<PAGE> 1
Registration No. 333-31725
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
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-4
(EXACT NAME OF TRUST)
----------------------------
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
DENNIS W. CLICK
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------------------
This Post-Effective Amendment amends the Registration Statement in respect to
the Prospectus and the Financial Statements.
It is proposed that this filing will become effective (check appropriate box).
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities being registered: Flexible Premium Variable Universal Life
Insurance Policies
Approximate date of proposed offering: Continuously on and after May 1, 1998
[ ] Check box if it is proposed that this filing will become effective on (date)
at (time) pursuant to Rule 487.
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<TABLE>
<CAPTION>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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
</TABLE>
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<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
44................................................................................How The Cash Value Varies
45................................................................................Not Applicable
46................................................................................How The Cash Value Varies
47................................................................................Not Applicable
48................................................................................Custodian of Assets
49................................................................................Not Applicable
50................................................................................Not Applicable
51................................................................................Summary of The Policies;
Information About The Policies
52................................................................................Substitution of Securities
53................................................................................Taxation of The Company
54................................................................................Not Applicable
55................................................................................Not Applicable
56................................................................................Not Applicable
57................................................................................Not Applicable
58................................................................................Not Applicable
59................................................................................Financial Statements
</TABLE>
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<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY
P.O. Box 182150
Columbus, Ohio 43218-2150
(800) 547-7548, TDD (800) 238-3035
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-4
The life insurance policies offered by this prospectus are flexible premium
variable universal life insurance policies (collectively referred to as the
"Policies"). The Policies are designed to provide life insurance coverage and
the flexibility to vary the amount and frequency of premium payments. The
Policies may also provide a Cash Surrender Value if the Policy is terminated
during the lifetime of the Insured. Nationwide Life Insurance Company (the
"Company") guarantees to keep the Policy in force during the Guaranteed Policy
Continuation Period provided that minimum premium requirements have been met
(see "Grace Period and Guaranteed Policy Continuation Provision"). The death
benefit and Cash Value of the Policies may vary to reflect the experience of the
Nationwide VLI Separate Account-4 (the "Variable Account") or the Fixed Account
to which Cash Values are allocated.
The policies described in this prospectus meet the definition of "life
insurance" under Section 7702 of the Internal Revenue Code (the "Code").
The Policy Owner may allocate Net Premiums and Cash Value to one or more of the
Sub-Accounts of the Variable Account and the Fixed 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
Mutual Fund options:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.,
A MEMBER OF THE AMERICAN CENTURY(SM) FAMILY OF INVESTMENTS
American Century VP Income & Growth American Century VP International
American Century VP Value
DREYFUS
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund, Inc.
Dreyfus Variable Investment Fund - Capital Appreciation Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Equity-Income Portfolio: Service Class VIP Growth Portfolio: Service Class
VIP High Income Portfolio: Service Class* VIP Overseas Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Contrafund Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
VIP III Growth Opportunities Portfolio: Service Class
MORGAN STANLEY
Morgan Stanley Universal Funds, Inc. - Emerging Markets Debt Portfolio
Van Kampen American Capital Life Investment Trust - Morgan Stanley Real Estate
Securities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
Capital Appreciation Fund Government Bond Fund
Money Market Fund Total Return Fund
Nationwide Balanced Fund
Nationwide Equity Income Fund
Nationwide Global Equity Fund
Nationwide High Income Bond Fund*
Nationwide Multi Sector Bond Fund*
Nationwide Select Advisers Mid Cap Fund
Nationwide Small Cap Value Fund
Nationwide Small Company Fund
1
<PAGE> 5
Nationwide Strategic Growth Fund
Nationwide Strategic Value Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
AMT Guardian Portfolio AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Aggressive Growth Fund
(formerly "Oppenheimer Capital Appreciation Fund")
Oppenheimer Growth Fund Oppenheimer Growth & Income Fund
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Emerging Markets Fund Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
Growth & Income Portfolio International Equity Portfolio
Post-Venture Capital Portfolio
* These Underlying Mutual Funds invest in lower quality debt securities commonly
referred to as junk bonds.
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 SUBJECT TO A GRACE PERIOD, UNLESS THE MINIMUM PREMIUM
REQUIREMENTS HAVE BEEN MET (SEE "GRACE PERIOD AND GUARANTEED POLICY
CONTINUATION PROVISION"). THIS PROSPECTUS GENERALLY DESCRIBES ONLY THAT PORTION
OF THE CASH VALUE ALLOCATED TO THE VARIABLE ACCOUNT. FOR A BRIEF SUMMARY OF THE
FIXED ACCOUNT, SEE "THE FIXED ACCOUNT OPTION."
THE BENEFITS DESCRIBED IN THIS PROSPECTUS MAY NOT BE AVAILABLE IN EVERY
JURISDICTION. PLEASE REFER TO YOUR POLICY FOR SPECIFIC BENEFIT INFORMATION.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, ANY ADVISER OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED
ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT
INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF
PRINCIPAL.
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.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE, www.sec.gov, THAT
CONTAINS ANY MATERIAL INCORPORATED BY REFERENCE RELATING TO THIS PROSPECTUS.
INFORMATION ABOUT THIS PRODUCT AND OTHER BEST OF AMERICA PRODUCTS CAN BE
OBTAINED ON THE WORLD-WIDE WEB AT www.bestofamerica.com.
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 MAY 1, 1998.
<PAGE> 6
GLOSSARY OF TERMS
ATTAINED AGE- The Insured's age on the Policy Date, plus the number of full
years since the Policy Date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Cash
Value of the Variable Account.
BENEFICIARY- The person to whom the Death Proceeds are paid.
CASH VALUE- The sum of the Policy values in the Variable Account, Fixed Account
and any associated value in the Policy Loan Account.
CASH SURRENDER VALUE- The Policy's Cash Value, less any Indebtedness under the
Policy, less Surrender Charge.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies
while the policy is in force prior to the Maturity Date.
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 in other separate accounts that have been or may be established by
the Company.
GUARANTEED POLICY CONTINUATION PERIOD- The guaranteed period during which a
policy will continue in force and not lapse, and is the lesser of 30 Policy
Years or the number of Policy Years until the Insured reaches Attained Age 65;
provided that for Policies issued to an Insured age 55 or older, the Guaranteed
Period is 10 years. This provision is subject to state restrictions.
SECURITIES AND EXCHANGE COMMISSION GUIDELINE LEVEL PREMIUM- The amount of level
annual premium calculated in accordance with the provisions of Rule 6(e)(3)(T)
under Investment Company Act of 1940. It represents the level annual premiums
required to mature the Policy under reasonable mortality and expense charges,
and at an annual effective interest rate of 5%.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDEBTEDNESS- Amounts owed the Company as a result of Policy loans including
both principal and accrued interest.
INITIAL INVESTMENT DATE- The later of the Policy Date or the date on which the
Company receives the Initial Premium at the Home Office.
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.
INSURED- The person whose life is covered by the Policy, and who is named on the
Policy Data Page.
MATURITY DATE- The Policy Anniversary on or next following the Insured's 100th
birthday.
MINIMUM MONTHLY PREMIUM- It is used to measure the total amount of premiums that
must be paid during the Guaranteed Policy Continuation Period to guarantee the
Policy stays in force and is shown on the Policy Data Page.
MINIMUM REQUIRED DEATH BENEFIT- Is the lowest death benefit which will qualify
the policy as life insurance under Section 7702 of the Code.
MINIMUM SPECIFIED AMOUNT- It is shown on the Policy Data Page. Changes to the
Policy which result in Specified Amount below the Minimum Specified Amount will
not be processed.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
NET AMOUNT AT RISK- The Net Amount At Risk can be determined as of the Monthly
Anniversary Day or any other day. The Net Amount At Risk on a Monthly
Anniversary Day is the death benefit minus the Cash Value prior to deduction of
the base Policy cost of insurance charge. On any other day the Net Amount At
Risk is the death benefit minus the Cash Value.
3
<PAGE> 7
NET ASSET VALUE- The value of one share of an Underlying Mutual Fund at the end
of a market day or at the close of the New York Stock Exchange. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
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(IES)- The variable life insurance Policy(ies) offered by this prospectus.
POLICY ANNIVERSARY- The same day and month as the Policy Date for succeeding
years.
POLICY CHARGES- All deductions made from the premiums and the Policy 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.
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.
SPECIFIED AMOUNT- A dollar amount used to determine the death benefit under a
Policy. It is shown on the Policy Data Page.
SUB-ACCOUNT- A part of the Variable Account, the assets of which are invested
exclusively in a corresponding Underlying Mutual Fund.
SURRENDER CHARGE- An amount deducted from the Cash Value if the Policy is
surrendered or if the Specified Amount is reduced as a result of a request from
the Policy Owner.
TARGET PREMIUM- The annual premium at which the sales load is reduced on a
current basis.
UNDERLYING MUTUAL FUNDS- The underlying mutual funds which correspond to the
Sub-Accounts of the Variable Account.
VALUATION DATE- Each day the New York Stock Exchange and the 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.
VALUATION PERIOD- A period commencing with the close of business on the New York
Stock Exchange and ending at the close of business for the next succeeding
Valuation Date.
VARIABLE ACCOUNT- Nationwide VLI Separate Account-4, a separate investment
account of Nationwide Life Insurance Company.
4
<PAGE> 8
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS............................................................................................3
SUMMARY OF THE POLICIES......................................................................................8
Variable Life Insurance.............................................................................8
The Variable Account and its Sub-Accounts...........................................................8
The Fixed Account...................................................................................8
Deductions and Charges..............................................................................8
Premiums...........................................................................................10
NATIONWIDE LIFE INSURANCE COMPANY...........................................................................10
THE VARIABLE ACCOUNT........................................................................................10
Investments of the Variable Account................................................................11
-American Century Variable Portfolios, Inc., a member of the American
Century(sm) Family of Investments................................................................12
-Dreyfus Stock Index Fund, Inc.....................................................................12
-Dreyfus Variable Investment Fund..................................................................13
-The Dreyfus Socially Responsible Growth Fund, Inc.................................................13
-Fidelity Variable Insurance Products Fund.........................................................13
-Fidelity Variable Insurance Products Fund II......................................................14
-Fidelity Variable Insurance Products Fund III.....................................................14
-Morgan Stanley Universal Funds, Inc...............................................................14
-Nationwide Separate Account Trust.................................................................15
-Subadvised Nationwide Funds.....................................................................15
-Neuberger & Berman Advisers Management Trust......................................................18
-Oppenheimer Variable Account Funds................................................................18
-Van Eck Worldwide Insurance Trust.................................................................19
-Van Kampen American Capital Life Investment Trust.................................................19
-Warburg Pincus Trust..............................................................................20
Reinvestment.......................................................................................20
Transfers..........................................................................................20
Dollar Cost Averaging..............................................................................21
Substitution of Securities.........................................................................21
Voting Rights......................................................................................22
INFORMATION ABOUT THE POLICIES..............................................................................22
Underwriting and Issuance..........................................................................22
-Minimum Requirements for Issuance of a Policy.....................................................22
-Premium Payments..................................................................................22
Allocation of Net Premium and Cash Value...........................................................23
Short-Term Right to Cancel Policy..................................................................23
POLICY CHARGES..............................................................................................23
Deductions from Premiums...........................................................................23
Surrender Charges..................................................................................24
-Reductions to Surrender Charges...................................................................25
Deductions from Cash Value.........................................................................25
-Monthly Cost of Insurance.........................................................................26
-Monthly Administrative Charge.....................................................................26
-Mortality and Expense Risk Charge.................................................................26
Reduction of Charges...............................................................................27
Expenses of the Underlying Mutual Funds............................................................27
HOW THE CASH VALUE VARIES...................................................................................30
How the Investment Experience is Determined........................................................30
Net Investment Factor..............................................................................31
Determining the Cash Value.........................................................................31
Valuation Periods and Valuation Dates..............................................................31
SURRENDERING THE POLICY FOR CASH............................................................................31
Right to Surrender.................................................................................31
Cash Surrender Value...............................................................................31
Partial Surrenders.................................................................................32
-Preferred Partial Surrenders......................................................................32
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
-Reduction of the Specified Amount.................................................................32
Maturity Proceeds..................................................................................32
Income Tax Withholding.............................................................................32
POLICY LOANS................................................................................................32
Taking a Policy Loan...............................................................................32
Effect on Investment Performance...................................................................33
Interest...........................................................................................33
Effect on Death Benefit and Cash Value.............................................................33
Repayment..........................................................................................34
HOW THE DEATH BENEFIT VARIES................................................................................34
Calculation of the Death Benefit...................................................................34
Proceeds Payable on Death..........................................................................34
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY................................................................34
CHANGES OF INVESTMENT POLICY................................................................................35
GRACE PERIOD AND GUARANTEED POLICY CONTINUATION PROVISION...................................................35
Grace Period.......................................................................................35
Guaranteed Policy Continuation Provision...........................................................35
REINSTATEMENT...............................................................................................35
THE FIXED ACCOUNT OPTION....................................................................................36
CHANGES IN EXISTING INSURANCE COVERAGE......................................................................36
Specified Amount Increases.........................................................................36
Specified Amount Decreases.........................................................................36
Changes in the Death Benefit Option................................................................37
OTHER POLICY PROVISIONS.....................................................................................37
Policy Owner.......................................................................................37
Beneficiary........................................................................................37
Assignment.........................................................................................37
Incontestability...................................................................................37
Error in Age or Sex................................................................................38
Suicide............................................................................................38
Nonparticipating Policies..........................................................................38
Riders.............................................................................................38
LEGAL CONSIDERATIONS........................................................................................38
DISTRIBUTION OF THE POLICIES................................................................................38
CUSTODIAN OF ASSETS.........................................................................................39
TAX MATTERS.................................................................................................39
Policy Proceeds....................................................................................39
-Withholding.......................................................................................40
-Federal Estate and Generation-Skipping Transfer Taxes.............................................40
-Non-Resident Aliens...............................................................................40
Taxation of the Company............................................................................41
Tax Changes........................................................................................41
THE COMPANY.................................................................................................41
COMPANY MANAGEMENT..........................................................................................42
Directors of the Company...........................................................................42
Executive Officers of the Company..................................................................44
OTHER CONTRACTS ISSUED BY THE COMPANY.......................................................................44
STATE REGULATION............................................................................................44
REPORTS TO POLICY OWNERS....................................................................................45
ADVERTISING.................................................................................................45
YEAR 2000 COMPLIANCE ISSUES.................................................................................45
LEGAL PROCEEDINGS...........................................................................................45
EXPERTS.....................................................................................................46
REGISTRATION STATEMENT......................................................................................46
LEGAL OPINIONS..............................................................................................46
APPENDIX 1..................................................................................................47
APPENDIX 2..................................................................................................50
FINANCIAL STATEMENTS........................................................................................66
</TABLE>
6
<PAGE> 10
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.
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.
7
<PAGE> 11
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The Policies offered by the Company provide for life insurance coverage on the
Insured. The policies may provide for a Cash Surrender Value which is payable if
the policy is terminated during the Insured's lifetime.
The death benefit and Cash Value of the policies may increase or decrease to
reflect the investment performance of the Sub-Accounts 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 the Policy Charges, the Policy will
lapse without value. Nationwide Life Insurance Company guarantees to keep the
Policy in force during the Guaranteed Policy Continuation Period provided the
premium 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 ("Code"). Excess premiums paid may also cause the policy
to become a modified endowment contract. 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 selects the
Sub-Accounts or the Fixed Account into which the Cash Value will be allocated
(see "Allocation of Cash Value"). In such states which require a return of
premiums to those Policy Owners exercising their short term right to cancel (see
"Short Term Right to Cancel Policy"), the Net Premiums will be allocated to the
NSAT- Money Market Fund (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.
Assets of each Sub-Account are invested at Net Asset Value in shares of
corresponding Underlying Mutual Funds (see "Allocation of Net Premium and Cash
Value"). 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 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 3%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the premiums and the Cash Value of the
policy. These charges are made for administrative and 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 for the respective Underlying Mutual Funds.
The Company deducts a sales load from each premium payment received which is
guaranteed never to exceed 2.5% of such premium payment. On a current basis, the
sales load, in all years, is 2.5% of premiums paid up to the Target Premium plus
0.5% of premiums in excess of the Target Premium. 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.
The Company also deducts a charge for tax expense equal to 3.5%, on both current
and guaranteed basis, of all premium payments. 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 3.5% tax expense
rate consists of the following components: (1) a state premium tax rate of
2.25%; and (2) a federal tax rate of 1.25%. There is no charge for tax expense
in the State of Oregon. However, there is a charge for administrative expenses
equal to 3.5% on both a current and guaranteed basis of all premium payments.
The Company also deducts the following charges from the Policy's Cash Value on
the Policy Date and each subsequent Monthly Anniversary Day:
- monthly cost of insurance; plus
- monthly cost of any additional benefits provided by riders to
the Policy; plus
8
<PAGE> 12
- an administrative expense charge. This charge is $10 per month in
the first year and $5 per month in renewal years. The charge may
be increased at the sole discretion of the Company but may not
exceed $10 per month in the first year, $7.50 per month in renewal
years; plus
- mortality and expense risk charge. This charge is equal to an
annual effective rate multiplied by the Cash Value attributable to
the Variable Account. The annual effective rate is 0.60% for the
first $25,000 of Cash Value attributable to the Variable Account,
0.30% for the next $225,000 of Cash Value attributable to the
Variable Account and 0.10% for all Cash Value attributable to the
Variable Account in excess of $250,000.
For Policies which are surrendered during the first nine Policy Years, the
Company deducts a Surrender Charge. This Surrender Charge is comprised of an
underwriting component and a sales component. The maximum initial Surrender
Charge varies by issue age, sex, Specified Amount and underwriting
classification and is calculated based on the initial Specified Amount. The
Surrender Charge in renewal years is equal to a percentage of the initial
Surrender Charge. The following table illustrates the maximum initial Surrender
Charge per $1,000 of initial Specified Amount for Policies which are issued on a
standard basis (see Appendix 1 for specific examples).
Initial Specified Amount $50,000-$99,999
----------------------------------------
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
<S> <C> <C> <C> <C> <C>
25 $7.773 $7.518 $8.369 $7.818
35 8.817 8.396 9.811 8.889
45 12.185 11.390 13.884 12.164
55 15.628 13.995 18.410 15.106
65 22.274 19.043 26.559 20.607
</TABLE>
Initial Specified Amount $100,000 +
-----------------------------------
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
<S> <C> <C> <C> <C> <C>
25 $5.773 $5.518 $6.369 $5.818
35 6.817 6.396 7.811 6.889
45 9.685 8.890 11.384 9.664
55 13.128 11.495 15.910 12.606
65 21.274 18.043 25.559 19.607
</TABLE>
Policies that are surrendered during the first nine Policy Years following an
increase in the Specified Amount will incur a Surrender Charge associated with
the increase. This Surrender Charge is comprised of an underwriting component
and a sales component. The maximum initial Surrender Charge associated with the
increase is based on the attained age at the time of the increase, the
underwriting classification of the increase, sex, and the amount of the increase
in Specified Amount. The actual initial Surrender Charge associated with the
increase is based upon the maximum initial Surrender Charge associated with the
increase and the premium received within one year of the increase in Specified
Amount.
