<PAGE> 1
Registration No. 33-44290
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 6
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
(EXACT NAME OF TRUST)
--------------------------
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
GORDON E. MCCUTCHAN
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(NAME AND ADDRESS OF AGENT FOR SERVICE)
--------------------------
This Post-Effective Amendment amends the Registration Statement in respect to
the Prospectus and Financial Statements.
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996 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)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
The Registrant has registered an indefinite number of securities by a prior
registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a) (3) thereof, a non-refundable
fee in the amount of $500.00 has been paid to the Commission. Registrant filed
its Rule 24f-2 Notice for the fiscal year ended December 31, 1995, on February
15, 1996.
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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
44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . How The Cash Value Varies
45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
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<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
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>
<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
The Life Insurance Policies offered by this prospectus are variable 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 guarantees to keep the Policy in force during
the first three years so long as the Minimum Premium requirement has been met.
The death benefit and Cash Value of the Policies may vary to reflect the
experience of the Nationwide VLI Separate Account (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 the
following underlying Mutual Fund options:
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
- Asset Allocation Fund (Formerly "Multiple Strategy Fund")
- Domestic Income Fund (Formerly "Domestic Strategic Income Fund")
- Emerging Growth Fund
- Enterprise Fund (Formerly "Common Stock Fund")
- Global Equity Fund
- Government Fund
- Money Market Fund
- Real Estate Securities Fund
Nationwide Life Insurance Company (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. Nationwide Life
Insurance Company guarantees to keep the Policy in force during the first three
years so long as the Minimum Premium requirement has been met.
This prospectus generally describes only that portion of the Cash Value
allocated to the Variable Account. For a brief summary of the Fixed Account
Option, see "The Fixed Account Option."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS
FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS
PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH.
The date of this Prospectus is May 1, 1996.
1
<PAGE> 5
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 Variable
Account Cash Value.
BENEFICIARY- The person to whom the Death Proceeds are paid.
BREAK POINT PREMIUM- The level annual premium at which the sales load is reduced
on a current basis.
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 any 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.
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.
GUIDELINE LEVEL PREMIUM- The amount of level annual premium calculated in
accordance with the provisions of the Code. It represents the level annual
premiums required to mature the Policy under guaranteed mortality and expense
charges and an 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 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 following the Insured's 95th
birthday.
MINIMUM PREMIUM- The Minimum Premium is shown on the Policy Data Page. It is
used to measure the total amount of premiums that must be paid during the first
three Policy Years to guarantee the Policy remains in force.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
MUTUAL FUNDS- The underlying mutual funds which correspond to the sub-accounts
of the Variable Account.
NET ASSET VALUE- The worth 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. It is computed
by adding the value of all portfolio holdings, plus other assets, deducting
liabilities and dividing the results 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 ANNIVERSARY- The same day and month as the Policy Date for succeeding
years.
POLICY CHARGES- All deductions made from the value of the Variable Account, or
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. In
the State of New York, the variable life insurance Policies offered by the
Company are offered as "Certificates" for "Certificate Owners" under a group
contract rather than individual Policies. The provisions of both these
Certificates and the Policies are essentially the same and references to the
provisions of Policies and rights of Policy Owners in this prospectus include
Certificates and Certificate Owners.
2
<PAGE> 6
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.
SURRENDER CHARGE- An amount deducted from the Cash Value if the Policy is
surrendered.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a sufficient
degree of trading such that the current net asset value of the Accumulation
Units might be materially affected.
VALUATION PERIOD- A period commencing with the close of business on the New York
Stock Exchange and ending at the close of business for the next succeeding
Valuation Date.
VARIABLE ACCOUNT- A separate investment account of the Nationwide Life Insurance
Company.
3
<PAGE> 7
TABLE OF CONTENTS
GLOSSARY OF TERMS.......................................................... 2
SUMMARY OF THE POLICIES.................................................... 6
Variable Life Insurance.............................................. 6
The Variable Account and its Sub-Accounts............................ 6
The Fixed Account.................................................... 6
Deductions and Charges............................................... 6
Underlying Mutual Fund Annual Expenses............................... 7
Premiums............................................................. 8
NATIONWIDE LIFE INSURANCE COMPANY.......................................... 8
THE VARIABLE ACCOUNT....................................................... 9
Investments of the Variable Account.................................. 9
Van Kampen American Capital Life Investment Trust.................... 9
Reinvestment......................................................... 11
Transfers............................................................ 11
Dollar Cost Averaging................................................ 11
Substitution of Securities........................................... 11
Voting Rights........................................................ 12
INFORMATION ABOUT THE POLICIES............................................. 12
Underwriting and Issuance............................................ 12
-Minimum Requirements for Issuance of a Policy....................... 12
-Premium Payments.................................................... 12
Allocation of Cash Value............................................. 13
Short-Term Right to Cancel Policy.................................... 13
POLICY CHARGES............................................................. 13
Deductions from Premiums............................................. 13
Surrender Charges.................................................... 13
-Reductions to Surrender Charges..................................... 14
Deductions from Cash Value........................................... 15
-Monthly Cost of Insurance........................................... 15
-Monthly Administrative Charge....................................... 15
-Increase Charge..................................................... 15
Deductions from the Sub-Accounts..................................... 16
HOW THE CASH VALUE VARIES.................................................. 16
How the Investment Experience is Determined.......................... 16
Net Investment Factor................................................ 16
Valuation of Assets.................................................. 17
Determining the Cash Value........................................... 17
Valuation Periods and Valuation Dates................................ 17
SURRENDERING THE POLICY FOR CASH........................................... 17
Right to Surrender................................................... 17
Cash Surrender Value................................................. 17
Partial Surrenders................................................... 17
Maturity Proceeds.................................................... 18
Income Tax Withholding............................................... 18
POLICY LOANS............................................................... 18
Taking a Policy Loan................................................. 18
Effect on Investment Performance..................................... 19
Interest............................................................. 19
Effect on Death Benefit and Cash Value............................... 19
Repayment............................................................ 19
HOW THE DEATH BENEFIT VARIES............................................... 19
Calculation of the Death Benefit..................................... 20
Proceeds Payable on Death............................................ 20
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY............................... 20
CHANGES OF INVESTMENT POLICY............................................... 21
GRACE PERIOD............................................................... 21
-First Three Policy Years............................................ 21
-Policy Years Four and After......................................... 21
-All Policy Years.................................................... 21
4
<PAGE> 8
REINSTATEMENT............................................................. 21
THE FIXED ACCOUNT OPTION.................................................. 22
CHANGES IN EXISTING INSURANCE COVERAGE.................................... 22
Specified Amount Increases.......................................... 22
Specified Amount Decreases.......................................... 22
Changes in the Death Benefit Option................................. 23
OTHER POLICY PROVISIONS................................................... 23
Policy Owner........................................................ 23
Beneficiary......................................................... 23
Assignment.......................................................... 23
Incontestability.................................................... 23
Error in Age or Sex................................................. 24
Suicide............................................................. 24
Nonparticipating Policies........................................... 24
LEGAL CONSIDERATIONS...................................................... 24
DISTRIBUTION OF THE POLICIES.............................................. 24
CUSTODIAN OF ASSETS....................................................... 24
TAX MATTERS............................................................... 24
Policy Proceeds..................................................... 24
Taxation of the Company............................................. 25
Other Considerations................................................ 25
THE COMPANY............................................................... 26
COMPANY MANAGEMENT........................................................ 26
Directors of the Company............................................ 26
Executive Officers of the Company................................... 27
OTHER CONTRACTS ISSUED BY THE COMPANY..................................... 28
STATE REGULATION.......................................................... 28
REPORTS TO POLICY OWNERS.................................................. 28
LEGAL PROCEEDINGS......................................................... 28
ADVERTISING............................................................... 28
EXPERTS................................................................... 28
REGISTRATION STATEMENT.................................................... 28
LEGAL OPINIONS............................................................ 28
APPENDIX 1................................................................ 29
APPENDIX 2................................................................ 31
FINANCIAL STATEMENTS ..................................................... 48
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.
5
<PAGE> 9
THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR
THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN
ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The variable life insurance Policies offered by Nationwide Life Insurance
Company (the "Company") are similar in many ways to fixed-benefit whole life
insurance. As with fixed-benefit whole life insurance, the Owner of the Policy
pays a premium for life insurance coverage on the person insured. Also like
fixed-benefit whole life insurance, the Policies may provide for a Cash
Surrender Value which is payable if the Policy is terminated during the
Insured's lifetime. As with fixed-benefit whole life insurance, the Cash
Surrender Value during the early Policy years may be substantially lower than
the premiums paid.
However, the Policies differ from fixed-benefit whole life insurance in several
respects. Unlike fixed-benefit whole life insurance, the death benefit and
Cash Value of the Policies may increase or decrease to reflect the investment
performance of the Variable Account 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 first three years so long as certain requirements
are 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
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 chooses the
sub-accounts of the Variable Account or the Fixed Account into which the Cash
Value will be allocated (see "Allocation of Cash Value"). When the Policy is
issued, the Policy's Net Premiums not allocated to the Fixed Account will be
placed in the Van Kampen American Capital Life Investment Trust Money Market
Fund until the expiration of the period in which the Policy Owner may exercise
his or her short-term right to cancel the Policy (see "Short-Term Right to
Cancel Policy). Assets of each sub-account are invested at net asset value in
shares of a corresponding underlying Mutual Fund option(s). For a description
of the underlying Mutual Fund options and their investment objectives, see
"Investments of the Variable Account".
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's General Account.
Cash Values allocated to the Fixed Account are credited with interest daily at
a rate declared by the Company. The interest rate declared is at the Company's
sole discretion, but may never be less than an effective annual rate of 4%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the assets of the Variable Account and
the Cash Value of the Policy. These charges are made for administrative and
sales expenses, state premium taxes, providing life insurance protection and
assuming the mortality and expense risks. For a discussion of any charges
imposed by the underlying Mutual Fund options, see the prospectuses of the
respective underlying Mutual Fund options.
The Company deducts a sales load from each premium payment received not to
exceed 3.5% of each premium payment. On a current basis, the sales load is
reduced to 1.5% on any portion of the annual premium paid in excess of the
annual Break Point Premium. The total sales load actually deducted from any
Policy will be equal to the sum of this front-end load plus any sales surrender
charge that may be deducted from Policies that are surrendered.
The Company also deducts a charge for state premium taxes equal to 2.5% 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:
1. monthly cost of insurance; plus
2. monthly cost of any additional benefits provided by riders to the
Policy; plus
3. an administrative expense charge. This charge is $25 per month
in the first year and $5 per month in renewal years. The
charge in renewal years may be increased at the sole discretion
of the Company but may not exceed $7.50 per month; plus
6
<PAGE> 10
4. an increase charge per $1000 applied to any increase in the
Specified Amount. The increase charge is $2.04 per year per
$1000 and is shown on the Policy data page. This charge is
designed to cover the costs associated with increasing the
Specified Amount (see "Policy Charges"). This charge will be
deducted on each Monthly Anniversary Day for the first 12 months
after the increase becomes effective.
The Company also deducts on a daily basis from the assets of the Variable
Account a charge to provide for mortality and expense risks. This charge is
equivalent to an annual effective rate of 0.80% of the daily net assets of the
Variable Account. On each Policy Anniversary beginning with the 10th, the
mortality and expense risk charge is reduced to 0.50% on an annual basis of the
daily net assets of the Variable Account, provided the Cash Surrender Value is
$25,000 or more on such anniversary.
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 Surrender Charge and a Sales Surrender Charge. 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).
<TABLE>
<CAPTION>
Initial Specified Amount $50,000-$99,999
Issue Age Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- --------
<S> <C> <C> <C> <C>
25 $7.776 $7.521 $8.369 $7.818
35 8.817 8.398 9.811 8.891
45 12.191 11.396 13.887 12.169
55 15.636 14.011 18.415 15.116
65 22.295 19.086 26.577 20.641
</TABLE>
<TABLE>
<CAPTION>
Initial Specified Amount $100,000+
Issue Age Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
25 $5.776 $5.521 $6.369 $5.818
35 6.817 6.398 7.811 6.891
45 9.691 8.896 11.387 9.669
55 13.136 11.511 15.915 12.616
65 21.295 18.086 25.577 19.641
</TABLE>
Underlying Mutual Fund shares are purchased at net asset value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each underlying Mutual Fund's investment adviser
for managing the underlying Mutual Fund and selecting its portfolio of
securities. Other underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the underlying Mutual Fund. The
management fees and other expenses for each underlying Mutual Fund for its most
recently completed fiscal year, expressed as a percentage of the underlying
Mutual Fund's average assets, are as follows:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
Asset Allocation Fund (formerly "Multiple Strategy Fund")
Management Fees 0.36%
Other Expenses 0.24%
Total underlying Mutual Fund Expenses 0.60%
Domestic Income Fund (formerly "Domestic Strategic Income Fund")
Management Fees 0.17%
Other Expenses 0.43%
Total underlying Mutual Fund Expenses 0.60%
Emerging Growth Fund
Management Fees 0.00%
Other Expenses 2.50%
Total underlying Mutual Fund Expenses 2.50%
Enterprise Fund (formerly "Common Stock Fund")
Management Fees 0.42%
Other Expenses 0.18%
Total underlying Mutual Fund Expenses 0.60%
7
<PAGE> 11
Global Equity Fund
Management Fees 0.00%
Other Expenses 4.35%
Total underlying Mutual Fund Expenses 4.35%
Government Fund
Management Fees 0.38%
Other Expenses 0.22%
Total underlying Mutual Fund Expenses 0.60%
Money Market Fund
Management Fees 0.17%
Other Expenses 0.43%
Total underlying Mutual Fund Expenses 0.60%
Real Estate Securities Fund
Management Fees 0.60%
Other Expenses 1.90%
Total underlying Mutual Fund Expenses 2.50%
The Mutual Fund expenses shown above are assessed at the underlying Mutual Fund
level and are not direct charges against the Variable Account or reductions in
Cash Value. These underlying Mutual Fund expenses are taken into consideration
in computing each underlying Mutual Fund's net asset value, which is the share
price used to calculate the Variable Account's unit value. The management fees
and other expenses, some of which may be subject to fee waivers or expense
reimbursements, 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.
PREMIUMS
The minimum Initial Premium for which a Policy may be issued is equal to three
minimum monthly premiums. A Policy may be issued to an Insured up to age 80.
For a limited time, the Policy Owner has a right to cancel the Policy and
receive a full refund of premiums paid (see "Short-Term Right to Cancel
Policy").
The Initial Premium is due on the Policy Date. It will be credited on the
Policy Date. Any due and unpaid monthly deductions will be subtracted from the
Cash Value at this time. Insurance will not be effective until the Initial
Premium is paid. The Initial Premium is shown on the Policy data page.
Premiums, other than the Initial Premium may be made at any time while your
Policy is in force subject to the limits described below. During the first
three Policy Years, the total premium payments less any Policy Indebtedness,
less any partial surrenders, and less any partial surrender fee must be greater
than or equal to the Minimum Premium requirement in order to guarantee the
Policy remain in force. The Minimum Premium requirement is equal to the monthly
Minimum Premium multiplied by the number of completed policy months. The
monthly Minimum Premium is shown on the Policy data page. We will send Scheduled
Premium payment reminder notices to you.
We will send them according to the premium mode shown on the Policy data page.
You may pay the Initial Premium to us at our Home Office or to an authorized
agent. All premiums after the first are payable at our Home Office. Premium
receipts will be furnished upon request.
Each premium must be at least equal to the monthly Minimum Premium. The Company
reserves the right to require satisfactory evidence of insurability before
accepting any additional premium payment which results in any increase in the
net amount at risk. Also, we will refund any portion of any premium payment
which is determined to be in excess of the premium limit established by law to
qualify your Policy as a contract for life insurance. Where permitted by state
law, we may also require that any existing Policy Indebtedness is repaid prior
to accepting any additional premium payments.
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the Nationwide
Insurance Enterprise which includes Nationwide Mutual Insurance Company,
Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity Insurance
Company, Nationwide Property and Casualty Insurance Company, National Casualty
Company, West Coast Life Insurance Company, Scottsdale Indemnity Company,
Nationwide Indemnity Company and Nationwide General Insurance Company. The
Company's Home Office is at One Nationwide Plaza, Columbus, Ohio 43216.
8
<PAGE> 12
The Company offers a complete line of life insurance, including annuities and
accident and health insurance. It is admitted to do business in all states,
the District of Columbia, and Puerto Rico (for additional information, see "The
Company").
THE VARIABLE ACCOUNT
The Variable Account was established by a resolution of the Company's Board of
Directors, on August 8, 1984, pursuant to the provisions of Ohio law. The
Company has caused the Variable Account to be registered with the Securities
and Exchange Commission as a unit investment trust pursuant to the provisions
of the Investment Company Act of 1940. Such registration does not involve
supervision of the management of the Variable Account or the Company by the
Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with the liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. The Death Benefit and Cash Value under the
Policy may vary with the investment performance of the investments in the
Variable Account (see "How the Death Benefit Varies" and "How the Cash Value
Varies").
Net Premium payments and Cash Value are allocated within the Variable Account
among one or more sub-accounts (see "Tax Matters"). The assets of each
sub-account are used to purchase shares of the underlying Mutual Funds
designated by the Policy Owner. Thus, the investment performance of a Policy
depends upon the investment performance of the underlying Mutual Funds
designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application, the Policy Owner elects to have the Net Premiums
allocated among one or more of the Variable Account sub-accounts and the Fixed
Account (see "Allocation of Cash Value"). During the period in which the Policy
Owner may exercise his or her short-term right to cancel the Policy, all Net
Premiums not allocated to the Fixed Account are placed in the Van Kampen
American Capital Life Investment Trust Money Market Fund sub-account. At the
end of this period, the Cash Value in that sub-account will be transferred to
the Variable Account sub- accounts based on the underlying Mutual Fund
allocation factors. Any subsequent Net Premiums received after this period will
be allocated based on the underlying Mutual 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 Cash Value" and "Short-Term
Right to Cancel Policy"). Additional Premium Payments, upon acceptance, will be
allocated to the Van Kampen American Capital Life Investment Trust Money Market
Fund unless the Policy Owner specifies otherwise (see "Premium Payments").
These underlying Mutual Funds are available only to serve as the underlying
investment for variable annuity and variable life contracts issued through
separate accounts of the 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 Fund
options, their investment policies and restrictions, risks and charges are
contained in the prospectuses of the respective underlying Mutual Fund options.
Each of the underlying Mutual Fund options receives investment advice from Van
Kampen American Capital Asset Management, Inc., (the "Advisor") which is paid
fees for its services by the underlying Mutual Funds. A summary of investment
objectives is contained in the description of each underlying Mutual Fund
option below. More detailed information may be found in the current prospectus
for each underlying Mutual Fund. A prospectus for the underlying Mutual Fund
options being considered must accompany this prospectus and should be read in
conjunction herewith.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen American Capital Life Investment Trust is an open-end
diversified management investment company organized as a Massachusetts business
trust on June 3, 1985. The Trust offers shares in separate funds 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. (the "Advisor") serves as the Fund's investment adviser.
