may not satisfy the applicable requirements in all circumstances, particularly if you pay the full amount of premiums permitted under the Policy. Depending on the total amount of premiums you pay, the Policy may be treated as a Modified Endowment Contract ( MEC ) under Federal tax laws. If a Policy is treated as a MEC, then surrenders, Withdrawals, and loans under the 6
Policy will be taxable as ordinary income to the extent there are earnings in the Policy. In addition, a 10% penalty tax may be imposed on surrenders, Withdrawals and loans taken before you attain age 59½. If a Policy is not a MEC, distributions generally will be treated first as a return of basis or investment in the contract and then as taxable income. Moreover, loans will generally not be treated as distributions. However, the tax consequences associated with preferred loans are uncertain. Finally, neither distributions nor loans from a Policy that is not a MEC are subject to the 10% penalty tax. See Modified Endowment Contracts below, for additional information. The tax treatment of the overloan protection rider that may be purchased with this Policy is uncertain. In particular, it is not clear whether the overloan protection rider will be effective to prevent taxation of the outstanding loan balance as a distribution when the overloan protection rider causes the Policy to convert to a fixed policy. Anyone contemplating the purchase of the Policy with the overloan protection rider should consult a tax adviser. See Federal Tax Considerations, below. You should consult a qualified tax adviser for assistance in all Policy-related tax matters. Withdrawal and Surrender Risks. The Surrender Charge under the Policy applies for 15 Policy Years after the Policy is issued. An additional Surrender Charge will apply for 15 years from the date of any increase in the Face Amount. It is possible that you will receive no net Cash Surrender Value if you surrender your Policy in the first few Policy Years. You should purchase the Policy only if you have the financial ability to keep it in force for a substantial period of time. You should not purchase the Policy if you intend to surrender all or part of the Policy s value in the near future. We designed the Policy to meet long-term financial goals. The Policy is not suitable as a short-term investment. Even if you do not ask to surrender your Policy, Surrender Charges may play a role in determining whether your Policy will lapse (or terminate without value), because Surrender Charges decrease the Cash Surrender Value, which is a measure we use to determine whether your Policy will enter a Grace Period (and possibly lapse). Withdrawals are not permitted in the first Policy Year, and we will reduce the Face Amount by the amount of a Withdrawal if Death Benefit Option A is in effect. A surrender or Withdrawal may have tax consequences. Loan Risks. A Policy loan, whether or not repaid, will affect the Accumulated Value over time because we subtract the amount of the loan from the subaccounts of the Separate Account and/or the General Account as Collateral, and this Collateral does not participate in the investment performance of the subaccounts of the Separate Account, or receive any higher interest rate credited to the General Account. We reduce the amount we pay on the Insured s death by the amount of any indebtedness. Your Policy may lapse if your indebtedness reduces the Cash Surrender Value to zero. A loan may have tax consequences. In addition, if you surrender your Policy or allow it to lapse while a Policy loan is outstanding, the amount of the loan, to the extent that it has not previously been taxed, will be added to any amount you receive and taxed accordingly. Portfolio Company Risks. A comprehensive discussion of the risks of each portfolio may be found in the prospectus for such portfolio. Please refer to the portfolios prospectuses for more information. There is no assurance that any portfolio will achieve its stated investment objective. Fee Tables The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Policy. If the amount of the charge depends on the personal characteristics of the Insured, then the fee table lists the minimum and maximum charges we assess under the Policy, and the fees and charges of an Insured with the characteristics set forth below. These charges may not be typical of the charges you will pay. The first table describes the fees and expenses that you will pay at the time you buy the Policy, surrender the Policy, take a Withdrawal from the Policy, or transfer Accumulated Value under the Policy among the subaccounts of the Separate Account and the General Account. Transaction Fees Charge Premium Tax Charge (1) When Charge is Deducted Upon receipt of each premium payment Amount Deducted - Maximum Guaranteed Charge 3.25% of each premium payment (2.0% for qualified employee Amount Deducted - Current Charge 3.25% of each premium payment (2.0% for qualified employee benefit plans) 7