Increases that are caused by a change in the death benefit option that preserves
the Net Amount At Risk are not subject to a Surrender Charge (for a discussion
on death benefit options see "Calculation of the Death Benefit"). The Surrender
Charge associated with the increase for Policy Years following the increase is a
percentage of the initial Surrender Charge.
The following table illustrates the maximum initial Surrender Charge per $1,000
of Specified Amount increase for Policies increasing coverage on a standard
basis.
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
25 $3.464 $3.311 $3.821 $3.491
35 4.090 3.837 4.686 4.133
45 5.811 5.334 6.830 5.798
55 7.877 6.897 9.546 7.563
65 12.764 10.826 15.335 11.764
</TABLE>
9
<PAGE> 13
The renewal surrender charge is reduced by any partial surrender charge actually
paid on previous decreases in Specified Amount. On any partial surrender after
the first Policy Year, a service charge of $25.00 may be deducted from the
amount of the partial surrender.
Decreases in Specified Amount, that are not associated with a partial withdrawal
or a death benefit option change that preserves the Net Amount At Risk, will
incur a proportional Surrender Charge. For a Policy with prior increases in
Specified Amounts, these decreases will be made on a LIFO (last in first out)
basis and therefore decrease each segment in reverse order of its effective
date. For each segment that is reduced by the decrease, a proportional surrender
charge will be incurred. The total Surrender Charge for the decrease will be the
sum of these proportional surrender charges for the decreases in various
segments.
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.
PREMIUMS
The minimum Initial Premium for which a Policy may be issued is equal to three
times the initial Minimum Monthly Premium.
For a limited time, the Policy Owner has the right to cancel the Policy and
receive an amount specified by the laws of the state in which the Policy was
issued (see "Short-Term Right to Cancel Policy").
The Initial Premium is due on the Policy Date. It will be credited on the
Initial Investment 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 Guaranteed
Policy Continuation Period, the total premium payments less any Policy
Indebtedness, less any partial surrenders, must be greater than or equal to the
sum of the Minimum Monthly Premiums in order to guarantee the Policy remain in
force. The Minimum Monthly Premiums are shown on the Policy data page.
The Company will send Scheduled Premium payment reminder notices to the Policy
Owner according to the premium mode shown on the Policy data page.
The Initial Premium may be paid to the Company at our Home Office or to an
authorized agent. All premiums after the first are payable at the Home Office.
Premium receipts will be furnished upon request.
Each premium payment must be at least $50. 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" with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215.
The Company is a provider of life insurance, annuities and retirement products.
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 the Company, on December 3, 1987,
pursuant to 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 ("the
1940 Act"). Nationwide Life Insurance Company, One Nationwide Plaza, Columbus,
Ohio 43215 serves as Trustee for the Trust. Nationwide Advisory Services, Inc.,
One Nationwide Plaza, Columbus, Ohio 43215 serves as principal
10
<PAGE> 14
underwriter for the Trust. Such registration does not involve supervision of the
management of the Variable Account or of 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 Sub-Accounts and the Fixed Account (see
"Allocation of Net Premium and Cash Value"). In such states which require a
return of premiums to those Policy Owners exercising their short term right to
cancel (see "Short Term Right to Cancel Policy"), Net Premiums will be allocated
to the NSAT- Money Market Fund (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. At the end of this period, the Cash Value in that Sub-Account will be
transferred to the 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 and as set forth in
this prospectus (see "Transfers", "Allocation of Net Premium and Cash Value" and
"Short-Term Right to Cancel Policy").
Additional Premium payments, upon acceptance, will be allocated to the NSAT-
Money Market Fund unless the Policy Owner specifies otherwise (see "Premium
Payments").
NSAT is a registered investment company which receives investment advice from a
registered investment adviser, and is managed by Nationwide Advisory Services,
Inc.
The Underlying Mutual Fund options are NOT available to the general public
directly. The Underlying Mutual Funds are available as investment options in
variable life insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in certain
qualified pension or retirement plans.
Some of the Underlying Mutual Funds have been established by investment advisers
which manage publicly traded mutual funds having similar names and investment
objectives. While some of the Underlying Mutual Funds may be similar to, and may
in fact be modeled after publicly traded mutual funds, Contract purchasers
should understand that the Underlying Mutual Funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any corresponding Underlying
Mutual Funds may differ substantially.
The 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 for the respective Underlying Mutual Funds.
11
<PAGE> 15
A summary of investment objectives is contained in the description of each
Underlying Mutual Fund below. 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.
Prospectuses for the Underlying Mutual Funds must be read in conjunction with
this prospectus. A copy of each prospectus may be obtained without charge from
the Company by calling 1-800-547-7548, TDD 1-800-238-3035, or by writing P.O.
Box 182150, Columbus, Ohio 43128-2150. THERE CAN BE NO ASSURANCE THAT THE
INVESTMENT OBJECTIVES WILL BE ACHEIVED.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
-AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the
portfolio to match the risk characteristics of the S&P 500 Stock Index
and then optimizes each portfolio to achieve the desired balance of risk
and return potential. This includes targeting a dividend yield that
exceeds that of the S&P 500. Such a management technique known as
"portfolio optimization" may cause the Fund to be more heavily invested
in some industries than in others. However, the Fund may not invest more
than 25% of its total assets in companies whose principal business
activities are in the same industry.
-AMERICAN CENTURY VP INTERNATIONAL
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. While
securities of United States issuers may be included in the portfolio from
time to time, it is the primary intent of the manager to diversify
investments across a broad range of foreign issuers. Although the primary
investment of the Fund will be common stocks (defined to include
depository receipts for common stock and other equity equivalents), the
Fund may also invest in other types of securities consistent with the
Fund's objective. When the manager believes that the total capital growth
potential of other securities equals or exceeds the potential return of
common stocks, the Fund may invest up to 35% of its assets in such other
securities. There can be no assurance that the Fund will achieve its
objectives.
-AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of
well-established companies with intermediate-to-large market
capitalizations that are believed by management to be undervalued at the
time of purchase. Under normal market conditions, the Fund expects to
invest at least 80% of the value of its total asset in equity securities,
including common and preferred stock, convertible preferred stock and
convertible debt obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as
the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus,
serves as the Fund's index manager. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation.
12
<PAGE> 16
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
sub-adviser and provides day-to-day management of the Portfolio.
-CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is
to provide long-term capital growth consistent with the preservation
of capital; current income is a secondary investment objective. This
Portfolio invests primarily in the common stocks of domestic and
foreign issuers.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Dreyfus serves as the Fund's investment adviser. NCM
Capital Management Group, Inc. serves as the Fund's sub-investment adviser and
provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in
companies that, in the opinion of the Fund's advisers, not only meet
traditional investment standards, but which also show evidence that
they conduct their business in a manner that contributes to the
enhancement of the quality of life in America. Current income is
secondary to the primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
-VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
-VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is
also important to point out that this Portfolio makes sense for you if
you can afford to ride out changes in the stock market because it invests
primarily in common stocks. FMR can also make temporary investments in
securities such as investment-grade bonds, high-quality preferred stocks
and short-term notes, for defensive purposes when it believes market
conditions warrant.
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<PAGE> 17
-VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or
lower by Moody's Investor Service, Inc. ("Moody's"); BB or lower by
Standard & Poor's and may be deemed to be of a speculative nature. The
Portfolio may also purchase lower-quality bonds such as those rated Ca3
by Moody's or C- by Standard & Poor's which provide poor protection for
payment of principal and interest (commonly referred to as "junk bonds").
For a further discussion of lower-rated securities, please see the "Risks
of Lower-Rated Debt Securities" section of the Portfolio's prospectus.
-VIP OVERSEAS PORTFOLIO: SERVICE CLASS
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
-VIP II CONTRAFUND PORTFOLIO: SERVICE CLASS
Investment Objective: To seek capital appreciation by investing primarily
in companies that FMR believes to be undervalued due to an overly
pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The Portfolio primarily invests in common
stock and securities convertible into common stock, but it has the
flexibility to invest in any type of security that may produce capital
appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and its portfolios.
-VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio,
under normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth
potential. Although the Portfolio invests primarily in common stock and
securities convertible into common stock, it has the ability to purchase
other securities, such as preferred stock and bonds, that may produce
capital growth. The Portfolio may invest in foreign securities without
limitation.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
Morgan Stanley Universal Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors. Its Emerging Markets Debt
Portfolio is managed by Morgan Stanley Asset Management, Inc.
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<PAGE> 18
-EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Nationwide Advisory
Services, Inc. ("NAS"), a wholly-owned subsidiary of Nationwide Life Insurance
Company.
-CAPITAL APPRECIATION FUND
Investment Objective: Long-term growth by primarily investing in a
diversified portfolio of the common stock of companies which NAS
determines have a better-than-average potential for sustained capital
growth over the long term.
-GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
-MONEY MARKET FUND
Investment Objective: 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.
-TOTAL RETURN FUND
Investment Objective: Capital growth by investing in common stocks of
companies that NAS believes will have above-average earnings or otherwise
provide investors with above-average potential for capital appreciation.
To maximize this potential, NAS may also utilize from time to time,
securities convertible into common stock, warrants and options to
purchase such stocks.
SUBADVISED NATIONWIDE FUNDS
-NATIONWIDE BALANCED FUND
Subadviser: Salomon Brothers Asset Management, Inc.
Investment Objective: Primarily seeks above-average income compared to a
portfolio entirely invested in equity securities. The Fund's secondary
objective is to take advantage of opportunities for growth of capital and
income. The Fund seeks its objective primarily through investments in a
broad variety of securities, including equity securities, fixed-income
securities and short term obligations. Under normal market conditions, it
is anticipated that the Fund will invest at least 40% of the Fund's total
assets in equity securities and at least 25% in fixed-income senior
securities. The Fund's subadviser, Salomon Brothers Asset Management,
Inc., will have discretion to invest in the full range of maturities of
fixed-income securities. Generally, most of the Fund's long-term debt
investments will consist of "investment grade" securities, but the Fund
may invest up to 20% of its net assets in non-convertible fixed-income
securities rated below investment grade or determined by the subadviser
to be of comparable quality. These securities are commonly known as junk
bonds. In addition, the Fund may invest an unlimited amount in
convertible securities rated below investment grade.
15
<PAGE> 19
-NATIONWIDE EQUITY INCOME FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks above average income and capital appreciation
by investing at least 65% of its assets in income-producing equity
securities. Such equity securities include common stocks, preferred
stocks, and securities (including debt securities) that are convertible
into common stocks. The portion of the Fund's total assets invested in
each type of equity security will vary according to the Fund's
subadviser's assessment of market, economic conditions and outlook.
-NATIONWIDE GLOBAL EQUITY FUND
Subadviser: J. P. Morgan Investment Management Inc.
Investment Objective: To provide high total return from a globally
diversified portfolio of equity securities. Total return will consist of
income plus realized and unrealized capital gains and losses. The Fund
seeks its investment objective through country allocation, stock
selection and management of currency exposure. Under normal market
conditions, J.P. Morgan Investment Management Inc., intends to keep the
Fund essentially fully invested with at least 65% of the value of its
total assets in equity securities consisting of common stocks and other
securities with equity characteristics such as preferred stocks,
warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Fund's primary
equity instruments are the common stock of companies based in the
developed countries around the world. The assets of the Fund will
ordinarily be invested in the securities of at least five different
countries.
-NATIONWIDE HIGH INCOME BOND FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks to provide high current income by investing
primarily in a professionally managed, diversified portfolio of fixed
income securities. To meet its objective, the Fund intends to invest at
least 65% of its assets in lower-rated fixed income securities such as
preferred stocks, bonds, debentures, notes, equipment lease certificates
and equipment trust certificates which are rated BBB or lower by Standard
& Poor's or Fitch Investors Service or Baa or lower by Moody's (or if not
rated, are determined by the Fund's subadviser to be of a comparable
quality). Such investments are commonly referred to as "junk bonds." For
a further discussion of lower-rated securities, please see the "High
Yield Securities" section of the Fund's prospectus.
-NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Salomon Brothers Asset Management, Inc. with Salomon Brothers
Asset Management Limited
Investment Objective: Primarily seeks a high level of current income.
Capital appreciation is a secondary objective. The Fund seeks to achieve
its objectives by investing in a globally diverse portfolio of
fixed-income investments and by giving the subadviser, Salomon Brothers
Asset Management, Inc. broad discretion to deploy the Fund's assets among
certain segments of the fixed-income market that the subadviser believes
will best contribute to achievement of the Fund's investment objectives.
The Fund reserves the right to invest predominantly in securities rated
in medium or lower categories, or as determined by the subadviser to be
of comparable quality, commonly referred to as "junk bonds." Although the
subadviser has the ability to invest up to 100% of the Fund's assets in
lower-rated securities, the subadviser does not anticipate investing in
excess of 75% of the Fund's assets in such securities. The Subadviser has
entered into a subadvisory agreement with its London based affiliate,
Salomon Brothers Asset Management Limited, pursuant to which the
subadviser has delegated to Salomon Brothers Asset Management Limited
responsibility for management of the Fund's investments in non-dollar
denominated debt securities and currency transactions.
16
<PAGE> 20
-NATIONWIDE SELECT ADVISERS MID CAP FUND
Subadvisers: First Pacific Advisors, Inc., Pilgrim Baxter & Associates,
Ltd., and Rice, Hall, James & Associates
Investment Objective: Capital appreciation by investing primarily in
equity securities of medium-sized companies (market capitalization
between $500 million and $7 billion). Under normal market conditions, the
Fund will invest in equity securities consisting of common stock,
preferred stock and securities convertible into common stocks, including
convertible preferred stock and convertible bonds. NAS has chosen the
Fund's subadvisers because they utilize a number of different investment
styles. In utilizing these different styles, NAS hopes to increase
prospects for investment return and to reduce market risk and volatility.
-NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. Under normal market
conditions, at least 75% of the Fund's total assets will be invested in
equity securities of companies with market capitalizations at the time of
purchase of between $200 million and $2.5 billion. The Fund will invest
in equity securities of domestic and foreign issuers characterized as
"value" companies according to criteria established by The Dreyfus
Corporation, the Fund's subadviser.
-NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger & Berman, L.P., Pictet
International Management Limited with Van Eck Associates Corporation,
Strong Capital Management, Inc. and Warburg Pincus Asset Management, Inc.
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers were chosen because they utilize a number of different
investment styles when investing in small company stocks. By utilizing
different investment styles, NAS hopes to increase prospects for
investment return and to reduce market risk and volatility.
-NATIONWIDE STRATEGIC GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by investing primarily in equity
securities that the Fund's subadviser believes have above-average growth
prospects. The Fund will generally invest in companies whose earnings are
believed to be in a relatively strong growth trend, and to a lesser
extent, in companies in which significant further growth is not
anticipated but whose market value is thought to be undervalued. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities, including common stocks, preferred stocks,
and securities convertible into common or preferred stocks, such as
warrants and convertible bonds. The Fund may invest up to 35% of its
total assets in debt obligations, including intermediate- to long-term
corporate or U.S. Government debt securities.
-NATIONWIDE STRATEGIC VALUE FUND
Subadviser: Strong Capital Management Inc./Schafer Capital Management
Inc.
Investment Objective: Primarily long-term capital appreciation; current
income is a secondary objective. The Fund seeks to meet its objectives by
investing in securities which are believed to offer the possibility of
increase in value, primarily common stocks of established companies
having a strong financial position and a low stock market valuation at
the time of purchase in relation to investment value. Other than
considered appropriate for cash reserves, the Fund will generally
maintain a fully invested position in common stocks of publicly held
companies, primarily in stocks of companies listed on a national
securities exchange or other equity securities (common stock or
securities convertible into common stock). Investments may also be made
in debt securities which are convertible into common stocks and in
warrants or other rights to purchase common stock, which in such case are
considered equity securities by the Fund. Strong Capital Management, Inc.
has subcontracted with Schafer Capital Management, Inc. to subadvise the
Fund.
17
<PAGE> 21
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust ("N&B AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of N&B AMT 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 Guardian, Partners and Mid-Cap Growth Portfolios of N&B AMT invest all of
their investable assets in a corresponding series of Advisers Managers Trust
managed by Neuberger & Berman Management Incorporated ("N&B Management"). Each
series then invests in securities in accordance with an investment objective,
policies and limitations identical to those of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of securities.
(For more information regarding "master/feeder fund" structure, see "Special
Information Regarding Organization, Capitalization, and Other Matters" in the
underlying mutual fund prospectus.) The investment advisor is N&B Management.
-AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current
income. The Portfolio and its corresponding series seek to achieve these
objectives by investing in common stocks of long-established,
high-quality companies. N&B Management uses a value-oriented investment
approach in selecting securities, looking for low price-to-earnings
ratios, strong balance sheets, solid management, and consistent earnings.
-AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital appreciation by investing in equity
securities of medium-sized companies that N&B Management believes have
the potential for long-term, above-average capital appreciation.
Medium-sized companies have market capitalizations form $300 million to
$10 billion at the time of investment. The Portfolio and its
corresponding series may invest up to 10% of its net assets, measured at
the time of investment, in corporate debt securities that are below
investment grade or, if unrated, deemed by N&B Management to be of
comparable quality. Securities that are below investment grade, as well
as unrated securities, are often considered to be speculative and usually
entail greater risk. As a part of the Portfolio's investment strategy,
the Portfolio may invest up to 20% of its net assets in securities of
issuers organized and doing business principally outside the United
States. This limitation does not apply with respect to foreign securities
that are denominated in U.S. dollars.
-AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth 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 the company's track
record through all parts of the market cycle.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold to provide benefits under variable life insurance policies
and variable annuity contracts. OppenheimerFunds, Inc. is the investment
adviser.
-OPPENHEIMER AGGRESSIVE GROWTH FUND (FORMERLY "OPPENHEIMER CAPITAL
APPRECIATION FUND")
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or
to be developing new products, services or markets and normally retain a
relatively larger portion of their earnings for research, development and
investment in capital assets. The Fund may also invest in cyclical
industries in "special situations" that OppenheimerFunds, Inc. believes
present opportunities for capital growth.
-OPPENHEIMER GROWTH FUND
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a
history of earnings and dividends and are issued by seasoned companies
18
<PAGE> 22
(companies which have an operating history of at least five years
including predecessors). Current income is a secondary consideration in
the selection of the Fund's portfolio securities.
-OPPENHEIMER GROWTH & INCOME FUND
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as
current income from quality and debt securities. In seeking its
investment objectives, the Fund may invest in equity and debt securities.
Equity investments will include common interests, asset-backed
securities, private-label mortgage-backed securities and CMOs, zero
coupon securities and U.S. debt obligations, and cash and cash
equivalents. From time to time, the Fund may focus on small to medium
capitalization issuers, the securities of which may be subject to greater
price volatility than those of larger capitalized issuers.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust ("Van Eck 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 Van Eck Trust are
offered only to separate accounts of insurance companies to fund the benefits of
variable life insurance policies and variable annuity contracts. The investment
advisor and manager is Van Eck Associates Corporation.
-WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund emphasizes investment in countries that, compared to the world's
major economies, exhibit relatively low gross national product per
capita, as well as the potential for rapid economic growth.
-WORLDWIDE HARD ASSETS FUND
Investment Objective: Long-term capital appreciation by investing
primarily in "Hard Asset Securities." For the Fund's purpose, "Hard
Assets" are real estate, energy, timber, and industrial and precious
metals. Income is a secondary consideration.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Van Kampen American Capital Life Investment Trust is an open-end diversified
management investment company organized as a Delaware business trust. Shares are
offered 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
Fund's investment adviser.
-MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally
in a diversified portfolio of securities of companies operating in the
real estate industry ("Real Estate Securities"). Current income is a
secondary consideration. Real Estate Securities include equity
securities, including common stocks and convertible securities, as well
as non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate
investment trusts. The Portfolio may invest up to 25% of its total assets
in securities issued by foreign issuers, some or all of which may also be
Real Estate Securities.
19
<PAGE> 23
WARBURG PINCUS TRUST
The Warburg Pincus 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. Portfolios are managed by Warburg Pincus Asset Management, Inc.
("Warburg").
-GROWTH & INCOME PORTFOLIO
Investment Objective: Long-term growth of capital and income by investing
primarily in dividend-paying equity securities. Under normal market
conditions, the Portfolio will invest substantially all of its asset in
equity securities that Warburg considers to be relatively undervalued
based upon research and analysis, taking into account factors such as
price/book ratio, price/cash flow ratio, earnings growth, debt/capital
ratio and multiples of earnings of comparable securities. Although the
Portfolio may hold securities of any size, it currently expects to focus
on companies with market capitalizations of $1 billion or greater at the
time of initial purchase.
-INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing
primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that in the judgment of Warburg 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.
-POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy. Under normal
market conditions, the Portfolio will invest at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is one that has received venture capital
financing either: (a) during the early stages of the company's existence
or the early stages of the development of a new product or service; or
(b) as part of a restructuring or recapitalization of the company. The
Portfolio may invest up to 10% of its assets in venture capital and other
investment funds.
REINVESTMENT
The Underlying Mutual 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
The Policy Owner may transfer amounts between the Fixed Account and the
Sub-Accounts, without penalty or adjustment, subject to the following
requirements. During any Policy Year, the Company reserves the right to restrict
such transfers between the Fixed Account and the Sub-Accounts to one transfer
per Policy Year.
The Company reserves the right to restrict the amount transferred from the Fixed
Account to 20% of that portion of the Cash Value attributable to the Fixed
Account as of the end of the previous Policy Year. This provision is subject to
state restrictions. Transfers out of the Fixed Account effected by Dollar Cost
Averaging are not subject to this restriction (see "Dollar Cost Averaging").
Transfers made to the Fixed Account may not be made either: (a) prior to the
first Policy Anniversary; or (b) within 12 months subsequent to a prior
transfer. The Company reserves the right to restrict the amount transferred to
the Fixed Account to 20% of that portion of Cash Value attributable to the
Sub-Accounts as of the close of business of the prior Valuation Period. The
Company further reserves the right to refuse a transfer to the Fixed Account, in
the event the Cash Value attributable to the Fixed Account should be greater
than or equal to 30% of the Cash Value.
Transfers 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
20
<PAGE> 24
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 will be borne by the Contract Owner. The Company may determine to
withdraw the Telephone Exchange Privilege, upon 30 days written notice to Policy
Owners.
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.
Policies described in this prospectus may in some cases be sold to individuals
who independently utilize the services of a firm or individual engaged in market
timing. Generally, such firms or individuals obtain authorization from multiple
Policy Owners to make transfers and exchanges among the Sub-Accounts on the
basis of perceived market trends. Because of the unusually large transfers of
funds associated with some of these transactions, the ability of the Company or
Underlying Mutual Funds to process such transactions may be compromised, and the
execution of such transactions may possibly disadvantage or work to the
detriment of other Policy Owners not utilizing market timing services.
Accordingly, the right to exchange Cash Surrender Values among the Sub-Accounts
may be subject to modification if such rights are exercised by a market timing
firm or any other third party authorized to initiate transfer or exchange
transactions on behalf of multiple Policy Owners. THE RIGHTS OF INDIVIDUAL
POLICY OWNERS TO EXCHANGE CASH SURRENDER VALUES, WHEN INSTRUCTIONS ARE SUBMITTED
DIRECTLY BY THE POLICY OWNER, OR BY THE POLICY OWNER'S REPRESENTATIVE OF RECORD
AS AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF ATTORNEY
FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the Company
may, among other things, not accept: (1) the transfer or exchange instructions
of any agent acting under a power of attorney on behalf of more than one Policy
Owner; or (2) the transfer or exchange instructions of individual Policy Owners
who have executed pre-authorized transfer or exchange forms which are submitted
by market timing firms or other third parties on behalf of more than one Policy
Owner at the same time. The Company will not impose any such restrictions or
otherwise modify exchange rights unless such action is reasonably intended to
prevent the use of such rights in a manner that will disadvantage or potentially
impair the contract rights of other Policy Owners.
DOLLAR COST AVERAGING
The Policy Owner may direct the Company to automatically transfer amounts from
the Fidelity VIP High Income Portfolio, NSAT-Government Bond Fund, NSAT-Money
Market Fund, NSAT-Nationwide High Income Bond Fund or the Fixed Account, to any
other Sub-Account within the Variable Account. Dollar Cost Averaging will occur
on a monthly basis or on another frequency permitted by the Company. Dollar Cost
Averaging is 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. To qualify for Dollar
Cost Averaging, there must be a minimum total Cash Value, less Policy
Indebtedness, of $15,000. The minimum monthly 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 program is requested.
Transfers will be processed until either the value in the originating funds is
exhausted or the Policy Owner instructs the Home Office in writing to cancel the
transfers.
The Company reserves the right to discontinue establishing new Dollar Cost
Averaging programs. 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
21
<PAGE> 25
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.
In accordance with its view of applicable law, the Company will vote the shares
of the Underlying Mutual Funds at regular and special meetings of the
shareholders. These shares will be voted in accordance with instructions
received from Policy Owners. If the 1940 Act or any regulation thereunder should
be amended or if the present interpretation changes, permitting the Company to
vote the shares of the Underlying Mutual Funds in its own right, it may elect to
do so.
The Policy Owner is the person who has voting interest under the Policy. The
number of Underlying Mutual Fund shares attributable to each Policy Owner 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 corresponding to the Sub-Account.
The number of shares which may be voted 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 at
least 21 days prior to such meeting. Each person having a voting interest will
receive periodic reports relating to the Underlying Mutual Fund, proxy material
and a form with which to give such voting instructions. 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.
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 and premium. The minimum Specified Amount
is $50,000 ($100,000 in Pennsylvania, New Jersey, Texas, Alabama and New York)
for non-preferred policies and $100,000 for preferred policies. Policies may be
issued to Insureds who are 80 or younger at the time of issue. Before issuing
any Policy, the Company requires satisfactory evidence of insurability which may
include a medical examination.
- -Premium Payments
The Initial Premium for a Policy is payable in full at the Home Office or to an
authorized agent. 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 Initial Premium, and delivery of the Policy while the Insured is still
living.
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 Guaranteed
Policy Continuation Period, the total premium payments less any Policy
Indebtedness and less any partial surrenders must be greater than or equal to
the sum of the Minimum Monthly Premiums in order to guarantee the Policy remain
in force. The Minimum Monthly Premiums are shown in the Policy data page.
22
<PAGE> 26
Each premium payment must be at least $50. 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 NET PREMIUM AND CASH VALUE
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%. At the time a Policy is
issued, its Cash Value will be determined as if the Policy had been issued and
the Initial Net Premium is invested on the date such premium was received in
good order by the Company.
In such states which require a return of premiums to those Policy Owners
exercising their short term right to cancel (see "Short Term Right to Cancel
Policy"), the Net Premiums will be allocated to the NSAT- Money Market Fund (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. 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").
SHORT-TERM RIGHT TO CANCEL POLICY
A Policy may be returned for cancellation 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 amount prescribed by the state in which the Policy was
issued within seven days after it receives the Policy. The amount of the refund
will be either the Premiums paid or the Cash Value less Indebtedness.
The scope of this right varies by state.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
The Company deducts a sales load from each premium payment received which is
guaranteed never to exceed 2.5% of such premium payment. On a current basis, the
sales load in all Policy Years is 2.5% of premium paid up to the Target Premium
plus 0.5% of premiums in excess of the Target Premium. 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.
The Company also deducts from premium payments a tax expense charge of 3.5%, on
both current and guaranteed basis, of all premium payments. 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
3.5% tax expense rate consists of the following components: (1) a state premium
tax rate of 2.25%; and (2) a federal tax rate of 1.25%. There is no charge for
tax expense in the State of Oregon. However, there is a charge for
administrative expenses equal to 3.5% on both a current and guaranteed basis of
all premium payments.
The Company expects to pay an average state premium tax rate of approximately
2.25% of premiums for all states, although such tax rates range by state from 0%
to 4%. To reimburse the Company for the payment of state premium taxes
associated with the Policies in states other than Oregon, the Company deducts a
charge for state premium taxes equal to 2.25% of all premium payments received.
This charge may be more or less than the amount actually assessed by the state
in which a particular Policy Owner lives. The 1.25% federal tax
23
<PAGE> 27
component is designed to reimburse the Company for expenses incurred from
federal taxes imposed under Section 848 of the Code. The Company does not expect
to make a profit from this charge.
SURRENDER CHARGES
The Company will deduct a Surrender Charge from the Policy's Cash Value for any
Policy surrendered during the first nine Policy Years. The maximum initial
Surrender Charge varies by issue age, sex, Specified Amount and underwriting
classification 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 standard basis (see
Appendix 1 for specific examples).
Initial Specified Amount $50,000-$99,999
----------------------------------------
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
---- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
25 $7.773 $7.518 $8.369 $7.818
35 8.817 8.396 9.811 8.889
45 12.185 11.390 13.884 12.164
55 15.628 13.995 18.410 15.106
65 22.274 19.043 26.559 20.607
</TABLE>
Initial Specified Amount $100,000+
----------------------------------
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
---- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
25 $5.773 $5.518 $6.369 $5.818
35 6.817 6.396 7.811 6.889
45 9.685 8.890 11.384 9.664
55 13.128 11.495 15.910 12.606
65 21.274 18.043 25.559 19.607
</TABLE>
The Surrender Charge is comprised of two components: an underwriting component
and sales component. The underwriting component varies by issue age in the
following manner:
Charge per $1,000 of
Initial Specified Amount
------------------------
<TABLE>
<CAPTION>
Issue Specified Amounts Specified Amounts
Age less than $100,000 $100,000 or more
----- ------------------- -------------------
<S> <C> <C>
0-35 $6.00 $4.00
36-55 7.50 5.00
56-80 7.50 6.50
</TABLE>
The underwriting component 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 component. The Surrender Charge
may be insufficient to recover certain expenses related to the sale of the
Policies. Unrecovered expenses are borne by the Company's general assets which
may include profits, if any, from mortality and expense risk charges (see
"Deductions from the Cash Value"). 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 component
represents the sales component. In no event will this component exceed 26-1/2%
of the lesser of the Securities and Exchange Commission Guideline Level Premium
required in the first year or the premiums actually paid in the first year. The
purpose of the sales component is to reimburse the Company for some of the
expenses incurred in the distribution of the Policies. The Company also deducts
3.5% of each premium for sales load (see "Deductions from Premiums").
Policies that are surrendered during the first nine Policy Years following an
increase in the Specified Amount will incur a Surrender Charge associated with
the increase. This Surrender Charge is comprised of an underwriting component
and sales component. The maximum initial Surrender Charge associated with the
increase is based
24
<PAGE> 28
on the attained age at the time of the increase, the underwriting classification
of the increase, sex, and the amount of the increase in Specified Amount. The
actual initial Surrender Charge associated with the increase is based upon the
maximum initial Surrender Charge and the premium received within one year of the
increase in Specified Amount.
Increases that are caused by a change in death benefit option (see "Changes in
the Death Benefit Option") that preserve the Net Amount At Risk are not subject
to a Surrender Charge. The Surrender Charge associated with the increase for
Policy Years following the increase is a percentage of the initial Surrender
Charge.
The following table illustrates the maximum initial Surrender Charge per $1,000
of Specified Amount increase for Policies increasing coverage on a standard
basis.
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
25 $3.464 $3.311 $3.821 $3.491
35 4.090 3.837 4.686 4.133
45 5.811 5.334 6.830 5.798
55 7.877 6.897 9.546 7.563
65 12.764 10.826 15.335 11.764
</TABLE>
- -Reductions to Surrender Charges
The Surrender Charges are reduced in subsequent Policy Years in the following
manner:
<TABLE>
<CAPTION>
Surrender Charge Surrender Charge
Completed as a % of Initial Completed as a % of Initial
Policy Years Surrender Charges Policy Years Surrender Charges
------------ ----------------- ------------ -----------------
<S> <C> <C> <C>
0 100% 5 60%
1 100% 6 50%
2 90% 7 40%
3 80% 8 30%
4 70% 9+ 0%
</TABLE>
The renewal surrender charge is reduced by any partial surrender charge actually
paid on previous decreases in Specified Amount.
For the Initial Specified Amount, a completed Policy Year (in the chart above)
is measured from the Issue Date. For any increase in Specified Amount, a
completed Policy Year (in the chart above) is measured from the effective date
of the increase.
Special guaranteed maximum Surrender Charges apply in Pennsylvania (see Appendix
1).
Decreases in Specified Amount requested by a Policy Owner will incur a
proportional Surrender Charge. This proportion is equal to the decrease in
Specified Amount divided by the Specified Amount prior to the decrease. In the
case of a Policy with prior increases, these fractional surrender charges will
be calculated separately for the Initial Specified Amount and each increase in
Specified Amount. For a Policy with prior increases in Specified Amounts, these
decreases will be made on a LIFO (last in first out) basis and therefore
decrease each segment in reverse order of its effective date.
Decreases in Specified Amount resulting from a partial surrender or a death
benefit option change that preserves the Net Amount Risk will be not incur a
proportional Surrender Charge.
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:
- monthly cost of insurance charges; plus
- monthly cost of any additional benefits provided by riders; plus
- monthly administrative expense charge; plus
- mortality and expense risk charge.
Mortality and expense risk deductions will be charged proportionally to the Cash
Value in each Sub-Account. Other deductions will be charged proportionately to
the Cash Value in each Sub-Account and the Fixed Account.
25
<PAGE> 29
- -Monthly Cost of Insurance
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.
If death benefit Option 1 or Option 3 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 for Policies issued on Specified Amounts less
than $100,000 are based on the 1980 Commissioners Extended Term Mortality Table,
Age Last Birthday (1980 CET). Guaranteed cost of insurance rates for Policies
issued on Specified Amounts $100,000 or more 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 guaranteed cost of insurance rate on a
standard basis. These mortality tables are sex distinct. In addition, separate
mortality tables will be used for tobacco and non-tobacco.
For group or sponsored arrangements (including employees of the Company and
their family members) and for special exchange programs which the Company may
make available from time to time, the mortality tables are unisex.
For Policies issued in the State of Montana, the mortality tables are unisex.
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. The Company may also
issue certain Policies on a "Non Medical" basis to certain categories of
individuals. Due to the underwriting criteria established for Policies issued on
a Non Medical basis, actual rates will be higher than the current cost of
insurance rates being charged under Policies that are medically underwritten.
- -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 $10 per month in the first year,
$5 per month in renewal years. The Company may at its sole discretion increase
this charge. However, the Company guarantees that this charge will never exceed
$10 per month in the first year and $7.50 per month in renewal years.
- -Mortality and Expense Risk Charge
The Company assumes certain risks for guaranteeing the mortality and expense
charges. The mortality risks assumed under the Policies is that the Insured may
not live as long as 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 monthly basis from the Cash Value attributable to the
Variable Account a charge to provide for mortality and expense risks. This
charge is equivalent to an annual effective rate of 0.60% of the first $25,000
of Cash Value attributable to the Variable Account, 0.30% of the next $225,000
of Cash Value attributable to the Variable Account, and 0.10% of Cash Value
attributable to the Variable Account in excess of $250,000. These charges are
all guaranteed. 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").
26
<PAGE> 30
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 (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.
REDUCTION OF CHARGES
The Policy is available for purchase by individuals, corporations and other
groups. For group or sponsored arrangements (including employees of the Company
and their family members) and for special exchange programs which the Company
may make available from time to time, the Company reserves the right to reduce
or eliminate the sales load, mortality and expense risk charges, surrender
charge, monthly administrative charge, monthly cost of insurance charges or
other charges normally assessed on certain multiple life cases where it is
expected that the size or nature of such cases will result in savings of sales,
underwriting, administrative or other costs.
Eligibility for and the amount of these reductions will be determined by a
number of factors, including the number of Insureds, the total premium expected
to be paid, total assets under management for the Policy Owner, the nature of
the relationship among individual Insureds, the purpose for which the Policies
are being purchased, the expected persistency of individual Policies, and any
other circumstances which, in the opinion of the Company is rationally related
to the expected reduction in expenses. The extent and nature of reductions may
change from time to time. Any variations in the charge structure will be
determined in a uniform manner reflecting differences in costs of services and
not unfairly discriminatory to Policy Owners.
EXPENSES OF THE UNDERLYING MUTUAL FUNDS
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.
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
--------------------------------------
(AFTER EXPENSE REIMBURSEMENT)
-----------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Management Total Portfolio
Fees Other Expenses 12b-1 Fees Operating Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - 0.70% 0.00% 0.00% 0.70%
American Century VP Income & Growth
- -----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 1.50% 0.00% 0.00% 1.50%
American Century VP International
- -----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 1.00% 0.00% 0.00% 1.00%
American Century VP Value
- -----------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth 0.75% 0.01% 0.00% 0.76%
Fund, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.03% 0.00% 0.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital 0.75% 0.05% 0.00% 0.80%
Appreciation Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: 0.50% 0.05% 0.10% 0.65%
Service Class
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.60% 0.07% 0.10% 0.77%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service 0.59% 0.11% 0.10% 0.80%
Class
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service 0.75% 0.16% 0.10% 1.01 %
Class
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: 0.60% 0.08% 0.10% 0.78%
Service Class
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities 0.60% 0.13% 0.10% 0.83%
Portfolio: Service Class
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc. - 0.04% 1.26% 0.00% 1.30%
Emerging Markets Debt Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Capital Appreciation Fund 0.60% 0.09% 0.00% 0.69%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Government Bond Fund 0.50% 0.08% 0.00% 0.58%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 0.40% 0.08% 0.00% 0.48%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund 0.60% 0.07% 0.00% 0.67%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Balanced Fund 0.75% 0.15% 0.00% 0.90%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 31
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NSAT - Nationwide Equity Income Fund 0.80% 0.15% 0.00% 0.95%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Global Equity Fund 1.00% 0.20% 0.00% 1.20%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide High Income Bond Fund 0.80% 0.15% 0.00% 0.95%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Multi-Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Select Advisers Mid Cap 1.05% 0.15% 0.00% 1.20%
Fund
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Company Fund 1.00% 0.11% 0.00% 1.11%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Strategic Growth Fund 0.90% 0.10% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Strategic Value Fund 0.90% 0.10% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT - Guardian Portfolio 0.60% 0.40% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT - Mid-Cap Growth 0.60% 0.40% 0.00% 1.00%
Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT - Partners Portfolio 0.80% 0.06% 0.00% 0.86%
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.71% 0.02% 0.00% 0.73%
Oppenheimer Aggressive Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.73% 0.02% 0.00% 0.75%
Oppenheimer Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.75% 0.08% 0.00% 0.83%
Oppenheimer Growth & Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - 0.80% 0.00% 0.00% 0.80%
Worldwide Emerging Markets Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - 1.00% 0.17% 0.00% 1.17%
Worldwide Hard Assets Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 0.07% 0.00% 1.07%
Trust - Morgan Stanley Real Estate
Securities Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income 0.65% 0.35% 0.00% 1.00%
Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity 1.00% 0.35% 0.00% 1.35%
Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital 1.07% 0.33% 0.00% 1.40%
Portfolio
</TABLE>
The Mutual Fund expenses shown above are assessed at the Underlying Mutual Fund
level and are not direct charges against Variable Account assets or reductions
from Cash Values. 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 unit values of the Variable Account.