ASSET ALLOCATION FUND (FORMERLY "MULTIPLE STRATEGY FUND")
The investment objective of this Fund is to seek a high total investment return
consistent with prudent risk through a fully managed investment policy utilizing
equity, intermediate and long-term debt and money market securities. Total
investment return consists of current income, including dividends, interest, and
discount accruals, and capital appreciation. The Advisor may vary the
composition of the
9
<PAGE> 13
fund from time to time based upon an evaluation of economic and market trends
and the anticipated relative total return available from a particular type of
security.
DOMESTIC INCOME FUND (FORMERLY "DOMESTIC STRATEGIC INCOME FUND")
The investment objective of this Fund is to seek current income as its primary
objective. Capital appreciation is a secondary objective. The Fund attempts to
achieve these objectives through investment primarily in a diversified portfolio
of fixed-income securities. The Fund may invest in investment grade securities
and lower rated and nonrated securities. Lower rated securities are regarded by
the rating agencies as predominantly speculative with respect to the issuer's
continuing ability to meet principal and interest payments.
EMERGING GROWTH FUND
The investment objective of this Fund is to seek capital appreciation by
investing in a portfolio of securities consisting principally of common stocks
of small and medium sized companies considered by the Advisor to be emerging
growth companies. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in common stocks of small and medium sized
companies (less than $2 billion of market capitalization), both domestic and
foreign. The Fund may invest up to 20% of its total assets in securities of
foreign issuers. Additionally, the Fund may invest up to 15% of the value of
its assets in restricted securities (i.e., securities which may not be sold
without registration under the Securities Act of 1933) and in other securities
not having readily available market quotations.
ENTERPRISE FUND (FORMERLY "COMMON STOCK FUND")
The investment objective of this Fund is to seek capital appreciation by
investing securities believed by the Advisor to have above average
appreciation. Any income received on such securities is incidental to the
objective of capital appreciation.
GLOBAL EQUITY FUND
The investment objective of this Fund is to seek long term capital growth
through investments in an internationally diversified portfolio of equity
securities of companies of any nation including the United States. The Fund
intends to be invested in equity securities of companies of at least three
countries including the United States. Under normal market conditions, at least
65% of the Fund's total assets are so invested. Equity securities include
common stocks, preferred stocks and warrants or options to acquire such
securities.
GOVERNMENT FUND
The investment objective of this Fund is to provide investors with a high
current return consistent with preservation of capital. The Government Fund
invests primarily in debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. In order to hedge against
changes in interest rates, the Government Fund may also purchase or sell options
and engage in transactions involving interest rate futures contracts and options
on such contracts.
MONEY MARKET FUND
The investment objective of this Fund is to seek a high level of current income
as is considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
REAL ESTATE SECURITIES FUND
The investment objective of this Fund is to seek long-term capital growth by
investing in a portfolio of securities of companies operating in the real estate
industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, 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 Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of which may also be Real
Estate Securities. There can be no assurance that the Fund will achieve its
investment objective.
10
<PAGE> 14
REINVESTMENT
The underlying Mutual Fund options described above have as a policy the
distribution of dividends in the form of additional shares (or fractions
thereof) of the underlying Mutual Funds. The distribution of additional shares
will not affect the number of Accumulation Units attributable to a particular
Policy (see "Allocation of Cash Value").
TRANSFERS
After the first Policy Anniversary, the Policy Owner may annually transfer a
portion of the value of the Variable Account to the Fixed Account, without
penalty or adjustment. The Policy Owner may request a transfer of up to 100% of
the Cash Value from the Variable Account to the Fixed Account. The Company
reserves the right to restrict transfers to the Fixed Account to 25% of the Cash
Value. The Policy Owner's Cash Value in each sub-account will be determined as
of the date the transfer request is received in the Home Office in good order.
The Policy Owner may transfer a portion of the value of the Fixed Account to the
Variable Account once each Policy Year, without penalty or adjustment. The
Policy Owner may request a transfer of up to 100% of the Cash Value in the Fixed
Account to the Variable sub-accounts. The Company reserves the right to
restrict the amount of such transfers to 25% of the Cash Value in the Fixed
Account.
Transfers may be made once per Valuation Date and may be made either in writing
or, in states allowing such transfers, by telephone. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. Such procedures may include any or all of the following, or such
other procedures as the Company may, from time to time, deem reasonable:
requesting identifying information, such as name, contract number, Social
Security number, and/or personal identification number; tape recording all
telephone transactions, and providing written confirmation thereof to both the
Policy Owner and any agent of record at the last address of record. Although
failure to follow reasonable procedures may result in the Company's liability
for any losses due to unauthorized or fraudulent telephone transfers, the
Company will not be liable for following instructions communicated by telephone
which it reasonably believes to be genuine. Any losses incurred pursuant to
actions taken by the Company in reliance on telephone instructions reasonably
believed to be genuine shall be borne the Policy Owner. The Company may
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") may transfer from the Fixed Account to the
Variable Account under the terms of that agreement.
DOLLAR COST AVERAGING
The Policy Owner may direct the Company to automatically transfer from the Money
Market sub-account or the Fixed Account to any other sub- account within the
Variable Account on a monthly basis. This service is intended to allow the
Policy Owner to utilize Dollar Cost Averaging, a long-term investment program
which provides for regular, level investments over time. The Company makes no
guarantees that Dollar Cost Averaging will result in a profit or protect against
loss. To qualify for Dollar Cost Averaging there must be a minimum total Cash
Value, less Policy Indebtedness, of $15,000. Transfers for purposes of Dollar
Cost Averaging can only be made from the Money Market sub-account or the Fixed
Account. The minimum monthly Dollar Cost Averaging transfer is $100. In
addition, Dollar Cost Averaging monthly transfers from the Fixed Account must be
equal to or less than 1/30th of the Fixed Account value when the Dollar Cost
Averaging program is requested. Transfers out of the Fixed Account, other than
for Dollar Cost Averaging, may be subject to certain additional restrictions
(see "Transfers"). A written election of this service, on a form provided by
the Company, must be completed by the Policy Owner in order to begin transfers.
Once elected, transfers from the Money Market sub-account or the Fixed Account
will be processed monthly until either the value in the Money Market sub-
account or the Fixed Account is completely depleted or the Policy Owner
instructs the Company in writing to cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost Averaging
upon 30 days' written notice to Policy Owners however, any discontinuation will
not affect Dollar Cost Averaging programs already commenced. The Company also
reserves the right to assess a processing fee for this service.
SUBSTITUTION OF SECURITIES
If shares of the above underlying Mutual Funds 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, the Company may eliminate Sub- Accounts, combine two or more
Sub-Accounts, or substitute shares of one or more underlying Mutual Fund for
other underlying Mutual Fund shares already purchased or to be purchased in the
future by Net Premium payments under the Policy. No substitution of securities
in the Variable Account may take place without prior approval of the Securities
and Exchange Commission, and under such requirements as it and any state
insurance department may impose.
11
<PAGE> 15
VOTING RIGHTS
Voting rights under the Policies apply only with respect to Cash Value
allocated to the sub-accounts of the Variable Account.
In accordance with its view of present applicable law, the Company will vote
the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual
Funds. These shares will be voted in accordance with instructions received
from Policy Owners who have an interest in the Variable Account. If the
Investment Company Act of 1940 or any regulation thereunder should be amended
or if the present interpretation thereof should change, and as a result the
Company determines that it is permitted to vote the shares of the underlying
Mutual Funds in its own right, it may elect to do so.
The Policy Owner shall have the voting interest under a Policy. The number of
shares in each sub-account for which the Policy Owner may give voting
instructions is determined by dividing any portion of the Policy's Cash Value
derived from participation in that underlying Mutual Fund option by the net
asset value of one share of that underlying Mutual Fund option. The number of
shares which a person has a right to vote will be determined as of a date chosen
by the Company, but not more than 90 days prior to the meeting of the underlying
Mutual Fund. Voting instructions will be solicited by written communication at
least 21 days prior to such meeting.
Underlying Mutual Fund shares held in 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.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to investments of the Variable Account, the underlying
Mutual Funds' proxy material and a form with which to give such voting
instructions.
Notwithstanding contrary Policy Owner voting instructions, the Company may vote
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,
is 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). Policies may be issued to
Insureds with issue ages 80 or younger. 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 Company's Home
Office. Upon payment of an initial premium, temporary insurance may be
provided, subject to maximum amount. The effective date of permanent insurance
coverage is dependent upon completion of all underwriting requirements, payment
of the 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 first
three Policy Years, the total premium payments less any Policy Indebtedness,
less any partial surrenders, and less any partial surrender fee must be greater
than or equal to the Minimum Premium requirement in order to guarantee the
Policy remains in force. The Minimum Premium requirement is equal to the
monthly Minimum Premium multiplied by the number of completed policy months.
The monthly Minimum Premium is shown on the Policy data page.
12
<PAGE> 16
Each premium payment must be at least equal to the monthly Minimum Premium.
Additional premium payments may be made at any time while the Policy is in
force. However, the Company reserves the right to require satisfactory
evidence of insurability before accepting any additional premium payment which
results in an increase in the net amount at risk. Also, the Company will
refund any portion of any premium payment which is determined to be in excess
of the premium limit established by law to qualify the Policy as a contract for
life insurance. The Company may also require that any existing Policy
Indebtedness is repaid prior to accepting any additional premium payments.
Additional premium payments or other changes to the contract, may jeopardize
the Policy's non-modified endowment contract status. The Company will monitor
premiums paid and other policy transactions and will notify the Policy Owner
when non-modified endowment contract status is in jeopardy (see "Tax Matters").
ALLOCATION OF CASH VALUE
At the time a Policy is issued, its Cash Value will be based on the Van Kampen
American Capital Life Investment Trust Money Market Fund sub- account value or
the Fixed Account as if the Policy had been issued and the Initial Net Premium
invested on the date such premium was received in good order by the Company.
When the Policy is issued, the Net Premiums will be allocated to the Van Kampen
American Capital Life Investment Trust Money Market Fund sub-account (for any
Net Premiums allocated to a sub-account on the application) or the Fixed Account
until the expiration of the period in which the Policy Owner may exercise his or
her short-term right to cancel the Policy. Net Premiums not designated for the
Fixed Account will be placed in the Van Kampen American Capital Life Investment
Trust Money Market Fund sub-account. At the expiration of the period in which
the Policy Owner may exercise his or her short term right to cancel the Policy,
shares of the underlying Mutual Funds specified by the Policy Owner are
purchased at net asset value for the respective sub-account(s). The Policy
Owner may change the allocation of Net Premiums or may transfer Cash Value from
one sub-account to another, subject to such terms and conditions as may be
imposed by each underlying Mutual Fund option and as set forth in the
prospectus. Net Premiums allocated to the Fixed Account at the time of
application may not be transferred prior to the first Policy Anniversary (see
"Transfers" and "Investments of the Variable Account").
The designation of investment allocations will be made by the prospective Policy
Owner at the time of application for a Policy. The Policy Owner may change the
way in which future Net Premiums are allocated by giving written notice to the
Company. All percentage allocations must be in whole numbers, and must be at
least 5%. The sum of allocations must equal 100%.
SHORT-TERM RIGHT TO CANCEL POLICY
A Policy may be returned for cancellation and a full refund of premium within 10
days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails or delivers a
Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or
delivered to the registered representative who sold it, or to the Company.
Immediately after such mailing or delivery, the Policy will be deemed void from
the beginning. The Company will refund the total premiums paid within seven
days after it receives the Policy.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
The Company deducts a sales load from each premium payment received not to
exceed 3.5% of each premium payment (the Company may reduce this sales load at
its discretion). On a current basis, the sales load is reduced to 1.5% on any
portion of the annual premium paid in excess of the annual Break Point 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 that may be
deducted from Policies that are surrendered. The Company also pays any state
premium taxes attributable to a particular policy when incurred by the Company.
The Company expects to pay an average state premium tax rate of approximately
2.5% of premiums for all states, although such tax rates generally can range
from 0% to 4%. To reimburse the Company for the payment of state premium taxes
associated with the Policies, the Company deducts a charge for state premium
taxes equal to 2.5% 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 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
13
<PAGE> 17
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).
<TABLE>
<CAPTION>
Initial Specified Amount $50,000-$99,999
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- --------
<S> <C> <C> <C> <C>
25 $7.776 $7.521 $8.369 $7.818
35 8.817 8.398 9.811 8.891
45 12.191 11.396 13.887 12.169
55 15.636 14.011 18.415 15.116
65 22.295 19.086 26.577 20.641
</TABLE>
<TABLE>
<CAPTION>
Initial Specified Amount $100,000+
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
- --- ----------- ----------- -------- --------
<S> <C> <C> <C> <C>
25 $5.776 $5.521 $6.369 $5.818
35 6.817 6.398 7.811 6.891
45 9.691 8.896 11.387 9.669
55 13.136 11.511 15.915 12.616
65 21.295 18.086 25.577 19.641
</TABLE>
The Surrender Charge is comprised of two components: an underwriting surrender
charge and sales surrender charge. The underwriting surrender charge varies by
issue age in the following manner:
<TABLE>
<CAPTION>
Charge per $1,000 of
Initial Specified Amount
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 surrender charge is designed to cover the administrative
expenses associated with underwriting and issuing the Policy, including the
costs of processing applications, conducting medical exams, determining
insurability and the Insured's underwriting class, and establishing policy
records. The Company does not expect to profit from the underwriting surrender
charges. The Surrender Charge may be insufficient to recover certain expenses
related to the sale of the Policies. Unrecovered expenses are borne by the
Company's general assets which may include profits, if any, from Mortality and
Expense Risk Charges (see "Deductions from the Sub-Accounts"). Additional
premiums and/or income earned on assets in the Variable Account have no effect
on these charges. The remainder of the Surrender Charge which is not
attributable to the underwriting surrender charge component represents the sales
surrender charge component. In no event will this component exceed 26 1/2% of
the lesser of the Guideline Level Premium required in the first year or the
premiums actually paid in the first year. The purpose of the sales surrender
charge component is to reimburse the Company for some of the expenses incurred
in the distribution of the Policies. The Company also deducts 3.5% of each
premium for sales load (see "Deductions from Premiums").
- -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>
Special guaranteed maximum Surrender Charges apply in Pennsylvania (see Appendix
1).
14
<PAGE> 18
DEDUCTIONS FROM CASH VALUE
The Company also deducts the following charges from the Policy's Cash Value on
the Policy Date and each subsequent Monthly Anniversary Day:
1. monthly cost of insurance charges; plus
2. monthly cost of any additional benefits provided by riders; plus
3. monthly administrative expense charge; plus
4. the increase charge per $1000 applied to any increase in the
Specified Amount (see "Specified Amount Increases"). The
increase charge is $2.04 per year per $1000 and is shown on the
Policy data page. This charge is designed to cover the costs
associated with increasing the Specified Amount (see "Policy
Charges"). This charge will be deducted on each Monthly
Anniversary Day for the first 12 months after the increase
becomes effective.
These deductions will be charged proportionately to the Cash Value in each
Variable Account sub-account and the Fixed Account.
- -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. The
net amount at risk is the difference between the death benefit and the Policy's
Cash Value, each calculated at the beginning of the policy month.
If death benefit Option 1 is in effect and there have been increases in the
Specified Amount, then the Cash Value shall first be considered a part of the
initial Specified Amount. If the Cash Value exceeds the initial Specified
Amount, it shall then be considered a part of the additional increases in
Specified Amount resulting from the increases in the order of the increases.
Monthly cost of insurance rates will not exceed those guaranteed in the Policy.
Guaranteed cost of insurance rates 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 1980 CSO. These mortality tables are
sex distinct. In addition, separate mortality tables will be used for standard
and non-tobacco.
For Policies issued in Texas on a standard basis ("Special Class - Standard" in
Texas), guaranteed cost of insurance rates for Specified Amounts less than
$100,000 are based on 130% of the 1980 Commissioners Standard Ordinary Mortality
Table, Age Last Birthday (1980 CSO).
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 otherwise identical 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 $25 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 $7.50 per month in renewal years.
- -Increase Charge
The Increase Charge is comprised of two components: an underwriting and
administration charge as well as a sales charge (see "Specified Amount
Increases"). The underwriting and administration charge is $1.50 per year per
$1000. This charge is to cover the cost of underwriting the increases and any
processing expenses. Nationwide Life does not expect to profit from this
charge. The sales charge is equal to .54 per year per $1000 and reimburses the
Company for expenses incurred in distribution.
15
<PAGE> 19
DEDUCTIONS FROM THE SUB-ACCOUNTS
The Company assumes certain risks for guaranteeing the Mortality and Expense
Charges. The mortality risk 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 daily basis from the assets of the Variable Account a
charge to provide for mortality and expense risks. This charge is equivalent to
an annual effective rate of 0.80% of the daily net assets of the Variable
Account. On each Policy Anniversary beginning with the 10th, the mortality and
expense risk charge is reduced to 0.50% on an annual basis of the daily net
assets of the Variable Account, provided the Cash Surrender Value is $25,000 or
more on such anniversary. To the extent that future levels of mortality and
expenses are less than or equal to those expected, the Company may realize a
profit from this charge. The Surrender Charge may be insufficient to recover
certain expenses related to the sale of the Policies. Unrecovered expenses are
borne by the Company's general assets which may include profits, if any, from
Mortality and Expense Risk Charges (see "Surrender Charges").
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the sub-accounts of the Variable
Account (see "Taxation of the Company"). The Company reserves the right to
assess a charge for such taxes against the Variable Account if the Company
determines that such taxes will be incurred.
HOW THE CASH VALUE VARIES
On any date during the Policy Year, the Cash Value equals the Cash Value on the
preceding Valuation Date, plus any Net Premium applied since the previous
Valuation Date, minus any partial surrenders, plus or minus any investment
results, and less any Policy Charges.
There is no guaranteed Cash Value. The Cash Value will vary with the investment
experience of the Variable Account and/or the daily crediting of interest in the
Fixed Account and Policy Loan Account depending on the allocation of Cash Value
by the Policy Owner.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value in each sub-account is converted to Accumulation Units of that
sub-account. The conversion is accomplished by dividing the amount of Cash
Value allocated to a sub-account by the value of an Accumulation Unit for the
sub-account of the Valuation Period during which the allocation occurs. The
value of an Accumulation Unit for each sub-account was arbitrarily set initially
at $10 when the underlying Mutual Fund shares in that sub- account were
available for purchase.
The value for any subsequent Valuation Period is determined by multiplying the
Accumulation Unit value for each sub-account for the immediately preceding
Valuation Period by the Net Investment Factor for the sub-account during the
subsequent Valuation Period. The value of an Accumulation Unit may increase or
decrease from Valuation Period to Valuation Period. The number of Accumulation
Units will not change as a result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by dividing
(a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the Net Asset Value per share of the underlying Mutual Fund held
in the sub-account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain
distributions made by the underlying Mutual Fund option held
in the sub-account if the "ex-dividend" date occurs during the
current Valuation Period.