Surrender Charge: (2) Deferred Administrative Charge Upon surrender or lapse of the Policy during the first 15 Policy Years, or 15 Policy Years following an increase in Face Amount benefit plans) Minimum and Maximum Charge (3) $ 0 - $2 per $1,000 of initial or increased Face Amount $ 0 - $2 per $1,000 of initial or increased Face Amount Charge for a 45 year old male nonsmoker, first Policy Year Deferred Sales Charge Deferred Sales Charge Minimum and Maximum Charge (4) Charge for a Deferred Sales Charge 45 year old male nonsmoker, first Policy Year Withdrawal Fees Transfer Fees Loan Interest Spread (5) Projection Report Charge Upon surrender or lapse of the Policy during the first 15 Policy Years or following an increase in Face Amount Upon making a Withdrawal Upon transfer after the 5 th transfer (the 12 th transfer for Policies issued in NY) in a Policy Year At the end of each Policy year, or upon death, surrender, or lapse, if earlier When report requested after the initial report $2 per $1,000 of Face Amount $1.10 to $37.75 per $1,000 of initial or increased Face Amount $8.26 per $1,000 of Face Amount $2 per $1,000 of Face Amount $1.10 to $37.75 per $1,000 of initial or increased Face Amount $8.26 per $1,000 of Face Amount $25 Lesser of 2% of amounts withdrawn or $25 $25 per transfer in excess None of 5 transfers (12 transfers for Policies issued in NY) in any one Policy Year 2% annually of amount held as Collateral $25 maximum in New York, no maximum elsewhere 1.3% annually of amount held as Collateral $25 (1) We may increase the Premium Tax Charge if applicable law changes so that the amounts of taxes on premiums paid by us increase. (2) The Surrender Charge is equal to the deferred administrative charge and the deferred sales charge. The deferred administrative charge is based on the Insured s issue age (or age on an increase in Face Amount) and Face Amount. The deferred sales charge is based on the Insured s issue age (or age on an increase in Face Amount), gender, rate class and the Face Amount. The Surrender Charges shown in the table may not be typical of the charges you will pay. Your Policy s data pages will indicate the charges applicable to your Policy. National Life or your agent will provide more detailed information about the Surrender Charges applicable to you at your request. (3) The minimum charge is based on an Insured with an Issue Age of 5 or less; the maximum charge is based on an Insured with an Issue Age of 25 or more. After the first 5 Policy Years, the charge declines linearly by month through the end of Policy Year 15. (4) The minimum charge is based on a female Insured with an Issue Age of 1; the maximum charge is based on male smoker Insured with an Issue Age of 68 or more. After the first 5 Policy Years, the charge declines linearly by month through the end of Policy Year 15. (5) The loan interest spread is the difference between the amount of interest we charge you for a loan (6.0%, compounded annually) and the amount of interest we credit to the amount in your Collateral loan account (currently 4.7% compounded annually). Currently, after the 10 th Policy year, we may credit your Collateral that is in excess of 50% of Accumulated Value with extra interest of 0.5% per annum over what is currently credited to loan Collateral prior to the 11th Policy Year. For loans taken after the 10th Policy year of not more than 50% of Accumulated Value, we may credit your Collateral with interest up to 6.0% compounded annually. Periodic Charges Other Than Portfolio Operating Expenses Charge Cost of Insurance: (1) When Charge is Deducted On the Date of Issue of the Policy and on each Monthly Policy Date Amount Deducted - Maximum Guaranteed Charge Amount Deducted - Current Charge 8