The management fees and other expenses are more fully described in the
prospectuses for each individual Underlying Mutual Fund. The information
relating to the Underlying Mutual Fund expenses was provided by the Underlying
Mutual Fund and was not independently verified by the Company. The following
Underlying Mutual Funds are subject to the following fee waiver and/or expense
reimbursement arrangements:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT REIMBURSEMENT FOR WAIVER
- ----------------------------- ----------------------------------------------------------------------------------------------
<S> <C>
The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Fidelity VIP Equity - fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
Income Portfolio: reimburse a portion of the management fees and/or other expenses resulting in a reduction of
Service Class total expenses. Without such waivers or reimbursement, Management Fees would have equaled
0.50%, Other Expenses would have equaled 0.18% and Total Portfolio Operating Expenses would
have equaled 0.68%.
- ----------------------------- ----------------------------------------------------------------------------------------------
Fidelity VIP Growth The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Portfolio: Service Class fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction of
total expenses. Without such waivers or reimbursements, Management Fees would have equaled
0.60%, Other Expenses would have equaled 0.19% and Total Portfolio Operating Expenses would
have equaled 0.79%.
- ----------------------------- ----------------------------------------------------------------------------------------------
Fidelity VIP Overseas The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Portfolio: Service Class fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction of
total expenses. Without such waivers or reimbursements, Management Fees would have equaled
0.75%, Other Expenses would have equal 0.27% and Total Portfolio Operating Expenses would
have equaled 1.02%.
- ----------------------------- ----------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT REIMBURSEMENT FOR WAIVER
- ------------------------------ ---------------------------------------------------------------------------------------------
<S> <C>
Fidelity VIP II Contrafund The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Portfolio: Service Class fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.60%, Other Expenses would have equaled 0.21% and Total Portfolio Operating
Expenses would have equaled 0.81%.
- ------------------------------ ---------------------------------------------------------------------------------------------
Fidelity VIP III Growth The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Opportunities Portfolio: fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
Service Class reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.60%, Other Expenses would have equaled 0.24% and Total Portfolio Operating
Expenses would have equaled 0.84%.
- ------------------------------ ---------------------------------------------------------------------------------------------
Morgan Stanley Universal The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Funds, Inc. - Emerging fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
Markets Debt Portfolio reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.80%, Other Expenses would have equaled 1.26% and Total Portfolio Operating
Expenses would have equaled 2.06%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Balanced Fund The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.75%, Other Expenses would have equaled 4.15% and Total Portfolio Operating
Expenses would have equaled 4.90%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Equity The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Income Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.80%, Other Expenses would have equaled 4.83% and Total Portfolio Operating
Expenses would have equaled 5.63%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Global The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Equity Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 1.00%, Other Expenses would have equaled 1.84% and Total Portfolio Operating
Expenses would have equaled 2.84%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide High Income The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Bond Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.80%, Other Expenses would have equaled 1.38% and Total Portfolio Operating
Expenses would have equaled 2.18%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Multi-Sector The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Bond Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.75%, Other Expenses would have equaled 3.66% and Total Portfolio Operating
Expenses would have equaled 4.41%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Select The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Advisers Mid Cap Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 1.05%, Other Expenses would have equaled 2.26% and Total Portfolio Operating
Expenses would have equaled 3.31%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Small Cap The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Value Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.90%, Other Expenses would have equaled 5.41% and Total Portfolio Operating
Expenses would have equaled 6.31%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Strategic The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Growth Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.90%, Other Expenses would have equaled 5.43% and Total Portfolio Operating
Expenses would have equaled 6.33%.
- ------------------------------ ---------------------------------------------------------------------------------------------
NSAT-Nationwide Strategic The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Value Fund fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.90%, Other Expenses would have equaled 4.64% and Total Portfolio Operating
Expenses would have equaled 5.54%.
- ------------------------------ ---------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT REIMBURSEMENT FOR WAIVER
- ------------------------------ ---------------------------------------------------------------------------------------------
<S> <C>
Van Eck Worldwide Insurance The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Trust - Worldwide Emerging fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
Markets Fund reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 1.00%, Other Expenses would have equaled 0.34% and Total Portfolio Operating Expenses
would have equaled 1.34%.
- ------------------------------ ---------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Trust - Worldwide Hard fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
Assets Fund reimburse a portion of the management fees and/or other expenses resulting in a reduction of
total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 1.00%, Other Expenses would have equaled 0.18% and Total Portfolio Operating Expenses
would have equaled 1.18%.
- ------------------------------ ---------------------------------------------------------------------------------------------
Warburg Pincus Trust - The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Growth & Income Portfolio fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
reimburse a portion of the management fees and/or other expenses resulting in a reduction
of total expenses. Without such waivers or reimbursements, Management Fees would have
equaled 0.75%, Other Expenses would have equaled 0.45% and Total Portfolio Operating
Expenses would have equaled 1.20%.
- ------------------------------ ---------------------------------------------------------------------------------------------
Warburg Pincus Trust - The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
International Equity fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
Portfolio reimburse a portion of the management fees and/or other expenses resulting in a
reduction of total expenses. Without such waivers or reimbursements, Management Fees would
have equaled 1.00%, Other Expenses would have equaled 0.36% and Total Portfolio Operating
Expenses would have equaled 1.36%.
- ------------------------------ ---------------------------------------------------------------------------------------------
Warburg Pincus Trust - The Management Fees, Other Expenses and Total Portfolio Operating Expenses are net of any
Post-Venture Capital fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to
Portfolio reimburse a portion of the management fees and/or other expenses resulting in a
reduction of total expenses. Without such waivers or reimbursements, Management Fees
would have equaled 1.25%, Other Expenses would have equaled 0.33% and Total Portfolio
Operating Expenses would have equaled 1.58%
- ------------------------------ ---------------------------------------------------------------------------------------------
</TABLE>
The information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the Company.
The Underlying 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.
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, minus any surrender charge for decreases in Specified Amount, 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. 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.
30
<PAGE> 34
NET INVESTMENT FACTOR
The net investment factor for any Valuation Period is determined by dividing (a)
by (b) 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; and
(2) the per share amount of any dividend or income distributions made
by the Underlying Mutual Fund held in the Sub-Account if the
"ex-dividend" date occurs during the current Valuation Period.
(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 (see "Taxation of the Company").
The net investment factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. Currently, the Company does
not maintain a tax reserve with respect to the Policies since income with
respect to the Underlying Mutual Funds is not taxable to the Company or the
Variable Account. The Company reserves the right to adjust the calculation of
the net investment factor to reflect a tax reserve should such income of other
items become taxable to the Company. 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 any charge or credit for tax
reserves.
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. (For a description of the annual effective credited rates, see "The
Fixed Account Option" and "Policy Loans.") 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 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 Insured
is living and receive its Cash 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, the
Company may require the signature to be guaranteed by a member firm of the New
York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchanges, 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 Cash Surrender Value increases or decreases daily to reflect the investment
experience of the Variable Account and the daily crediting of interest in the
Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the
Policy's Cash Value, next computed after the date the Company receives a proper
31
<PAGE> 35
written request for surrender and the Policy, minus any charges, Indebtedness or
other deductions due on that date, which may also include a Surrender Charge.
PARTIAL SURRENDERS
After the Policy has been in force for one year, the Policy Owner may request a
partial surrender. When a partial surrender is made, the Cash Value will be
reduced by the amount of the partial surrender. Further, the Specified Amount
will be reduced by the amount necessary to prevent any increase to the Net
Amount At Risk, unless the partial surrender is treated as a preferred partial
surrender. Partial surrenders will be permitted only if they satisfy the
following requirements:
1. the minimum partial surrender is $200;
2. the partial surrender may not reduce the Specified Amount below
the Minimum Specified Amount;
3. during Policy Years two through ten, the maximum amount of a
partial surrender cannot exceed 10% of Cash Surrender Value as
of the beginning of the Policy Year;
4. after the completion of ten Policy Years, the maximum amount of a
partial surrender is the Cash Surrender Value less the greater of
$500 or three monthly deductions; and
5. after the partial surrender, the Policy continues to qualify as
life insurance.
- -Preferred Partial Surrenders
A partial surrender is considered a preferred partial surrender if the following
conditions are met: (1) the surrender occurs before the 15th Policy Anniversary;
and (2) the surrender amount plus the amount of any previous preferred policy
surrenders in that same Policy Year does not exceed 10% of the Cash Surrender
Value as of the beginning of the Policy Year.
- -Reduction of the Specified Amount
When a partial surrender is made, in addition to the Cash Value being reduced by
the amount of the partial surrender, the Specified Amount may also be reduced,
except for a preferred partial surrender. The reduction to the Specified Amount
will be made in the following order: (1) against the most recent increase in the
Specified Amount; (2) against the next most recent increases in the Specified
Amount in succession; and (3) against the Specified Amount under the original
application.
The Company reserves the right to deduct a fee from the partial surrender
amount. The maximum fee is $25.00. 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 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.
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following: (1) the value each year of the life
insurance protection provided; (2) an amount equal to any employer-paid
premiums; or (3) some or all of the amount by which the current value exceeds
the employer's interest in the Policy. Participants should consult with the
sponsor or the administrator of the plan, and/or with their personal tax or
legal advisor, to determine the tax consequences, if any, of their
employer-sponsored life insurance arrangements.
POLICY LOANS
TAKING A POLICY LOAN
The Policy Owner may take a Policy loan at any time using the Policy as
security. Maximum Policy Indebtedness is limited to Cash Value attributable to
both Fixed and Policy Loan Accounts, and 90% of the Cash
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Value of the Variable Account, less any Surrender Charges 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, Cash Surrender Value or the maturity proceeds, 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 Exchanges; 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 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 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
The annual effective loan interest rate charged on Policy Loans is 3.9%.
On a current basis, the Cash Value in the Policy Loan Account is credited with
an annual effective rate of 3% during Policy Years 1 through 10 and an annual
effective rate of 3.9% during the 11th and subsequent Policy Years. The Company
may change the current interest crediting rate on the policy loans at any time
at its sole discretion. However, the crediting rate is guaranteed never to be
lower than 3% during Policy Years 1 through 10 and 3.65% during the 11th and
subsequent Policy Years. 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,
at the time a new loan is requested, or at the time of loan repayment. It will
be allocated according to the Fund allocation factors in effect at the time of
the transfer.
Interest is charged daily and is payable at the end of each Policy Year or at
the time of loan repayment. Unpaid interest will be added to the existing Policy
Indebtedness as of the due date and will be charged interest at the same rate as
the rest of the Indebtedness.
Whenever the total Policy Indebtedness exceeds the Cash Value less any Surrender
Charges, and if the Guaranteed Policy Continuation Period is not in effect, 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.
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REPAYMENT
All or part of the Indebtedness may be repaid at any time while the Policy is in
force during the Insured's lifetime. Any payment intended as a loan repayment,
rather than a premium payment, must be identified as such. Loan repayments will
be credited to the Sub-Accounts and the Fixed Account in proportion to 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 Specified Amount and the death benefit
option. At issue, the Policy Owner also irrevocably elects either of the
following tests qualifying the Policy as life insurance under Section 7702 of
the Code: (1) Guideline Premium/Cash Value Corridor Test; or (2) the Cash Value
Accumulation Test.
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 may choose one of three death benefit options.
Under OPTION 1, the death benefit will be the greater of the Specified Amount or
Minimum Required Death Benefit. 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 as of the date of death, or Minimum Required Death Benefit
and will vary directly with the investment performance.
Under OPTION 3, the death benefit is the greater of the Minimum Required Death
Benefit or the sum of the Specified Amount on the date of death and accumulated
premium account which consists of all premium payments accumulated to date of
death less partial surrenders accumulated to date of death. The accumulated
premium account will accumulate to the date of death all premium payments less
any partial surrenders. The accumulations will be calculated based on the OPTION
3 interest rate shown on the Policy data page. In no event will the accumulated
premium account be less than zero or greater than the maximum accumulated
premium account shown on the Policy data page.
For any death benefit option, the calculation of the Minimum Required Death
Benefit is shown on the Policy Data Page. The Minimum Required Death Benefit is
the lowest death benefit which will qualify the Policy as life insurance under
Section 7702 of the Code. A change in death benefit option will not be permitted
if it results in the total premiums paid exceeding the then current maximum
premium limitations under Section 7702 of the Code where the Policy Owner has
selected Guideline Premium/Cash Value Corridor Test.
PROCEEDS PAYABLE ON DEATH
The actual Death Proceeds payable on the Insured's death 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 TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may exchange the Policy for a flexible premium adjustable life
insurance policy offered by the Company on the Policy Date. The benefits for the
new policy will not vary with the investment experience of a separate account.
The exchange must be elected within 24 months from the Policy Date. No evidence
of insurability will be required.
The Policy Owner and Beneficiary under the new policy will be the same as those
under the exchanged Policy on the effective date of the exchange. The new policy
will have a death benefit on the exchange date not more than the death benefit
of the original Policy immediately prior to the exchange date. The new policy
will have the same Policy Date and issue age as the original Policy. The initial
Specified Amount and any increases in Specified Amount will have the same rate
class as those of the original Policy. Any Indebtedness may be transferred to
the new policy.
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The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two Policies.
After adjustment, if any excess is owed the Policy Owner, the Company will pay
the excess to the Policy Owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
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. If a Policy Owner objects, the Policy may be converted to a
substantially comparable General Account life insurance policy offered by the
Company on the life of the Insured. 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
conversion. The Company will not require evidence of insurability for this
conversion.
The new policy will not be affected by the investment experience of any separate
account. The new policy will be for an amount of insurance not exceeding the
death benefit of the policy converted on the date of such conversion.
GRACE PERIOD AND GUARANTEED POLICY CONTINUATION PROVISION
GRACE PERIOD
If the Cash Surrender Value on a Monthly Anniversary Day is not sufficient to
cover the current monthly deduction, and the Guaranteed Policy Continuation
Provision is not in effect, a grace period will be allowed for the payment of a
premium of at least four times the current monthly deduction. The Company will
send the Policy Owner a notice at the start of the grace period, at the address
in the application or another address specified by the Policy Owner, stating the
amount of premium required. The grace period will end 61 days after the day the
notice is mailed. If sufficient premium is not received by the Company by the
end of the grace period, the policy will lapse without value. If Death Proceeds
become payable during the grace period, the Company will pay the Death Proceeds.
GUARANTEED POLICY CONTINUATION PROVISION
This policy will not lapse during the Guaranteed Policy Continuation Period
provided that 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,
and minus any partial surrenders; and
(2) is the sum of Minimum Monthly Premiums required since the Policy
Date including the Minimum Monthly Premium for the current Monthly
Anniversary Day.
The Guaranteed Policy Continuation Period is the lesser of 30 Policy Years or
the number of Policy Years until the Insured reaches Attained Age 65. For
policies issued to ages greater than 55, the Guaranteed Policy Continuation
Period is 10 Policy Years. This provision is subject to state restrictions.
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
Owner may reinstate the Policy by:
1. submitting a written request at any time within 3 years after
the end of the grace period and prior to the Maturity Date;
2. providing evidence of insurability satisfactory to the Company;
3. paying sufficient premium to cover all policy charges that were
due and unpaid during the grace period;
4. paying sufficient premium to keep the policy in force for 3 months
from the date of reinstatement; and
5. paying or reinstating any Indebtedness against the policy which
existed at the end of the grace period.
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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 the 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
Under exemptive and exclusionary provisions, interests in the 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 1940 Act.
Accordingly, neither the General Account nor any interests therein is 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 concerning 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 General Account. The 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 3%. Upon
request the Company will inform the 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 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 request must be applied for in writing;
2. satisfactory evidence of insurability must be provided;
3. the increase must be for a minimum of $10,000;
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 supplemental application.
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.
Any such decrease shall reduce insurance in the following order:
1. against insurance provided by the most recent increase;
2. against the next most recent increases successively; and
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3. against 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 Specified
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 elect to change the death
benefit option under the Policy from either Option 1 to Option 2, or from Option
2 to Option 1. Only one change of death benefit option is permitted per Policy
Year. The effective date of such change will be the Monthly Anniversary Day
following the date such change is approved by the Company.
In order for any such change in the death benefit option to become effective,
the Cash Surrender Value, after such change, must be sufficient to keep the
Policy in force for at least three months subsequent to said change.
The Company will adjust the Specified Amount such that the Net Amount At Risk
remains constant before and after the death benefit option change. A change in
death benefit option will not be permitted if it results in the total premiums
paid exceeding the then current maximum premium limitations under Section 7702
of the Code where the Policy Owner has selected Guideline Premium/Cash Value
Corridor Test.
OTHER POLICY PROVISIONS
POLICY OWNER
While the 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 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 is other than the Insured and names no contingent Policy
Owner, and dies before the Insured, the Policy Owner's rights in this Policy
belong to the Policy Owner's estate.
BENEFICIARY
The Beneficiary(ies) will be as named in the application or as subsequently
changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while the Insured is living. Any
change must be in a written form satisfactory to the Company and recorded at the
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 survives the Insureds, the Death Proceeds shall be paid to the
Policy Owner or the Policy Owner's estate.
ASSIGNMENT
While the 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 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 owed to the Company before it was recorded.
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 Insured's
lifetime 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
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Proceeds based on such an increase after it has been in force during the
Insured's lifetime for 2 years from its effective date.
ERROR IN AGE OR SEX
If the age or sex of the Insured has been misstated, the death benefit and Cash
Value will be adjusted. The amount of the death benefit will be (1) multiplied
by (2) and then the result added to (3), where:
(1) is the Net Amount At Risk at the time of the Insured's death;
(2) is the ratio of the monthly cost of insurance applied in the
policy month of death and the monthly cost of insurance that
should have been applied at the true age and sex in the policy
month of death; and
(3) is the Cash Value at the time of the Insured's death.
The Cash Value will be adjusted to reflect the cost of insurance charges on the
correct age and sex from the Policy Date.