(b) 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 immediately
preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved
for in the immediately preceding Valuation Period.
16
<PAGE> 20
(c) is a factor representing the daily Mortality and Expense Risk
Charge deducted from the Variable Account. Such factor is equal to an
annual rate of .80% of the daily net asset value of the Variable
Account. On each Policy Anniversary beginning with the 10th, the
mortality and expense risk charge is reduced to 0.50% on an annual
basis of the daily net assets of the Variable Account, provided the
Cash Surrender Value is $25,000 or more on such anniversary.
For underlying Mutual Funds that credit dividends on a daily basis and pay such
dividends once a month, the Net Investment Factor allows for the monthly
reinvestment of these daily dividends.
The Net Investment Factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to changes
in the net asset value of underlying Mutual Fund shares, because of the
deduction for Mortality and Expense Risk Charge, and any charge or credit for
tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at their
Net Asset Value.
DETERMINING THE CASH VALUE
The sum of the value of all Accumulation Units attributable to the Policy and
amounts credited to the Fixed 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. If part or all of the Cash Value is surrendered or charges or
deductions are made against the Cash Value, an appropriate number of
Accumulation Units from the Variable Account and an appropriate amount from the
Fixed Account will be deducted in the same proportion that the Policy Owner's
interest in the Variable Account and the Fixed Account bears to the total Cash
Value.
The Cash Value in the Fixed Account and the Policy Loan Account is credited with
interest daily at an effective annual rate which the Company periodically
declares. The annual effective rate will never be less than 4%. Upon request,
the Company will inform the Policy Owner of the then applicable rates for each
account.
VALUATION PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business on the New
York Stock Exchange and ending at the close of business for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock Exchange
and the Company's Home Office are open for business or any other day during
which there is sufficient degree of trading that the current net asset value of
the Accumulation Units might be materially affected.
SURRENDERING THE POLICY FOR CASH
RIGHT TO SURRENDER
The Policy Owner may surrender the Policy in full at any time while the 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, where
permitted, the signature guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a commercial
bank or a savings and loan, which is a member of the Federal Deposit Insurance
Corporation or other eligible guarantor institution as defined by the federal
securities laws and regulations. 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
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. Partial surrenders will be permitted only if they satisfy
the following requirements:
1. The minimum partial surrender is $500;
2. The partial surrender may not reduce the Specified Amount to less
than $50,000;
17
<PAGE> 21
3. After the partial surrender, the Cash Surrender Value is greater
than $500 or an amount equal to three times the current monthly
deduction if higher;
4. The maximum total partial surrenders in any policy year are
limited to 10% of the total premium payments. On a current basis,
this requirement is waived in years 15 and beyond provided
the Cash Surrender Value is $10,000 or more after the withdrawal;
and
5. After the partial surrender, the Policy continues to qualify as
life insurance.
When a partial surrender is made, the Cash Value is reduced by the amount of the
partial surrender. Under Death Benefit Option 1, the Specified Amount is
reduced by the amount of the partial surrender, unless the death benefit is
based on the applicable percentage of Cash Value. In such a case, a partial
surrender will decrease the Specified Amount by the amount by which the partial
surrender exceeds the difference between the death benefit and Specified
Amount. Partial surrender amounts must be first deducted from the values in the
Variable Account sub-accounts. Partial surrenders will be deducted from the
Fixed Account only to the extent that insufficient values are available in the
Variable Account sub-accounts. The Company reserves the right to deduct a
$25.00 fee from the partial surrender amount.
Surrender Charges will be waived for any partial surrenders which satisfy the
above conditions. Certain partial surrenders may result in currently taxable
income and tax penalties (see "Tax Matters").
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
95th 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 of the
Policy 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 advisers, to determine the tax consequences, if any, of
their employer-sponsored life insurance arrangements.
POLICY LOANS
TAKING A POLICY LOAN
After the first Policy Year, the Policy Owner may take a Policy loan using the
Policy as security. Maximum Policy Indebtedness is limited to 90% of the Cash
Value less Surrender Charge less interest due on the next Policy Anniversary.
Maximum policy indebtedness, in Texas, is limited to 90% of the Cash Value in
the sub-accounts and 100% of the Cash Value in the Fixed Account less Surrender
Charge less interest due on the next Policy Anniversary. The Company will not
grant a loan for an amount less than $200. Should the Death Proceeds become
payable, the Policy be surrendered, or the Policy mature while a loan is
outstanding, the amount of Policy Indebtedness will be deducted from the death
benefit, Cash Surrender Value or the maturity value, respectively.
Any request for a Policy loan must be in written form satisfactory to the
Company. The request must be signed and, where permitted, the signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia or Pacific Stock Exchange; or by a commercial bank or a savings
and loan which is a member of the Federal Deposit Insurance Corporation or
other eligible guarantor institution as defined by the federal securities laws
and regulations. 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").
18
<PAGE> 22
EFFECT ON INVESTMENT PERFORMANCE
When a loan is made, an amount equal to the amount of the loan is transferred
from the Variable Account to the Policy Loan Account. If the assets relating
to a Policy are held in more than one sub-account, withdrawals from
sub-accounts will be made in proportion to the assets in each Variable
sub-account at the time of the loan. Policy loans will be transferred from the
Fixed Account only when insufficient amounts are available in the Variable
sub-accounts. The amount taken out of the Variable Account will not be affected
by the Variable Account's investment experience while the loan is outstanding.
INTEREST
On a current basis, policy loans are credited with an annual effective rate of
5.1% during policy years 2 through 14 and an annual effective rate of 6% during
the 15th and subsequent policy years. The rate is guaranteed never to be lower
than 5.1%. The Company may change the current interest crediting rate on policy
loans at any time its sole discretion. The loan interest rate is 6% per year
for all Policy loans. In the event that it is determined that such loans will
be treated, as a result of the differential between the interest crediting rate
and the loan interest rate, as taxable distributions under any applicable
ruling, regulation, or court decision, the Company retains the right to increase
the net cost (by decreasing the interest crediting rate) on all subsequent
policy loans to an amount that would result in the transaction being treated as
a loan under Federal tax law. If this amount is not prescribed by such ruling,
regulation, or court decision, the amount will be that which the Company
considers to be more likely to result in the transaction being treated as a loan
under Federal tax law.
Amounts transferred to the Policy Loan Account will earn interest daily from
the date of transfer. The earned interest is transferred from the Policy Loan
Account to a Variable Account or the Fixed Account on each Policy Anniversary
or at the time of loan repayment. It will be allocated according to the
underlying Mutual Fund allocation factors in effect at the time of the
transfer.
Interest is charged daily and is payable at the end of each Policy Year or at
the time of loan repayment. Unpaid interest will be added to the existing
Policy Indebtedness as of the due date and will be charged interest at the same
rate as the rest of the Indebtedness.
Whenever the total Policy Indebtedness exceeds the Cash Value less any
Surrender Charges, the Company will send a notice to the Policy Owner and the
assignee, if any. The Policy will terminate without value 61 days after the
mailing of the notice unless a sufficient repayment is made during that period.
A repayment is sufficient if it is large enough to reduce the total Policy
Indebtedness to an amount equal to the total Cash Value less any Surrender
Charges plus an amount sufficient to continue the Policy in force for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A Policy loan, whether or not repaid, will have a permanent effect on the Death
Benefit and Cash Value because the investment results of the Variable Account
or the Fixed Account will apply only to the non-loaned portion of the Cash
Value. The longer the loan is outstanding, the greater the effect is likely to
be. Depending on the investment results of the Variable Account or the Fixed
Account while the loan is outstanding, the effect could be favorable or
unfavorable.
REPAYMENT
All or part of the Indebtedness may be repaid at any time while the Policy is
in force during 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 Variable sub-accounts and the Fixed Account
in proportion to the Policy Owner's underlying Mutual Fund allocation factors
in effect at the time of the repayment. Each repayment may not be less than
$50. The Company reserves the right to require that any loan repayments
resulting from Policy loans transferred from the Fixed Account must be first
allocated to the Fixed Account.
HOW THE DEATH BENEFIT VARIES
CALCULATION OF THE DEATH BENEFIT
At issue, the Policy Owner selects the Specified Amount.
While the Policy is in force, the death benefit will never be less than the
Specified Amount. The death benefit may vary with the Cash Value of the
Policy, which depends on investment performance.
The Policy Owner may choose one of two death benefit options. Under Option 1,
the death benefit will be the greater of the Specified Amount or the Applicable
Percentage of Cash Value. Under Option 1, the amount of the death benefit will
ordinarily not change for several years to reflect the investment performance
and may not change at all. If investment performance is favorable, the amount
of death benefit may increase. To see how
19
<PAGE> 23
and when investment performance will begin to affect death benefits, please see
the illustrations. Under Option 2, the death benefit will be the greater of
the Specified Amount plus the Cash Value, or the Applicable Percentage of Cash
Value and will vary directly with the investment performance.
The term "Applicable Percentage" means:
1. 250% when the Insured is Attained Age 40 or less at the beginning
of a Policy Year; and
2. when the Insured is above Attained Age 40, the percentage shown in
the "Applicable Percentage of Cash Value Table" shown in this
provision.
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
</TABLE>
PROCEEDS PAYABLE ON DEATH
The actual Death Proceeds payable on the 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.
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").
20
<PAGE> 24
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 Nationwide 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
- -First Three Policy Years
This Policy will not lapse during the first three Policy Years 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 Policy
Indebtedness, minus any partial surrenders, and minus any partial
surrender fee; and
(2) Is the sum of monthly Minimum Premiums required since the Policy
Date including the monthly Minimum Premium for the current Monthly
Anniversary Day.
If (1) is less than (2) and the Cash Surrender Value is less than zero, a Grace
Period of 61 days from the Monthly Anniversary Day will be allowed for the
payment of sufficient premium to satisfy the Minimum Premium requirement. If
sufficient premium is not paid by the end of the Grace Period, the Policy will
lapse without value. In any event the Policy will not lapse as long as there
is a positive Cash Surrender Value.
- -Policy Years Four and After
If the Cash Surrender Value on a Monthly Anniversary Day is not sufficient to
cover the current Policy Charges, a Grace Period of 61 days from the Monthly
Anniversary Day will be allowed for the payment of sufficient premium to cover
the current Policy Charges due plus an amount equal to three times the current
monthly deduction.
- -All Policy Years
The Company will send such a notice at the start of the Grace Period to the
Policy Owner's last known address. If the Insured dies during the Grace
Period, the Company will pay the Death Proceeds.
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 an amount of premium equal to the sum of the Minimum Monthly
Premiums missed since the beginning of the Grace Period, if the Policy
terminated in the first three policy years;
4. paying sufficient premium to cover all policy charges that were due and
unpaid during the Grace Period if the Policy terminated in the fourth or later
policy year;
5. paying sufficient premium to keep the Policy in force for 3 months from
the date of reinstatement; and
6. paying or reinstating any Indebtedness against the Policy which existed
at the end of the Grace Period.
The effective date of a reinstated Policy will be the Monthly Anniversary Day
on or next following the date the application for reinstatement is approved by
the Company. If the Policy is reinstated, the Cash Value on the
21
<PAGE> 25
date of reinstatement, but prior to applying any premiums or loan repayments
received, will be set equal to the lesser of:
1. the Cash Value at the end of the Grace Period; or
2. the Surrender Charge for the Policy Year in which the Policy was
reinstated.
Unless the Policy Owner has provided otherwise, all amounts will be allocated
based on the underlying Mutual Fund allocation factors in effect at the start
of the Grace Period.
THE FIXED ACCOUNT OPTION
Because of exemptive and exclusionary provisions, interests in the Company's
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the General Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus relating to the
Fixed Account option. Disclosures regarding the General Account may, however,
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
As explained earlier, a Policy Owner may elect to allocate or transfer
all or part of the Cash Value to the Fixed Account and the amount allocated or
transferred becomes part of the Company's General Account. The Company's
General Account consists of all assets of the Company other than those in the
Variable Account and in other separate accounts that have been or may be
established by the Company. Subject to applicable law, the Company has sole
discretion over the investment of the assets of the General Account, and Policy
Owners do not share in the investment experience of those assets. The Company
guarantees that the part of the Cash Value invested under the Fixed Account
option will accrue interest daily at an effective annual rate that the Company
declares periodically. The Fixed Account crediting rate will not be less than
an effective annual rate of 4%. Upon request the Company will inform a Policy
Owner of the then applicable rate. The Company is not obligated to credit
interest at a higher rate.
CHANGES IN EXISTING INSURANCE COVERAGE
The Policy Owner may request certain changes in the insurance coverage under the
Policy. Any request must be in writing and received at the Company's Home
Office. No change will take effect unless the Cash Surrender Value, after the
change, is sufficient to keep the Policy in force for at least 3 months.
SPECIFIED AMOUNT INCREASES
After the first Policy Year, the Policy Owner may request an increase to the
Specified Amount. Any increase will be subject to the following conditions:
1. the 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
3. against insurance provided under the original application.
22
<PAGE> 26
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 $50,000; or
2. disqualify the Policy as a contract for life insurance.
CHANGES IN THE DEATH BENEFIT OPTION
After the first Policy Year, the Policy Owner may change the death benefit
option under the Policy. If the change is from Option 1 to Option 2, the
Specified Amount will be decreased by the amount of the Cash Value. If the
change is from Option 2 to Option 1, the Specified Amount will be increased by
the amount of the Cash Value. Evidence of Insurability is not required for a
change from Option 2 to Option 1. The Company reserves the right to require
evidence of insurability for a change from Option 1 to Option 2. The effective
date of the change will be the Monthly Anniversary Day on or next following the
date the Company approves the request for change. Only one change of option is
permitted per Policy Year. A change in death benefit option will not be
permitted if it results in the total premiums paid exceeding the then current
maximum premium limitations prescribed by the Internal Revenue Service to
qualify the Policy as a life insurance contract.
OTHER POLICY PROVISIONS
POLICY OWNER
While 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 Company's Home Office. Once recorded, the
change will be effective when signed. The change will not affect any payment
made or action taken by the Company before it was recorded. The Company may
require that the Policy be submitted for endorsement before making a change.
If the Policy Owner 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) shall be as named in the application or as subsequently
changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while the Insured is living. Any
change must be in a written form satisfactory to the Company and recorded at
the Company's Home Office. Once recorded, the change will be effective when
signed. The change will not affect any payment made or action taken by the
Company before it was recorded.
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 Company at its Home Office. Any assignment will not affect any
payments made or actions taken by the Company before it was recorded. The
Company is not responsible for any assignment not submitted for recording, nor
is the Company responsible for the sufficiency or validity of any assignment.
The assignment will be subject to any Indebtedness 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 Proceeds based on such an increase after it has been in force
during the Insured's lifetime for 2 years from its effective date.
23
<PAGE> 27
ERROR IN AGE OR SEX
If the age or sex of the Insured has been misstated, the affected benefits will
be adjusted. The amount of the death benefit (1) will be multiplied by (2) and
then the result added to (3), where:
(1) is the amount of the death benefit at the time of the Insured's
death reduced by the amount of the Cash Value 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.
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. 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.
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 contributions made on or
after August 1, 1983. The Policies offered by this prospectus are based upon
actuarial tables which distinguish between men and women and thus the Policies
provide different benefits to men and women of the same age. Accordingly,
employers and employee organizations should consider, in consultation with
legal counsel, the impact of Norris on any employment related insurance or
benefit program before purchasing this Policy.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by licensed insurance agents in those states where
the Policies may lawfully be sold. Such agents will be registered
representatives of broker dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
(NASD). The Policies will be distributed by the General Distributor, American
Capital Marketing, Inc.
Gross first year commissions plus any expense allowance payments paid by the
Company on the sale of these policies provided by the General Distributor will
not exceed 80% of the target Premium plus 4% of any excess premium payments.
Gross renewal commissions in years 2-10 paid by the Company will not exceed 4%
of actual premium payment, and will not exceed 1% in years 11+.
CUSTODIAN OF ASSETS
The Company serves as the Custodian of the assets of the Variable Account.
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 in the same way
annuities are taxed. Modified endowment contract distributions are defined by
the Code as amounts not
24
<PAGE> 28
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.
It may not be advantageous to replace existing insurance with Policies
described in this prospectus. It may also be disadvantageous to purchase a
policy to obtain additional insurance protection if the purchaser already owns
another variable life insurance policy.
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
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 Section 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 which does not satisfy the diversification
standards will not be treated as life insurance unless the failure to satisfy
the regulations was inadvertent, the failure is corrected, and the Policy Owner
or the Company pays an amount to the Internal Revenue Service. The amount will
be based on the tax that would have been paid by the Policy Owner if the
income, for the period the policy was not diversified, had been received by the
Policy Owner. If the failure to diversify is not corrected in this manner, the
Policy Owner will be deemed the owner of the underlying securities and taxed on
the earnings of his or her account.
Should the Secretary of the Treasury issue additional rules or regulations
limiting the number of funds, transfers between funds, exchanges of underlying
Mutual Funds or changes in investment objectives of underlying Mutual Funds
such that the Policy would no longer qualify as life insurance under Section
7702 of the 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 will generally be treated as taxable
income, regardless of whether or not the Policy is a modified endowment
contract.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policy Owner or Beneficiary.
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.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Counsel
and other competent advisors should be consulted for more complete information.
This discussion is based on the Company's understanding of federal income tax
laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these current
laws and interpretations.
25
<PAGE> 29
THE COMPANY
The life insurance business, which includes product lines in health insurance
and annuities, is the only business in which the Company is engaged.
The Company markets its Policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
The Company serves as depositor for 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,
MFS Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI
Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, NACo Variable Account and Nationwide DC Variable Account, 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, together with Nationwide Mutual Insurance
Company, Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity
Insurance Company, Nationwide Property and Casualty Insurance Company, National
Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity
Company, Nationwide Indemnity Company and Nationwide General Insurance Company
and all of their affiliated companies comprise the Nationwide Insurance
Enterprise.
The companies comprising the Nationwide Insurance Enterprise have substantially
common boards of directors and officers. Nationwide Corporation, is the sole
shareholder of Nationwide Life.