Minimum and Maximum Charge (2) $0.057 to $58.01 per $1,000 of Net Amount at Risk per month $0.023 to $0.18 per $1,000 of Net Amount at Risk per month Charge for a 45 year old male nonsmoker in the preferred underwriting class, Face Amount between $250,000 and $999,999, Policy Year 1 Mortality and Expense Risk Fees (3 ) Administrative Fees Charges for Optional Benefits Additional Protection Benefit (5) Minimum and Maximum Charge (6) On the Date of Issue of the Policy and on each day On the Date of Issue of the Policy and on each Monthly Policy Date On the Date of Issue of the Policy and on each Monthly Policy Date $0.28 per $1,000 of Net Amount at Risk per month Annual rate of 0.90% of the average daily net assets of each subaccount of the Separate Account $7.50 per month, plus $0.07 per $1,000 of Face Amount(4) $0.057 to $58.01 per $1,000 of Net Amount at Risk per month $0.22 per $1,000 of Net Amount at Risk per month Annual rate of 0.90% of the average daily net assets of each subaccount of the Separate Account $7.50 per month $0.013 to $19.94 per $1,000 of Net Amount at Risk per month Charge for a 45 year old male nonsmoker in the preferred underwriting class, Policy Year 1 Waiver of Monthly Deduction (5) On the Date of Issue of the Policy and on each Monthly Policy Date thereafter $0.28 per $1,000 of Net Amount at Risk per month $0.055 per $1,000 of Net Amount at Risk per month Minimum and Maximum Charge $0.051 to $0.27 per month multiplied by the Monthly Deduction $0.051 to $0.27 per month multiplied by the Monthly Deduction Charge for a 45 year old male nonsmoker in the preferred underwriting class, Policy Year 1 $0.075 per month multiplied by the Monthly Deduction $0.075 per month multiplied by the Monthly Deduction The next table describes the fees and expenses that you will pay periodically during the time you own the Policy, not including portfolio fees and expenses. Periodic Charges Other Than Portfolio Operating Expenses Charge Accidental Death Benefit (5) When Charge is Deducted On the Date of Issue of the Policy and on each Monthly Policy Date thereafter Amount Deducted - Maximum Guaranteed Charge Amount Deducted - Current Charge Minimum and Maximum Charge $0.023 to $0.18 per month per $1,000 of net amount of the increase in Death Benefit provided by the rider $0.023 to $0.18 per month per $1,000 of net amount of the increase in Death Benefit provided by the rider Charge for a 45 year old male nonsmoker in the preferred $0.086 per month per $1,000 of net amount of $0.086 per month per $1,000 of net amount of the increase 9
underwriting class, Policy Year 1 Guaranteed Insurability Option (7) On the Date of Issue of the Policy and on each Monthly Policy Date thereafter the increase in Death Benefit provided by the rider in Death Benefit provided by the rider Minimum and Maximum Charge $0.022 to $0.16 per month times the amount the rider permits you to increase the Face Amount $0.022 to $0.16 per month times the amount the rider permits you to increase the Face Amount Charge for a 35 year old male (not available for ages 40 and over) Guaranteed Death Benefit No Lapse Guaranty Disability Benefit - Payment of Mission Costs (7) On the Date of Issue of the Policy and on each Monthly Policy Date thereafter On the Date of Issue of the Policy and on each Monthly Policy Date On the Date of Issue of the Policy and on each Monthly Policy Date $0.15 per month times the amount the rider permits you to increase the Face Amount $0.01 per $1,000 of Face Amount per month $0.05 per $1,000 of Face Amount per month $0.15 per month times the amount the rider permits you to increase the Face Amount $0.01 per $1,000 of Face Amount per month $0.05 per $1,000 of Face Amount per month Minimum and Maximum Charge $1.65 to $4.25 per month $1.65 to $4.25 per month Charge for a 45 year old male nonsmoker in the preferred underwriting class, Policy Year 1 $3.06 per month $3.06 per month Periodic Charges Other Than Portfolio Operating Expenses Charge Accelerated Care Rider (7) When Charge is Deducted On the Date of Issue of the Policy and on each Monthly Policy Date Amount Deducted - Maximum Guaranteed Charge Amount Deducted - Current Charge Minimum and Maximum Charge $0.025 to $4.32 per $1,000 of Net Amount at Risk, plus from $0.0007 to $0.92 per dollar of Monthly Deduction, per month $0.01to $1.98 per $1,000 of Net Amount at Risk, plus from $0.0003 to $0.63 per dollar of Monthly Deduction, per month Charge for a 45 year old male nonsmoker in the preferred underwriting class, ACR1 with inflation protection option, Policy Year 1 Chronic Care Protection Rider (7) On the Date of Issue of the Policy and on each Monthly Policy Date $0.14 per $1,000 of Net Amount at Risk, plus $0.0038 per dollar of Monthly Deduction, per month Minimum and Maximum Charge $0.0051 to $4.34 per $1,000 of Face Amount per month $0.0051 to $4.34 per $1,000 of Face Amount per month Charge for a 45 year old male $0.18 per $1,000 of Face $0.18 per $1,000 of Face 10