SUICIDE
If the 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 the 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.
RIDERS
A rider may be added as an addition to the policy. Riders currently include:
1. Maturity Extension Endorsement;
2. Spouse Rider;
3. Child Rider;
4. Waiver of Monthly Deductions Rider;
5. Accidental Death Benefit Rider;
6. Additional Protection Rider; and
7. Change of Insured Rider.
Rider availability varies by state.
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
member firms of the National Association of Securities Dealers, Inc. ("NASD").
The policies will be distributed by the General Distributor, Nationwide Advisory
Services, Inc. NAS acts as general distributor for the Nationwide Multi-Flex
Variable Account, Nationwide DC Variable Account, Nationwide DCVA-II, Nationwide
Variable Account-II, Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide Variable Account-9,
Nationwide VA Separate Account-A, Nationwide VA Separate Account-B, Nationwide
VA Separate Account-C, Nationwide VL Separate Account-A, Nationwide VL Separate
Account-B, Nationwide VL Separate Account-C, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4, NACo
Variable Account and the Nationwide Variable Account,
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all of which are separate investment accounts of the Company or its affiliates.
NAS is a wholly owned subsidiary of the Company.
NAS also acts as principal underwriter for the Nationwide Investing Foundation,
Nationwide Separate Account Trust, Financial Horizons Investment Trust,
Nationwide Investing Foundation II, Nationwide Investing Foundation III and
Nationwide Asset Allocation Trust, which are open-end management investment
companies.
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 90% of the Target Premium plus 3% of any excess premium payments.
Gross renewal commissions in years 2 through 10 paid by the Company will not
exceed 3% of actual premium payment, and will not exceed 2% in Policy Years 11
and thereafter.
CUSTODIAN OF ASSETS
The Company serves as the custodian of the assets of the Variable Account.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the 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.
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 (other than certain
distributions to terminally ill individuals) are subject to federal income taxes
in a manner similar to the 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 or the distribution is part of an annuity to the
Policy Owner as defined in the Code. Under certain circumstances, certain
distributions made under a policy on the life of a "terminally ill individual",
as that term is defined in the Code, are excludable from gross income.
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 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 Policy 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 under 817(h) provide that a
variable life policy that fails to satisfy the diversification standards will
not be treated as life insurance unless such failure was inadvertent, is
corrected, and the Policy Owner or the Company pays an amount to the IRS. 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 will be deemed the owner of the underlying securities and taxed
on the earnings of his or her account.
Representatives of the IRS have suggested, from time to time, that the number of
Underlying Mutual Funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of Underlying Mutual Funds, transfers between
Underlying Mutual Funds, exchanges of Underlying Mutual Funds or changes in
investment objectives of Underlying Mutual Funds such that the policy would no
longer qualify as
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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.
- - Withholding
Distributions of income from a modified endowment contract are subject to
federal income tax withholding; however, the recipient may elect not to have the
withholding taken from the distribution. A distribution of income from a
modified endowment contract may be subject to mandatory back-up withholding
(which cannot be waived). The mandatory back-up withholding rate is 31% of the
income that is distributed and will arise of no Taxpayer Identification Number
is provided to the Company, or if the IRS notifies the Company that back-up
withholding is required.
- -Federal Estate and Generation-Skipping Transfer Taxes
The federal estate tax is integrated with the federal gift tax under a unified
tax rate schedule. In general, in 1998, an estate of less than $625,000
(inclusive of certain predeath gifts) will not incur a federal estate tax
liability. In addition, an unlimited marital deduction may be available for
federal estate tax purposes, for certain amounts that pass to the surviving
spouse.
When the Insured dies, the death benefit will generally be included in the
lnsured's federal gross estate if: (1) the proceeds were payable to or for the
benefit of the Insured's estate; or (2) the Insured held any "incident of
ownership" in the policy at death or at any time within three years of death. An
incident of ownership is, in general, any right that may be exercised by the
Policy Owner, such as the right to borrow on the Policy, or the right to name a
new Beneficiary.
If the Policy Owner (whether or not he or she is the Insured) transfers
ownership of the Policy to another person, such transfer may be subject to a
federal gift tax. In addition, if such Policy Owner transfers the Policy to
someone two or more generations younger than the Policy Owner, the transfer may
be subject to the federal generation-skipping transfer tax ("GSTT"), the taxable
amount being the value of the Policy.
Similarly, if the Beneficiary is two or more generations younger than the
Insured, the payment of the Death Proceeds at the death of the Insured may be
subject to the GSTT. Pursuant to regulations recently promulgated by the U.S.
Treasury Department, the Company may be required to withhold a portion of the
Death Proceeds and pay them directly to the IRS as the GSTT liability.
The GSTT provisions generally apply to the same transfers that are subject to
estate or gift taxes.
The tax rate is a flat rate equal to the maximum estate tax rate (currently
55%), and there is a provision for an aggregate $1 million exemption. Due to the
complexity of these rules, the Policy Owner should consult with counsel and
other competent advisors regarding these taxes.
- - Non-Resident Aliens
Pre-death distributions from modified endowment contracts to nonresident aliens
("NRAs") are generally subject to federal income tax and tax withholding, at a
statutory rate of 30% of the amount of income that is distributed. The Company
is required to withhold such amount from the distribution and remit it to the
IRS. Distributions to certain NRAs may be subject to lower, or in certain
instances zero, tax and withholding rates, if the United States has entered into
an applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to the Company sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. In
addition the NRA must obtain an individual Taxpayer Identification Number from
the IRS, and furnish that number to the Company prior to the distribution. If
the Company does not have the proper proof of citizenship or residency and a
proper individual Taxpayer Identification Number prior to any distribution, the
Company will be required to withhold 30% of the income, regardless of any treaty
provision.
A pre-death distribution may not be subject to withholding where the recipient
sufficiently establishes to the Company that such payment is effectively
connected to the recipient's conduct of a trade or business in the United States
and that such payment is includable in the recipient's gross income for United
States federal
40
<PAGE> 44
income tax purposes. Any such distributions may be subject to back-up
withholding at the statutory rate (currently 31%) if not taxpayer identification
number, or an incorrect taxpayer identification number, is provided.
State and local estate, inheritance, income and other tax consequences of
ownership or receipt of Policy proceeds depend on the circumstances of each
Policy Owner or Beneficiary.
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.
TAX CHANGES
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice.
The Code has been subjected to numerous amendments and changes, and it is
reasonable to believe that it will continue to be revised. The United States
Congress has, in the past, considered numerous legislative proposals that, if
enacted, could change the tax treatment of the policies. It is reasonable to
believe that such proposals, and other proposals will be considered in the
future, and some may be enacted into law. In addition, the U.S. Treasury
Department may amend existing regulations, issue new regulations, or adopt new
interpretations of existing law that may be at variance with its current
positions on these matters. In addition, current state law (which is not
discussed herein), and future amendments to state law, may affect the tax
consequences of the policy.
If the Policy Owner, Insured, or Beneficiary or other person receiving any
benefit or interest in or from the Policy is not both a resident and citizen of
the United States, there may be a tax imposed by a foreign country, in addition
to any tax imposed by the United States. The foreign law (including regulations,
rulings, and case law) may change and impose additional taxes on the policy, the
Death Benefit, or other Distributions and/or ownership of the Policy, or a
treaty may be amended and all or part of the favorable treatment may be
eliminated.
Any or all of the foregoing may change from time to time without any notice, and
the tax consequences arising out of a policy may be changed retroactively. There
is no way of predicting if, when, and to what extent any such change may take
place. No representation is made as to the likelihood of the continuation of
these current laws, interpretations, and Policies.
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO
INSURANCE POLICIES. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD NOT
TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR.
THE COMPANY
The life insurance business, including 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 serves as depositor for the Nationwide Variable Account, Nationwide
Variable Account-II, Nationwide Variable Account-3, Nationwide Variable
Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6,
Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8,
Nationwide Variable Account-9, MFS Variable Account, Nationwide Multi-Flex
Variable Account, Nationwide VLI Separate Account, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate
41
<PAGE> 45
Account-4, NACo Variable Account, Nationwide DC Variable Account and the
Nationwide DCVA-II, each of which is a registered investment company, and each
of which is a separate investment account of the Company.
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 and Nationwide Life and Annuity Insurance
Company, together with Nationwide Mutual Insurance Company, Nationwide Mutual
Fire Insurance Company, Nationwide Property and Casualty Insurance Company and
Nationwide General Insurance Company and their affiliated companies comprise the
Nationwide Insurance Enterprise.
The companies listed above have substantially common boards of directors and
officers. Nationwide Financial Services, Inc. ("NFS") is the sole shareholder of
Nationwide Life Insurance Company. NFS serves as a holding company for other
financial institutions. Nationwide Life Insurance Company is the sole owner of
Nationwide Life and Annuity Insurance Company. Each of the directors and
officers listed below is a director or officer respectively of at least one or
more of the other major insurance affiliates of the Nationwide Insurance
Enterprise. Messrs. McFerson, Gasper, Woodward, Fuellgraf and Weihl and Ms.
Thomas are also trustees of one or more of the registered investment companies
distributed by Nationwide Advisory Services, a registered broker-dealer
affiliated with the Nationwide Insurance Enterprise.
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
DIRECTORS OF THE DEPOSITOR NAME AND POSITIONS AND OFFICERS WITH DEPOSITOR PRINCIPAL OCCUPATION
PRINCIPAL BUSINESS ADDRESS
<S> <C> <C>
Lewis J. Alphin Director Farm Owner and Operator (1)
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director Farm Owner and Operator (1)
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director Partner, Fred W. Eckel Sons;
1647 Falls Road President, Eckel Farms, Inc. (1)
Clarks Summit, PA 18411
Willard J. Engel Director Retired General Manager, Lyon County
301 East Marshall Street Co-operative Oil Company (1)
Marshall, MN 44691
Fred C. Finney Director Owner and Operator, Moreland Fruit
1558 West Moreland Road Farm; Operator, Melrose Orchard (1)
Wooster, OH 44691
</TABLE>
42
<PAGE> 46
<TABLE>
<S> <C> <C>
Charles L. Fuellgraf, Jr. Director Chief Executive Officer, Fuellgraf
600 South Washington Street Electric Company (1)
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer President and Chief Operating Officer,
One Nationwide Plaza and Director Nationwide Life Insurance Company and
Columbus, OH 43215 Nationwide Life and Annuity Insurance
Company (2)
Dimon R. McFerson Chairman and Chief Executive Chairman and Chief Executive
One Nationwide Plaza Officer-Nationwide Insurance Enterprise Officer-Nationwide Insurance
Columbus, OH 43215 and Director Enterprise (2)
David O. Miller Chairman of the Board and Director President, Owen Potato Farm, Inc.;
115 Sprague Drive Partner, M&M Enterprises (1)
Hebron, OH 43025
Yvonne L. Montgomery Director Senior Vice President-General Manager
Suite 1600 Southern Customer Operations for U.S.
2859 Paces Ferry Road Customer Operations, Xerox Corporation
Atlanta, GA 30339 (2)
C. Ray Noecker Director Owner and Operator Noecker Farms (1)
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director Vice President, Pattersons, Inc.;
8765 Mulberry Road President, Patterson Farms, Inc. (1)
Chesterland, OH 44026
Arden L. Shisler Director President and Chief Executive Officer,
1356 North Wenger Road K&B Transport, Inc. (1)
Dalton, OH 44618
Robert L. Stewart Director Owner and Operator Sunnydale Farms and
88740 Fairview Road Mining (1)
Jewett, OH 43986
Nancy C. Thomas Director Farm Owner and Operator, Da-Ma-Lor
10835 Georgetown Street NE Farms (1)
Louisville, OH 44641
Harold W. Weihl Director Farm Owner and Operator, Weihl Farms
14282 King Road (1)
Bowling Green, OH 43402
</TABLE>
1) Principal occupation for last five years.
2) Prior to assuming this current position, Messrs. McFerson and Gasper held
other executive management positions with the companies.
Each of the directors is a director of the other major insurance affiliates of
the Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of
the Company and Nationwide Life and Annuity Insurance Company. Messrs. McFerson
and Gasper are directors of Nationwide Advisory Services, Inc., a registered
broker-dealer.
Messrs., McFerson, Miller, Patterson, Shisler and Fuellgraf are directors of
Nationwide Financial Services, Inc. Messrs. Fuellgraf, McFerson, Ms. Thomas and
Mr. Weihl are trustees of Nationwide Investing Foundation, and Nationwide
Investing Foundation III, registered investment companies. Messrs. McFerson,
Gasper and Woodward are trustees of Nationwide Separate Account Trust and
Nationwide Allocation Trust, registered investment companies. Mr. McFerson is
trustee of Financial Horizons Investment Trust and Nationwide Investing
Foundation II, registered investment companies. Mr. Engel is a director of
Western Cooperative Transport.
43
<PAGE> 47
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
OFFICERS OF THE DEPOSITOR OFFICES OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS
<S> <C>
Robert A. Oakley Executive Vice President-Chief Financial Officer
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General Counsel and Assistant
One Nationwide Plaza Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary, Health and Annuities
One Nationwide Plaza
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales and Financial Services
One Nationwide Plaza
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life Company Operations
One Nationwide Plaza
Columbus, OH 43215
Matthew S. Easley Vice President-Life Marketing and Administrative Services
One Nationwide Plaza
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic Marketing
One Nationwide Plaza
Columbus, OH 43215
R. Dennis Noice Vice President Retail Operations
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath Vice President-Product and Market Compliance
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
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.
44
<PAGE> 48
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, Cash Surrender Value, premiums paid, monthly charges deducted since the
last report, and the amounts invested in the Fixed Account, each Sub-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.
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.
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the Year 2000. The
problem relates to many existing computer programs using only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company has been evaluating its exposure to the Year
2000 issue through a review of all of its operating systems as well as
dependencies on the systems of others since 1996. The Company expects all system
changes and replacements needed to achieve Year 2000 compliance to be completed
by the end of 1998. Compliance testing will be completed in the first quarter of
1999. The Company charges all costs associated with these system changes as the
costs are incurred.
Operating expenses in 1997 include approximately $45 million on technology
projects, which includes costs related to Year 2000 and the development of a new
policy administration system for traditional life insurance products and other
system enhancements. The Company anticipates spending a comparable amount in
1998 on technology projects, including Year 2000 initiatives. These expenses do
not have an effect on the assets of the Variable Account and are not charged
through to the Contract Owner.
LEGAL PROCEEDINGS
The Company is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on the Company.
The General Distributor, Nationwide Advisory Services, Inc. is not engaged in
any litigation of any material nature.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance pricing
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements. In February 1997, Nationwide Life Insurance Company
was named as a defendant in a lawsuit filed in New York Supreme Court related to
the sale of whole life policies on a "vanishing premium" basis (John H. Snyder
v. Nationwide Life Insurance Co.). The plaintiff in such lawsuit seeks to
represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit has not been
certified as a class action. In April, 1997, a motion to dismiss the Snyder
complaint in its entirety was filed by the defendants, and the plaintiff has
opposed such motion.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced an action against Nationwide Life Insurance Company and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this action, plaintiffs seek to
represent a class of variable life insurance contract owners and
45
<PAGE> 49
variable annuity contract owners whom they claim were allegedly misled when
purchasing these variable contracts into believing that some portion of their
premiums were invested in a publicly traded mutual fund when, in fact, the
premium monies were invested in a mutual fund whose shares may only be purchased
by insurance companies. The complaint seeks unspecified compensatory, treble and
punitive damages. In January 1998, both Nationwide Life Insurance Company and
American Century filed motions to dismiss the entire complaint. Plaintiffs'
counsel have opposed these motions and the federal court in Texas heard
arguments on the motions to dismiss in April, 1998. This lawsuit is in an early
stage and has not been certified as a class action. Nationwide Life Insurance
Company intends to defend this case vigorously.
There can be no assurance that any litigation relating to pricing and sales
practices will not have a material adverse effect on the Company in the future.
EXPERTS
The audited financial statements have been included herein in reliance upon the
report 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, Dietrich, Reynolds & Koogler, One Nationwide Plaza, Columbus,
Ohio 43215. All the members of such firm are employed by the Nationwide Mutual
Insurance Company.
46
<PAGE> 50
APPENDIX 1
ILLUSTRATION OF
SURRENDER CHARGES
Example 1: A female non-tobacco, age 45, purchases a Policy with a Specified
Amount of $50,000 and a Scheduled Premium of $750. She now wishes to surrender
the Policy during the first Policy Year. By using the initial surrender charge
table reproduced below, (also see "Surrender Charges") the total surrender
charge per thousand multiplied by the Specified Amount expressed in thousands
equals the total surrender charge of $569.50 ($11.390 x 50=569.50).
Example 2: A male non-tobacco, age 35, purchases a Policy with a Specified
Amount of $100,000 and a Scheduled Premium of $1100. He now wants to surrender
the Policy in the sixth Policy Year. The total initial surrender charge is
calculated using the method illustrated above. (Surrender Charge per
1000 6.817 x 100=681.70 maximum initial surrender charge.) Because the fifth
Policy Year has been completed, the maximum initial surrender charge is reduced
by multiplying it by the applicable percentage factor from the "Reductions to
Surrender Charges" table below. (Also see "Reductions to Surrender Charges".)
In this case, $681.70 x 60%=$409.02.
Maximum Surrender Charge per $1,000 of initial Specified Amount for Policies
which are issued on a standard basis.
Initial Specified Amount $50,000-$99,999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25 $7.773 $7.518 $8.369 $7.818
- ----------------------------------------------------------------------------------------------------------
35 8.817 8.396 9.811 8.889
- ----------------------------------------------------------------------------------------------------------
45 12.185 11.390 13.884 12.164
- ----------------------------------------------------------------------------------------------------------
55 15.628 13.995 18.410 15.106
- ----------------------------------------------------------------------------------------------------------
65 22.274 19.043 26.559 20.607
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Initial Specified Amount $100,000+
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25 $5.773 $5.518 $6.369 $5.818
- ----------------------------------------------------------------------------------------------------------
35 6.817 6.396 7.811 6.889
- ----------------------------------------------------------------------------------------------------------
45 9.685 8.890 11.384 9.664
- ----------------------------------------------------------------------------------------------------------
55 13.128 11.495 15.910 12.606
- ----------------------------------------------------------------------------------------------------------
65 21.274 18.043 25.559 19.607
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Reductions to Surrender Charges
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0 100% 5 60%
- -----------------------------------------------------------------------------------------------
1 100% 6 50%
- -----------------------------------------------------------------------------------------------
2 90% 7 40%
- -----------------------------------------------------------------------------------------------
3 80% 8 30%
- -----------------------------------------------------------------------------------------------
4 70% 9+ 0%
- -----------------------------------------------------------------------------------------------
</TABLE>
The current Surrender Charges are the same for all states. However, in
Pennsylvania the guaranteed maximum Surrender Charges are spread out over 14
years. The guaranteed maximum Surrender Charge in subsequent years in
Pennsylvania is reduced in the following manner:
47
<PAGE> 51
<TABLE>
<CAPTION>
COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE
POLICY AS A % OF INITIAL POLICY AS A % OF INITIAL POLICY AS A % OF INITIAL
YEARS SURRENDER CHARGES YEARS SURRENDER CHARGES YEARS SURRENDER CHARGES
<S> <C> <C> <C> <C> <C> <C>
0 100% 5 60% 10 20%
1 100% 6 50% 11 15%
2 90% 7 40% 12 10%
3 80% 8 30% 13 5%
4 70% 9 25% 14+ 0%
</TABLE>
The illustrations of current values in this prospectus are the same for
Pennsylvania. However, the illustrations of guaranteed values in this prospectus
do not reflect guaranteed maximum Surrender Charges which are spread out over 14
years. If this Policy is issued in Pennsylvania, please contact the Home Office
for an illustration.