<TABLE>
<CAPTION>
DIRECTORS OF THE COMPANY
Director
Name Since Principal Occupation
---- ----- --------------------
<S> <C> <C> <C>
Lewis J. Alphin 1993 Farm Owner and Operator (1)
Keith W. Eckel 1996 Partner and Manager, Fred W. Eckel Sons and Eckel Farms, Inc. (1)
Willard J. Engel 1994 General Manager, Lyon County Cooperative Oil Company (1)
Fred C. Finney 1992 Owner and Operator, Moreland Fruit Farm; Operator, Melrose Orchard
Charles L. Fuellgraf, Jr. *+ 1969 Chief Executive Officer, Fuellgraf Electric Company, Electrical
Construction and Engineering Services (1)
Joseph J. Gasper *+ 1996 President and Chief Operating Officer, Nationwide Life Insurance
Company and Nationwide Life and Annuity Insurance Company (2)
Henry S. Holloway *+ 1986 Farm Owner and Operator (1)
</TABLE>
26
<PAGE> 30
<TABLE>
<S> <C> <C>
D. Richard McFerson *+ 1988 Chairman and Chief Executive Officer, Nationwide Insurance
Enterprise (2)
David O. Miller *+ 1985 Farm Owner and Land Developer; President, Owen Potato Farm, Inc.;
Partner, M&M Enterprises (1)
C. Ray Noecker 1994 Farm Owner and Operator (1)
James F. Patterson + 1989 Vice President, Pattersons, Inc. ; President, Patterson Farms, Inc.
(1)
Arden L. Shisler *+ 1984 Partner and Manager, Sweetwater Beef Farms; President and Chief
Executive Officer, K&B Transport, Inc. (1)
Robert L. Stewart 1989 Farm Owner and Operator; Owner, Sunnydale Mining (1)
Nancy C. Thomas * 1986 Farm Owner and Operator, Da-Ma-Lor Farms (1)
Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farm (1)
. . . . . . . . . . . . . . . . . .
<FN>
*Member, Executive Committee +Member, Investment Committee
(1) Principal occupation for last five years.
(2) Prior to assuming their current positions, Messrs. McFerson and Gasper
held other executive management positions with the companies.
</TABLE>
Each of the directors is a director of the other major insurance affiliates of
the Nationwide Insurance Enterprise, except Mr. Gasper who is a director only
of the Company and Nationwide Life Insurance Company. Messrs. Gasper and
McFerson are directors of Nationwide Financial Services, Inc., a registered
broker-dealer.
Messrs. Gasper, Holloway, McFerson, Miller, Patterson and Shisler are directors
of Nationwide Corporation. Messrs. Fuellgraf, Gasper, McFerson, Ms. Thomas,
and Mr. Weihl are trustees of Nationwide Investing Foundation, a registered
investment company. Mr. McFerson is a trustee of Nationwide Separate Account
Trust, Financial Horizons Investment Trust, and Nationwide Investing Foundation
II, registered investment companies. Mr. Engel is a director of Western
Cooperative Transport.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE COMPANY
NAME OFFICE HELD
---- -----------
<S> <C>
D. Richard McFerson Chairman and Chief Executive Officer-Nationwide Insurance
Enterprise
Joseph J. Gasper President and Chief Operating Officer
Gordon E. McCutchan Executive Vice President, Law and Corporate Services and
Secretary
Robert A. Oakley Executive Vice President - Chief Financial Officer
Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
James E. Brock Senior Vice President - Life Company Operations
W. Sidney Druen Senior Vice President and General Counsel and Assistant Secretary
Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary
Richard A. Karas Senior Vice President - Sales and Financial Services
Mark A. Folk Vice President and Treasurer
</TABLE>
Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and
Annuity Insurance Company. Each of the other officers listed above is also an
officer of each of the companies comprising the Nationwide Enterprise. Each of
the executive officers listed above has been associated with the registrant in
an executive capacity for more than the past five years, except Mr. Folk, who
joined the Registrant in 1993. From 1983-1993, Mr. Folk served as a partner at
the accounting firm KPMG Peat Marwick LLP.
27
<PAGE> 31
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer variable
contracts and policies with benefits which vary in accordance with the
investment experience of a separate account of the Company.
STATE REGULATION
The Company is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a
prescribed form is filed with the Insurance Department each year covering the
operation of the Company for the preceding year and its financial condition as
of the end of such year. Regulation by the Insurance Department includes
periodic examination to determine the Company's contract liabilities and
reserves so that the Insurance Department may certify the items are correct.
The Company's books and accounts are subject to review by the Insurance
Department at all times and a full examination of its operations is conducted
periodically by the National Association of Insurance Commissioners. Such
regulation does not, however, involve any supervision of management or
investment practices or policies. In addition, the Company is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing the amount of the current death benefit, the Cash
Value, and Cash Surrender Value, premiums paid and monthly charges deducted
since the last report, the amounts invested in the Fixed Account and in the
Variable Account and in each sub-account of the Variable Account, and any
Policy Indebtedness.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as changes in Specified Amount, changes in death benefit option, changes
in future premium allocation, transfers among sub-accounts, premium payments,
loans, loan repayments, reinstatement and termination.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The General Distributor, American Capital Marketing, Inc., is not engaged in
any material litigation of any nature.
ADVERTISING
The Company is ranked and rated by independent financial rating services, among
which are 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.
EXPERTS
The financial statements and schedules included herein have been included
herein in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Account, the Company, and the Policies
offered hereby. Statements contained in this prospectus as to the content of
Policies and other legal instruments are summaries. For a complete statement
of the terms thereof, reference is made to such instruments as filed.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being passed
upon by Druen, Rath & Dietrich, One Nationwide Plaza, Columbus, Ohio 43216.
All the members of such firm are employed by the Nationwide Mutual Insurance
Company.
28
<PAGE> 32
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 $569.80 ($11.396 x 50=569.80).
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.
<TABLE>
<CAPTION>
Initial Specified Amount $50,000-$99,999
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
<S> <C> <C> <C> <C>
25 $7.776 $7.521 $8.369 $7.818
35 8.817 8.398 9.811 8.891
45 12.191 11.396 13.887 12.169
55 15.636 14.011 18.415 15.116
65 22.295 19.086 26.577 20.641
</TABLE>
<TABLE>
<CAPTION>
Initial Specified Amount $100,000+
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
<S> <C> <C> <C> <C>
25 $5.776 $5.521 $6.369 $5.818
35 6.817 6.398 7.811 6.891
45 9.691 8.896 11.387 9.669
55 13.136 11.511 15.915 12.616
65 21.295 18.086 25.577 19.641
</TABLE>
<TABLE>
<CAPTION>
Reductions to Surrender Charges.
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>
29
<PAGE> 33
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:
<TABLE>
<CAPTION>
SURRENDER CHARGE SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
------------ ----------------- ------------ ----------------- ------------ -----------------
<S> <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 contract is issued in Pennsylvania, please contact
the Home Office for an illustration.
The Company has no plans to change the current Surrender Charges.
30
<PAGE> 34
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 daily charges made against the assets of the sub-accounts for
assuming Mortality and Expense Risks. The Mortality and Expense Risk Charges
are equivalent to an annual effective rate of .80% of the daily net asset value
of the Variable Account. On each Policy Anniversary beginning with the 10th,
the Mortality and Expense Risk Charge is reduced to 0.50% on an annual basis
of the daily net assets of the Variable Account, provided the Cash Surrender
Value is $25,000 or more on such anniversary. In addition, the net investment
returns also reflect the deduction of underlying Mutual Fund investment
advisory fees and other expenses which are equivalent to an annual effective
rate of 0.60% of the daily net asset value of the Variable Account.
Considering current charges for Mortality and Expense Risks and underlying
Mutual Fund expenses, gross annual rates of return of 0%, 6% and 12% correspond
to net investment experience at constant annual rates of -1.40%, 4.60% and
10.60%. On each Policy Anniversary beginning with the 10th, the gross annual
rates of return of 0%, 6%, and 12% correspond to net investment experience at
constant annual rate of -1.10%, 4.90%, and 10.90% provided the Cash Surrender
Value is $25,000 or more on such anniversary. This is due to a guaranteed
reduction in the Mortality and Expense Risk Charge from an annual effective
rate of 0.80% to an annual effective rate of 0.50% if the aforementioned
conditions apply.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection. 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 (including non-tobacco). Policies issued on a substandard
basis would result in lower Cash Values and Death benefits than those
illustrated.
The illustrations also reflect the fact that the Company deducts a sales load
from each premium payment. Current values reflect a deduction of 3.5% of each
premium payment up to Break Point Premium and 1.5% of any excess. Guaranteed
values reflect a deduction of 3.5% of each premium payment. The illustrations
also reflect the fact that the Company deducts a charge for state premium taxes
equal to 2.5% of all premium payments.
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 years.
In addition, the illustrations reflect the fact that the Company deducts a
monthly administrative charge at the beginning of each Policy Month. This
monthly administrative expense charge is $25 per month in the first year, $5
per month in renewal years. Current values reflect a current monthly
administrative expense charge of $5 in renewal years, and guaranteed values
reflect the $7.50 maximum monthly administrative charge under the Policy in
renewal 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.
31
<PAGE> 35
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 788 238 0 50,000 265 0 50,000 292 0 50,000
2 1,614 698 124 50,000 774 200 50,000 854 280 50,000
3 2,483 1,136 620 50,000 1,291 774 50,000 1,458 941 50,000
4 3,394 1,550 1,091 50,000 1,810 1,351 50,000 2,103 1,644 50,000
5 4,351 1,938 1,537 50,000 2,333 1,932 50,000 2,795 2,393 50,000
6 5,357 2,303 1,959 50,000 2,860 2,516 50,000 3,538 3,194 50,000
7 6,412 2,649 2,362 50,000 3,397 3,110 50,000 4,343 4,056 50,000
8 7,520 2,972 2,743 50,000 3,939 3,709 50,000 5,212 4,982 50,000
9 8,683 3,273 3,101 50,000 4,486 4,314 50,000 6,151 5,979 50,000
10 9,905 3,552 3,552 50,000 5,039 5,039 50,000 7,167 7,167 50,000
11 11,188 3,804 3,804 50,000 5,594 5,594 50,000 8,266 8,266 50,000
12 12,535 4,028 4,028 50,000 6,149 6,149 50,000 9,454 9,454 50,000
13 13,949 4,221 4,221 50,000 6,702 6,702 50,000 10,738 10,738 50,000
14 15,434 4,380 4,380 50,000 7,247 7,247 50,000 12,126 12,126 50,000
15 16,993 4,494 4,494 50,000 7,777 7,777 50,000 13,622 13,622 50,000
16 18,630 4,567 4,567 50,000 8,293 8,293 50,000 15,242 15,242 50,000
17 20,349 4,590 4,590 50,000 8,786 8,786 50,000 16,995 16,995 50,000
18 22,154 4,553 4,553 50,000 9,249 9,249 50,000 18,891 18,891 50,000
19 24,049 4,458 4,458 50,000 9,680 9,680 50,000 20,951 20,951 50,000
20 26,039 4,295 4,295 50,000 10,070 10,070 50,000 23,193 23,193 50,000
21 28,129 4,059 4,059 50,000 10,415 10,415 50,000 25,643 25,643 50,000
22 30,323 3,741 3,741 50,000 10,704 10,704 50,000 28,412 28,412 50,000
23 32,626 3,329 3,329 50,000 10,927 10,927 50,000 31,467 31,467 50,000
24 35,045 2,811 2,811 50,000 11,071 11,071 50,000 34,851 34,851 50,000
25 37,585 2,183 2,183 50,000 11,131 11,131 50,000 38,623 38,623 50,000
26 40,252 1,431 1,431 50,000 11,094 11,094 50,000 42,846 42,846 50,000
27 43,052 522 522 50,000 10,928 10,928 50,000 47,556 47,556 53,738
28 45,992 (*) (*) (*) 10,624 10,624 50,000 52,725 52,725 58,525
29 49,079 (*) (*) (*) 10,160 10,160 50,000 58,401 58,401 63,657
30 52,321 (*) (*) (*) 9,510 9,510 50,000 64,645 64,645 69,170
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</TABLE>
32
<PAGE> 36
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 788 172 0 50,000 197 0 50,000 222 0 50,000
2 1,614 532 0 50,000 599 25 50,000 670 96 50,000
3 2,483 866 350 50,000 998 481 50,000 1,141 625 50,000
4 3,394 1,174 715 50,000 1,392 933 50,000 1,638 1,179 50,000
5 4,351 1,454 1,052 50,000 1,779 1,377 50,000 2,162 1,760 50,000
6 5,357 1,703 1,359 50,000 2,157 1,812 50,000 2,712 2,368 50,000
7 6,412 1,920 1,633 50,000 2,521 2,234 50,000 3,288 3,001 50,000
8 7,520 2,100 1,871 50,000 2,867 2,637 50,000 3,889 3,659 50,000
9 8,683 2,239 2,067 50,000 3,190 3,018 50,000 4,513 4,341 50,000
10 9,905 2,333 2,333 50,000 3,484 3,484 50,000 5,159 5,159 50,000
11 11,188 2,379 2,379 50,000 3,744 3,744 50,000 5,826 5,826 50,000
12 12,535 2,373 2,373 50,000 3,965 3,965 50,000 6,514 6,514 50,000
13 13,949 2,311 2,311 50,000 4,142 4,142 50,000 7,223 7,223 50,000
14 15,434 2,190 2,190 50,000 4,267 4,267 50,000 7,952 7,952 50,000
15 16,993 1,999 1,999 50,000 4,330 4,330 50,000 8,697 8,697 50,000
16 18,630 1,733 1,733 50,000 4,321 4,321 50,000 9,455 9,455 50,000
17 20,349 1,381 1,381 50,000 4,226 4,226 50,000 10,222 10,222 50,000
18 22,154 928 928 50,000 4,027 4,027 50,000 10,992 10,992 50,000
19 24,049 359 359 50,000 3,704 3,704 50,000 11,755 11,755 50,000
20 26,039 (*) (*) (*) 3,235 3,235 50,000 12,505 12,505 50,000
21 28,129 (*) (*) (*) 2,595 2,595 50,000 13,233 13,233 50,000
22 30,323 (*) (*) (*) 1,757 1,757 50,000 13,932 13,932 50,000
23 32,626 (*) (*) (*) 691 691 50,000 14,594 14,594 50,000
24 35,045 (*) (*) (*) (*) (*) (*) 15,207 15,207 50,000
25 37,585 (*) (*) (*) (*) (*) (*) 15,755 15,755 50,000
26 40,252 (*) (*) (*) (*) (*) (*) 16,212 16,212 50,000
27 43,052 (*) (*) (*) (*) (*) (*) 16,544 16,544 50,000
28 45,992 (*) (*) (*) (*) (*) (*) 16,706 16,706 50,000
29 49,079 (*) (*) (*) (*) (*) (*) 16,641 16,641 50,000
30 52,321 (*) (*) (*) (*) (*) (*) 16,282 16,282 50,000
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
33
<PAGE> 37
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 788 237 0 50,237 264 0 50,264 291 0 50,291
2 1,614 693 120 50,693 769 195 50,769 848 275 50,848
3 2,483 1,128 611 51,128 1,281 764 51,281 1,446 930 51,446
4 3,394 1,535 1,076 51,535 1,792 1,333 51,792 2,082 1,623 52,082
5 4,351 1,914 1,513 51,914 2,304 1,902 52,304 2,759 2,357 52,759
6 5,357 2,268 1,924 52,268 2,816 2,471 52,816 3,481 3,137 53,481
7 6,412 2,601 2,314 52,601 3,333 3,046 53,333 4,259 3,972 54,259
8 7,520 2,909 2,679 52,909 3,851 3,621 53,851 5,090 4,861 55,090
9 8,683 3,191 3,019 53,191 4,368 4,196 54,368 5,982 5,809 55,982
10 9,905 3,449 3,449 53,449 4,886 4,886 54,886 6,938 6,938 56,938
11 11,188 3,677 3,677 53,677 5,396 5,396 55,396 7,959 7,959 57,959
12 12,535 3,875 3,875 53,875 5,900 5,900 55,900 9,050 9,050 59,050
13 13,949 4,037 4,037 54,037 6,390 6,390 56,390 10,212 10,212 60,212
14 15,434 4,161 4,161 54,161 6,861 6,861 56,861 11,446 11,446 61,446
15 16,993 4,236 4,236 54,236 7,303 7,303 57,303 12,749 12,749 62,749
16 18,630 4,265 4,265 54,265 7,714 7,714 57,714 14,128 14,128 64,128
17 20,349 4,239 4,239 54,239 8,084 8,084 58,084 15,580 15,580 65,580
18 22,154 4,149 4,149 54,149 8,400 8,400 58,400 17,099 17,099 67,099
19 24,049 3,996 3,996 53,996 8,661 8,661 58,661 18,694 18,694 68,694
20 26,039 3,770 3,770 53,770 8,853 8,853 58,853 20,360 20,360 70,360
21 28,129 3,469 3,469 53,469 8,968 8,968 58,968 22,097 22,097 72,097
22 30,323 3,084 3,084 53,084 8,994 8,994 58,994 23,902 23,902 73,902
23 32,626 2,605 2,605 52,605 8,916 8,916 58,916 25,769 25,769 75,769
24 35,045 2,023 2,023 52,023 8,716 8,716 58,716 27,776 27,776 77,776
25 37,585 1,340 1,340 51,340 8,391 8,391 58,391 29,858 29,858 79,858
26 40,252 545 545 50,545 7,924 7,924 57,924 32,008 32,008 82,008
27 43,052 (*) (*) (*) 7,280 7,280 57,280 34,204 34,204 84,204
28 45,992 (*) (*) (*) 6,451 6,451 56,451 36,449 36,449 86,449
29 49,079 (*) (*) (*) 5,419 5,419 55,419 38,733 38,733 88,733
30 52,321 (*) (*) (*) 4,163 4,163 54,163 41,050 41,050 91,050
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
</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.
34
<PAGE> 38
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 788 171 0 50,171 195 0 50,195 220 0 50,220
2 1,614 527 0 50,527 593 19 50,593 663 89 50,663
3 2,483 856 339 50,856 985 469 50,985 1,127 611 51,127
4 3,394 1,156 697 51,156 1,370 911 51,370 1,612 1,153 51,612
5 4,351 1,426 1,024 51,426 1,744 1,342 51,744 2,119 1,717 52,119
6 5,357 1,663 1,319 51,663 2,105 1,760 52,105 2,645 2,301 52,645
7 6,412 1,865 1,578 51,865 2,447 2,160 52,447 3,189 2,902 53,189
8 7,520 2,028 1,798 52,028 2,765 2,536 52,765 3,748 3,518 53,748
9 8,683 2,146 1,974 52,146 3,054 2,882 53,054 4,316 4,144 54,316
10 9,905 2,217 2,217 52,217 3,307 3,307 53,307 4,891 4,891 54,891
11 11,188 2,237 2,237 52,237 3,517 3,517 53,517 5,467 5,467 55,467
12 12,535 2,201 2,201 52,201 3,679 3,679 53,679 6,040 6,040 56,040
13 13,949 2,109 2,109 52,109 3,786 3,786 53,786 6,605 6,605 56,605
14 15,434 1,954 1,954 51,954 3,832 3,832 53,832 7,156 7,156 57,156
15 16,993 1,731 1,731 51,731 3,804 3,804 53,804 7,681 7,681 57,681
16 18,630 1,432 1,432 51,432 3,692 3,692 53,692 8,171 8,171 58,171
17 20,349 1,049 1,049 51,049 3,483 3,483 53,483 8,611 8,611 58,611
18 22,154 572 572 50,572 3,159 3,159 53,159 8,983 8,983 58,983
19 24,049 0 0 0 2,702 2,702 52,702 9,264 9,264 59,264
20 26,039 0 0 0 2,093 2,093 52,093 9,431 9,431 59,431
21 28,129 0 0 0 1,312 1,312 51,312 9,462 9,462 59,462
22 30,323 0 0 0 342 342 50,342 9,328 9,328 59,328
23 32,626 0 0 0 0 0 0 9,003 9,003 59,003
24 35,045 0 0 0 0 0 0 8,452 8,452 58,452
25 37,585 0 0 0 0 0 0 7,632 7,632 57,632
26 40,252 0 0 0 0 0 0 6,488 6,488 56,488
27 43,052 0 0 0 0 0 0 4,953 4,953 54,953
28 45,992 0 0 0 0 0 0 2,944 2,944 52,944
29 49,079 0 0 0 0 0 0 371 371 50,371
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
</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.