nonsmoker in the preferred Amount per month underwriting class, EBR1 with inflation protection option without nonforfeiture benefit option, Policy Year 1 Overloan Protection At the time of exercise 0%-5% of Accumulated Value Amount per month 0%-5% of Accumulated Value (1) Cost of insurance charges vary based on factors including, the Insured s age, sex, Rate Class, Net Amount at Risk, and Face Amount, and the current cost of insurance charges also vary based on the Policy s Duration and size. In addition, current cost of insurance charges for currently issued Policies may be lower than for Policies issued during specified past periods. The Net Amount at Risk is the amount by which the Unadjusted Death Benefit under the Policy exceeds the Accumulated Value of the Policy. The cost of insurance charges shown in the table may not be typical of what you will pay. Your Policy s data page will indicate the guaranteed cost of insurance charges applicable to your Policy. We will also provide more detailed information concerning your charges at your request. (2) The current minimum charge is based on an Insured with the following characteristics: Issue Age 20, female, elite preferred nonsmoker, Policy year 11, for Face Amounts of $1,000,000 or more; the guaranteed minimum charge is based on an Insured with the following characteristics: Issue Ages 0-10, female, juvenile, the Policy Year in which Attained Age 10 is reached, for all Face Amount bands; the guaranteed maximum charge is based on an Insured with the following characteristics: all Issue Ages, male, all underwriting classes, the Policy Year in which Attained Ages 98, 99 and 100 are reached; and the current maximum charge is based on an Insured with the following characteristics: all Issue Ages, both sexes, all underwriting classes, the Policy Year in which Attained Ages 99 and 100 are reached. (3) We currently intend, starting in Policy Year 11, to partially offset this charge by reducing each Monthly Deduction by an amount equal to 0.50% per annum of the Accumulated Value in the Separate Account, and we also intend, starting in Policy Year 11, to credit interest on non-loaned Accumulated Value in the Fixed Account at rates that are 0.50% per annum higher than those that applies to Policies still in their first 10 Policy Years. These enhancements are not guaranteed, however. (4) $7.50 per month in all states other than New York and Texas. (5) The additional protection benefit, waiver of monthly deduction, and accidental death benefit rider charges vary by the Insured s Issue Age, sex, Rate Class and the Policy s Duration. The rider charges shown in the table may not be representative of the charges you will pay. Charges based on age may increase as the Insured ages. Your Policy s data page will indicate the guaranteed charges applicable to your Policy. National Life and/or your agent will provide more detailed information concerning your charges at your request. (6) The current minimum charge is based on an Insured with the following characteristics: Issue Age 20, female, elite preferred nonsmoker, Policy year 11; the guaranteed minimum charge is based on an Insured with the following characteristics: Issue Ages 0-10, female, juvenile, the Policy Year in which Attained Age 10 is reached; the guaranteed maximum charge is based on an Insured with the following characteristics: all Issue Ages, male, all underwriting classes, the Policy Year in which Attained Ages 98, 99 and 100 are reached; and the current maximum charge is based on an Insured with the following characteristics: all Issue Ages, male, all underwriting classes, the Policy Year in which Attained Age 100 is reached. For currently issued Policies, the current maximum charge will apply to all Issue Ages, males, preferred and standard smokers, at Attained Ages 98-100. (7) The guaranteed insurability option, disability benefit - payment of mission costs, accelerated care, and chronic care rider charges vary by the Insured s age and sex. The rider charges shown in the table may not be representative of the charges you