The Company has no plans to change the current Surrender Charges.
48
<PAGE> 52
APPENDIX 2
ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES,
AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the Policies change with investment performance. The illustrations
illustrate how Cash Values, Cash Surrender Values and death benefits under a
Policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the Cash Values, Cash Surrender Values and death benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the Policies would go into default, at which time additional
premium payments would be required to continue the policy in force. The
illustrations also assume there is no Policy Indebtedness, no additional premium
payments are made, no Cash Values are allocated to the Fixed Account, and there
are no changes in the Specified Amount or death benefit option.
The amounts shown for the Cash Value, Cash Surrender Value and death benefit as
of each Policy Anniversary reflect the fact that the net investment return on
the assets held in the Sub-Accounts is lower than the gross return. This is due
to the deduction of Underlying Mutual Fund investment advisory fees and other
expenses which are equivalent to an annual effective rate of 0.90%. This
effective rate is based on the average of the fund expenses for the preceding
year for all Underlying Mutual Fund options available under the policy as of
March 13, 1998.
Taking into account the Underlying Mutual Fund expenses, gross annual rates of
return of 0%, 6% and 12% correspond to net investment experience at constant
annual rates of -0.90%, 5.10% and 11.10%.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection, recovering taxes, providing for
administrative expenses, and assuming mortality and expense risks. Current
values reflect current cost of insurance charges and guaranteed values reflect
the maximum cost of insurance charges guaranteed in the Policy. The values shown
are for Policies which are issued as standard. Policies issued on a substandard
basis would result in lower Cash Values and Death benefits than those
illustrated.
The Cash Surrender Values shown in the illustrations reflect the fact that the
Company will deduct a Surrender Charge from the Policy's Cash Value for any
Policy surrendered in full during the first nine Policy Years.
The illustrations also reflect the fact that no charges for federal or state
income taxes are currently made against the Variable Account. If such a charge
is made in the future, it will require a higher gross investment return than
illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, the Company will furnish a comparable illustration based on the
proposed Insured's age, sex, smoking classification, rating classification and
premium payment requested.
49
<PAGE> 53
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 788 406 0 50,000 438 0 50,000 471 0 50,000
2 1,614 853 279 50,000 945 371 50,000 1,041 468 50,000
3 2,483 1,281 764 50,000 1,461 945 50,000 1,658 1,141 50,000
4 3,394 1,690 1,231 50,000 1,989 1,530 50,000 2,326 1,867 50,000
5 4,351 2,085 1,683 50,000 2,531 2,129 50,000 3,056 2,654 50,000
6 5,357 2,463 2,119 50,000 3,087 2,743 50,000 3,852 3,508 50,000
7 6,412 2,826 2,539 50,000 3,659 3,372 50,000 4,723 4,436 50,000
8 7,520 3,172 2,942 50,000 4,246 4,017 50,000 5,675 5,446 50,000
9 8,683 3,502 3,330 50,000 4,849 4,677 50,000 6,719 6,546 50,000
10 9,905 3,814 3,814 50,000 5,469 5,469 50,000 7,863 7,863 50,000
11 11,188 4,110 4,110 50,000 6,105 6,105 50,000 9,119 9,119 50,000
12 12,535 4,387 4,387 50,000 6,759 6,759 50,000 10,499 10,499 50,000
13 13,949 4,647 4,647 50,000 7,431 7,431 50,000 12,017 12,017 50,000
14 15,434 4,887 4,887 50,000 8,121 8,121 50,000 13,690 13,690 50,000
15 16,993 5,108 5,108 50,000 8,830 8,830 50,000 15,534 15,534 50,000
16 18,630 5,309 5,309 50,000 9,559 9,559 50,000 17,570 17,570 50,000
17 20,349 5,462 5,462 50,000 10,283 10,283 50,000 19,799 19,799 50,000
18 22,154 5,562 5,562 50,000 10,998 10,998 50,000 22,246 22,246 50,000
19 24,049 5,611 5,611 50,000 11,709 11,709 50,000 24,943 24,943 50,000
20 26,039 5,615 5,615 50,000 12,419 12,419 50,000 27,932 27,932 50,000
21 28,129 5,557 5,557 50,000 13,116 13,116 50,000 31,252 31,252 50,000
22 30,323 5,432 5,432 50,000 13,798 13,798 50,000 34,950 34,950 50,000
23 32,626 5,230 5,230 50,000 14,457 14,457 50,000 39,082 39,082 50,000
24 35,045 4,942 4,942 50,000 15,089 15,089 50,000 43,716 43,716 51,148
25 37,585 4,559 4,559 50,000 15,686 15,686 50,000 48,852 48,852 56,668
26 40,252 4,067 4,067 50,000 16,243 16,243 50,000 54,509 54,509 62,685
27 43,052 3,456 3,456 50,000 16,752 16,752 50,000 60,756 60,756 68,654
28 45,992 2,711 2,711 50,000 17,204 17,204 50,000 67,661 67,661 75,103
29 49,079 1,811 1,811 50,000 17,590 17,590 50,000 75,301 75,301 82,078
30 52,321 734 734 50,000 17,895 17,895 50,000 83,767 83,767 89,630
<FN>
- --------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE TARGET PREMIUM AND 4% ON PREMIUMS IN EXCESS OF TARGET FOR ANY
SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
50
<PAGE> 54
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 788 404 0 50,404 436 0 50,436 469 0 50,469
2 1,614 848 274 50,848 939 365 50,939 1,035 461 51,035
3 2,483 1,270 753 51,270 1,449 932 51,449 1,643 1,127 51,643
4 3,394 1,672 1,213 51,672 1,966 1,507 51,966 2,299 1,840 52,299
5 4,351 2,056 1,654 52,056 2,495 2,093 52,495 3,011 2,610 53,011
6 5,357 2,422 2,078 52,422 3,034 2,690 53,034 3,784 3,440 53,784
7 6,412 2,770 2,483 52,770 3,584 3,298 53,584 4,623 4,336 54,623
8 7,520 3,100 2,870 53,100 4,145 3,915 54,145 5,534 5,304 55,534
9 8,683 3,410 3,238 53,410 4,715 4,543 54,715 6,524 6,352 56,524
10 9,905 3,700 3,700 53,700 5,295 5,295 55,295 7,600 7,600 57,600
11 11,188 3,971 3,971 53,971 5,885 5,885 55,885 8,771 8,771 58,771
12 12,535 4,220 4,220 54,220 6,483 6,483 56,483 10,045 10,045 60,045
13 13,949 4,448 4,448 54,448 7,090 7,090 57,090 11,432 11,432 61,432
14 15,434 4,654 4,654 54,654 7,704 7,704 57,704 12,943 12,943 62,943
15 16,993 4,838 4,838 54,838 8,325 8,325 58,325 14,589 14,589 64,589
16 18,630 4,998 4,998 54,998 8,952 8,952 58,952 16,383 16,383 66,383
17 20,349 5,103 5,103 55,103 9,553 9,553 59,553 18,306 18,306 68,306
18 22,154 5,148 5,148 55,148 10,119 10,119 60,119 20,366 20,366 70,366
19 24,049 5,135 5,135 55,135 10,653 10,653 60,653 22,579 22,579 72,579
20 26,039 5,071 5,071 55,071 11,156 11,156 61,156 24,965 24,965 74,965
21 28,129 4,939 4,939 54,939 11,611 11,611 61,611 27,529 27,529 77,529
22 30,323 4,732 4,732 54,732 12,007 12,007 62,007 30,286 30,286 80,286
23 32,626 4,443 4,443 54,443 12,332 12,332 62,332 33,245 33,245 83,245
24 35,045 4,064 4,064 54,064 12,574 12,574 62,574 36,419 36,419 86,419
25 37,585 3,585 3,585 53,585 12,718 12,718 62,718 39,821 39,821 89,821
26 40,252 2,998 2,998 52,998 12,749 12,749 62,749 43,462 43,462 93,462
27 43,052 2,295 2,295 52,295 12,653 12,653 62,653 47,359 47,359 97,359
28 45,992 1,467 1,467 51,467 12,413 12,413 62,413 51,527 51,527 101,527
29 49,079 502 502 50,502 12,009 12,009 62,009 55,981 55,981 105,981
30 52,321 (*) (*) (*) 11,414 11,414 61,414 60,734 60,734 110,734
<FN>
- --------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
51
<PAGE> 55
DEATH BENEFIT OPTION 1
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1260 590 0 50,000 640 0 50,000 690 0 50,000
2 2,583 1,195 502 50,000 1,333 640 50,000 1,479 786 50,000
3 3,972 1,774 1,150 50,000 2,041 1,418 50,000 2,333 1,709 50,000
4 5,431 2,341 1,787 50,000 2,779 2,225 50,000 3,276 2,722 50,000
5 6,962 2,898 2,413 50,000 3,549 3,064 50,000 4,319 3,834 50,000
6 8,570 3,444 3,028 50,000 4,353 3,937 50,000 5,472 5,056 50,000
7 10,259 3,979 3,632 50,000 5,192 4,846 50,000 6,750 6,403 50,000
8 12,032 4,503 4,226 50,000 6,070 5,793 50,000 8,165 7,888 50,000
9 13,893 5,016 4,808 50,000 6,988 6,780 50,000 9,736 9,528 50,000
10 15,848 5,519 5,519 50,000 7,948 7,948 50,000 11,479 11,479 50,000
11 17,901 6,012 6,012 50,000 8,954 8,954 50,000 13,416 13,416 50,000
12 20,056 6,408 6,408 50,000 9,926 9,926 50,000 15,496 15,496 50,000
13 22,318 6,719 6,719 50,000 10,874 10,874 50,000 17,752 17,752 50,000
14 24,694 6,955 6,955 50,000 11,812 11,812 50,000 20,223 20,223 50,000
15 27,189 7,111 7,111 50,000 12,733 12,733 50,000 22,938 22,938 50,000
16 29,808 7,135 7,135 50,000 13,597 13,597 50,000 25,908 25,908 50,000
17 32,559 7,028 7,028 50,000 14,405 14,405 50,000 29,194 29,194 50,000
18 35,447 6,773 6,773 50,000 15,147 15,147 50,000 32,855 32,855 50,000
19 38,479 6,367 6,367 50,000 15,824 15,824 50,000 36,969 36,969 50,000
20 41,663 5,814 5,814 50,000 16,443 16,443 50,000 41,633 41,633 50,000
21 45,006 5,082 5,082 50,000 16,982 16,982 50,000 46,958 46,958 50,000
22 48,517 4,141 4,141 50,000 17,426 17,426 50,000 52,960 52,960 55,607
23 52,202 2,955 2,955 50,000 17,754 17,754 50,000 59,573 59,573 62,551
24 56,073 1,481 1,481 50,000 17,940 17,940 50,000 66,857 66,857 70,200
25 60,136 (*) (*) (*) 17,957 17,957 50,000 74,875 74,875 78,619
26 64,403 (*) (*) (*) 17,779 17,779 50,000 83,698 83,698 87,883
27 68,883 (*) (*) (*) 17,365 17,365 50,000 93,401 93,401 98,071
28 73,587 (*) (*) (*) 16,666 16,666 50,000 104,065 104,065 109,268
29 78,527 (*) (*) (*) 15,614 15,614 50,000 115,777 115,777 121,566
30 83,713 (*) (*) (*) 14,112 14,112 50,000 128,630 128,630 135,062
<FN>
- --------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
52
<PAGE> 56
DEATH BENEFIT OPTION 2
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1260 583 0 50,583 632 0 50,632 682 0 50,682
2 2,583 1,174 481 51,174 1,311 618 51,311 1,454 761 51,454
3 3,972 1,734 1,110 51,734 1,996 1,372 51,996 2,281 1,657 52,281
4 5,431 2,277 1,722 52,277 2,702 2,147 52,702 3,184 2,629 53,184
5 6,962 2,803 2,318 52,803 3,430 2,945 53,430 4,171 3,686 54,171
6 8,570 3,313 2,897 53,313 4,182 3,766 54,182 5,251 4,835 55,251
7 10,259 3,806 3,459 53,806 4,958 4,611 54,958 6,433 6,087 56,433
8 12,032 4,282 4,005 54,282 5,758 5,481 55,758 7,728 7,451 57,728
9 13,893 4,743 4,535 54,743 6,585 6,377 56,585 9,147 8,939 59,147
10 15,848 5,187 5,187 55,187 7,439 7,439 57,439 10,703 10,703 60,703
11 17,901 5,615 5,615 55,615 8,320 8,320 58,320 12,409 12,409 62,409
12 20,056 5,928 5,928 55,928 9,128 9,128 59,128 14,176 14,176 64,176
13 22,318 6,138 6,138 56,138 9,872 9,872 59,872 16,021 16,021 66,021
14 24,694 6,259 6,259 56,259 10,558 10,558 60,558 17,965 17,965 67,965
15 27,189 6,282 6,282 56,282 11,176 11,176 61,176 20,008 20,008 70,008
16 29,808 6,149 6,149 56,149 11,661 11,661 61,661 22,098 22,098 72,098
17 32,559 5,865 5,865 55,865 12,010 12,010 62,010 24,240 24,240 74,240
18 35,447 5,415 5,415 55,415 12,198 12,198 62,198 26,425 26,425 76,425
19 38,479 4,802 4,802 54,802 12,219 12,219 62,219 28,663 28,663 78,663
20 41,663 4,038 4,038 54,038 12,076 12,076 62,076 30,968 30,968 80,968
21 45,006 3,097 3,097 53,097 11,732 11,732 61,732 33,320 33,320 83,320
22 48,517 1,960 1,960 51,960 11,157 11,157 61,157 35,698 35,698 85,698
23 52,202 607 607 50,607 10,315 10,315 60,315 38,082 38,082 88,082
24 56,073 (*) (*) (*) 9,169 9,169 59,169 40,445 40,445 90,445
25 60,136 (*) (*) (*) 7,680 7,680 57,680 42,758 42,758 92,758
26 64,403 (*) (*) (*) 5,820 5,820 55,820 45,003 45,003 95,003
27 68,883 (*) (*) (*) 3,549 3,549 53,549 47,149 47,149 97,149
28 73,587 (*) (*) (*) 827 827 50,827 49,161 49,161 99,161
29 78,527 (*) (*) (*) (*) (*) (*) 50,992 50,992 100,992
30 83,713 (*) (*) (*) (*) (*) (*) 52,579 52,579 102,579
<FN>
- ---------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
53
<PAGE> 57
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,575 931 34 100,000 1,000 103 100,000 1,069 172 100,000
2 3,229 1,896 998 100,000 2,093 1,196 100,000 2,299 1,402 100,000
3 4,965 2,832 2,024 100,000 3,221 2,414 100,000 3,644 2,836 100,000
4 6,788 3,741 3,023 100,000 4,386 3,668 100,000 5,114 4,396 100,000
5 8,703 4,621 3,993 100,000 5,588 4,960 100,000 6,724 6,096 100,000
6 10,713 5,473 4,935 100,000 6,830 6,291 100,000 8,489 7,950 100,000
7 12,824 6,297 5,848 100,000 8,112 7,663 100,000 10,424 9,975 100,000
8 15,040 7,092 6,733 100,000 9,437 9,078 100,000 12,548 12,189 100,000
9 17,367 7,857 7,588 100,000 10,805 10,536 100,000 14,883 14,614 100,000
10 19,810 8,593 8,593 100,000 12,220 12,220 100,000 17,450 17,450 100,000
11 22,376 9,299 9,299 100,000 13,682 13,682 100,000 20,276 20,276 100,000
12 25,069 9,974 9,974 100,000 15,195 15,195 100,000 23,390 23,390 100,000
13 27,898 10,618 10,618 100,000 16,759 16,759 100,000 26,825 26,825 100,000
14 30,868 11,231 11,231 100,000 18,378 18,378 100,000 30,628 30,628 100,000
15 33,986 11,771 11,771 100,000 20,016 20,016 100,000 34,810 34,810 100,000
16 37,261 12,223 12,223 100,000 21,660 21,660 100,000 39,406 39,406 100,000
17 40,699 12,579 12,579 100,000 23,307 23,307 100,000 44,468 44,468 100,000
18 44,309 12,831 12,831 100,000 24,951 24,951 100,000 50,058 50,058 100,000
19 48,099 12,984 12,984 100,000 26,604 26,604 100,000 56,251 56,251 100,000
20 52,079 13,058 13,058 100,000 28,288 28,288 100,000 63,146 63,146 100,000
21 56,258 13,004 13,004 100,000 29,967 29,967 100,000 70,821 70,821 100,000
22 60,646 12,823 12,823 100,000 31,645 31,645 100,000 79,394 79,394 100,000
23 65,253 12,498 12,498 100,000 33,315 33,315 100,000 88,984 88,984 105,001
24 70,091 12,013 12,013 100,000 34,971 34,971 100,000 99,575 99,575 116,503
25 75,170 11,349 11,349 100,000 36,605 36,605 100,000 111,244 111,244 129,044
26 80,504 10,485 10,485 100,000 38,212 38,212 100,000 124,100 124,100 142,715
27 86,104 9,401 9,401 100,000 39,784 39,784 100,000 138,299 138,299 156,278
28 91,984 8,070 8,070 100,000 41,316 41,316 100,000 153,996 153,996 170,936
29 98,158 6,459 6,459 100,000 42,797 42,797 100,000 171,366 171,366 186,789
30 104,641 4,525 4,525 100,000 44,213 44,213 100,000 190,612 190,612 203,955
<FN>
- ----------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
54
<PAGE> 58
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,575 927 30 100,927 996 98 100,996 1,065 167 101,065
2 3,229 1,884 987 101,884 2,080 1,183 102,080 2,285 1,388 102,285
3 4,965 2,809 2,001 102,809 3,195 2,387 103,195 3,613 2,806 103,613
4 6,788 3,702 2,984 103,702 4,340 3,622 104,340 5,059 4,341 105,059
5 8,703 4,563 3,935 104,563 5,516 4,887 105,516 6,635 6,006 106,635
6 10,713 5,391 4,853 105,391 6,723 6,185 106,723 8,352 7,813 108,352
7 12,824 6,186 5,737 106,186 7,962 7,514 107,962 10,224 9,775 110,224
8 15,040 6,947 6,588 106,947 9,234 8,875 109,234 12,266 11,907 112,266
9 17,367 7,673 7,404 107,673 10,538 10,268 110,538 14,495 14,226 114,495
10 19,810 8,365 8,365 108,365 11,874 11,874 111,874 16,929 16,929 116,929
11 22,376 9,021 9,021 109,021 13,244 13,244 113,244 19,587 19,587 119,587
12 25,069 9,641 9,641 109,641 14,647 14,647 114,647 22,492 22,492 122,492
13 27,898 10,224 10,224 110,224 16,083 16,083 116,083 25,667 25,667 125,667
14 30,868 10,768 10,768 110,768 17,553 17,553 117,553 29,150 29,150 129,150
15 33,986 11,229 11,229 111,229 19,009 19,009 119,009 32,922 32,922 132,922
16 37,261 11,585 11,585 111,585 20,429 20,429 120,429 36,994 36,994 136,994
17 40,699 11,831 11,831 111,831 21,804 21,804 121,804 41,387 41,387 141,387
18 44,309 11,956 11,956 111,956 23,118 23,118 123,118 46,125 46,125 146,125
19 48,099 11,967 11,967 111,967 24,374 24,374 124,374 51,248 51,248 151,248
20 52,079 11,885 11,885 111,885 25,593 25,593 125,593 56,820 56,820 156,820
21 56,258 11,659 11,659 111,659 26,720 26,720 126,720 62,831 62,831 162,831
22 60,646 11,289 11,289 111,289 27,747 27,747 127,747 69,326 69,326 169,326
23 65,253 10,760 10,760 110,760 28,653 28,653 128,653 76,339 76,339 176,339
24 70,091 10,057 10,057 110,057 29,414 29,414 129,414 83,907 83,907 183,907
25 75,170 9,163 9,163 109,163 30,003 30,003 130,003 92,068 92,068 192,068