35
<PAGE> 39
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 1,260 283 0 50,000 323 0 50,000 364 0 50,000
2 2,583 718 25 50,000 822 129 50,000 932 239 50,000
3 3,972 1,092 468 50,000 1,287 663 50,000 1,501 878 50,000
4 5,431 1,400 845 50,000 1,711 1,157 50,000 2,068 1,513 50,000
5 6,962 1,635 1,150 50,000 2,085 1,600 50,000 2,623 2,138 50,000
6 8,570 1,791 1,375 50,000 2,400 1,984 50,000 3,160 2,745 50,000
7 10,259 1,860 1,514 50,000 2,644 2,298 50,000 3,670 3,324 50,000
8 12,032 1,829 1,552 50,000 2,801 2,523 50,000 4,138 3,861 50,000
9 13,893 1,685 1,477 50,000 2,852 2,644 50,000 4,546 4,338 50,000
10 15,848 1,413 1,413 50,000 2,778 2,778 50,000 4,878 4,878 50,000
11 17,901 999 999 50,000 2,559 2,559 50,000 5,112 5,112 50,000
12 20,056 429 429 50,000 2,172 2,172 50,000 5,228 5,228 50,000
13 22,318 (*) (*) (*) 1,590 1,590 50,000 5,198 5,198 50,000
14 24,694 (*) (*) (*) 779 779 50,000 4,988 4,988 50,000
15 27,189 (*) (*) (*) (*) (*) (*) 4,552 4,552 50,000
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
36
<PAGE> 40
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$1200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 1,260 482 0 50,482 528 0 50,528 575 0 50,575
2 2,583 1,165 472 51,165 1,295 602 51,295 1,430 737 51,430
3 3,972 1,803 1,179 51,803 2,057 1,433 52,057 2,333 1,710 52,333
4 5,431 2,390 1,836 52,390 2,810 2,256 52,810 3,284 2,730 53,284
5 6,962 2,919 2,434 52,919 3,544 3,059 53,544 4,278 3,792 54,278
6 8,570 3,391 2,975 53,391 4,258 3,842 54,258 5,317 4,901 55,317
7 10,259 3,798 3,452 53,798 4,942 4,595 54,942 6,398 6,051 56,398
8 12,032 4,131 3,854 54,131 5,583 5,306 55,583 7,511 7,234 57,511
9 13,893 4,392 4,184 54,392 6,180 5,972 56,180 8,661 8,453 58,661
10 15,848 4,571 4,571 54,571 6,721 6,721 56,721 9,839 9,839 59,839
11 17,901 4,665 4,665 54,665 7,198 7,198 57,198 11,043 11,043 61,043
12 20,056 4,667 4,667 54,667 7,598 7,598 57,598 12,265 12,265 62,265
13 22,318 4,566 4,566 54,566 7,907 7,907 57,907 13,493 13,493 63,493
14 24,694 4,353 4,353 54,353 8,110 8,110 58,110 14,716 14,716 64,716
15 27,189 4,030 4,030 54,030 8,202 8,202 58,202 15,933 15,933 65,933
16 29,808 3,588 3,588 53,588 8,166 8,166 58,166 17,131 17,131 67,131
17 32,559 3,001 3,001 53,001 7,968 7,968 57,968 18,277 18,277 68,277
18 35,447 2,270 2,270 52,270 7,603 7,603 57,603 19,365 19,365 69,365
19 38,479 1,388 1,388 51,388 7,050 7,050 57,050 20,377 20,377 70,377
20 41,663 345 345 50,345 6,291 6,291 56,291 21,293 21,293 71,293
21 45,006 (*) (*) (*) 5,293 5,293 55,293 22,078 22,078 72,078
22 48,517 (*) (*) (*) 4,023 4,023 54,023 22,693 22,693 72,693
23 52,202 (*) (*) (*) 2,444 2,444 52,444 23,097 23,097 73,097
24 56,073 (*) (*) (*) 527 527 50,527 23,247 23,247 73,247
25 60,136 (*) (*) (*) (*) (*) (*) 23,095 23,095 73,095
26 64,403 (*) (*) (*) (*) (*) (*) 22,586 22,586 72,586
27 68,883 (*) (*) (*) (*) (*) (*) 21,657 21,657 71,657
28 73,587 (*) (*) (*) (*) (*) (*) 20,248 20,248 70,248
29 78,527 (*) (*) (*) (*) (*) (*) 18,281 18,281 68,281
30 83,713 (*) (*) (*) (*) (*) (*) 15,662 15,662 65,662
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
</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.
37
<PAGE> 41
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 1,260 276 0 50,276 315 0 50,315 355 0 50,355
2 2,583 698 5 50,698 800 107 50,800 907 214 50,907
3 3,972 1,053 429 51,053 1,242 618 51,242 1,449 826 51,449
4 5,431 1,336 782 51,336 1,634 1,080 51,634 1,975 1,421 51,975
5 6,962 1,540 1,055 51,540 1,965 1,480 51,965 2,473 1,988 52,473
6 8,570 1,658 1,243 51,658 2,225 1,809 52,225 2,933 2,517 52,933
7 10,259 1,684 1,338 51,684 2,402 2,055 52,402 3,340 2,993 53,340
8 12,032 1,606 1,328 51,606 2,477 2,200 52,477 3,675 3,398 53,675
9 13,893 1,411 1,203 51,411 2,434 2,226 52,434 3,917 3,709 53,917
10 15,848 1,089 1,089 51,089 2,253 2,253 52,253 4,041 4,041 54,041
11 17,901 630 630 50,630 1,916 1,916 51,916 4,024 4,024 54,024
12 20,056 25 25 50,025 1,406 1,406 51,406 3,839 3,839 53,839
13 22,318 (*) (*) (*) 704 704 50,704 3,457 3,457 53,457
14 24,694 (*) (*) (*) (*) (*) (*) 2,844 2,844 52,844
15 27,189 (*) (*) (*) (*) (*) (*) 1,956 1,956 51,956
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
38
<PAGE> 42
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 1,575 792 0 100,000 856 0 100,000 920 22 100,000
2 3,229 1,782 884 100,000 1,966 1,068 100,000 2,158 1,260 100,000
3 4,965 2,730 1,922 100,000 3,096 2,288 100,000 3,493 2,685 100,000
4 6,788 3,637 2,919 100,000 4,248 3,530 100,000 4,936 4,218 100,000
5 8,703 4,505 3,877 100,000 5,423 4,795 100,000 6,498 5,870 100,000
6 10,713 5,336 4,797 100,000 6,624 6,085 100,000 8,193 7,655 100,000
7 12,824 6,118 5,669 100,000 7,840 7,391 100,000 10,023 9,574 100,000
8 15,040 6,843 6,484 100,000 9,062 8,703 100,000 11,991 11,632 100,000
9 17,367 7,512 7,243 100,000 10,291 10,022 100,000 14,115 13,845 100,000
10 19,810 8,118 8,118 100,000 11,520 11,520 100,000 16,400 16,400 100,000
11 22,376 8,672 8,672 100,000 12,759 12,759 100,000 18,877 18,877 100,000
12 25,069 9,184 9,184 100,000 14,019 14,019 100,000 21,576 21,576 100,000
13 27,898 9,656 9,656 100,000 15,303 15,303 100,000 24,522 24,522 100,000
14 30,868 10,069 10,069 100,000 16,593 16,593 100,000 27,725 27,725 100,000
15 33,986 10,408 10,408 100,000 17,875 17,875 100,000 31,297 31,297 100,000
16 37,261 10,676 10,676 100,000 19,152 19,152 100,000 35,199 35,199 100,000
17 40,699 10,868 10,868 100,000 20,421 20,421 100,000 39,470 39,470 100,000
18 44,309 10,969 10,969 100,000 21,668 21,668 100,000 44,145 44,145 100,000
19 48,099 10,975 10,975 100,000 22,890 22,890 100,000 49,276 49,276 100,000
20 52,079 10,891 10,891 100,000 24,091 24,091 100,000 54,927 54,927 100,000
21 56,258 10,704 10,704 100,000 25,262 25,262 100,000 61,163 61,163 100,000
22 60,646 10,385 10,385 100,000 26,461 26,461 100,000 68,053 68,053 100,000
23 65,253 9,927 9,927 100,000 27,607 27,607 100,000 75,692 75,692 100,000
24 70,091 9,301 9,301 100,000 28,679 28,679 100,000 84,187 84,187 100,000
25 75,170 8,497 8,497 100,000 29,671 29,671 100,000 93,596 93,596 108,572
26 80,504 7,504 7,504 100,000 30,575 30,575 100,000 103,883 103,883 119,465
27 86,104 6,281 6,281 100,000 31,361 31,361 100,000 115,154 115,154 130,124
28 91,984 4,813 4,813 100,000 32,019 32,019 100,000 127,518 127,518 141,545
29 98,158 3,073 3,073 100,000 32,531 32,531 100,000 141,097 141,097 153,795
30 104,641 1,010 1,010 100,000 32,862 32,862 100,000 156,026 156,026 166,948
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
</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.
39
<PAGE> 43
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 1,575 744 0 100,000 807 0 100,000 869 0 100,000
2 3,229 1,655 757 100,000 1,832 934 100,000 2,017 1,119 100,000
3 4,965 2,519 1,711 100,000 2,868 2,060 100,000 3,247 2,439 100,000
4 6,788 3,335 2,617 100,000 3,913 3,195 100,000 4,565 3,847 100,000
5 8,703 4,103 3,474 100,000 4,966 4,338 100,000 5,979 5,351 100,000
6 10,713 4,818 4,279 100,000 6,022 5,484 100,000 7,494 6,956 100,000
7 12,824 5,476 5,027 100,000 7,078 6,629 100,000 9,116 8,667 100,000
8 15,040 6,073 5,714 100,000 8,126 7,767 100,000 10,850 10,491 100,000
9 17,367 6,602 6,333 100,000 9,162 8,892 100,000 12,703 12,434 100,000
10 19,810 7,060 7,060 100,000 10,178 10,178 100,000 14,682 14,682 100,000
11 22,376 7,440 7,440 100,000 11,169 11,169 100,000 16,797 16,797 100,000
12 25,069 7,737 7,737 100,000 12,128 12,128 100,000 19,058 19,058 100,000
13 27,898 7,949 7,949 100,000 13,051 13,051 100,000 21,481 21,481 100,000
14 30,868 8,068 8,068 100,000 13,929 13,929 100,000 24,080 24,080 100,000
15 33,986 8,083 8,083 100,000 14,751 14,751 100,000 26,868 26,868 100,000
16 37,261 7,985 7,985 100,000 15,505 15,505 100,000 29,955 29,955 100,000
17 40,699 7,761 7,761 100,000 16,176 16,176 100,000 33,289 33,289 100,000
18 44,309 7,392 7,392 100,000 16,746 16,746 100,000 36,894 36,894 100,000
19 48,099 6,857 6,857 100,000 17,191 17,191 100,000 40,800 40,800 100,000
20 52,079 6,137 6,137 100,000 17,489 17,489 100,000 45,046 45,046 100,000
21 56,258 5,211 5,211 100,000 17,617 17,617 100,000 49,679 49,679 100,000
22 60,646 4,056 4,056 100,000 17,548 17,548 100,000 54,760 54,760 100,000
23 65,253 2,650 2,650 100,000 17,256 17,256 100,000 60,363 60,363 100,000
24 70,091 962 962 100,000 16,704 16,704 100,000 66,576 66,576 100,000
25 75,170 (*) (*) (*) 15,844 15,844 100,000 73,509 73,509 100,000
26 80,504 (*) (*) (*) 14,613 14,613 100,000 81,294 81,294 100,000
27 86,104 (*) (*) (*) 12,927 12,927 100,000 90,098 90,098 101,811
28 91,984 (*) (*) (*) 10,676 10,676 100,000 99,872 99,872 110,858
29 98,158 (*) (*) (*) 7,730 7,730 100,000 110,598 110,598 120,551
30 104,641 (*) (*) (*) 3,938 3,938 100,000 122,394 122,394 130,961
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
40
<PAGE> 44
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 1,575 788 0 100,788 852 0 100,852 916 19 100,916
2 3,229 1,772 875 101,772 1,955 1,058 101,955 2,146 1,249 102,146
3 4,965 2,710 1,903 102,710 3,074 2,266 103,074 3,467 2,660 103,467
4 6,788 3,604 2,886 103,604 4,208 3,490 104,208 4,889 4,171 104,889
5 8,703 4,454 3,826 104,454 5,360 4,732 105,360 6,421 5,792 106,421
6 10,713 5,263 4,724 105,263 6,530 5,992 106,530 8,073 7,535 108,073
7 12,824 6,018 5,569 106,018 7,706 7,258 107,706 9,845 9,397 109,845
8 15,040 6,710 6,351 106,710 8,877 8,518 108,877 11,736 11,377 111,736
9 17,367 7,340 7,071 107,340 10,042 9,773 110,042 13,756 13,487 113,756
10 19,810 7,898 7,898 107,898 11,190 11,190 111,190 15,907 15,907 115,907
11 22,376 8,399 8,399 108,399 12,333 12,333 112,333 18,214 18,214 118,214
12 25,069 8,852 8,852 108,852 13,479 13,479 113,479 20,700 20,700 120,700
13 27,898 9,259 9,259 109,259 14,630 14,630 114,630 23,383 23,383 123,383
14 30,868 9,600 9,600 109,600 15,764 15,764 115,764 26,261 26,261 126,261
15 33,986 9,856 9,856 109,856 16,860 16,860 116,860 29,417 29,417 129,417
16 37,261 10,033 10,033 110,033 17,918 17,918 117,918 32,805 32,805 132,805
17 40,699 10,124 10,124 110,124 18,931 18,931 118,931 36,437 36,437 136,437
18 44,309 10,114 10,114 110,114 19,877 19,877 119,877 40,319 40,319 140,319
19 48,099 9,998 9,998 109,998 20,748 20,748 120,748 44,468 44,468 144,468
20 52,079 9,783 9,783 109,783 21,546 21,546 121,546 48,916 48,916 148,916
21 56,258 9,456 9,456 109,456 22,252 22,252 122,252 53,676 53,676 153,676
22 60,646 8,988 8,988 108,988 22,829 22,829 122,829 58,743 58,743 158,743
23 65,253 8,371 8,371 108,371 23,264 23,264 123,264 64,137 64,137 164,137
24 70,091 7,581 7,581 107,581 23,521 23,521 123,521 69,859 69,859 169,859
25 75,170 6,611 6,611 106,611 23,583 23,583 123,583 75,932 75,932 175,932
26 80,504 5,456 5,456 105,456 23,434 23,434 123,434 82,379 82,379 182,379
27 86,104 4,082 4,082 104,082 23,026 23,026 123,026 89,197 89,197 189,197
28 91,984 2,484 2,484 102,484 22,340 22,340 122,340 96,410 96,410 196,410
29 98,158 648 648 100,648 21,348 21,348 121,348 104,039 104,039 204,039
30 104,641 0 0 0 19,997 19,997 119,997 112,083 112,083 212,083
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
</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.