will pay. Charges based on age may increase as the Insured ages. Your Policy s data page will indicate the charge applicable to your Policy. National Life and/or your agent will provide more detailed information concerning your charges at your request. The following table describes the portfolio fees and expenses that you will pay periodically during the time that you own the Policy. The table shows the minimum and maximum fees and expenses charged by any of the portfolios for the year ended December 31, 2015 (before any fee waivers or expense reimbursements). The expenses of the portfolios may be higher or lower in the future. More details concerning each portfolio s fees and expenses are contained in the prospectus for each portfolio. Underlying Fund Annual Expenses (as a percentage of underlying Fund average net assets) Total Annual Fund Operating Expenses (expenses that are deducted from fund assets, including management fee, distribution and/or service 12b-1 fees, and other expenses). Minimum Maximum 0.10% 1.36% The annual expenses as of December 31, 2015 (unless otherwise noted) of each Fund, before any fee waivers or expense reimbursements, are shown below. 1 Fund Manageme nt Fee 12b-1 Fees 2 11 Other Expenses Acquired Gross Waivers, Net Total Fund Fees Total Annual Expenses 3 Reimburse ments, and Recoupment Annual Expenses 3 Sentinel VPT Balanced Fund 0.55% 0.00% 0.32% 0.02% 0.89% 0.00% 0.89% Bond Fund 0.40% 0.00% 0.27% 0.01% 0.68% 0.00% 0.68%
Alger Common Stock Fund 0.50% 0.00% 0.22% 0.00% 0.72% 0.00% 0.72% Mid Cap Fund 0.50% 0.00% 0.31% 0.00% 0.81% 0.00% 0.81% Small Company Fund 0.50% 0.00% 0.28% 0.01% 0.79% 0.00% 0.79% Capital Appreciation Portfolio - Class O Shares 0.81% 0.00% 0.12% 0.00% 0.93% 0.00% 0.93% Large Cap Growth Portfolio - Class O Shares 0.71% 0.00% 0.15% 0.00% 0.86% 0.00% 0.86% Small Cap Growth Portfolio - Class O Shares 0.81% 0.00% 0.15% 0.00% 0.96% 0.00% 0.96% AB VPS Fund, Inc International Growth Portfolio - Class A Shares 0.75% 0.00% 0.36% 0.00% 1.11% 0.00% 1.11% International Value Portfolio - Class A Shares 0.75% 0.00% 0.10% 0.00% 0.85% 0.00% 0.85% Small/Mid Cap Value Portfolio - Class A Shares 0.75% 0.00% 0.07% 0.00% 0.82% 0.00% 0.82% Value Portfolio - Class A Shares 0.55% 0.00% 0.26% 0.00% 0.81% 0.00% 0.81% American Century VP Income & Growth Fund - Class I 0.70% 0.00% 0.00% 0.00% 0.70% 0.00% 0.70% Inflation Protection Fund - Class I 0.47% 0.00% 0.00% 0.00% 0.47% 0.00% 0.47% International Fund - Class I 1.33% 0.00% 0.00% 0.00% 1.33% 0.00% 1.33% Ultra Fund - Class I 1.00% 0.00% 0.00% 0.00% 1.00% 0.00% 1.00% Value Fund - Class I 0.96% 0.00% 0.00% 0.00% 0.96% 0.00% 0.96% Dreyfus VIF Appreciation Portfolio - Initial Shares 0.75% 0.00% 0.05% 0.00% 0.80% 0.00% 0.80% VIF Opportunistic Small Cap Portfolio - Initial Shares 0.75% 0.00% 0.10% 0.00% 0.85% 0.00% 0.85% VIF Quality Bond Portfolio - Initial Shares 0.65% 0.00% 0.27% 0.00% 0.92% 0.00% 0.92% Dreyfus Socially Responsible Growth Fund - Initial Shares 0.75% 0.00% 0.11% 0.00% 0.86% 0.00% 0.86% Deutsche Variable Series II Deutsche Large Cap Value VIP - Class B shares 0.64% 0.25% 0.21% 0.00% 1.10% Deutsche Small Mid Cap Value VIP - Class B shares 0.65% 0.25% 0.26% 0.00% 1.16% DWS VIT Funds 12 4 5 0.00% 1.10% 0.00% 1.16% Small Cap Index VIP Fund 0.35% 0.00% 0.19% 0.00% 0.54% 6 0.09% 0.45% 6 Fidelity VIP VIP Contrafund Portfolio - Initial Class 0.55% 0.00% 0.08% 0.00% 0.63% 0.00% 0.63% VIP Equity-Income Portfolio - Initial Class 0.45% 0.00% 0.09% 0.08% 0.62% 0.00% 0.62% VIP Growth Portfolio - Initial Class 0.55% 0.00% 0.09% 0.00% 0.64% 0.00% 0.64% VIP High Income Portfolio - Initial Class 0.56% 0.00% 0.12% 0.00% 0.68% 0.00% 0.68% VIP Index 500 Portfolio - Initial Class 0.05% 0.00% 0.06% 0.00% 0.10% 0.00% 0.10% VIP Investment Grade Bond Portfolio - Initial Class 0.31% 0.00% 0.11% 0.00% 0.42% 0.00% 0.42% VIP Mid Cap Portfolio - Initial Class 0.55% 0.00% 0.08% 0.00% 0.63% 0.00% 0.63% VIP Government Money Market Portfolio - Service Class 0.17% 0.10% 0.08% 0.00% 0.35% 0.00% 0.35% VIP Overseas Portfolio - Initial Class 0.55% 0.00% 0.08% 0.00% 0.63% 0.00% 0.63% 4 5