26 80,504 8,064 8,064 108,064 30,394 30,394 130,394 100,866 100,866 200,866
27 86,104 6,744 6,744 106,744 30,559 30,559 130,559 110,351 110,351 210,351
28 91,984 5,186 5,186 105,186 30,465 30,465 130,465 120,574 120,574 220,574
29 98,158 3,370 3,370 103,370 30,076 30,076 130,076 131,587 131,587 231,587
30 104,641 1,267 1,267 101,267 29,345 29,345 129,345 143,442 143,442 243,442
<FN>
- ------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
55
<PAGE> 59
DEATH BENEFIT OPTION 1
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,404 242 100,000 1,514 352 100,000 1,625 462 100,000
2 5,381 2,840 1,677 100,000 3,151 1,988 100,000 3,476 2,314 100,000
3 8,275 4,247 3,201 100,000 4,855 3,809 100,000 5,516 4,470 100,000
4 11,314 5,627 4,697 100,000 6,631 5,701 100,000 7,767 6,837 100,000
5 14,505 6,979 6,165 100,000 8,482 7,668 100,000 10,252 9,438 100,000
6 17,855 8,303 7,606 100,000 10,412 9,715 100,000 12,999 12,302 100,000
7 21,373 9,601 9,020 100,000 12,428 11,846 100,000 16,039 15,457 100,000
8 25,066 10,871 10,406 100,000 14,532 14,067 100,000 19,405 18,940 100,000
9 28,945 12,115 11,767 100,000 16,732 16,383 100,000 23,136 22,788 100,000
10 33,017 13,333 13,333 100,000 19,032 19,032 100,000 27,280 27,280 100,000
11 37,293 14,524 14,524 100,000 21,439 21,439 100,000 31,894 31,894 100,000
12 41,782 15,536 15,536 100,000 23,815 23,815 100,000 36,910 36,910 100,000
13 46,497 16,390 16,390 100,000 26,187 26,187 100,000 42,412 42,412 100,000
14 51,446 17,104 17,104 100,000 28,583 28,583 100,000 48,491 48,491 100,000
15 56,644 17,666 17,666 100,000 30,998 30,998 100,000 55,232 55,232 100,000
16 62,101 17,981 17,981 100,000 33,362 33,362 100,000 62,696 62,696 100,000
17 67,831 18,049 18,049 100,000 35,685 35,685 100,000 71,023 71,023 100,000
18 73,848 17,841 17,841 100,000 37,957 37,957 100,000 80,376 80,376 100,000
19 80,165 17,351 17,351 100,000 40,191 40,191 100,000 90,964 90,964 100,000
20 86,798 16,585 16,585 100,000 42,408 42,408 100,000 102,881 102,881 110,083
21 93,763 15,487 15,487 100,000 44,591 44,591 100,000 116,096 116,096 121,901
22 101,076 14,004 14,004 100,000 46,730 46,730 100,000 130,665 130,665 137,198
23 108,755 12,069 12,069 100,000 48,814 48,814 100,000 146,720 146,720 154,056
24 116,818 9,602 9,602 100,000 50,830 50,830 100,000 164,403 164,403 172,623
25 125,284 6,511 6,511 100,000 52,768 52,768 100,000 183,868 183,868 193,061
26 134,173 2,713 2,713 100,000 54,636 54,636 100,000 205,286 205,286 215,551
27 143,506 (*) (*) (*) 56,426 56,426 100,000 228,841 228,841 240,283
28 153,307 (*) (*) (*) 58,135 58,135 100,000 254,729 254,729 267,466
29 163,597 (*) (*) (*) 59,748 59,748 100,000 283,201 283,201 297,362
30 174,402 (*) (*) (*) 61,244 61,244 100,000 314,509 314,509 330,234
<FN>
- ----------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
56
<PAGE> 60
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,389 226 101,389 1,498 335 101,498 1,607 445 101,607
2 5,381 2,797 1,635 102,797 3,104 1,941 103,104 3,424 2,262 103,424
3 8,275 4,165 3,119 104,165 4,760 3,714 104,760 5,408 4,361 105,408
4 11,314 5,493 4,563 105,493 6,470 5,540 106,470 7,575 6,645 107,575
5 14,505 6,780 5,966 106,780 8,233 7,420 108,233 9,944 9,131 109,944
6 17,855 8,027 7,330 108,027 10,054 9,356 110,054 12,537 11,839 112,537
7 21,373 9,234 8,653 109,234 11,932 11,351 111,932 15,374 14,792 115,374
8 25,066 10,401 9,936 110,401 13,871 13,406 113,871 18,481 18,016 118,481
9 28,945 11,529 11,180 111,529 15,872 15,523 115,872 21,885 21,536 121,885
10 33,017 12,616 12,616 112,616 17,938 17,938 117,938 25,617 25,617 125,617
11 37,293 13,664 13,664 113,664 20,071 20,071 120,071 29,721 29,721 129,721
12 41,782 14,489 14,489 114,489 22,086 22,086 122,086 34,042 34,042 134,042
13 46,497 15,114 15,114 115,114 23,996 23,996 123,996 38,625 38,625 138,625
14 51,446 15,563 15,563 115,563 25,820 25,820 125,820 43,518 43,518 143,518
15 56,644 15,818 15,818 115,818 27,539 27,539 127,539 48,735 48,735 148,735
16 62,101 15,765 15,765 115,765 29,024 29,024 129,024 54,184 54,184 154,184
17 67,831 15,409 15,409 115,409 30,265 30,265 130,265 59,889 59,889 159,889
18 73,848 14,717 14,717 114,717 31,213 31,213 131,213 65,842 65,842 165,842
19 80,165 13,696 13,696 113,696 31,855 31,855 131,855 72,067 72,067 172,067
20 86,798 12,367 12,367 112,367 32,193 32,193 132,193 78,612 78,612 178,612
21 93,763 10,680 10,680 110,680 32,156 32,156 132,156 85,453 85,453 185,453
22 101,076 8,596 8,596 108,596 31,683 31,683 131,683 92,575 92,575 192,575
23 108,755 6,071 6,071 106,071 30,699 30,699 130,699 99,955 99,955 199,955
24 116,818 3,063 3,063 103,063 29,130 29,130 129,130 107,566 107,566 207,566
25 125,284 (*) (*) (*) 26,892 26,892 126,892 115,376 115,376 215,376
26 134,173 (*) (*) (*) 23,937 23,937 123,937 123,390 123,390 223,390
27 143,506 (*) (*) (*) 20,187 20,187 120,187 131,580 131,580 231,580
28 153,307 (*) (*) (*) 15,564 15,564 115,564 139,914 139,914 239,914
29 163,597 (*) (*) (*) 9,963 9,963 109,963 148,339 148,339 248,339
30 174,402 (*) (*) (*) 3,258 3,258 103,258 156,779 156,779 256,779
<FN>
- ---------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$10.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
57
<PAGE> 61
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 788 355 0 50,000 385 0 50,000 416 0 50,000
2 1,614 718 144 50,000 802 229 50,000 891 317 50,000
3 2,483 1,058 542 50,000 1,220 704 50,000 1,397 881 50,000
4 3,394 1,374 915 50,000 1,637 1,178 50,000 1,936 1,477 50,000
5 4,351 1,665 1,264 50,000 2,052 1,651 50,000 2,511 2,110 50,000
6 5,357 1,928 1,584 50,000 2,463 2,118 50,000 3,123 2,779 50,000
7 6,412 2,160 1,873 50,000 2,864 2,577 50,000 3,772 3,485 50,000
8 7,520 2,356 2,127 50,000 3,253 3,023 50,000 4,460 4,231 50,000
9 8,683 2,513 2,341 50,000 3,623 3,451 50,000 5,186 5,014 50,000
10 9,905 2,626 2,626 50,000 3,971 3,971 50,000 5,952 5,952 50,000
11 11,188 2,692 2,692 50,000 4,290 4,290 50,000 6,760 6,760 50,000
12 12,535 2,705 2,705 50,000 4,575 4,575 50,000 7,610 7,610 50,000
13 13,949 2,664 2,664 50,000 4,823 4,823 50,000 8,508 8,508 50,000
14 15,434 2,562 2,562 50,000 5,025 5,025 50,000 9,455 9,455 50,000
15 16,993 2,391 2,391 50,000 5,171 5,171 50,000 10,454 10,454 50,000
16 18,630 2,142 2,142 50,000 5,252 5,252 50,000 11,506 11,506 50,000
17 20,349 1,806 1,806 50,000 5,254 5,254 50,000 12,614 12,614 50,000
18 22,154 1,367 1,367 50,000 5,159 5,159 50,000 13,779 13,779 50,000
19 24,049 809 809 50,000 4,948 4,948 50,000 15,002 15,002 50,000
20 26,039 115 115 50,000 4,599 4,599 50,000 16,287 16,287 50,000
21 28,129 (*) (*) (*) 4,088 4,088 50,000 17,640 17,640 50,000
22 30,323 (*) (*) (*) 3,387 3,387 50,000 19,071 19,071 50,000
23 32,626 (*) (*) (*) 2,466 2,466 50,000 20,594 20,594 50,000
24 35,045 (*) (*) (*) 1,284 1,284 50,000 22,222 22,222 50,000
25 37,585 (*) (*) (*) (*) (*) (*) 23,972 23,972 50,000
26 40,252 (*) (*) (*) (*) (*) (*) 25,865 25,865 50,000
27 43,052 (*) (*) (*) (*) (*) (*) 27,931 27,931 50,000
28 45,992 (*) (*) (*) (*) (*) (*) 30,202 30,202 50,000
29 49,079 (*) (*) (*) (*) (*) (*) 32,730 32,730 50,000
30 52,321 (*) (*) (*) (*) (*) (*) 35,587 35,587 50,000
<FN>
- --------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
58
<PAGE> 62
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 788 352 0 50,352 383 0 50,383 414 0 50,414
2 1,614 711 137 50,711 795 221 50,795 883 309 50,883
3 2,483 1,045 529 51,045 1,205 689 51,205 1,380 863 51,380
4 3,394 1,353 894 51,353 1,611 1,152 51,611 1,905 1,446 51,905
5 4,351 1,632 1,231 51,632 2,011 1,610 52,011 2,460 2,058 52,460
6 5,357 1,881 1,537 51,881 2,402 2,057 52,402 3,044 2,700 53,044
7 6,412 2,096 1,809 52,096 2,778 2,491 52,778 3,656 3,369 53,656
8 7,520 2,273 2,043 52,273 3,135 2,905 53,135 4,294 4,065 54,294
9 8,683 2,406 2,234 52,406 3,466 3,293 53,466 4,955 4,783 54,955
10 9,905 2,493 2,493 52,493 3,764 3,764 53,764 5,636 5,636 55,636
11 11,188 2,528 2,528 52,528 4,025 4,025 54,025 6,335 6,335 56,335
12 12,535 2,508 2,508 52,508 4,241 4,241 54,241 7,048 7,048 57,048
13 13,949 2,430 2,430 52,430 4,406 4,406 54,406 7,772 7,772 57,772
14 15,434 2,289 2,289 52,289 4,512 4,512 54,512 8,503 8,503 58,503
15 16,993 2,077 2,077 52,077 4,547 4,547 54,547 9,232 9,232 59,232
16 18,630 1,787 1,787 51,787 4,500 4,500 54,500 9,950 9,950 59,950
17 20,349 1,411 1,411 51,411 4,358 4,358 54,358 10,646 10,646 60,646
18 22,154 936 936 50,936 4,102 4,102 54,102 11,302 11,302 61,302
19 24,049 349 349 50,349 3,712 3,712 53,712 11,901 11,901 61,901
20 26,039 (*) (*) (*) 3,168 3,168 53,168 12,421 12,421 62,421
21 28,129 (*) (*) (*) 2,451 2,451 52,451 12,840 12,840 62,840
22 30,323 (*) (*) (*) 1,539 1,539 51,539 13,136 13,136 63,136
23 32,626 (*) (*) (*) 413 413 50,413 13,282 13,282 63,282
24 35,045 (*) (*) (*) (*) (*) (*) 13,247 13,247 63,247
25 37,585 (*) (*) (*) (*) (*) (*) 12,991 12,991 62,991
26 40,252 (*) (*) (*) (*) (*) (*) 12,461 12,461 62,461
27 43,052 (*) (*) (*) (*) (*) (*) 11,591 11,591 61,591
28 45,992 (*) (*) (*) (*) (*) (*) 10,302 10,302 60,302
29 49,079 (*) (*) (*) (*) (*) (*) 8,505 8,505 58,505
30 52,321 (*) (*) (*) (*) (*) (*) 6,106 6,106 56,106
<FN>
- ---------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
59
<PAGE> 63
DEATH BENEFIT OPTION 1
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1260 468 0 50,000 514 0 50,000 561 0 50,000
2 2,583 910 217 50,000 1,032 339 50,000 1,161 468 50,000
3 3,972 1,294 671 50,000 1,522 898 50,000 1,772 1,148 50,000
4 5,431 1,616 1,061 50,000 1,976 1,422 50,000 2,389 1,835 50,000
5 6,962 1,867 1,382 50,000 2,386 1,901 50,000 3,008 2,523 50,000
6 8,570 2,041 1,625 50,000 2,742 2,326 50,000 3,621 3,205 50,000
7 10,259 2,129 1,783 50,000 3,032 2,686 50,000 4,220 3,874 50,000
8 12,032 2,118 1,841 50,000 3,240 2,963 50,000 4,794 4,517 50,000
9 13,893 1,993 1,785 50,000 3,349 3,141 50,000 5,328 5,120 50,000
10 15,848 1,741 1,741 50,000 3,338 3,338 50,000 5,807 5,807 50,000
11 17,901 1,345 1,345 50,000 3,186 3,186 50,000 6,214 6,214 50,000
12 20,056 789 789 50,000 2,871 2,871 50,000 6,530 6,530 50,000
13 22,318 56 56 50,000 2,365 2,365 50,000 6,735 6,735 50,000
14 24,694 (*) (*) (*) 1,634 1,634 50,000 6,799 6,799 50,000
15 27,189 (*) (*) (*) 633 633 50,000 6,683 6,683 50,000
16 29,808 (*) (*) (*) (*) (*) (*) 6,333 6,333 50,000
17 32,559 (*) (*) (*) (*) (*) (*) 5,675 5,675 50,000
18 35,447 (*) (*) (*) (*) (*) (*) 4,611 4,611 50,000
19 38,479 (*) (*) (*) (*) (*) (*) 3,014 3,014 50,000
20 41,663 (*) (*) (*) (*) (*) (*) 724 724 50,000
21 45,006 (*) (*) (*) (*) (*) (*) (*) (*) (*)
22 48,517 (*) (*) (*) (*) (*) (*) (*) (*) (*)
23 52,202 (*) (*) (*) (*) (*) (*) (*) (*) (*)
24 56,073 (*) (*) (*) (*) (*) (*) (*) (*) (*)
25 60,136 (*) (*) (*) (*) (*) (*) (*) (*) (*)
26 64,403 (*) (*) (*) (*) (*) (*) (*) (*) (*)
27 68,883 (*) (*) (*) (*) (*) (*) (*) (*) (*)
28 73,587 (*) (*) (*) (*) (*) (*) (*) (*) (*)
29 78,527 (*) (*) (*) (*) (*) (*) (*) (*) (*)
30 83,713 (*) (*) (*) (*) (*) (*) (*) (*) (*)
<FN>
- --------------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
60
<PAGE> 64
DEATH BENEFIT OPTION 2
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1260 459 0 50,459 505 0 50,505 551 0 50,551
2 2,583 886 193 50,886 1,006 313 51,006 1,132 439 51,132
3 3,972 1,249 626 51,249 1,470 846 51,470 1,712 1,088 51,712
4 5,431 1,542 988 51,542 1,888 1,333 51,888 2,283 1,728 52,283
5 6,962 1,758 1,273 51,758 2,248 1,763 52,248 2,835 2,350 52,835
6 8,570 1,890 1,474 51,890 2,542 2,126 52,542 3,359 2,943 53,359
7 10,259 1,929 1,582 51,929 2,755 2,408 52,755 3,840 3,493 53,840
8 12,032 1,863 1,586 51,863 2,869 2,592 52,869 4,260 3,982 54,260
9 13,893 1,679 1,472 51,679 2,866 2,658 52,866 4,597 4,389 54,597
10 15,848 1,367 1,367 51,367 2,727 2,727 52,727 4,828 4,828 54,828
11 17,901 913 913 50,913 2,431 2,431 52,431 4,929 4,929 54,929
12 20,056 310 310 50,310 1,961 1,961 51,961 4,874 4,874 54,874
13 22,318 (*) (*) (*) 1,295 1,295 51,295 4,633 4,633 54,633
14 24,694 (*) (*) (*) 409 409 50,409 4,170 4,170 54,170
15 27,189 (*) (*) (*) (*) (*) (*) 3,442 3,442 53,442
16 29,808 (*) (*) (*) (*) (*) (*) 2,392 2,392 52,392
17 32,559 (*) (*) (*) (*) (*) (*) 948 948 50,948
18 35,447 (*) (*) (*) (*) (*) (*) (*) (*) (*)
19 38,479 (*) (*) (*) (*) (*) (*) (*) (*) (*)
20 41,663 (*) (*) (*) (*) (*) (*) (*) (*) (*)
21 45,006 (*) (*) (*) (*) (*) (*) (*) (*) (*)
22 48,517 (*) (*) (*) (*) (*) (*) (*) (*) (*)
23 52,202 (*) (*) (*) (*) (*) (*) (*) (*) (*)
24 56,073 (*) (*) (*) (*) (*) (*) (*) (*) (*)
25 60,136 (*) (*) (*) (*) (*) (*) (*) (*) (*)
26 64,403 (*) (*) (*) (*) (*) (*) (*) (*) (*)
27 68,883 (*) (*) (*) (*) (*) (*) (*) (*) (*)
28 73,587 (*) (*) (*) (*) (*) (*) (*) (*) (*)
29 78,527 (*) (*) (*) (*) (*) (*) (*) (*) (*)
30 83,713 (*) (*) (*) (*) (*) (*) (*) (*) (*)
<FN>
- -----------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
61
<PAGE> 65
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,575 931 34 100,000 1,000 102 100,000 1,069 171 100,000
2 3,229 1,854 956 100,000 2,050 1,153 100,000 2,255 1,357 100,000
3 4,965 2,738 1,930 100,000 3,121 2,313 100,000 3,538 2,730 100,000
4 6,788 3,580 2,862 100,000 4,212 3,494 100,000 4,926 4,208 100,000
5 8,703 4,379 3,751 100,000 5,320 4,692 100,000 6,428 5,800 100,000
6 10,713 5,132 4,593 100,000 6,444 5,906 100,000 8,054 7,515 100,000
7 12,824 5,833 5,384 100,000 7,579 7,130 100,000 9,812 9,363 100,000
8 15,040 6,477 6,118 100,000 8,720 8,361 100,000 11,711 11,352 100,000
9 17,367 7,058 6,789 100,000 9,861 9,592 100,000 13,763 13,493 100,000
10 19,810 7,571 7,571 100,000 10,997 10,997 100,000 15,979 15,979 100,000
11 22,376 8,009 8,009 100,000 12,123 12,123 100,000 18,376 18,376 100,000
12 25,069 8,368 8,368 100,000 13,233 13,233 100,000 20,971 20,971 100,000
13 27,898 8,643 8,643 100,000 14,323 14,323 100,000 23,788 23,788 100,000
14 30,868 8,827 8,827 100,000 15,387 15,387 100,000 26,851 26,851 100,000
15 33,986 8,908 8,908 100,000 16,413 16,413 100,000 30,193 30,193 100,000
16 37,261 8,877 8,877 100,000 17,392 17,392 100,000 33,848 33,848 100,000
17 40,699 8,719 8,719 100,000 18,310 18,310 100,000 37,852 37,852 100,000
18 44,309 8,416 8,416 100,000 19,149 19,149 100,000 42,247 42,247 100,000
19 48,099 7,945 7,945 100,000 19,889 19,889 100,000 47,085 47,085 100,000
20 52,079 7,286 7,286 100,000 20,510 20,510 100,000 52,429 52,429 100,000
21 56,258 6,417 6,417 100,000 20,991 20,991 100,000 58,359 58,359 100,000
22 60,646 5,315 5,315 100,000 21,308 21,308 100,000 64,972 64,972 100,000
23 65,253 3,955 3,955 100,000 21,437 21,437 100,000 72,388 72,388 100,000
24 70,091 2,304 2,304 100,000 21,348 21,348 100,000 80,754 80,754 100,000
25 75,170 317 317 100,000 20,996 20,996 100,000 90,218 90,218 104,653
26 80,504 (*) (*) (*) 20,324 20,324 100,000 100,668 100,668 115,769
27 86,104 (*) (*) (*) 19,257 19,257 100,000 112,193 112,193 126,778
28 91,984 (*) (*) (*) 17,696 17,696 100,000 124,916 124,916 138,657
29 98,158 (*) (*) (*) 15,524 15,524 100,000 138,987 138,987 151,495
30 104,641 (*) (*) (*) 12,605 12,605 100,000 154,580 154,580 165,401
<FN>
- -----------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
62
<PAGE> 66
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,575 927 29 100,927 995 98 100,995 1,064 167 101,064
2 3,229 1,842 945 101,842 2,037 1,140 102,037 2,241 1,343 102,241
3 4,965 2,714 1,906 102,714 3,094 2,286 103,094 3,507 2,699 103,507
4 6,788 3,540 2,822 103,540 4,164 3,446 104,164 4,869 4,151 104,869
5 8,703 4,318 3,689 104,318 5,244 4,615 105,244 6,334 5,705 106,334
6 10,713 5,043 4,504 105,043 6,329 5,791 106,329 7,906 7,368 107,906
7 12,824 5,711 5,262 105,711 7,415 6,966 107,415 9,592 9,143 109,592
8 15,040 6,315 5,956 106,315 8,492 8,133 108,492 11,394 11,035 111,394
9 17,367 6,848 6,578 106,848 9,554 9,285 109,554 13,317 13,048 113,317
10 19,810 7,304 7,304 107,304 10,592 10,592 110,592 15,365 15,365 115,365