41
<PAGE> 45
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 1,575 740 0 100,740 803 0 100,803 865 0 100,865
2 3,229 1,644 746 101,644 1,820 922 101,820 2,004 1,106 102,004
3 4,965 2,497 1,689 102,497 2,843 2,035 102,843 3,218 2,410 103,218
4 6,788 3,298 2,580 103,298 3,869 3,151 103,869 4,513 3,795 104,513
5 8,703 4,046 3,418 104,046 4,895 4,267 104,895 5,892 5,264 105,892
6 10,713 4,736 4,197 104,736 5,917 5,378 105,917 7,359 6,820 107,359
7 12,824 5,363 4,915 105,363 6,927 6,478 106,927 8,915 8,466 108,915
8 15,040 5,923 5,564 105,923 7,918 7,559 107,918 10,561 10,202 110,561
9 17,367 6,409 6,140 106,409 8,881 8,612 108,881 12,298 12,028 112,298
10 19,810 6,815 6,815 106,815 9,808 9,808 109,808 14,126 14,126 114,126
11 22,376 7,135 7,135 107,135 10,690 10,690 110,690 16,046 16,046 116,046
12 25,069 7,364 7,364 107,364 11,517 11,517 111,517 18,058 18,058 118,058
13 27,898 7,500 7,500 107,500 12,282 12,282 112,282 20,167 20,167 120,167
14 30,868 7,534 7,534 107,534 12,973 12,973 112,973 22,371 22,371 122,371
15 33,986 7,456 7,456 107,456 13,574 13,574 113,574 24,665 24,665 124,665
16 37,261 7,256 7,256 107,256 14,069 14,069 114,069 27,045 27,045 127,045
17 40,699 6,922 6,922 106,922 14,440 14,440 114,440 29,594 29,594 129,594
18 44,309 6,437 6,437 106,437 14,660 14,660 114,660 32,222 32,222 132,222
19 48,099 5,782 5,782 105,782 14,701 14,701 114,701 34,916 34,916 134,916
20 52,079 4,941 4,941 104,941 14,536 14,536 114,536 37,659 37,659 137,659
21 56,258 3,898 3,898 103,898 14,137 14,137 114,137 40,436 40,436 140,436
22 60,646 2,639 2,639 102,639 13,477 13,477 113,477 43,230 43,230 143,230
23 65,253 1,152 1,152 101,152 12,528 12,528 112,528 46,024 46,024 146,024
24 70,091 (*) (*) (*) 11,256 11,256 111,256 48,794 48,794 148,794
25 75,170 (*) (*) (*) 9,617 9,617 109,617 51,503 51,503 151,503
26 80,504 (*) (*) (*) 7,554 7,554 107,554 54,102 54,102 154,102
27 86,104 (*) (*) (*) 5,000 5,000 105,000 56,525 56,525 156,525
28 91,984 (*) (*) (*) 1,870 1,870 101,870 58,685 58,685 158,685
29 98,158 (*) (*) (*) (*) (*) (*) 60,489 60,489 160,489
30 104,641 (*) (*) (*) (*) (*) (*) 61,843 61,843 161,843
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
42
<PAGE> 46
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$2500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 2,625 1,373 211 100,000 1,482 319 100,000 1,591 428 100,000
2 5,381 2,926 1,764 100,000 3,236 2,073 100,000 3,559 2,396 100,000
3 8,275 4,421 3,375 100,000 5,031 3,984 100,000 5,692 4,646 100,000
4 11,314 5,839 4,909 100,000 6,849 5,919 100,000 7,989 7,059 100,000
5 14,505 7,164 6,351 100,000 8,675 7,861 100,000 10,449 9,636 100,000
6 17,855 8,404 7,706 100,000 10,515 9,817 100,000 13,097 12,400 100,000
7 21,373 9,552 8,971 100,000 12,365 11,784 100,000 15,949 15,368 100,000
8 25,066 10,598 10,133 100,000 14,213 13,748 100,000 19,016 18,551 100,000
9 28,945 11,538 11,189 100,000 16,057 15,708 100,000 22,323 21,974 100,000
10 33,017 12,380 12,380 100,000 17,905 17,905 100,000 25,906 25,906 100,000
11 37,293 13,112 13,112 100,000 19,748 19,748 100,000 29,883 29,883 100,000
12 41,782 13,711 13,711 100,000 21,565 21,565 100,000 34,206 34,206 100,000
13 46,497 14,169 14,169 100,000 23,351 23,351 100,000 38,923 38,923 100,000
14 51,446 14,466 14,466 100,000 25,089 25,089 100,000 44,077 44,077 100,000
15 56,644 14,593 14,593 100,000 26,857 26,857 100,000 49,736 49,736 100,000
16 62,101 14,545 14,545 100,000 28,581 28,581 100,000 55,982 55,982 100,000
17 67,831 14,287 14,287 100,000 30,237 30,237 100,000 62,897 62,897 100,000
18 73,848 13,811 13,811 100,000 31,823 31,823 100,000 70,601 70,601 100,000
19 80,165 13,095 13,095 100,000 33,329 33,329 100,000 79,233 79,233 100,000
20 86,798 12,100 12,100 100,000 34,731 34,731 100,000 88,960 88,960 100,000
21 93,763 10,792 10,792 100,000 36,013 36,013 100,000 99,955 99,955 104,953
22 101,076 9,087 9,087 100,000 37,123 37,123 100,000 112,027 112,027 117,629
23 108,755 6,921 6,921 100,000 38,026 38,026 100,000 125,225 125,225 131,486
24 116,818 4,216 4,216 100,000 38,685 38,685 100,000 139,646 139,646 146,628
25 125,284 872 872 100,000 39,045 39,045 100,000 155,393 155,393 163,163
26 134,173 (*) (*) (*) 39,050 39,050 100,000 172,579 172,579 181,208
27 143,506 (*) (*) (*) 38,637 38,637 100,000 191,325 191,325 200,891
28 153,307 (*) (*) (*) 37,712 37,712 100,000 211,757 211,757 222,345
29 163,597 (*) (*) (*) 36,157 36,157 100,000 234,011 234,011 245,711
30 174,402 (*) (*) (*) 33,797 33,797 100,000 258,225 258,225 271,137
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
</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.
43
<PAGE> 47
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 2,625 1,200 38 100,000 1,303 141 100,000 1,407 245 100,000
2 5,381 2,510 1,347 100,000 2,796 1,634 100,000 3,095 1,933 100,000
3 8,275 3,717 2,670 100,000 4,269 3,223 100,000 4,871 3,825 100,000
4 11,314 4,814 3,884 100,000 5,715 4,785 100,000 6,736 5,806 100,000
5 14,505 5,795 4,981 100,000 7,123 6,309 100,000 8,692 7,878 100,000
6 17,855 6,649 5,952 100,000 8,482 7,785 100,000 10,741 10,044 100,000
7 21,373 7,368 6,787 100,000 9,781 9,200 100,000 12,886 12,305 100,000
8 25,066 7,936 7,471 100,000 11,000 10,535 100,000 15,125 14,660 100,000
9 28,945 8,334 7,985 100,000 12,121 11,772 100,000 17,456 17,107 100,000
10 33,017 8,548 8,548 100,000 13,123 13,123 100,000 19,882 19,882 100,000
11 37,293 8,560 8,560 100,000 13,986 13,986 100,000 22,407 22,407 100,000
12 41,782 8,354 8,354 100,000 14,690 14,690 100,000 25,042 25,042 100,000
13 46,497 7,912 7,912 100,000 15,214 15,214 100,000 27,885 27,885 100,000
14 51,446 7,210 7,210 100,000 15,527 15,527 100,000 30,884 30,884 100,000
15 56,644 6,213 6,213 100,000 15,590 15,590 100,000 34,054 34,054 100,000
16 62,101 4,871 4,871 100,000 15,351 15,351 100,000 37,413 37,413 100,000
17 67,831 3,120 3,120 100,000 14,738 14,738 100,000 40,977 40,977 100,000
18 73,848 876 876 100,000 13,660 13,660 100,000 44,770 44,770 100,000
19 80,165 (*) (*) (*) 12,009 12,009 100,000 48,827 48,827 100,000
20 86,798 (*) (*) (*) 9,663 9,663 100,000 53,207 53,207 100,000
21 93,763 (*) (*) (*) 6,482 6,482 100,000 57,998 57,998 100,000
22 101,076 (*) (*) (*) 2,299 2,299 100,000 63,321 63,321 100,000
23 108,755 (*) (*) (*) (*) (*) (*) 69,335 69,335 100,000
24 116,818 (*) (*) (*) (*) (*) (*) 76,252 76,252 100,000
25 125,284 (*) (*) (*) (*) (*) (*) 84,349 84,349 100,000
26 134,173 (*) (*) (*) (*) (*) (*) 94,004 94,004 100,000
27 143,506 (*) (*) (*) (*) (*) (*) 105,103 105,103 110,358
28 153,307 (*) (*) (*) (*) (*) (*) 117,152 117,152 123,009
29 163,597 (*) (*) (*) (*) (*) (*) 130,212 130,212 136,723
30 174,402 (*) (*) (*) (*) (*) (*) 144,349 144,349 151,566
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
44
<PAGE> 48
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 2,625 1,361 199 101,361 1,469 307 101,469 1,577 415 101,577
2 5,381 2,892 1,729 102,892 3,198 2,035 103,198 3,517 2,354 103,517
3 8,275 4,353 3,306 104,353 4,952 3,906 104,952 5,603 4,556 105,603
4 11,314 5,723 4,793 105,723 6,711 5,781 106,711 7,825 6,895 107,825
5 14,505 6,986 6,172 106,986 8,454 7,640 108,454 10,177 9,363 110,177
6 17,855 8,147 7,449 108,147 10,183 9,486 110,183 12,672 11,975 112,672
7 21,373 9,199 8,618 109,199 11,891 11,310 111,891 15,317 14,736 115,317
8 25,066 10,128 9,663 110,128 13,557 13,092 113,557 18,106 17,641 118,106
9 28,945 10,931 10,582 110,931 15,175 14,826 115,175 21,047 20,699 121,047
10 33,017 11,614 11,614 111,614 16,745 16,745 116,745 24,159 24,159 124,159
11 37,293 12,165 12,165 112,165 18,253 18,253 118,253 27,441 27,441 127,441
12 41,782 12,554 12,554 112,554 19,660 19,660 119,660 30,970 30,970 130,970
13 46,497 12,776 12,776 112,776 20,955 20,955 120,955 34,676 34,676 134,676
14 51,446 12,805 12,805 112,805 22,102 22,102 122,102 38,545 38,545 138,545
15 56,644 12,635 12,635 112,635 23,087 23,087 123,087 42,582 42,582 142,582
16 62,101 12,263 12,263 112,263 23,894 23,894 123,894 46,794 46,794 146,794
17 67,831 11,654 11,654 111,654 24,477 24,477 124,477 51,157 51,157 151,157
18 73,848 10,804 10,804 110,804 24,817 24,817 124,817 55,677 55,677 155,677
19 80,165 9,699 9,699 109,699 24,888 24,888 124,888 60,347 60,347 160,347
20 86,798 8,307 8,307 108,307 24,639 24,639 124,639 65,143 65,143 165,143
21 93,763 6,606 6,606 106,606 24,029 24,029 124,029 70,045 70,045 170,045
22 101,076 4,525 4,525 104,525 22,966 22,966 122,966 74,983 74,983 174,983
23 108,755 2,028 2,028 102,028 21,386 21,386 121,386 79,910 79,910 179,910
24 116,818 (*) (*) (*) 19,222 19,222 119,222 84,776 84,776 184,776
25 125,284 (*) (*) (*) 16,393 16,393 116,393 89,512 89,512 189,512
26 134,173 (*) (*) (*) 12,824 12,824 112,824 94,054 94,054 194,054
27 143,506 (*) (*) (*) 8,448 8,448 108,448 98,340 98,340 198,340
28 153,307 (*) (*) (*) 3,172 3,172 103,172 102,281 102,281 202,281
29 163,597 (*) (*) (*) (*) (*) (*) 105,776 105,776 205,776
30 174,402 (*) (*) (*) (*) (*) (*) 108,679 108,679 208,679
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
$25 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 NOT STAY IN FORCE.
</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.
45
<PAGE> 49
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 2,625 1,186 23 101,186 1,288 125 101,288 1,391 228 101,391
2 5,381 2,468 1,306 102,468 2,750 1,587 102,750 3,044 1,882 103,044
3 8,275 3,633 2,587 103,633 4,173 3,126 104,173 4,760 3,714 104,760
4 11,314 4,673 3,743 104,673 5,545 4,615 105,545 6,534 5,604 106,534
5 14,505 5,578 4,765 105,578 6,853 6,039 106,853 8,358 7,544 108,358
6 17,855 6,340 5,642 106,340 8,080 7,382 108,080 10,222 9,525 110,222
7 21,373 6,946 6,364 106,946 9,208 8,627 109,208 12,117 11,536 112,117
8 25,066 7,378 6,913 107,378 10,213 9,748 110,213 14,021 13,556 114,021
9 28,945 7,621 7,272 107,621 11,068 10,719 111,068 15,913 15,565 115,913
10 33,017 7,657 7,657 107,657 11,746 11,746 111,746 17,771 17,771 117,771
11 37,293 7,471 7,471 107,471 12,220 12,220 112,220 19,570 19,570 119,570
12 41,782 7,051 7,051 107,051 12,465 12,465 112,465 21,285 21,285 121,285
13 46,497 6,383 6,383 106,383 12,454 12,454 112,454 22,889 22,889 122,889
14 51,446 5,450 5,450 105,450 12,153 12,153 112,153 24,348 24,348 124,348
15 56,644 4,227 4,227 104,227 11,520 11,520 111,520 25,613 25,613 125,613
16 62,101 2,679 2,679 102,679 10,500 10,500 110,500 26,707 26,707 126,707
17 67,831 761 761 100,761 9,026 9,026 109,026 27,478 27,478 127,478
18 73,848 (*) (*) (*) 7,014 7,014 107,014 27,825 27,825 127,825
19 80,165 (*) (*) (*) 4,381 4,381 104,381 27,638 27,638 127,638
20 86,798 (*) (*) (*) 1,044 1,044 101,044 26,806 26,806 126,806
21 93,763 (*) (*) (*) (*) (*) (*) 25,218 25,218 125,218
22 101,076 (*) (*) (*) (*) (*) (*) 22,758 22,758 122,758
23 108,755 (*) (*) (*) (*) (*) (*) 19,235 19,235 119,235
24 116,818 (*) (*) (*) (*) (*) (*) 14,584 14,584 114,584
25 125,284 (*) (*) (*) (*) (*) (*) 8,628 8,628 108,628
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
46
<PAGE> 50
<PAGE> 1
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide VLI Separate Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account as of December 31,
1995, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the three
year period then ended. These financial statements and schedules of changes in
unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value 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 and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and the
transfer agents of the underlying mutual funds. 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 financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide VLI Separate Account as of December 31, 1995, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
<PAGE> 2
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in Van Kampen American Capital Life
Investment Trust, at market value:
Common Stock Fund
1,801,420 shares (cost $23,991,656) .............. $ 26,462,863
Domestic Strategic Income Fund
427,490 shares (cost $3,589,193) .................. 3,509,695
Emerging Growth Fund
42,444 shares (cost $475,666) ..................... 497,015
Global Equity Fund
20,666 shares (cost $209,185) ..................... 213,064
Government Fund
6,265,236 shares (cost $54,992,190) ............... 56,763,039
Money Market Fund
9,782,717 shares (cost $9,782,717) ................ 9,782,717
Multiple Strategy Fund
2,098,321 shares (cost $23,600,829) ............... 24,424,455
Real Estate Securities Fund
4,679 shares (cost $48,129) ....................... 50,248
------------
Total assets ................................... 121,703,096
ACCOUNTS PAYABLE .......................................... 585
------------
CONTRACT OWNERS' EQUITY ................................... $121,702,511
============
</TABLE>
Contract owners' equity represented by:
<TABLE>
<CAPTION>
UNITS UNIT VALUE
--------- ----------
<S> <C> <C> <C>
Single Premium contracts issued prior to
April 16, 1990:
Common Stock Sub-account ............... 1,165,519 $ 22.498859 $ 26,222,848
Domestic Strategic Income Sub-account .. 193,912 17.235188 3,342,110
Emerging Growth Sub-account ............ 42,641 11.655608 497,007
Global Equity Sub-account .............. 20,762 10.262083 213,061
Government Sub-account ................. 2,990,179 18.968390 56,718,881
Money Market Sub-account ............... 611,001 15.695093 9,589,718
Multiple Strategy Sub-account .......... 1,125,079 21.519909 24,211,598
Real Estate Securities Sub-account ..... 4,659 10.784280 50,244
Single Premium contracts issued on or after
April 16, 1990:
Common Stock Sub-account ............... 5,428 21.257132 115,384
Domestic Strategic Income Sub-account .. 9,801 17.099466 167,592
Government Sub-account ................. 2,836 14.433482 40,933
Money Market Sub-account ............... 16,792 11.648994 195,610
Multiple Strategy Sub-account .......... 5,169 18.558022 95,926
Multiple Payment Contracts and Flexible
Premium Contracts:
Common Stock Sub-account ............... 6,873 18.137100 124,656
Multiple Strategy Sub-account .......... 7,030 16.634918 116,943
========= ========= ------------
$121,702,511
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends ................ $ 11,096,149 9,791,294 8,172,407
------------- ----------- -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual
fund shares ......................................... 23,835,749 22,040,399 23,152,130
Cost of mutual fund shares sold ..................... (21,777,460) (20,667,556) (20,977,882)
------------- ----------- -----------
Realized gain (loss) on investments ................. 2,058,289 1,372,843 2,174,248
Change in unrealized gain (loss) on
investments ....................................... 11,069,519 (15,672,902) (360,705)
------------- ----------- -----------
Net gain (loss) on investments ................... 13,127,808 (14,300,059) 1,813,543
------------- ----------- -----------
Net investment activity .................... 24,223,957 (4,508,765) 9,985,950
------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments from contract owners ................ 39,639 25,229 19,352
Surrenders (note 2d) .................................. (11,745,567) (9,547,706) (9,817,586)
Death benefits (note 4) ............................... (1,552,445) (1,196,526) (1,033,549)
Policy loans (net of repayments) (note 5) ............. 833,405 1,817,775 (226,605)
------------- ----------- -----------
Net equity transactions .................... (12,424,968) (8,901,228) (11,058,388)
------------- ----------- -----------
EXPENSES:
Deductions for surrender charges (note 2d) ........... (193,286) (377,936) (421,375)
Redemptions to pay cost of insurance charges
and administrative charges (notes 2b
and 2c) ............................................. (1,770,626) (2,043,874) (2,027,161)
Deductions for asset charges (note 3) ................. (1,124,778) (1,135,456) (1,270,553)
------------- ----------- -----------
Total expenses ............................. (3,088,690) (3,557,266) (3,719,089)
------------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................... 8,710,299 (16,967,259) (4,791,527)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ............. 112,992,212 129,959,471 134,750,998
------------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ................... $ 121,702,511 112,992,212 129,959,471
============= =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND NATURE OF OPERATIONS
The Nationwide VLI Separate Account ("Separate Account") was
established pursuant to a resolution of the Board of Directors of
Nationwide Life Insurance Company (the Company) on August 8, 1984. The
Separate Account has been registered as a unit investment trust under
the Investment Company Act of 1940 and consists of eight sub-accounts.
Assets of each sub-account are invested at net asset value in shares
of corresponding underlying mutual funds offered by Van Kampen
American Capital Life Investment Trust. The funds consist of Common
Stock, Domestic Strategic Income (formerly Corporate Bond), Emerging
Growth, Global Equity, Government, Money Market, Multiple Strategy and
Real Estate Securities Funds. At December 31, 1995, contract owners
have invested in all of the above funds.
The Company offers modified single premium, and multiple payment and
flexible premium variable life insurance contracts through the
Account. The primary distribution for the contracts is through the
brokerage community; however, other distributors may be utilized.
(b) THE CONTRACTS
Prior to December 31, 1990, only contracts without a front-end sales
charge, but with a contingent deferred sales charge and certain other
fees, were offered for purchase. Beginning December 31, 1990,
contracts with a front-end sales charge, a contingent deferred sales
charge and certain other fees, are offered for purchase. See note 2
for a discussion of policy charges and note 3 for asset charges.
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain policy
charges (see notes 2 and 3). The accompanying financial statements
include only contract owners' purchase payments pertaining to the
variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts
of the Company.
(c) SECURITY VALUATION, TRANSACTIONS AND RELATED INVESTMENT INCOME
The market value of the underlying mutual funds is based on the
closing net asset value per share at December 31, 1995. Fund purchases
and sales are accounted for on the trade date (date the order to buy
or sell is executed). The cost of investments sold is determined on a
specific identification basis, and dividends (which include capital
gain distributions) are accrued as of the ex-dividend date.
(d) FEDERAL INCOME TAXES
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account.
Taxes are the responsibility of the contract owner upon termination or
withdrawal.
(e) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities,
if any, at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE> 5
2. POLICY CHARGES
(a) DEDUCTIONS FROM PREMIUMS
On multiple payment contracts and flexible premium contracts, the
Company deducts a charge for state premium taxes equal to 2.5% of all
premiums received to cover the payment of these premium taxes. The
Company also deducts a sales load from each premium payment received
not to exceed 3.5% of each premium payment. The Company may at its
sole discretion reduce this sales loading.
(b) COST OF INSURANCE
A cost of insurance charge is assessed monthly against each contract
by liquidating units. The amount of the charge is based upon age, sex,
rate class and net amount at risk (death benefit less total contract
value).