VIP Value Strategies Portfolio - Initial Class 0.55% 0.00% 0.12% 0.00% 0.67% 0.00% 0.67% Franklin Templeton Foreign VIP Fund - Class 2 shares 0.75% 0.25% 0.03% 0.00% 1.03% 0.00% 1.03% Global Real Estate VIP Fund - Class 2 shares 1.05% 0.25% 0.06% 0.00% 1.36% 0.00% 1.36% Mutual Global Discovery VIP Fund - Class 1 Shares 0.94% 0.00% 0.08% 0.00% 1.02% 0.00% 1.02% Mutual Shares VIP Fund - Class 2 shares 0.69% 0.25% 0.04% 0.00% 0.98% 0.00% 0.98% Small Cap Value VIP Fund - Class 2 7 shares 0.62% 0.25% 0.03% 0.01% 0.91% 0.00% 0.91% Small-Mid Cap Growth VIP Fund - Class 2 shares 0.77% 0.25% 0.04% 0.00% 1.06% 0.00% 1.06% U.S. Government Securities VIP Fund- Class 1 Shares 0.47% 0.00% 0.03% 0.00% 0.50% 0.00% 0.50% Invesco V.I. Mid Cap Growth Fund - Series I Shares 0.75% 0.00% 0.32% 0.00% 1.07% 0.00% 1.07% 8 Global Health Care Fund- Series I Shares 0.75% 0.00% 0.32% 0.01% 1.08% 0.00% 1.08% Technology Fund- Series I Shares 0.75% 0.00% 0.40% 0.00% 1.15% 0.00% 1.15% JP Morgan Insurance Trust 9 Small Cap Core Portfolio - Class 1 Shares 0.38% 0.00% 0.38% 0.00% 0.76% Neuberger Berman AMT 0.00% 0.76% Large Cap Value Portfolio - I Class 0.85% 0.00% 0.29% 0.00% 1.14% 0.00% 1.14% Mid Cap Growth Portfolio - I Class 0.84% 0.00% 0.13% 0.01% 0.98% 0.00% 0.98% Short Duration Bond Portfolio - I Class 0.65% 0.00% 0.19% 0.00% 0.84% 0.00% 0.84% Mid-Cap Growth Portfolio - S Class 0.84% 0.25% 0.13% 0.01% 1.23% 0.00% 1.23% Socially Responsive Portfolio - I Class 0.84% 0.00% 0.14% 0.00% 0.98% 0.00% 0.98% Oppenheimer Variable Accounts Funds Conservative Balanced Fund/VA - Service Shares 0.74% 0.25% 0.17% 0.00% 1.16% 0.24% 10 0.92% Main Street Small Cap Fund/VA - Service Shares 0.68% 0.25% 0.12% 0.00% 1.05% 0.00% 1.05% Global Strategic Income Fund/VA - 11 Service Shares 0.59% 0.25% 0.03% 0.15% 1.02% 0.03% 12 0.99% T. Rowe Price Blue Chip Growth Portfolio - Class II shares 0.85% 0.25% 0.00% 0.00% 1.10% 0.00% 1.10% Equity Income Portfolio - Class II shares 0.85% 0.25% 0.00% 0.00% 1.10% 0.00% 1.10% Health Sciences Portfolio - Class II shares 0.95% 0.25% 0.00% 0.00% 1.20% 0.00% 1.20% Personal Strategy Balanced Portfolio VIP I 0.90% 0.00% 0.13% 0.00% 1.03% 0.13% 13 0.90% VanEck VIP Trust Emerging Markets Fund - Initial Class 1.00% 0.00% 0.14% 0.00% 1.14% 14 0.00% 1.14% 14 Unconstrained Emerging Markets 15 15 Bond Fund - Initial Class 1.00% 0.00% 0.34% 0.00% 1.34% 0.24% 1.10% Global Hard Assets Fund - Initial Class 1.00% 0.00% 0.05% 0.00% 1.05% 16 0.00% 1.05% 16 Wells Fargo Advantage VT Discovery Fund 0.75% 0.25% 0.17% 0.00% 1.17% 0.02% 1.15% 17 Opportunity Fund 0.70% 0.25% 0.14% 0.00% 1.09% 0.09% 1.00% 18 9 13
1. The Fund fees and expenses used to prepare the table above were provided to us by the Funds. We have not independently verified such information. Current or future expenses may be greater or less than those shown. In addition, certain Funds may impose a redemption fee of no more than 2% of the amount of Fund shares redeemed. We may be required to implement a Fund's redemption fee. The redemption fee will be assessed against your Contract Value. For more information, please see each Fund's prospectus. 2. Our affiliate, Equity Services, Inc., the principal underwriter for the Contracts, will receive 12b-1 fees deducted from certain Fund assets attributable to the Contracts for providing distribution and shareholder support services to some Funds. 3. The Total Annual Fund Operating Expenses may not be the same as the reported in the portfolio's financial highlights and shareholder reports, because Total Annual Fund Operating Expenses include expenses related to other investment companies acquired by the portfolio, if any, while the financial highlights and shareholder reports do not. 4. Through April 30, 2017 the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay certain operating expenses of the portfolio to the extent necessary to maintain the portfolio s total annual operating expenses at ratios no higher than 1.06% for Class B shares, excluding certain expenses, taxes, brokerage and interest expense. These agreements may only be terminated with the consent of the fund s Board. 5. Through September 30, 2016, the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay certain operating expenses of the portfolio to the extent necessary to maintain the portfolio's total annual operating expenses at 1.18% for Class B shares, excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest. The agreement may only be terminated with the consent of the fund's Board. 6. Through April 30, 2017, the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay certain operating expenses of the portfolio to the extent necessary to maintain the portfolio's total annual operating expenses at ratios no higher than 0.45% for Class A shares, excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest. The agreement may only be terminated with the consent of the fund's Board. 