11 22,376 7,676 7,676 107,676 11,596 11,596 111,596 17,544 17,544 117,544
12 25,069 7,959 7,959 107,959 12,557 12,557 112,557 19,858 19,858 119,858
13 27,898 8,149 8,149 108,149 13,470 13,470 113,470 22,316 22,316 122,316
14 30,868 8,237 8,237 108,237 14,320 14,320 114,320 24,924 24,924 124,924
15 33,986 8,212 8,212 108,212 15,093 15,093 115,093 27,688 27,688 127,688
16 37,261 8,063 8,063 108,063 15,772 15,772 115,772 30,615 30,615 130,615
17 40,699 7,777 7,777 107,777 16,337 16,337 116,337 33,706 33,706 133,706
18 44,309 7,335 7,335 107,335 16,763 16,763 116,763 36,957 36,957 136,957
19 48,099 6,719 6,719 106,719 17,020 17,020 117,020 40,361 40,361 140,361
20 52,079 5,910 5,910 105,910 17,080 17,080 117,080 43,913 43,913 143,913
21 56,258 4,891 4,891 104,891 16,913 16,913 116,913 47,608 47,608 147,608
22 60,646 3,647 3,647 103,647 16,492 16,492 116,492 51,441 51,441 151,441
23 65,253 2,163 2,163 102,163 15,785 15,785 115,785 55,408 55,408 155,408
24 70,091 419 419 100,419 14,756 14,756 114,756 59,499 59,499 159,499
25 75,170 (*) (*) (*) 13,359 13,359 113,359 63,693 63,693 163,693
26 80,504 (*) (*) (*) 11,535 11,535 111,535 67,956 67,956 167,956
27 86,104 (*) (*) (*) 9,210 9,210 109,210 72,242 72,242 172,242
28 91,984 (*) (*) (*) 6,296 6,296 106,296 76,483 76,483 176,483
29 98,158 (*) (*) (*) 2,700 2,700 102,700 80,607 80,607 180,607
30 104,641 (*) (*) (*) (*) (*) (*) 84,540 84,540 184,540
<FN>
- ---------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
63
<PAGE> 67
DEATH BENEFIT OPTION 1
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,393 230 100,000 1,502 340 100,000 1,613 450 100,000
2 5,381 2,724 1,562 100,000 3,031 1,869 100,000 3,352 2,190 100,000
3 8,275 3,963 2,917 100,000 4,555 3,508 100,000 5,199 4,153 100,000
4 11,314 5,101 4,171 100,000 6,065 5,135 100,000 7,160 6,230 100,000
5 14,505 6,131 5,317 100,000 7,554 6,740 100,000 9,239 8,425 100,000
6 17,855 7,043 6,345 100,000 9,011 8,313 100,000 11,443 10,745 100,000
7 21,373 7,825 7,244 100,000 10,424 9,843 100,000 13,779 13,198 100,000
8 25,066 8,461 7,996 100,000 11,776 11,311 100,000 16,252 15,787 100,000
9 28,945 8,934 8,585 100,000 13,048 12,699 100,000 18,867 18,518 100,000
10 33,017 9,225 9,225 100,000 14,221 14,221 100,000 21,635 21,635 100,000
11 37,293 9,318 9,318 100,000 15,278 15,278 100,000 24,571 24,571 100,000
12 41,782 9,194 9,194 100,000 16,198 16,198 100,000 27,704 27,704 100,000
13 46,497 8,835 8,835 100,000 16,962 16,962 100,000 31,065 31,065 100,000
14 51,446 8,214 8,214 100,000 17,542 17,542 100,000 34,688 34,688 100,000
15 56,644 7,295 7,295 100,000 17,901 17,901 100,000 38,610 38,610 100,000
16 62,101 6,028 6,028 100,000 17,989 17,989 100,000 42,875 42,875 100,000
17 67,831 4,346 4,346 100,000 17,739 17,739 100,000 47,535 47,535 100,000
18 73,848 2,162 2,162 100,000 17,065 17,065 100,000 52,659 52,659 100,000
19 80,165 (*) (*) (*) 15,863 15,863 100,000 58,342 58,342 100,000
20 86,798 (*) (*) (*) 14,020 14,020 100,000 64,718 64,718 100,000
21 93,763 (*) (*) (*) 11,403 11,403 100,000 71,975 71,975 100,000
22 101,076 (*) (*) (*) 7,853 7,853 100,000 80,362 80,362 100,000
23 108,755 (*) (*) (*) 3,173 3,173 100,000 90,209 90,209 100,000
24 116,818 (*) (*) (*) (*) (*) (*) 101,771 101,771 106,860
25 125,284 (*) (*) (*) (*) (*) (*) 114,520 114,520 120,246
26 134,173 (*) (*) (*) (*) (*) (*) 128,503 128,503 134,928
27 143,506 (*) (*) (*) (*) (*) (*) 143,825 143,825 151,016
28 153,307 (*) (*) (*) (*) (*) (*) 160,592 160,592 168,621
29 163,597 (*) (*) (*) (*) (*) (*) 178,913 178,913 187,859
30 174,402 (*) (*) (*) (*) (*) (*) 198,906 198,906 208,851
<FN>
- ---------------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
64
<PAGE> 68
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,377 215 101,377 1,486 323 101,486 1,595 433 101,595
2 5,381 2,680 1,517 102,680 2,982 1,819 102,982 3,298 2,135 103,298
3 8,275 3,874 2,827 103,874 4,452 3,405 104,452 5,081 4,035 105,081
4 11,314 4,951 4,021 104,951 5,884 4,954 105,884 6,944 6,014 106,944
5 14,505 5,901 5,087 105,901 7,265 6,452 107,265 8,880 8,067 108,880
6 17,855 6,712 6,014 106,712 8,579 7,882 108,579 10,885 10,187 110,885
7 21,373 7,372 6,791 107,372 9,808 9,227 109,808 12,949 12,368 112,949
8 25,066 7,863 7,398 107,863 10,926 10,461 110,926 15,056 14,591 115,056
9 28,945 8,165 7,816 108,165 11,906 11,557 111,906 17,188 16,839 117,188
10 33,017 8,260 8,260 108,260 12,721 12,721 112,721 19,326 19,326 119,326
11 37,293 8,132 8,132 108,132 13,344 13,344 113,344 21,449 21,449 121,449
12 41,782 7,766 7,766 107,766 13,745 13,745 113,745 23,535 23,535 123,535
13 46,497 7,147 7,147 107,147 13,899 13,899 113,899 25,565 25,565 125,565
14 51,446 6,256 6,256 106,256 13,768 13,768 113,768 27,512 27,512 127,512
15 56,644 5,065 5,065 105,065 13,309 13,309 113,309 29,334 29,334 129,334
16 62,101 3,538 3,538 103,538 12,464 12,464 112,464 30,972 30,972 130,972
17 67,831 1,626 1,626 101,626 11,162 11,162 111,162 32,352 32,352 132,352
18 73,848 (*) (*) (*) 9,316 9,316 109,316 33,377 33,377 133,377
19 80,165 (*) (*) (*) 6,835 6,835 106,835 33,942 33,942 133,942
20 86,798 (*) (*) (*) 3,634 3,634 103,634 33,937 33,937 133,937
21 93,763 (*) (*) (*) (*) (*) (*) 33,254 33,254 133,254
22 101,076 (*) (*) (*) (*) (*) (*) 31,778 31,778 131,778
23 108,755 (*) (*) (*) (*) (*) (*) 29,388 29,388 129,388
24 116,818 (*) (*) (*) (*) (*) (*) 25,943 25,943 125,943
25 125,284 (*) (*) (*) (*) (*) (*) 21,264 21,264 121,264
26 134,173 (*) (*) (*) (*) (*) (*) 15,133 15,133 115,133
27 143,506 (*) (*) (*) (*) (*) (*) 7,275 7,275 107,275
28 153,307 (*) (*) (*) (*) (*) (*) (*) (*) (*)
29 163,597 (*) (*) (*) (*) (*) (*) (*) (*) (*)
30 174,402 (*) (*) (*) (*) (*) (*) (*) (*) (*)
<FN>
- -------------------------
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY $10 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND
$7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL
PREMIUMS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL LAPSE WITHOUT VALUE.
</TABLE>
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
65
<PAGE> 69
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) CONSOLIDATION POLICY
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
subsidiaries classified as discontinued operations" in the
accompanying consolidated balance sheets and "Income from
discontinued operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $365.5 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) FUTURE POLICY BENEFITS
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 4.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) PARTICIPATING BUSINESS
Participating business represents approximately 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $3.5
million.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995, the Company transferred nearly all of its fixed maturity
securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the
fixed maturity securities had amortized cost of $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), which is equal to interest
income recognized using a cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
INTEREST RATES: Interest rates vary by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published
tables, modified for the Company's actual experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
respectively. The contract is immaterial to the Company's results of
operations. The ceding of risk does not discharge the original insurer
from its primary obligation to the policyholder. Under the terms of the
contract, Franklin has established a trust as collateral for the
recoveries. The trust assets are invested in investment grade
securities, the market value of which must at all times be greater than
or equal to 102% of the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
FIXED MATURITY AND EQUITY SECURITIES: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE, NET: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
INVESTMENT CONTRACTS: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 13.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
CREDIT RISK: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) PENSION PLAN
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $20.5 million and $15.1 million as of
December 31, 1997 and 1996, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1997 and
1996 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) CONTINGENCIES
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(14) SEGMENT INFORMATION
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses and
investment management fees and other revenue earned from mutual funds,
other than the portion allocated to the variable annuities and life
insurance segments, are reported in the Corporate and Other segment.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 11 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 70
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement to 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 89 pages.
Representations and Undertakings.
The Signatures.
Accountants' Consent
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C> <C>
1. Power of Attorney dated April 1, 1998 Attached hereto.
2. Resolution of the Depositor's Board of Directors Filed previously in connection with Securities and Exchange
authorizing the establishment of the Registrant, Commission File No. 333-31725 and is hereby incorporated by
adopted reference.
Filed previously in connection with Securities and Exchange
3. Distribution Contracts Commission File No. 333-27133 and is hereby incorporated
herein by reference.
Filed previously in connection with Securities and Exchange
4. Form of Security Commission File No. 333-31725 and is hereby incorporated by
reference.
Filed previously in connection with Securities and Exchange
5. Articles of Incorporation of Depositor Commission File No. 333-27133 and is hereby incorporated herein
by reference.
6. Application form of Security Filed previously in connection with Securities and Exchange
Commission File No. 333-31725 and is hereby incorporated by
reference.
7. Opinion of Counsel Filed previously in connection with Securities and Exchange
Commission File No. 333-31725 and is hereby incorporated by
reference.
</TABLE>
90
<PAGE> 71
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.
(f) The fees and charges deducted under the policy in the aggregate are
reasonable in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by the Company.
91
<PAGE> 72
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Columbus, Ohio
April 24, 1998
92
<PAGE> 73
SIGNATURES
As required by the Securities Act of 1933, the Registrant, Nationwide VLI
Separate Account-4, has caused this Post-Effective Amendment No. 2 to be signed
on its behalf in the City of Columbus, and the State of Ohio, on this 24th day
of April, 1998.
NATIONWIDE VLI SEPARATE ACCOUNT-4
----------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
Attest: ----------------------------------
(Depositor)
by /s/ W. SIDNEY DRUEN By: /s/ JOSEPH P. RATH
- ----------------------------- ----------------------------------
W. Sidney Druen Joseph P. Rath -
Assistant Secretary Vice President - Product and
Market Compliance
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 24th day of April, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- -------------------------------------------------
Lewis J. Alphin
A. I. BELL Director
- -------------------------------------------------
A. I. Bell
KEITH W. ECKEL Director
- -------------------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -------------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- -------------------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- ------------------------------------------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ------------------------------------------------- Nationwide Insurance Enterprise and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
C. RAY NOECKER Director
- -------------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- -------------------------------------------------
Robert A. Oakley Chief Financial Officer
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director Attorney-in-Fact
- -------------------------------------------------
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>
93
<PAGE> 1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, and if applicable, of the Investment
Company Act of 1940, as amended, various Registration Statements and amendments
thereto for the registration under said Act of Individual Deferred Variable
Annuity Contracts in connection with MFS Variable Account, Nationwide Variable
Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide Variable
Account-9, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B,
Nationwide VA Separate Account-C and Nationwide VA Separate Account-Q; and the
registration of fixed interest rate options subject to a market value adjustment
offered under some or all of the aforementioned individual Variable Annuity
Contracts in connection with Nationwide Multiple Maturity Separate Account and
Nationwide Multiple Maturity Separate Account-A, and the registration of Group
Flexible Fund Retirement Contracts in connection with Nationwide DC Variable
Account, Nationwide DCVA-II, and NACo Variable Account; and the registration of
Group Common Stock Variable Annuity Contracts in connection with Separate
Account No. 1; and the registration of variable life insurance policies in
connection with Nationwide VLI Separate Account, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4,
Nationwide VL Separate Account-A and Nationwide VL Separate Account-B,
Nationwide VL Separate Account-C, hereby constitutes and appoints Dimon R.
McFerson, Joseph J. Gasper, W. Sidney Druen, Mark R. Thresher, and Joseph P.
Rath, and each of them with power to act without the others, his/her attorney,
with full power of substitution and resubstitution, for and in his/her name,
place and stead, in any and all capacities, to approve, and sign such
Registration Statements and any and all amendments thereto, with power to affix
the corporate seal of said corporation thereto and to attest said seal and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the U.S. Securities and Exchange Commission, hereby granting
unto said attorneys, and each of them, full power and authority to do and
perform all and every act and thing requisite to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming that which
said attorneys, or any of them, may lawfully do or cause to be done by virtue
hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 1st day of April, 1998.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ Yvonne L. Montgomery
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director Yvonne L. Montgomery, Director
/s/ A. I. Bell /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
A. I. Bell, Director C. Ray Noecker, Director
/s/ Keith W. Eckel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Keith W. Eckel, Director Robert A. Oakley, Executive Vice President - Chief
Financial Officer
/s/ Willard J. Engel /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director James F. Patterson, Director
/s/ Fred C. Finney /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director Arden L. Shisler, Director
/s/ Charles L. Fuellgraf /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Robert L. Stewart, Director
/s/ Joseph J. Gasper /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Nancy C. Thomas, Director
and Director
/s/ Dimon R. McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon R. McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
/s/ David O. Miller
- -------------------------------------------------
David O. Miller, Chairman of the Board, Director
</TABLE>