(c) ADMINISTRATIVE CHARGES
For single premium contracts, the Company deducts an annual
administrative charge which is determined as follows:
Contracts issued prior to April 16, 1990:
Purchase payments totalling less than $25,000 - $10/month
Purchase payments totalling $25,000 or more - none
Contracts issued on or after April 16, 1990:
Purchase payments totalling less than $25,000 - $90/year ($65/year
in New York)
Purchase payments totalling $25,000 or more - $50/year
For multiple payment contracts the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to
recover policy maintenance, accounting, record keeping and other
administrative expenses.
For flexible premium contracts, the Company currently deducts a
monthly administrative charge of $25 during the first policy year and
$5 per month thereafter (may deduct up to $7.50, maximum) to recover
policy maintenance, accounting, record keeping and other
administrative expenses. Additionally, the Company deducts an increase
charge of $2.04 per year per $1,000 applied to any increase in the
specified amount during the first 12 months after the increase becomes
effective.
The above charges are assessed against each contract by liquidating
units.
(d) SURRENDERS
Policy surrenders result in a redemption of the contract value from
the Separate Account and payment of the surrender proceeds to the
contract owner or designee. The surrender proceeds consist of the
contract value, less any outstanding policy loans, and less a
surrender charge, if applicable. The charge is determined according to
contract type.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single
premium contracts issued prior to April 16, 1990, the charge is 8% in
the first year and declines to 0% after the ninth year. For single
premium contracts issued on or after April 16, 1990, the charge is
8.5% in the first year and declines to 0% after the ninth year.
For multiple payment contracts and flexible premium contracts, the
amount charged is based upon a specified percentage of the initial
surrender charge, which varies by issue age, sex and rate class. The
charge is 100% of the initial surrender charge in the first year, with
certain exceptions, declining to 0% after the ninth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of
a contract are not incurred.
<PAGE> 6
3. ASSET CHARGES
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to
operations, and to recover policy maintenance and premium tax charges.
For contracts issued prior to April 16, 1990, the charge is equal to
an annual rate of .95% during the first ten policy years, and .50%
thereafter. A reduction of charges on these contracts is possible in
policy years six through ten for those contracts achieving certain
investment performance criteria; for contracts issued on or after
April 16, 1990, the charge is equal to an annual rate of 1.30% during
the first ten policy years, and 1.00% thereafter.
For multiple payment contracts and flexible premium contracts, the
Company deducts a charge equal to an annual rate of .80%, with certain
exceptions, to cover mortality and expense risk charges related to
operations.
The above charges are assessed through the daily unit value
calculation.
4. DEATH BENEFITS
Death benefits result in a redemption of the contract value from the
Separate Account and payment of the death benefit proceeds, less any
outstanding policy loans and policy charges, to the legal beneficiary.
The excess of the death benefit proceeds over the contract value on
the date of death is paid by the Company's general account.
5. POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% (50%
during first year of single premium contracts) of a policy's cash
surrender value. For single premium contracts issued prior to April
16, 1990, 6.5% interest is due and payable annually in advance. For
single premium contracts issued on or after April 16, 1990, multiple
payment contracts and flexible premium contracts, 6% interest is due
and payable in advance on the policy anniversary when there is a loan
outstanding on the policy.
At the time the loan is granted, the amount of the loan is transferred
from the Account to the Company's general account as collateral for
the outstanding loan. Collateral amounts in the general account are
credited with the stated rate of interest in effect at the time the
loan is made, subject to a guaranteed minimum rate. Loan repayments
result in a transfer of collateral, including interest, back to the
Account.
6. SCHEDULE I
Schedule I presents the components of the change in unit values, which
are the basis for determining contract owners' equity. This schedule
is presented for each sub-account in the following format:
- Beginning unit value - Jan. 1
- Reinvested dividends and capital gains
(This amount reflects the increase in the unit value due to
dividend and capital gain distributions from the underlying
mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Asset charges
(This amount reflects the decrease in the unit value due to the
charges discussed in note 3.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
<PAGE> 7
SCHEDULE I
NATIONWIDE VLI SEPARATE ACCOUNT
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL)
<TABLE>
<CAPTION>
DOMESTIC
COMMON STRATEGIC EMERGING
STOCK INCOME GROWTH GLOBAL EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $16.580891 14.336077 10.000000 10.000000
--------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 3.004553 1.359225 .000000 .000000
--------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.100329 1.690878 1.707069 .309271
--------------------------------------------------------------------------------------------
Asset charges (.186914) (.150992) (.051461) (.047188)
--------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $22.498859 17.235188 11.655608 10.262083
--------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 36% 20% 17%(b) 3%(b)
============================================================================================
1994
Beginning unit value - Jan. 1 $17.325425 15.127964 ** **
--------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.976086 1.490981
--------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.559308) (2.144766)
--------------------------------------------------------------------------------------------
Asset charges (.161312) (.138102)
--------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.580891 14.336077
--------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (4)% (5)%
============================================================================================
1993
Beginning unit value - Jan. 1 $16.049449 13.129409 ** **
--------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .988860 1.177277
--------------------------------------------------------------------------------------------
Unrealized gain (loss) .443906 .958277
--------------------------------------------------------------------------------------------
Asset charges (.156790) (.136999)
--------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.325425 15.127964
--------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 8% 15%
============================================================================================
<CAPTION>
MONEY MULTIPLE REAL ESTATE
GOVERNMENT MARKET STRATEGY SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 16.344365 15.022875 16.538427 10.000000
-------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.217414 .817690 2.418600 .092106
-------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.576618 .000000 2.744315 .740132
-------------------------------------------------------------------------------------------
Asset charges (.170007) (.145472) (.181433) (.047958)
-------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 18.968390 15.695093 21.519909 10.784280
-------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 16% 4% 30% 8%(b)
===========================================================================================
1994
Beginning unit value - Jan. 1 17.301801 14.623465 17.329774 **
-------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.062855 .539516 1.995739
-------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.862740) .000000 (2.627910)
-------------------------------------------------------------------------------------------
Asset charges (.157551) (.140106) (.159176)
-------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 16.344365 15.022875 16.538427
-------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (6)% 3% (5)%
===========================================================================================
1993
Beginning unit value - Jan. 1 16.194306 14.379569 16.243698 **
-------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.044833 .381680 1.376516
-------------------------------------------------------------------------------------------
Unrealized gain (loss) .225301 .000000 (.130378)
-------------------------------------------------------------------------------------------
Asset charges (.162639) (.137784) (.160062)
-------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 17.301801 14.623465 17.329774
-------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 7% 2% 7%
===========================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not available or was not utilized.
<PAGE> 8
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL)
<TABLE>
<CAPTION>
DOMESTIC
COMMON STRATEGIC MONEY MULTIPLE
STOCK INCOME GOVERNMENT MARKET STRATEGY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995**
Beginning unit value - Jan. 1 $15.720497 14.272889 12.480782 11.189053 14.311997
-----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 2.839638 1.348751 .928076 .607952 2.086061
-----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.939071 1.683177 1.202259 .000000 2.374431
-----------------------------------------------------------------------------------------------------------
Asset charges (.242074) (.205351) (.177635) (.148011) (.214467)
-----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $21.257132 17.099466 14.433482 11.648994 18.558022
-----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 35% 20% 16% 4% 30%
===========================================================================================================
1994
Beginning unit value - Jan. 1 $16.483852 15.113958 13.258615 10.929642 15.049256
-----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.874048 1.484668 .813111 .402452 1.727365
-----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.427739) (2.137258) (1.425714) .000000 (2.275800)
-----------------------------------------------------------------------------------------------------------
Asset charges (.209664) (.188479) (.165230) (.143041) (.188824)
-----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $15.720497 14.272889 12.480782 11.189053 14.311997
-----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (5)% (6)% (6)% 2% (5)%
===========================================================================================================
1993
Beginning unit value - Jan. 1 $15.324267 13.163967 12.453930 10.785653 14.156355
-----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .941020 1.176441 .802266 .285158 1.195810
-----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .423067 .961164 .173553 .000000 (.112372)
-----------------------------------------------------------------------------------------------------------
Asset charges (.204502) (.187614) (.171134) (.141169) (.190537)
-----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.483852 15.113958 13.258615 10.929642 15.049256
-----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 8% 15% 6% 1% 6%
===========================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** No other investment options were utilized.
<PAGE> 9
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL)
<TABLE>
<CAPTION>
COMMON MULTIPLE
STOCK STRATEGY
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
1995**
Beginning unit value - Jan. 1 $13.346462 12.765144
---------------------------------------------------------------------------------------
Reinvested dividends and capital gains 2.421740 1.869449
---------------------------------------------------------------------------------------
Unrealized gain (loss) 2.495698 2.118344
---------------------------------------------------------------------------------------
Asset charges (.126800) (.118019)
---------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.137100 16.634918
---------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 36% 30%
=======================================================================================
1994**
Beginning unit value - Jan. 1 $13.924920 13.355954
---------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.590429 1.540293
---------------------------------------------------------------------------------------
Unrealized gain (loss) (2.059623) (2.027726)
---------------------------------------------------------------------------------------
Asset charges (.109264) (.103377)
---------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.346462 12.765144
---------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (4)% (4)%
=======================================================================================
1993**
Beginning unit value - Jan. 1 $12.880252 12.500360
---------------------------------------------------------------------------------------
Reinvested dividends and capital gains .794704 1.060708
---------------------------------------------------------------------------------------
Unrealized gain (loss) .356007 (.101308)
---------------------------------------------------------------------------------------
Asset charges (.106043) (.103806)
---------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.924920 13.355954
---------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 8% 7%
=======================================================================================
</TABLE>
** An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** No other investment options were utilized.
See note 6.
<PAGE> 51
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules 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.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
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, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906
Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787
Mortgage loans on real estate 4,786,599 4,222,284
Real estate 239,089 252,681
Policy loans 370,908 340,491
Other long-term investments 67,280 63,914
Short-term investments (note 13) 45,732 131,643
----------- -----------
19,710,703 16,770,419
----------- -----------
Cash 10,485 7,436
Accrued investment income 239,881 220,540
Deferred policy acquisition costs 1,094,195 1,064,159
Deferred Federal income tax -- 36,515
Other assets 795,169 790,603
Assets held in Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
$40,614,111 31,112,133
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461
Policyholders' dividend accumulations 353,554 338,058
Other policyholder funds 71,155 72,770
Accrued Federal income tax (note 7):
Current 34,064 13,126
Deferred 238,877 -
----------- -----------
272,941 13,126
----------- -----------
Other liabilities 284,143 235,778
Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
37,945,599 29,203,654
----------- -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Additional paid-in capital 673,782 622,753
Retained earnings 1,606,607 1,401,579
Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668)
----------- -----------
2,668,512 1,908,479
----------- -----------
Commitments and contingencies (notes 9 and 15)
$40,614,111 31,112,133
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Traditional life insurance premiums $ 274,957 209,538 215,715
Accident and health insurance premiums 509,658 324,524 312,655
Universal life and investment product policy charges 307,676 239,021 188,057
Net investment income (note 5) 1,482,980 1,289,501 1,204,426
Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673
---------- ---------- ----------
2,576,107 2,046,200 2,034,526
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,656,287 1,279,763 1,236,906
Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Other operating costs and expenses 458,970 352,402 329,396
---------- ---------- ----------
2,256,375 1,772,970 1,721,625
---------- ---------- ----------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 319,732 273,230 312,901
---------- ---------- ----------
Federal income tax expense (note 7):
Current 103,464 79,847 75,124
Deferred 3,790 9,657 31,634
---------- ---------- ----------
107,254 89,504 106,758
---------- ---------- ----------
Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143
Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365
---------- ---------- ----------
Net income $ 212,478 183,726 211,508
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242
Capital contributions -- 111,000 -- -- 111,000
Dividends paid to shareholder -- -- (17,805) -- (17,805)
Net income -- -- 211,508 -- 211,508
Unrealized losses on equity securities, net -- -- -- (83,777) (83,777)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168
========== ========== ========= ========== ==========
1994:
Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168
Capital contribution -- 200,000 -- -- 200,000
Net income -- -- 183,726 -- 183,726
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 216,915 216,915
Unrealized losses on securities available-
for-sale, net -- -- -- (343,330) (343,330)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479
========== ========== ========== ========== ==========
1995:
Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479
Capital contribution (note 13) -- 51,029 -- (4,111) 46,918
Dividends paid to shareholder -- -- (7,450) -- (7,450)
Net income -- -- 212,478 -- 212,478
Unrealized gains on securities available-
for-sale, net -- -- -- 508,087 508,087
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 212,478 183,726 211,508
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994)
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Amortization and depreciation 10,319 6,207 11,156
Realized losses (gains) on invested assets, net 717 15,949 (113,648)
Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006)
Increase in accrued investment income (19,341) (29,654) (4,218)
Increase in other assets (3,227) (112,566) (549,277)
Increase in policy liabilities 198,200 1,038,641 509,370
Increase in policyholders' dividend accumulations 15,496 15,372 17,316
Increase in accrued Federal income tax payable 20,938 832 16,838
Increase in other liabilities 48,365 17,826 26,958
Other, net (20,556) (19,303) (11,745)
----------- ----------- ------------
Net cash provided by operating activities 211,000 945,174 18,392
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 706,442 579,067 --
Proceeds from sale of securities available-for-sale 131,420 247,876 247,502
Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093
Proceeds from sale of fixed maturities -- -- 33,959
Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047
Proceeds from sale of real estate 48,477 46,713 23,587
Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643
Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550)
Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831)
Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336)
Cost of real estate acquired (10,970) (15,962) (8,827)
Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491)
----------- ----------- ------------
Net cash used in investing activities (2,012,182) (2,261,105) (887,204)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions 46,918 200,000 111,000
Dividends paid to shareholder (7,450) -- (17,805)
Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740
Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504)
----------- ----------- -----------
Net cash provided by financing activities 1,718,320 1,391,378 884,431
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619
Cash and cash equivalents, beginning of year 139,079 63,632 48,013
----------- ----------- -----------
Cash and cash equivalents, end of year $ 56,217 139,079 63,632
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
Financial Horizons Life Insurance Company), West Coast Life Insurance
Company (WCLIC), Employers Life Insurance Company of Wausau and
subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
Financial Services, Inc. (NFS). NLIC and its subsidiaries are
collectively referred to as "the Company."
NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
and NCC is a property and casualty insurer. The Company is licensed in
all 50 states, the District of Columbia, the Virgin Islands and Puerto
Rico. The Company offers a full range of life insurance, health insurance
and annuity products through exclusive agents, brokers and other
distribution channels and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
Insurance Departments of states in which it is licensed, and undergoes
periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce insurer
profits, new legal theories or insurance company insolvencies through
guaranty fund assessments may create costs for the insurer beyond
those currently recorded in the consolidated financial statements. 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 is 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
sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
INTEREST RATE RISK is 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.
(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 (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
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 December 31, 1995 consolidated financial statements include the
accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
and NFS. The December 31, 1994 and 1993 consolidated financial statements
include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
1994 consolidated balance sheet also includes the accounts of ELICW, which
was acquired by NLIC effective December 31, 1994. See Note 13. 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, 1995.
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 are 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.
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.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121). SFAS 121 requires impairment losses to be 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. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The statement is effective for fiscal years beginning after December 15,
1995 and earlier application is permitted. Previously issued consolidated
financial statements shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the consolidated financial statements is not
expected to be material.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums and
benefits and consist primarily of whole life, limited-payment life, term
life 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.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual and
group deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and investment
products consist of 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 benefits and claims incurred in the period in
excess of related policy account balances and interest credited to policy
account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums
are recognized as revenue over the terms of the policies. Policy claims are
charged to expense in the period that the claims are incurred.
(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 agency expenses have been deferred. For traditional life and
individual health 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. For
universal life and investment 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).
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific investment
objectives. 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 for administrative services
and risks assumed.
(f) FUTURE POLICY BENEFITS
Future policy benefits for traditional life and individual health
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 6.
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Future policy benefits and claims for collectively renewable long-term
disability policies (primarily discounted at 5.2%) and group long-term
disability policies (primarily discounted at 5.5%) are the present value of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on other
group health insurance policies are not discounted.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 45% (45% in 1994 and
48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
45% in 1993) of life insurance premiums. The provision for policyholder
dividends is based on current dividend scales. Future dividends are
provided for ratably in future policy benefits based on dividend scales in
effect at the time the policies were issued. Dividend scales are approved
by the Board of Directors.
Income attributable to participating policies in excess of policyholder
dividends is accounted for as belonging to the shareholder. See note 12.
(h) FEDERAL INCOME TAX
NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
return with Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
income tax return with Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW files a separate Federal income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
from the deferred method of accounting for income tax of APB Opinion 11 to
the asset and liability method of accounting for income tax. Under the
asset and liability 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.
The Company has reported the cumulative effect of the change in method
of accounting for income tax in the 1993 consolidated statement of income.
See note 3.
(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.
(j) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with original maturities of three
months or less to be cash equivalents.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(k) RECLASSIFICATION
Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(3) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,593,844
and $7,024,736, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994 has been recorded
as a direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
---------
$ 216,915
=========
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in
the 1993 consolidated statement of income as the cumulative effect of
changes in accounting principles, as follows:
Asset/liability method of recognizing income tax (note 2(h)) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296) (note 11) (20,979)
--------
$ 5,365
========
</TABLE>
(4) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
filed with the Department of Insurance of the State of Ohio (the
Department), California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by such
regulatory authorities. 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.
The statutory capital shares and surplus of NLIC as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$1,363,031, $1,262,861 and $992,631, respectively. The statutory net
income of NLIC as reported to regulatory authorities for the years
ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
$185,943, respectively.
<PAGE> 11
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(5) INVESTMENTS
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 772,589 674,346 --
Equity securities 1,436 550 7,230
Fixed maturities held-to-maturity 232,692 193,009 800,255
Mortgage loans on real estate 410,965 376,783 364,810
Real estate 39,222 40,280 39,684
Short-term investments 12,249 6,990 5,080
Other 61,701 42,831 33,832
---------- ---------- ----------
Total investment income 1,530,854 1,334,789 1,250,891
Less investment expenses 47,874 45,288 46,465
---------- ---------- ----------
Net investment income $1,482,980 1,289,501 1,204,426
========== ========== ==========
</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>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 6,792 (7,120) --
Equity securities 3,435 1,427 129,728
Fixed maturities -- -- 20,225
Mortgage loans on real estate (7,312) (20,462) (28,241)
Real estate and other (2,079) 9,771 (8,039)
-------- -------- --------
$ 836 (16,384) 113,673
======== ======== ========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- -------------
<S> <C> <C>
Gross unrealized gains (losses) $ 735,103 (266,618)
Adjustment to deferred policy acquisition costs (143,851) 82,525
Deferred Federal income tax (206,944) 64,425
--------- ---------
$ 384,308 (119,668)
========= =========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 1,001,706 (703,851) --
Equity securities 15 (1,990) (128,837)
Fixed maturities held-to-maturity 86,477 (421,427) 223,392
----------- ----------- -----------
$ 1,088,198 (1,127,268) 94,555
=========== =========== ===========
</TABLE>
<PAGE> 12
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities available-for-sale
were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 438,109 36,714 (53) 474,770
Obligations of states and political subdivisions 9,742 1,252 (1) 10,993
Debt securities issued by foreign governments 162,442 9,641 (66) 172,017
Corporate securities 8,902,494 524,796 (30,561) 9,396,729
Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868
--------- ----------- ----------- -----------
Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377
Equity securities 27,362 6,441 (85) 33,718
---------- ----------- ----------- -----------
$13,465,992 775,489 (40,386) 14,201,095
=========== =========== ============ ===========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
and fixed maturities held-to-maturity were as follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
---------- ---------- ---------- ---------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,372 6,637 (296) 24,713
---------- ---------- ---------- ---------
$8,337,237 77,888 (344,506) 8,070,619
========== ========= ========== =========
FIXED MATURITY SECURITIES HELD-TO-MATURITY
Obligations of states and political subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
---------- ---------- ---------- ---------
$3,688,787 34,383 (120,860) 3,602,310
========== ========== ========== =========
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, 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
cost fair value
----------- ------------
<S> <C> <C>
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE
- --------------------------------------------
Due in one year or less $ 641,490 647,639
Due after one year through five years 5,365,703 5,623,126
Due after five years through ten years 2,477,457 2,609,262
Due after ten years 1,028,137 1,174,482
----------- -----------
9,512,787 10,054,509
Mortgage-backed securities 3,925,843 4,112,868
----------- -----------
$13,438,630 14,167,377
=========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 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 $4,285.