7. The investment manager has contractually agreed in advance to reduce its fees as a result of the fund s investment in a Franklin Templeton money market fund (the acquired fund ) for at least the next 12 month period. 8. Invesco Advisers, Inc. ( Invesco or the Adviser ) has contractually agreed to waive a portion of the Fund s management fee in an amount equal to the net management fee that Invesco earns on the Fund s investments in certain affiliated funds, which will have the effect of reducing the Acquired Fund Fees and Expenses. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2017. The fee waiver agreement cannot be terminated during its term. 9. The Portfolio s "Adviser", Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fees and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.70%. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Board of Directors of the Universal Institutional Funds, Inc. (the Fund ) acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. 10. After discussions with the Fund's Board, the Manager has contractually agreed to waive fees and/or reimburse the Fund for certain expenses in order to limit "Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement" (excluding any applicable dividend expense, taxes, interest and fees from borrowing, any subsidiary expenses, Acquired Fund Fees and Expenses, brokerage commissions, extraordinary expenses and certain other Fund expenses) to annual rates of 0.92% as calculated on the daily net assets of the Fund. This fee waiver and/or expense reimbursements may not be amended or withdrawn for one year from the date of this prospectus, unless approved by the Board. 11. "Management Fees" reflects the gross management fees paid to the Manager by the Fund during the Fund's most recent fiscal year and the gross management fee of the Subsidiary during the Fund's most recent fiscal year. 12. After discussion with the Fund's Board, the Manager has contractually agreed to waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund's investment in funds managed by the Manager or its affiliates. This fee waiver and/or expense reimbursement may not be amended or withdrawn until one year from the date of this prospectus, unless approved by the Board. 13. T. Rowe Price Associates, Inc. is required to permanently waive a portion of its management fee charged to the fund 14
in an amount sufficient to fully offset any acquired fund fees and expenses related to investments in other T. Rowe Price mutual funds. The amount of the waiver will vary each fiscal year in proportion to the amount invested in other T. Rowe Price mutual funds. The T. Rowe Price funds would be required to seek regulatory approval in order to terminate this arrangement. 14. The Adviser has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.50% of the Fund's average daily net assets per year until May 1, 2017. During such time, the expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation. 15. The Adviser has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.10% of the Fund's average daily net assets per year until May 1, 2017. During such time, the expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation. 16. The Adviser has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.20% of the Fund's average daily net assets per year until May 1, 2017. During such time, the expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation. 17. The Adviser has committed through April 30, 2017 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund's Total Annual Fund Operating Expenses After Fee Waiver at 1.15%. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses and extraordinary expenses are excluded from the cap. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. 18. The Adviser has committed through April 30, 2017 to waive fees and/or reimburse expenses to the extent necessary to cap the Fund's Total Annual Fund Operating Expenses After Fee Waiver at 1.00%. Brokerage commissions, stamp duty fees, interest, taxes, acquired fund fees and expenses and extraordinary expenses are excluded from the cap. After this time, the cap may be increased or the commitment to maintain the cap may be terminated only with the approval of the Board of Trustees. For information concerning compensation paid in connection with the sale of the Policies, see Distribution of the Policies. 15