As permitted by the FASB'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 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 $3,705,644, resulting in a gross
unrealized gain of $171,531.
Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.
Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).
Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.
As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Allowance, beginning year $ 47,892
Additions charged to operations 7,653
Direct write-downs charged against the allowance (4,850)
--------
Allowance, end of year $ 50,695
========
</TABLE>
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
mortgage loans on real estate in process of foreclosure or in-substance
foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
value.
Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
of December 31, 1995 and 1994, respectively, were on deposit with various
regulatory agencies as required by law.
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts represents
approximately 82% and 81% of the total liability for future policy benefits
as of December 31, 1995 and 1994, respectively. The average interest rate
credited on investment product policies was approximately 6.5%, 6.5% and
7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.
The liability for future policy benefits for traditional life insurance and
individual health insurance policies has been established based upon the
following assumptions:
INTEREST RATES: Interest rates vary as follows:
<TABLE>
<CAPTION>
Health
Year of issue Life Insurance insurance
-------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
1995 7.6%, not graded - permanent contracts with loan provisions 4.5%
7.7%, not graded - all other contracts
1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0%
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0%
1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
</TABLE>
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.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the liability for unpaid claims and claim adjustment expenses is
summarized for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 637,998 592,180 760,209
Less reinsurance recoverables 438,761 430,720 547,683
--------- --------- ---------
Net balance, beginning of year 199,237 161,460 212,526
--------- --------- ---------
Incurred related to:
Current year 425,907 273,299 309,721
Prior years (17,203) (26,156) (26,248)
--------- --------- ---------
Total incurred 408,704 247,143 283,473
--------- --------- ---------
Paid related to:
Current year 290,605 175,700 208,978
Prior years 111,353 73,889 125,561
--------- --------- ---------
Total paid 401,958 249,589 334,539
--------- --------- ---------
Unpaid claims of acquired companies 2,542 40,223 --
--------- --------- ---------
Net balance, end of year 208,525 199,237 161,460
Plus reinsurance recoverables 491,321 438,761 430,720
--------- --------- ---------
Balance, end of year $ 699,846 637,998 592,180
========= ========= =========
</TABLE>
Reinsurance recoverables include amounts from affiliates, as discussed in
note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31,
1995, 1994, 1993 and 1992, respectively.
The provision for claims and claim adjustment expenses for prior years
decreased in each of the three years ended December 31, 1995 due to
lower-than-anticipated costs to settle accident and health insurance claims.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 179,916 124,044
Fixed maturity securities available-for-sale -- 95,536
Liabilities in Separate Accounts 129,120 94,783
Mortgage loans on real estate and real estate 26,062 25,632
Other policyholder funds 7,752 7,137
Other assets and other liabilities 47,215 57,528
--------- ---------
Total gross deferred tax assets 390,065 404,660
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 312,616 317,224
Fixed maturity securities available-for-sale 266,184 --
Equity securities available-for-sale and other
long-term investments 3,431 3,620
Other 46,711 47,301
--------- ---------
Total gross deferred tax liabilities 628,942 368,145
--------- ---------
$(238,877) 36,515
========= =========
</TABLE>
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company has determined that valuation allowances are not necessary as
of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. 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. All future
deductible amounts can be offset by future taxable amounts or recovery of
Federal income tax paid within the statutory carryback period. In
addition, for future deductible amounts for securities available-for-sale,
affiliates of the Company which are included in the same consolidated
Federal income tax return hold investments that could be sold for capital
gains that could offset capital losses realized by the Company should
securities available-for-sale be sold at a loss.
<TABLE>
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
--------------- ----- -------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0
Tax exempt interest and dividends
received deduction (137) (0.1) (194) (0.1) (2,322) (0.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 1,704 0.5
Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7)
--------- ---- --------- ---- --------- ----
Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1
========= ==== ========= ==== ========= ====
</TABLE>
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the
years ended December 31, 1995, 1994 and 1993, respectively.
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral
from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated in
the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
consolidated financial statements. The DRA eliminated any additional
deferrals to the PSA. Any distributions from the PSA, however, will
continue to be taxable at the then current tax rate. The balance of the
PSA was approximately $35,344 as of December 31, 1995.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair
value information about existing on and off-balance sheet financial
instruments. SFAS 107 defines the fair value of a financial instrument 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 based on estimates 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. SFAS 107 excludes certain assets and liabilities from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are 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:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the consolidated balance sheets for these
instruments approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: 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.
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.
MORTGAGE LOANS ON REAL ESTATE: 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 mortgages in default is the estimated fair value of the
underlying collateral.
INVESTMENT CONTRACTS: 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.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life 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.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts were
as follow as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments:
Securities available-for-sale:
Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906
Equity securities 33,718 33,718 24,713 24,713
Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310
Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284
Policy loans 370,908 370,908 340,491 340,491
Short-term investments 45,732 45,732 131,643 131,643
Cash 10,485 10,485 7,436 7,436
Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461
LIABILITIES
- -----------
Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556
Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384
Policyholders' dividend accumulations 353,554 353,554 338,058 338,058
Other policyholder funds 71,155 71,155 72,770 72,770
Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
</TABLE>
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
--------------------------------------------
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 80% 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 $361,974 extending into 1996 were
outstanding as of December 31, 1995.
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% (22%
in 1994) in any geographic area and no more than 2% (2% in 1994) with any
one borrower.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 140,732 110,361 534,814 184,201 970,108
East South Central 23,978 15,653 183,790 84,588 308,009
Mountain -- 18,940 144,156 48,727 211,823
Middle Atlantic 124,079 72,201 183,562 18,383 398,225
New England 9,594 39,526 153,644 1 202,765
Pacific 190,628 239,687 395,914 107,650 933,879
South Atlantic 101,904 74,731 458,355 279,692 914,682
West North Central 134,866 14,205 81,521 37,586 268,178
West South Central 69,143 99,618 194,717 272,323 635,801
--------- --------- --------- --------- ---------
$ 794,924 684,922 2,330,473 1,033,151 4,843,470
========= ========= ========= =========
Less valuation allowances and unamortized discount 56,871
---------
Total mortgage loans on real estate, net $4,786,599
=========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
--------- --------- --------- --------- ---------
$ 669,832 613,707 2,176,705 816,831 4,277,075
========= ========= ========= =========
Less valuation allowances and unamortized discount 54,791
---------
Total mortgage loans on real estate, net $4,222,284
=========
</TABLE>
(10) 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
thousand hours of service within a twelve-month period and who have met
certain age requirements. 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> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
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. 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, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
respectively.
The Company's net accrued pension expense as of December 31, 1995 and
1994 was $1,376 and $1,836, respectively.
The net periodic pension cost for the Nationwide Insurance Companies and
Affiliates Retirement Plan as a whole for the years ended December 31,
1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighed average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
in group annuity contracts of NLIC and ELICW. Prior to the merger, the
assets of the Nationwide Insurance Companies and Affiliates Retirement
Plan were invested in a group annuity contract of NLIC.
(11) 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.
Effective January 1, 1993, the Company adopted the provisions of STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
accrual method of accounting for postretirement life and health care
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $32,275 ($20,979 net of related income tax benefit) was
recorded in the 1993 consolidated statement of income as a cumulative
effect of a change in accounting principle. See note 3. The adoption of
SFAS 106, including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $35,277
to $36,544 in 1993. 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, 1995 and 1994 was $51,490 and $36,001, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was
$8,269 and $4,627, respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the plan as a whole as of
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. 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, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
-------------------------------------------------------------
Each insurance company'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 each of its
insurance subsidiaries exceed the minimum risk-based capital
requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, as of the year-end shall
inure to the benefit of the shareholder. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall
be used only for the payment or apportionment of dividends to
participating policyholders at least to the extent required by statute
or for the purpose of making up any loss on participating policies.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In the opinion of counsel for the Company, the ultimate ownership of the
entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable to
participating policies in excess of the amounts paid as dividends to
policyholders belong to the shareholder rather than the policyholders,
and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares was
$2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
1993, respectively. The amount thereof not presently available for
dividends to the shareholder due to the New York restrictions was
$1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
respectively.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $2,468,687
of shareholder's equity, as presented in the accompanying consolidated
financial statements, is so restricted as to dividend payments in 1996.
Each of NLIC's insurance company subsidiaries are limited in their
payment of dividends by the state insurance department of their
respective state of domicile. As of December 31, 1995, the maximum amount
of shareholder's equity available for dividend payment to NLIC in 1996 by
its insurance company subsidiaries without prior approval are:
<TABLE>
<S> <C>
Nationwide Life and Annuity Insurance Company $10,143
West Coast Life Insurance Company 13,153
Employers Life Insurance Company of Wausau 10,132
National Casualty Company --
-------
$33,428
=======
</TABLE>
(13) TRANSACTIONS WITH AFFILIATES
----------------------------
On March 1, 1995, Corp. contributed all of the outstanding shares of
Farmland Life Insurance Company (Farmland) to NLIC, which then merged
Farmland into WCLIC effective June 30, 1995. The contribution resulted in
a direct increase to consolidated shareholder's equity of $46,918. The
contribution of Farmland has been accounted for in a manner similar to a
pooling of interests and accordingly, Farmland's results are included in
the consolidated statements of income beginning January 1, 1995. However,
prior period consolidated financial statements have not been restated due
to the impact of Farmland being immaterial.
Effective December 31, 1994, NLIC purchased all of the outstanding shares
of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC
transferred fixed maturity securities and cash with a fair value of
$155,000 to WSC on December 28, 1994, which resulted in a realized loss
of $19,239 on the disposition of the securities. The purchase price
approximated both the historical cost basis and fair value of net assets
of ELICW. ELICW has and will continue to share home office, other
facilities, equipment and common management and administrative services
with WSC.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Corp. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1995 were
$57,969, $50,470 and $44,577, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company 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 1995 and
1994 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
31, 1995. These contracts are immaterial to the consolidated financial
statements.
NCC participates in several 100% quota share reinsurance agreements with
NMIC and Nationwide Mutual Fire Insurance Company, the minority
shareholder of Corp. As a result of these agreements, the following
assets and (liabilities) are included in the consolidated financial
statements as of December 31, 1995 and 1994 for reinsurance ceded:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Reinsurance recoverable $ 590,379 541,289
Unearned premium reserves (112,467) (110,353)
Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
</TABLE>
The ceding of reinsurance does not discharge the original insurer from
primary liability to its policyholder. The insurer which assumes the
coverage assumes the related liability and it is the practice of insurers
to treat insured risks, to the extent of reinsurance ceded, as though
they were risks for which the original insurer is not liable. Management
believes the financial strength of NMIC reduces to an acceptable level
any risk to NCC under these intercompany reinsurance agreements.
ELICW assumes certain accident and health insurance business from
Employers Insurance of Wausau A Mutual Company, an affiliate. During
1995, total premiums assumed by ELICW under the reinsurance
agreement were $150,622.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash Management
Company (CCMC), both affiliates, under which NCMC and CCMC act as common
agents in handling the purchase and sale of short-term securities for the
respective accounts of the participants. Amounts on deposit with NCMC and
CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994,
respectively, and are included in short-term investments on the
accompanying consolidated balance sheets.
(14) BANK LINES OF CREDIT
--------------------
As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization.
(15) 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.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT INFORMATION
-------------------
The Company operates in the long-term savings, life insurance and
accident and health insurance lines of business in the life insurance and
property and casualty insurance industries. Long-term savings operations
include both qualified and non-qualified annuity contracts issued to both
individuals and groups. Life insurance operations include whole life,
universal life, variable universal life and endowment and term life
insurance issued to individuals and groups. Accident and health insurance
operations also provide coverage to individuals and groups. Corporate
primarily includes investments, and the related investment income, which
are not specifically allocated to one of the three operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better reflect
the way the businesses are managed. Prior periods have been restated to
reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in accounting
principles for the years ended December 31, 1995, 1994 and 1993 and
assets as of December 31, 1995, 1994 and 1993, by business segment.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 1,406,241 1,125,013 1,048,045
Life insurance 502,885 452,795 432,343
Accident and health insurance 532,383 345,545 339,764
Corporate 134,598 122,847 214,374
------------ ------------ ------------
$ 2,576,107 2,046,200 2,034,526
============ ============ ============
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 129,475 95,530 47,966
Life insurance 63,169 46,119 36,383
Accident and health insurance (12,521) 13,221 15,041
Corporate 139,609 118,360 213,511
------------ ------------ ------------
$ 319,732 273,230 312,901
============ ============ ============
Assets:
Long-term savings 34,634,892 25,815,273 20,695,598
Life insurance 3,675,581 3,231,651 2,897,574
Accident and health insurance 307,643 291,296 297,200
Corporate 1,995,995 1,773,913 1,515,989
------------ ------------ ------------
$ 40,614,111 31,112,133 25,406,361
============ ============ ============
</TABLE>
<PAGE> 52
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 6 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 81 pages.
Representations and Undertakings.
Accountants' Consent.
The Signatures.
<TABLE>
<CAPTION>
The following exhibits required by Forms N-8B-2 and S-6:
<S> <C>
1. Power of Attorney dated April 4, 1996 Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2
authorizing the establishment of the Registrant, adopted for the Nationwide VLI Separate Account (File No. 811-
4399), and hereby incorporated herein by reference.
3. Distribution Contracts Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account (File No. 811-
4399), and hereby incorporated herein by reference.
4. Form of Security Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account (File No. 811-
4399), and hereby incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account (File No. 811-
4399), and hereby incorporated herein by reference.
6. Application form of Security Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account (File No. 811-
4399), and hereby incorporated herein by reference.
7. Opinion of Counsel Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account (File No. 811-
4399), and hereby incorporated herein by reference.
</TABLE>
85
<PAGE> 53
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)(I)(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.
86
<PAGE> 54
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide VLI Separate Account:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1996
87
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, NATIONWIDE VLI SEPARATE ACCOUNT, certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment No. 6 and has duly caused this Post-Effective
Amendment No. 6 to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City
of Columbus, and State of Ohio, on this 26th day of April, 1996.
NATIONWIDE VLI SEPARATE ACCOUNT
----------------------------------
(Registrant)
(Seal)
Attest: NATIONWIDE LIFE INSURANCE COMPANY
----------------------------------
(Sponsor)
W. SIDNEY DRUEN By: JOSEPH P. RATH
- ---------------------------- -------------------------------
W. Sidney Druen Joseph P. Rath
Assistant Secretary Vice President and Associate
General Counsel
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 6 has been signed below by the following
persons in the capacities indicated on the 26th day of April, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ---------------
Lewis J. Alphin
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/Chief
- ---------------- Operating Office and Director
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board
- ----------------- and Director
Henry S. Holloway
D. RICHARD McFERSON Chairman and Chief Executive Officer-
- ------------------- Nationwide Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- ---------------
David O. Miller
C. RAY NOECKER Director
- --------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ---------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------ -------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- ----------------
Arden L. Shisler
ROBERT L. STEWART Director
- -----------------
Robert L. Stewart
NANCY C. THOMAS Director
- ---------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ---------------
Harold W. Weihl
</TABLE>
88
<PAGE> 1
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 55
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
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>
1 2,625 1,186 23 101,186 1,288 125 101,288 1,391 228 101,391
2 5,381 2,468 1,306 102,468 2,750 1,587 102,750 3,044 1,882 103,044
3 8,275 3,633 2,587 103,633 4,173 3,126 104,173 4,760 3,714 104,760
4 11,314 4,673 3,743 104,673 5,545 4,615 105,545 6,534 5,604 106,534
5 14,505 5,578 4,765 105,578 6,853 6,039 106,853 8,358 7,544 108,358
6 17,855 6,340 5,642 106,340 8,080 7,382 108,080 10,222 9,525 110,222
7 21,373 6,946 6,364 106,946 9,208 8,627 109,208 12,117 11,536 112,117
8 25,066 7,378 6,913 107,378 10,213 9,748 110,213 14,021 13,556 114,021
9 28,945 7,621 7,272 107,621 11,068 10,719 111,068 15,913 15,565 115,913
10 33,017 7,657 7,657 107,657 11,746 11,746 111,746 17,771 17,771 117,771
11 37,293 7,471 7,471 107,471 12,220 12,220 112,220 19,570 19,570 119,570
12 41,782 7,051 7,051 107,051 12,465 12,465 112,465 21,285 21,285 121,285
13 46,497 6,383 6,383 106,383 12,454 12,454 112,454 22,889 22,889 122,889
14 51,446 5,450 5,450 105,450 12,153 12,153 112,153 24,348 24,348 124,348
15 56,644 4,227 4,227 104,227 11,520 11,520 111,520 25,613 25,613 125,613
16 62,101 2,679 2,679 102,679 10,500 10,500 110,500 26,707 26,707 126,707
17 67,831 761 761 100,761 9,026 9,026 109,026 27,478 27,478 127,478
18 73,848 (*) (*) (*) 7,014 7,014 107,014 27,825 27,825 127,825
19 80,165 (*) (*) (*) 4,381 4,381 104,381 27,638 27,638 127,638
20 86,798 (*) (*) (*) 1,044 1,044 101,044 26,806 26,806 126,806
21 93,763 (*) (*) (*) (*) (*) (*) 25,218 25,218 125,218
22 101,076 (*) (*) (*) (*) (*) (*) 22,758 22,758 122,758
23 108,755 (*) (*) (*) (*) (*) (*) 19,235 19,235 119,235
24 116,818 (*) (*) (*) (*) (*) (*) 14,584 14,584 114,584
25 125,284 (*) (*) (*) (*) (*) (*) 8,628 8,628 108,628
<FN>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A
MONTHLY $25 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 NOT STAY IN FORCE.
</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.
46
